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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended September 30, 2024

 

or

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Period from _________ to _________

 

Commission file number: 001-41227

 

CISO GLOBAL, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   83-4210278

(State or other Jurisdiction of

Incorporation or Organization)

  

(I.R.S. Employer

Identification No.)

 

6900 E. Camelback Road, Suite 900, Scottsdale, Arizona   85251
(Address of Principal Executive Offices)   (Zip Code)

 

(480) 389-3444

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.00001 par value   CISO   The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
       
Non-accelerated filer ☒ Smaller reporting company ☒
       
    Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act: ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

As of November 15, 2024, there were 11,821,866 shares of the registrant’s common stock outstanding.

 

 

 

 

 

 

CISO GLOBAL, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024 (unaudited)

 

TABLE OF CONTENTS

 

    Page
     
PART I. FINANCIAL INFORMATION 4
     
ITEM 1. Financial Statements (unaudited) 4
     
  Condensed Consolidated Balance Sheets 4
     
  Condensed Consolidated Statements of Operations and Comprehensive Loss 5
     
  Condensed Consolidated Statements of Changes in Stockholders’ Equity 6
     
  Condensed Consolidated Statements of Cash Flows 7
     
  Notes to Condensed Consolidated Financial Statements 8
     
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
     
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 28
     
ITEM 4. Controls and Procedures 28
     
PART II. OTHER INFORMATION 29
     
ITEM 1. Legal Proceedings 29
     
ITEM 1A. Risk Factors 29
     
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 29
     
ITEM 3. Defaults Upon Senior Securities 29
     
ITEM 4. Mine Safety Disclosures 29
     
ITEM 5. Other Information 29
     
ITEM 6. Exhibits 29
     
SIGNATURES 30

 

2

 

 

FORWARD-LOOKING STATEMENTS

 

The information contained in this report should be read in conjunction with the financial statements and related notes contained elsewhere in this Quarterly Report on Form 10-Q. Certain statements made in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based upon beliefs of, and information currently available to, us as of the date hereof, as well as estimates and assumptions made by us. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms and similar expressions identify forward-looking statements. Such statements reflect our current view with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to our business, industry, and our operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Forward-looking statements made in this Quarterly Report on Form 10-Q include statements about:

 

● our ability to maintain an effective system of internal controls and accurately report our financial results;
● that 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;
● our belief that our cash balance as of the date of this filing, together with anticipated revenues, will be sufficient to meet our anticipated cash requirement for the near term;
● the doubt about our ability to continue as a going concern;
● our efforts to developing our business, reducing overhead cost, and capital raising;
● our plan 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;
● our estimate for indirect tax liabilities; and
● our expectation that we will incur further losses through the end of 2024.

 

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks detailed from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, any of which may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. These risks may cause our or our industry’s actual results, levels of activity, or performance to be materially different from any future results, levels of activity, or performance expressed or implied by these forward-looking statements.

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

 

3

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

CISO GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   September 30,   December 31, 
   2024   2023 
         
ASSETS          
           
Current Assets:          
Cash and cash equivalents  $443,086   $241,643 
Accounts receivable, net   1,893,094    2,800,209 
Prepaid cost of revenue   174,930    244,698 
Prepaid expenses and other current assets   264,572    205,919 
Contract asset   223,011    197,656 
Assets of business held for sale   -    22,600,715 
Total Current Assets   2,998,693    26,290,840 
           
Property and equipment, net   809,862    1,052,637 
Right of use asset, net   583,104    762,228 
Intangible assets, net   2,193,956    3,546,580 
Goodwill   19,900,550    19,900,550 
Prepaid cost of revenue, net of current portion   70,736    32,375 
Other assets   70,173    70,173 
           
Total Assets  $26,627,074   $51,655,383 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
Current Liabilities:          
Accounts payable and accrued expenses  $9,664,060   $7,597,469 
Deferred revenue   1,267,193    1,371,637 
Lease liability   227,911    219,342 
Loans payable   2,686,087    1,856,245 
Line of credit   2,134,096    - 
Convertible notes payable   2,050,000    2,050,000 
Convertible notes payable, related party   5,000,000    - 
Liabilities of business held for sale   -    16,666,096 
Total Current Liabilities   23,029,347    29,760,789 
           
Long-term Liabilities:          
Deferred revenue, net of current portion   86,694    84,294 
Loans payable, net of current portion   46,778    74,542 
Convertible notes payable, related party   -    5,000,000 
Lease liability, net of current portion   424,018    596,307 
           
Total Liabilities   23,586,837    35,515,932 
           
Commitments and Contingencies   -    - 
           
Stockholders’ Equity:          
Common stock, $.00001 par value; 300,000,000 shares authorized; 11,821,866 and 11,949,959 issued and outstanding at September 30, 2024 and December 31, 2023, respectively   123    119 
Preferred stock, $.00001 par value; 50,000,000 shares authorized; 0 shares issued and outstanding on September 30, 2024 and December 31, 2023, respectively   -    - 
Additional paid-in capital   180,076,826    172,837,842 
Treasury stock, at cost (502,137 and zero shares)   (290,737)   - 
Accumulated translation adjustment   (3,327)   1,320,177 
Accumulated deficit   (176,742,648)   (158,018,687)
Total Stockholders’ Equity   3,040,237    16,139,451 
           
Total Liabilities and Stockholders’ Equity  $26,627,074   $51,655,383 

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

 

4

 

 

CISO GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

             
   Three Months Ended   Nine Months Ended 
   September 30,
2024		   September 30,
2023		   September 30,
2024		   September 30,
2023		 
                 
Revenue:                    
Security managed services  $6,965,518   $7,659,301   $21,204,477   $22,714,377 
Professional services   437,209    1,025,225    1,835,932    3,055,607 
Cybersecurity software   108,570    -    304,727    - 
Total revenue   7,511,297    8,684,526    23,345,136    25,769,984 
                     
Cost of revenue:                    
Security managed services   2,319,234    2,370,100    7,207,886    7,552,415 
Professional services   84,947    191,795    375,111    445,583 
Cybersecurity software   29,939    -    88,708    - 
Cost of payroll   2,982,871    3,934,583    9,641,597    12,356,969 
Stock based compensation   1,060,238    317,851    3,357,635    3,783,116 
Total cost of revenue   6,477,229    6,814,329    20,670,937    24,138,083 
Total gross profit   1,034,068    1,870,197    2,674,199    1,631,901 
                     
Operating expenses:                    
Professional fees   223,149    645,176    1,025,410    2,696,815 
Advertising and marketing   1,339    116,314    34,099    269,935 
Selling, general and administrative   3,083,920    4,395,127    10,667,794    13,909,737 
Stock based compensation   1,244,664    677,231    3,604,406    6,421,245 
Impairment of goodwill   -    -    -    31,776,820 
Total operating expenses   4,553,072    5,833,848    15,331,709    55,074,552 
                     
Loss from operations   (3,519,004)   (3,963,651)   (12,657,510)   (53,442,651)
                     
Other income (expense):                    
Other income (expense)   917,852    253,166    882,934    283,396 
Interest expense, net   (1,237,301)   (621,925)   (2,611,067)   (1,528,123)
                     
Total other income (expense)   (319,449)   (368,759)   (1,728,133)   (1,244,727)
                     
Loss from continuing operations before income taxes   (3,838,453)   (4,332,410)   (14,385,643)   (54,687,378)
Benefit from income taxes   -    -    -    - 
Loss from continuing operations   (3,838,453)   (4,332,410)   (14,385,643)   (54,687,378)
Gain/(loss) from discontinued operations, net of income taxes(1)   160,567    (1,174,853)   (4,338,318)   (14,990,237)
                     
Net Loss   (3,677,886)   (5,507,263)   (18,723,961)   (69,677,615)
Foreign currency translation adjustment   (680)   (1,392,395)   (3,327)   228,331 
Comprehensive loss  $(3,678,566)   (6,899,658)   (18,727,288)  $(69,449,284)
                     
Net loss per common share - basic and diluted:                    
Continuing operations  $(0.33)  $(0.37)  $(1.20)  $(5.04)
Discontinued operations   0.01    (0.10)   (0.36)   (1.38)
   $(0.32)  $(0.47)  $(1.56)  $(6.42)
                     
Weighted average shares outstanding - basic   11,693,367    11,809,741    12,001,220    10,856,255 
Weighted average shares outstanding - diluted   11,693,367    11,809,741    12,001,220    10,856,255 

 

(1)Includes recognized loss on disposal of $3,189,232 for the nine months ended September 30, 2024

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

 

5

 

 

CISO GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (NOTE 2)

(Unaudited)

 

   Shares      Shares                   
                           Accumulated         
                   Additional       Other         
   Common Stock   Preferred Stock   Paid-in   Treasury   Comprehensive   Accumulated     
   Shares   Amount   Shares   Amount   Capital   Stock   Gain/(Loss)   Deficit   Total 
                                     
Balance at January 1, 2024   11,949,959   $119    -   $-   $172,837,842   $-   $1,320,177   $(158,018,687)  $16,139,451 
                                              
Stock based compensation - stock options   -    -    -    -    6,904,141    -    -    -    6,904,141 
Stock based compensation - common stock   100,000    1    -    -    57,899    -    -    -    57,900 
Stock issued for cash   126,688    2    -    -    154,945    -    -    -    154,947 
Stock issued as lending discount   100,000    1    -    -    121,999    -    -    -    122,000 
Stock adjustment after reverse stock split   47,356    -    -    -    -    -    -    -    - 
Repurchase of treasury stock related to disposition of assets   -    -    -    -    -    (290,737)   -    -    (290,737)
Foreign currency translation   -    -    -    -    -    -    (3,327)   -    (3,327)
Reclassification of foreign currency translation to net loss   -    -    -    -    -    -    (1,320,177)   -    (1,320,177)
Net loss   -    -    -    -    -    -    -    (18,723,961)   (18,723,961)
Balance at September 30, 2024   12,324,003   $123    -   $-   $180,076,826   $(290,737)  $(3,327)  $(176,742,648)  $3,040,237 
                                              
Balance at January 1, 2023   9,697,921   $97    -   $-   $153,170,351   $-   $1,062,247   $(77,787,604)  $76,445,091 
                                              
Stock based compensation - stock options   -    -    -    -    9,190,027    -    -    -    9,190,027 
Stock based compensation - common stock   233,333    2    -    -    733,498    -    -    -    733,500 
Stock issued for cash   1,782,658    18    -    -    6,682,180    -    -    -    6,682,198 
Exercise of options   69,378    1    -    -    491,852    -    -    -    491,853 
Stock issued for SB Cyber acquisition   33,335    -    -    -    99,000    -    -    -    99,000 
Foreign currency translation   -    -    -    -    -    -    228,331    -    228,331 
Net loss   -    -    -    -    -    -    -    (69,677,615)   (69,677,615)
Balance at September 30, 2023   11,816,625   $118    -   $-   $170,366,908   $-   $1,290,578   $(147,465,219)  $24,192,385 

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

 

6

 

 

CISO GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   September 30,
2024		   September 30,
2023		 
Cash flows from operating activities:          
Net loss  $(18,723,961)  $(69,677,615)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock based compensation - stock options   6,904,141    9,190,027 
Stock based compensation - common stock   57,900    733,500 
Depreciation and amortization   1,949,506    2,411,989 
Right of use amortization   179,124    165,291 
Other   391,497    93,199 
Impairment of intangible assets   -    3,116,039 
Impairment of goodwill   -    41,038,172 
Loss on assets held for sale   3,189,232    - 
Gain on sale of vCISO   (1,000,000)   - 
Changes in operating assets and liabilities:          
Accounts receivable, net   2,367,571    1,689,837 
Inventory   161,586    (66,296)
Contract assets   (25,355)   67,440 
Prepaids and other current assets   166,631    (232,829)
Accounts payable and accrued expenses   667,381    4,650,420 
Lease liability   (163,720)   (307,816)
Deferred revenue   295,741    424,144 
           
Net cash used in operating activities   (3,582,726)   (6,704,498)
           
Cash flows from investing activities:          
           
Cash acquired in acquisitions, net   -    30,430 
Cash received from sale of vCISO   1,000,000    - 
Purchases of property and equipment   (83,095)   (166,278)
           
Net cash provided by/(used in) investing activities   916,905    (135,848)
           
Cash flows from financing activities:          
Proceeds from sale of common stock   154,947    6,682,198 
Proceeds from stock option exercise   -    491,853 
Proceeds from loan payable   4,273,823    4,448,641 
Proceeds from convertible notes payable, related party   -    5,000,000 
Proceeds from convertible note payable   -    1,050,000 
Proceeds from lines of credit   2,564,589    173,477 
Payment on lines of credit   (466,555)   (174,547)
Payment on loans payable   (4,277,125)   (9,206,420)
Payment of convertible note payable   -    (2,550,000)
Payment of debt issuance cost   (144,000)   (137,500)
           
Net cash provided by financing activities   2,105,679    5,777,702 
           
Effect of exchange rates on cash and cash equivalents   (59,214)   (39)
           
Net decrease in cash and cash equivalents   (619,356)   (1,062,683)
           
Cash and cash equivalents - beginning of the period   1,062,442    1,833,163 
           
Cash and cash equivalents - end of the period  $443,086   $770,480 
           
Reconciliation of cash and cash equivalents to the condensed consolidated financial statements          
Cash from continuing operations  $241,643   $1,404,075 
Cash from discontinued operations   820,799    429,088 
Total cash and cash equivalents, beginning of period  $1,062,442   $1,833,163 
           
Cash from continuing operations  $443,086   $588,504 
Cash from discontinued operations   -    181,976 
Total cash and cash equivalents, end of period  $443,086   $770,480 
           
Supplemental cash flow information:          
Cash paid for:          
Interest  $1,780,035   $2,904,020 
Income taxes  $-   $- 
Supplemental disclosure of non-cash transactions:          
Operating lease assets obtained in exchange for operating lease obligations  $-   $733,782 
Common stock issued in SB Cyber acquisition  $-   $99,000 
Common stock issued as a lending discount  $122,000   $- 

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

 

7

 

 

CISO GLOBAL, INC. and subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

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 United States dollars.

 

NOTE 1 – ORGANIZATION OF BUSINESS AND GOING CONCERN

 

Description of the Business

 

We are a cybersecurity, compliance and software company comprised of highly trained and seasoned security professionals who work with clients to enhance or create a better cyber posture in their organization. We provide a full range of cybersecurity consulting, related services and cybersecurity software, encompassing all three pillars of compliance, cybersecurity, and culture. Our services include secured managed services, compliance services, security operations center (“SOC”) services, virtual Chief Information Security Officer (“vCISO”) services, incident response, certified forensics, technical assessments, and cybersecurity training. We believe that culture is the foundation of every successful cybersecurity and compliance program. To deliver that outcome, we developed our unique offering of MCCP+ (“Managed Compliance & Cybersecurity Provider + Culture”), which is a holistic solution that provides all three of these pillars under one roof from a dedicated team of subject matter experts. In contrast to the majority of cybersecurity firms that are focused on a specific technology or service, we seek to differentiate ourselves by remaining technology agnostic, focusing on accumulating highly sought-after topic experts. 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 bringing together a world-class team of technological experts with multi-faceted expertise in the 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, thereby setting us apart from competitors and in-house security teams. 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.

 

Basis of Presentation

 

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), the instructions to Form 10-Q pursuant to regulations of the SEC, and include our accounts and the accounts of our subsidiaries. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although, we believe that the disclosures made are adequate to make the information not misleading. All material intercompany accounts and transactions have been eliminated.

 

Our interim financial statements are unaudited, and in our opinion, include all adjustments of a normal recurring nature necessary for the fair presentation of the periods presented. The results for the interim periods are not necessarily indicative of the results to be expected for any subsequent period or for the year ending December 31, 2024. These unaudited condensed consolidated financial statements and related notes should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2023.

 

Going Concern

 

The accompanying 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. However, due to losses incurred, substantial doubt about our ability to continue as a going concern exists.

 

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, which may result in us taking the Company private and no longer operating as a publicly traded company, and restructuring operations to grow revenues and decrease expenses. However, we may be unable to access further equity or debt financing when needed. As such, there can be no assurance that we will be able to obtain additional liquidity when needed or under acceptable terms, if at all.

 

8

 

 

The ability for us to continue as a going concern is dependent upon our ability to successfully accomplish the plan and eventually attain profitable operations. The condensed consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if we are unable to continue as a going concern.

 

Reclassifications

 

Reclassifications of certain immaterial prior period amounts have been made to conform to the current period presentation.

 

Use of Estimates

 

GAAP requires management to make estimates and assumptions that affect the reported amounts in our unaudited condensed consolidated financial statements. We periodically evaluate our estimates and adjust prospectively, if necessary. We believe our estimates and assumptions are reasonable; however, actual results could materially differ.

 

We believe the critical accounting policies discussed below affect our more significant judgments and estimates used in the preparation of the accompanying unaudited condensed consolidated financial statements. Material estimates include the allowance for credit losses, the carrying value of intangible assets and goodwill, deferred tax asset and valuation allowance, the estimated fair value of assets acquired, liabilities assumed and stock issued in business combinations, and assumptions used in the Black-Scholes option pricing model, such as expected volatility, risk-free interest rate, share price, and expected dividend rate.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Revenue

 

Our revenue is derived from three major types of services to clients: security managed services, professional services and software. With respect to security managed services, we provide culture education and enablement, tools and technology provisioning, data and privacy monitoring, regulations and compliance monitoring, remote infrastructure administration, and cybersecurity services, including, but not limited to, antivirus and patch management. With respect to professional services, we provide cybersecurity consulting, compliance auditing, vulnerability assessment and penetration testing, and disaster recovery and data backup solutions.

 

Our revenue is categorized and disaggregated as reflected in our unaudited condensed consolidated statement of operations as follows:

 

Security Managed Services

 

Security managed services revenue primarily consists of risk compliance, cyber defense operations, and secured managed services. We consider these services to be a single performance obligation, and revenue is recognized as services and materials are provided to the customer.

 

Professional Services

 

Professional services revenue primarily consists of security testing and training, and incident response and digital forensics. We consider these services to be a single performance obligation, and revenue is recognized in the period in which the performance obligations are satisfied.

 

Cybersecurity Software

 

Cybersecurity software revenue primarily consists of our internally developed cybersecurity software designed to provide a security management platform, protect users from untrusted and malicious online threats, provide proactive security monitoring, and deliver continuous security assessments. We consider these services to be a single performance obligation, and revenue is recognized in the period in which the performance obligations are satisfied.

 

9

 

 

Accounts Receivable

 

Accounts receivable are reported at their outstanding unpaid principal balances, net of allowances for credit losses. We periodically assess our accounts and other receivables for collectability on a specific identification basis. We provide for allowances for credit losses based on management’s estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate. Payments are generally due within 30 days of invoice. We write-off accounts receivable against the allowance for credit losses when a balance is determined to be uncollectible. As of September 30, 2024 and December 31, 2023, our allowance for credit losses was $178,477 and $219,141, respectively.

 

Reverse Stock Split

 

On February 29, 2024, our board of directors approved a 1-for-15 reverse stock split of our common stock. The record date for the reverse stock split was the close of business on March 7, 2024, with share distribution occurring on March 8, 2024. As a result of the reverse stock split, stockholders received one share of CISO Global, Inc. common stock, par value $0.00001, for each 15 shares they held as of the record date. All share and per share amounts have been retroactively restated for the effects of this reverse stock split. Common stock underlying our outstanding warrants, convertible notes, and options have also been adjusted, and the conversion and exercise prices have also been adjusted.

 

Net Loss per Common Share

 

Net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. For dilutive securities, all outstanding options and warrants are considered potentially outstanding common stock. The dilutive effect, if any, of stock options is calculated using the treasury stock method. All outstanding convertible notes are considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method. Since the effect of common stock equivalents are anti-dilutive with respect to losses, the options, warrants and shares issuable upon conversion thereof have been excluded from our computation of net loss per common share for the three and nine months ended September 30, 2024 and 2023.

 

Our shares of outstanding common stock and earnings per share calculation have been retroactively restated for all periods presented to reflect our 1-for-15 reverse stock split. The following tables summarize the securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive due to our net loss position even though the exercise price could be less than the average market price of the common shares:

  

   September 30,
2024		   September 30,
2023		 
Stock options   1,550,718    2,254,697 
Warrants   49,614    49,614 
Convertible debt   888,560    277,778 
Total   2,488,892    2,582,089 

 

Deferred Revenue

 

Deferred revenue primarily consists of billings or payments received from customers in advance of revenue recognized for the services provided to our customers or annual licenses and is recognized as services are performed or ratably over the life of the license. We generally invoice customers in advance or in milestone-based installments.

 

Deferred revenue consisted of the following:

  

  

September 30,

2024

   December 31,
2023		 
Current:          
Security managed services  $660,962   $578,941 
Professional services   483,098    792,696 
Cybersecurity software   123,133    - 
Total deferred revenue - current  $1,267,193   $1,371,637 
Long-term:          
Security managed services  $86,694   $84,294 
Total deferred revenue – long term  $86,694   $84,294 

 

10

 

 

The increase in the deferred revenue balance is primarily driven by payments received in advance of satisfying our performance obligations, offset by $1,212,483 of revenue recognized during 2024, which was included in the deferred revenue balance as of December 31, 2023. The deferred revenue balance as of September 30, 2024 represents our remaining performance obligations that will be recognized as revenue over the period in which the performance obligations are satisfied, and is expected to be recognized in revenue as follows:

  

   Remainder of 2024   2025   2026   2027   2028   Thereafter   Total 
Security managed services  $309,196   $364,770   $44,751   $20,563   $5,290   $3,086   $747,656 
Professional services   483,098    -    -    -    -    -    483,098 
Cybersecurity software   71,566    51,567    -    -    -    -    123,133 
Total deferred revenue  $863,860   $416,337   $44,751   $20,563   $5,290   $3,086   $1,353,887 

 

Income Taxes

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities, including tax loss and credit carry forwards, are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

We utilize ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the unaudited condensed consolidated financial statements or tax returns. We account for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely than not” that a deferred tax asset will not be realized. At September 30, 2024, our net deferred tax asset has been fully reserved.

 

For uncertain tax positions that meet a “more likely than not” threshold, we recognize the benefit of uncertain tax positions in the unaudited condensed consolidated financial statements. Our practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the unaudited condensed consolidated statements of operations when a determination is made that such expense is likely.

 

Recent Accounting Pronouncements

 

In November 2023, the Financial Standards Accounting Board (FASB) issued guidance to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. This update is effective for our 2024 fiscal year and interim periods in fiscal year 2025, with early adoption permitted. We are currently evaluating the impact that the adoption of this standard will have on our condensed consolidated financial statements.

 

In December 2023, the FASB issued guidance to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this guidance require additional disclosures about income taxes, primarily focused on the disclosures of income taxes paid and the rate reconciliation table. The new guidance will be effective for the 2025 fiscal year, with early adoption permitted. We are currently evaluating the impact of this standard on our disclosures within our consolidated financial statements.

 

11

 

 

NOTE 3 – DISPOSITIONS

 

Latin America

 

On July 1, 2024, we entered into a stock purchase agreement with Southford Equities, Inc. (the “Arkavia SPA”) to sell 100% of the outstanding shares of our wholly owned subsidiary Ocean Point Equities, Inc., in exchange for 194,267 shares of our common stock owned by the owners of Southford Equities, Inc. and nominal cash consideration ($1.00 dollar).

 

On July 1, 2024, we entered into a stock purchase agreement with CT Group, LP, Datadeck LP, Woodface, LP, VMT Technologies, LP and Quijote Ventures, LP (the “CUATROi SPA”) to sell 100% of the outstanding shares of our wholly owned subsidiaries Servicios Informaticos CUATROi SpA, Comercializadora CUATROi SpA, CUATROi Peru, SAC, and CUATROi SAS, in exchange for 135,795 shares of our common stock owned by the owners of CT Group, LP, Datadeck LP, Woodface, LP, VMT Technologies, LP and Quijote Ventures, LP and nominal cash consideration ($5.00 dollars).

 

On July 1, 2024, we entered into a stock purchase agreement with Itada Equities, Inc. (the “NLT SPA”) to sell 100% of the outstanding shares of our wholly owned subsidiaries NLT Networks, S.P.A., NLT Technologias, Limitada, NLT Servicios Profesionales, S.P.A. and White and Blue Solutions, LLC., in exchange for 172,075 shares of our common stock owned by the owners of Itada Equities, Inc. and nominal cash consideration ($1.00 dollar).

 

We committed to a formal plan to sell our former Latin America subsidiaries to focus on our US-based operations and development and marketing of our internally developed cybersecurity software. The operating results of our former Latin America subsidiaries are reported within discontinued operations on our condensed consolidated statements of operation through July 1, 2024. As a result of the sale, we recorded a loss on disposal of $4,338,318, which includes the release of associated accumulated translation adjustment from the net assets disposed of.

 

The following table reflects the major classes of assets and liabilities disposed of pursuant to the Arkavia SPA, CUATROi SPA and NLT SPA.

 

   July 1,
2024		 
     
Cash and cash equivalents  $190,567 
Accounts receivable, net   1,261,581 
Inventory   52,511 
Prepaid cost of revenue   3,315,675 
Prepaid expenses and other assets   393,594 
Property and equipment   2,209,044 
Intangible assets, net   184,600 
Goodwill   7,520,046 
Total assets  $15,127,618 
      
Accounts payable and accrued expenses  $6,557,367 
Deferred revenue   3,948,982 
Loans payable   3,489,242 
Total liabilities  $13,995,591 

 

The table below provides the total revenue and loss of the discontinued operations presented in our statements of operations.

 

   2024   2023   2024   2023 
  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
   2024   2023   2024   2023 
                 
Revenue  $-   $5,380,595   $8,387,171   $17,546,812 
                     
Cost of revenue   -    4,770,252    7,092,426    15,287,255 
Operating expenses   -    1,265,951    2,097,362    16,939,183 
Other expense   -    519,245    346,469    746,289 
Loss from discontinued operations before income taxes   -    (1,174,853)   (1,149,086)   (15,425,915)
Benefit from income taxes   -    -    -    435,678 
Gain/(loss) from assets held for sale, net of tax   160,567    -    (3,189,232)   - 
Gain/(loss) from discontinued operations  $160,567   $(1,174,853)  $(4,338,318)  $(14,990,237)

 

Cash flows from operating activities of discontinued operations was $223,831 and $738,860 for the nine months ended September 30, 2024 and 2023, respectively.

 

Cash used in investing activities of discontinued operations was $83,095 and $77,932 for the nine months ended September 30, 2024 and 2023, respectively.

 

vCISO

 

In September 2024, we entered into an Intellectual Property Purchase Agreement in which we sold our wholly-owned subsidiary vCISO, LLC. (“vCISO”), for cash proceeds of $1,000,000. vCISO owns substantially all of our internally developed intellectual property currently marketed to our customers and also being developed for future deployment. As a condition of closing the Intellectual Property Purchase Agreement, we concurrently entered into a License-Back and Buy-Back Agreement which provides us with a perpetual, transferable and royalty-free license to use the intellectual property rights to sell such software to our customers. The license is exclusive for our use for the initial six months of this agreement. In exchange for these rights, we have agreed to continue development of the intellectual property at our own cost.

 

We also retain the right to buy back the intellectual property at a price of $1,500,000, if such right is exercised within six months from the date of the agreement, $1,750,000 if repurchased within six to twelve months, or at an agreed upon purchase price if repurchased after twelve months.

 

vCISO did not hold any assets or liabilities reported in our condensed consolidated financial statements, as a result, we recorded a $1,000,000 gain on the disposition of vCISO.

 

NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consisted of:

 

  

September 30,

2024

  

December 31,

2023

 
Prepaid expenses  $226,348   $146,521 
Prepaid insurance   38,224    59,398 
Total prepaid expenses and other current assets  $264,572   $205,919 

 

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NOTE 5 – PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

  

September 30,

2024

  

December 31,

2023

 
Computer equipment  $414,214   $414,214 
Leasehold improvements   25,791    25,791 
Furniture and fixtures   75,698    75,698 
Software   879,642    879,642 
Property and equipment gross   1,395,345    1,395,345 
Less: accumulated depreciation   (585,483)   (342,708)
Property and equipment, net  $809,862   $1,052,637 

 

Total depreciation expense was $79,481 and $46,992 for the three months ended September 30, 2024 and 2023, respectively and was $242,775 and $138,639 for the nine months ended September 30, 2024 and 2023, respectively.

 

NOTE 6 – INTANGIBLE ASSETS AND GOODWILL

 

Goodwill

 

The following table summarizes the changes in goodwill during the nine months ended September 30, 2024:

 

Balance as of December 31, 2023     
Goodwill  $71,525,609 
Accumulated impairment losses   (51,625,059)
    19,900,550 
      
Balance September 30, 2024     
Goodwill   71,525,609 
Accumulated impairment losses   (51,625,059)
   $19,900,550 

 

Intangible Assets

 

Intangible assets, net are summarized as follows:

 

   Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount 
   September 30, 2024 
   Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount 
Tradenames – trademarks  $3,835,981   $(2,914,386)  $921,595 
Customer base   572,048    (298,311)   273,737 
Non-compete agreements   487,400    (485,198)   2,202 
Intellectual property/technology   2,455,879    (1,459,457)   996,422 
Intangible Asset  $7,351,308   $(5,157,352)  $2,193,956 

 

   Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount 
   December 31, 2023 
   Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount 
Tradenames – trademarks  $3,835,981   $(2,138,946)  $1,697,035 
Customer base   572,048    (245,357)   326,691 
Non-compete agreements   487,400    (450,181)   37,219 
Intellectual property/technology   2,455,879    (970,244)   1,485,635 
Intangible Asset  $7,351,308   $(3,804,728)  $3,546,580 

 

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The weighted average remaining useful life of identifiable amortizable intangible assets is 2.32 years as of September 30, 2024.

 

Amortization of identifiable intangible assets for the three months ended September 30, 2024 and 2023 was $400,905 and $377,210, respectively, and $1,352,624 and $1,427,708 for the nine months ended September 30, 2024 and 2023, respectively.

 

Based on the balance of intangible assets at September 30, 2024, expected future amortization expense is as follows:

 

      
2024 (remainder of)  $391,740 
2025   921,139 
2026   709,464 
2027   73,213 
2028   49,200 
Thereafter   49,200 
Future Amortization Expense  $2,193,956 

 

NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consisted of the following amounts:

 

   September 30,
2024		   December 31,
2023		 
Accounts payable  $5,625,306   $4,766,294 
Accrued payroll and bonuses   1,368,748    1,167,804 
Accrued expenses   1,574,359    1,032,270 
Accrued commissions   45,229    100,000 
Indirect taxes payable   16,851    53,277 
Accrued interest   1,033,567    477,824 
Total accounts payable and accrued expenses  $9,664,060   $7,597,469 

 

Note 8 – RELATED PARTY TRANSACTIONS

 

Independent Consulting Agreement with Stephen Scott

 

In July 2023, we entered into an Independent Consulting Agreement with Stephen Scott, a significant stockholder due to his beneficial ownership, to provide, on a non-exclusive basis, advisory and consulting services relating to our strategic and business development, intellectual property development, banking relationships, and strategic M&A for a period of one year. Mr. Scott will receive a consulting fee of $15,000 per month for such services under the terms of this agreement. During the three months ended September 30, 2024 and 2023, we paid consulting fees to Mr. Scott in the amount of $45,000 and $45,000, respectively, and $135,000 and $114,000 during the nine months ended September 30, 2024 and 2023, respectively.

 

Managed Services Agreement with Hensley Beverage Company – Related Party

 

In July 2021, we entered into a 1-year Managed Services Agreement with Hensley Beverage Company to provide secured managed services. We also may be engaged by Hensley Beverage Company from time to time to provide other related services outside the scope of the Managed Services Agreement. While the agreement provides for a term through December 31, 2021, the agreement will continue until terminated by either party. For the three months ended September 30, 2024 and 2023, we received $385,998 and $416,058, respectively, and for the nine months ended September 30, 2024 and 2023, we received $1,561,911 and $923,150, respectively, from Hensley Beverage Company for contracted services, and had an outstanding receivable balance of zero and $176,944 as of September 30, 2024 and December 31, 2023, respectively. The payments received during the nine months ended September 30, 2024, included a payment of $543,743 for future services, of which $193,734 remains outstanding. Andy McCain, a director of our company, is President and Chief Executive Officer of Hensley & Company, d/b/a Hensley Beverage Company.

 

Convertible Note Payable with Hensley & Company

 

In March 2023, we issued an unsecured convertible note to Hensley & Company in the principal amount of $5,000,000 bearing an interest rate of 10.00% per annum. The principal amount, together with accrued and unpaid interest is due on March 20, 2025. At any time prior to or on the maturity date, Hensley & Company is permitted to convert all or any portion of the outstanding principal amount and all accrued but unpaid interest thereon into shares of our common stock at a conversion price of $18.00 per share. During the three months ended September 30, 2024 and 2023, we recorded interest expense of $125,000, and during the nine months ended September 30, 2024 and 2023, we recorded interest expense of $375,000 and $263,888, respectively. As of September 30, 2024 and December 31, 2023, we had accrued interest of $763,888 and $388,888, respectively. Mr. McCain, a director of our company, is President and Chief Executive Officer of Hensley & Company.

 

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Note 9 – STOCKHOLDERS’ EQUITY

 

Options

 

We granted stock options vesting solely upon the continued service of the recipient. We recognize the accounting grant date fair value of equity-based awards as compensation expense over the required service period of each award.

 

The following table summarizes stock option activity:

 

   Shares  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining

Contractual

Life

(in years)

  

Aggregate

Intrinsic

Value

 
Outstanding at January 1, 2024   2,105,168   $31.63    -    - 
Granted   33,953    1.68    -    - 
Exercised   -    -    -    - 
Expired or cancelled   (588,403)   15.30    -    - 
Outstanding at September 30, 2024   1,550,718   $36.95    4.60   $23,326 
Exercisable at September 30, 2024   1,243,493   $36.73    3.87   $23,326 

 

Total compensation expense related to the options was $2,247,002 and $554,249 for the three months ended September 30, 2024 and 2023, respectively, and $6,904,141 and $9,190,027 for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, there was future compensation expense of $8,179,967 with a weighted average recognition period of 1.17 years related to the options.

 

The weighted-average grant-date fair value of options granted during the three months ended September 30, 2024 was zero. The total intrinsic value of options exercised during the three and nine months ended September 30, 2024, was zero.

 

During the nine months ended September 30, 2024, 257,811 options vested, net of forfeitures.

 

Warrant Activity Summary

 

The following table summarizes warrant activity:

 

   Shares  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining

Contractual

Life

(in years)

  

Aggregate

Intrinsic

Value

 
Outstanding at January 1, 2024   49,614   $17.56    4.12    - 
Granted   -    -    -    - 
Exercised   -    -    -    - 
Expired or cancelled   -    -    -    - 
Outstanding at September 30, 2024   49,614   $17.56    3.37   $- 
Exercisable at September 30, 2024   49,614   $17.56    3.37   $- 

 

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NOTE 10 – COMMITMENTS AND CONTINGENCIES

 

Legal Claims

 

There are no material pending legal proceedings in which we or any of our subsidiaries are a party or in which any of our directors, officers or affiliates, any owner of record or beneficially of more than 5% of any class of our voting securities, or security holder is a party adverse to us or has a material interest adverse to us.

 

Indirect Taxes

 

We are subject to indirect taxation in some, but not all, of the various states and foreign jurisdictions in which we conduct business. Laws and regulations attempting to subject commerce conducted over the Internet to various indirect taxes are becoming more prevalent, both in the U.S. and internationally, and may impose additional burdens on us in the future. Increased regulation could negatively affect our business directly, as well as the business of our customers. Taxing authorities may impose indirect taxes on the Internet-related revenue we generated based on regulations currently being applied to similar, but not directly comparable industries. There are many transactions and calculations where the ultimate indirect tax determination is uncertain. In addition, domestic and international indirect taxation laws are complex and subject to change. We may be audited in the future, which could result in changes to our indirect tax estimates. We continually evaluate those jurisdictions in which nexus exists, and believe we maintain adequate indirect tax accruals.

 

As of September 30, 2024 and December 31, 2023, our accrual for estimated indirect tax liabilities was $16,851 and $53,277, respectively, reflecting our best estimate of the potential liability based on an analysis of our business activities, revenues subject to indirect taxes, and applicable regulations. Although we believe our indirect tax estimates and associated liabilities are reasonable, the final determination of indirect tax audits, litigation, or settlements could be materially different than the amounts established for indirect tax contingencies.

 

Warranties

 

Our services are generally warranted to deliver and operate in a manner consistent with general industry standards that are reasonably applicable and materially conform with our documentation under normal use and circumstances.

 

We offer a limited warranty to certain customers, subject to certain conditions, to cover certain costs incurred by the customer in case of a security breach. We have entered into an insurance policy to cover our potential liability arising from this limited warranty arrangement. We have not incurred any material costs related to such obligations and have not accrued any liabilities related to such obligations in the unaudited condensed consolidated financial statements as of September 30, 2024 and December 31, 2023.

 

In addition, we also indemnify certain of our directors and executive officers against certain liabilities that may arise while they are serving in good faith in their company capacities. We maintain director and officer liability insurance coverage that would generally enable us to recover a portion of any future amounts paid.

 

NOTE 11 – LOANS PAYABLE AND LINES OF CREDIT

 

Loans Payable

 

Loans payable was as follows:

 

    Interest Rate     Maturities     September 30,
2024		     December 31,
2023		  
                         
Term loans     4.00% – 71.55 %     2024 - 2027     $ 2,732,865     $ 1,930,787  
Less, current portion                     (2,686,087 )     (1,856,245 )
Long term loans payable                   $ 46,778     $ 74,542  

 

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Term Loans

 

Various subsidiaries in the United States are borrowers under certain term loans. These term loans require monthly principal and interest payments. These term loans are secured by various assets owned by our subsidiaries. We recorded aggregate interest expense on these term loans of $1,563 and $8,536 for the three months ended September 30, 2024 and 2023, respectively, and $5,558 and $47,015 for the nine months ended September 30, 2024 and 2023, respectively. Accrued interest as of September 30, 2024 and December 31, 2023 was zero. The aggregate effective interest rate of the term loans is 5.70%.

 

In November 2023, we entered into a business loan and security agreement with LendSpark Corporation, pursuant to which we obtained a loan with a principal amount of $2,200,000 and paid an origination fee of $44,000. The business loan bears interest at a rate of 53.44% per annum and is payable in 52 weekly installments of $53,731. We may prepay the loan in whole or in part, but partial repayments do not reduce the total interest payable on the loan, of $594,000. The business loan is secured by all of the assets of our US subsidiaries. The proceeds of the loan were used to repay in full the amount owned under our cash advance agreements that we entered into in March and August 2023. For the three and nine months ended September 30, 2024, we recorded interest expense of zero and $564,529, respectively.

 

In connection with the business loan, we entered into a fee agreement, pursuant to which we issued 133,334 shares (2,000,000 on a pre-reverse split basis) of our common stock as partial consideration for the lender to enter into the business loan and extend credit to us. We recorded the issuance of our common stock as a discount to the business loan, which is amortized using the effective interest method over the term of the loan.

 

On March 28, 2024, under a trouble debt restructuring, we entered into a Business Loan and Security Agreement (the “Loan Agreement” with LendSpark Corporation (the “Lender”), pursuant to which we obtained a restructured loan with a principal amount of $2,200,000 (the “Restructured Loan”) from the Lender. Pursuant to the Loan Agreement, we paid the Lender a $44,000 origination fee. The Restructured Loan bears interest at a rate of 51.73% per annum and is payable in 52 weekly installments of $53,308, commencing on April 5, 2024. We may prepay the Loan in whole or in part, but partial repayments do not reduce the total interest payable on the Loan.

 

Pursuant to the Loan Agreement, we granted the Lender a security interest in all if our assets and the assets of our U.S. subsidiaries (the “Collateral”) that is secondary to the security interest held by Aion. Upon the occurrence of an event of default, the Lender may, among other things, accelerate the Loan and declare all obligations immediately due and payable or take possession of the Collateral.

 

In connection with Restructured Loan, we entered into a Fee Agreement (the “Fee Agreement”) with the Lender pursuant to which we issued 100,000 shares of our common stock, par value $0.00001 per share (the “Shares”) as partial consideration for the Lender’s agreement to enter into the Loan Agreement and extend credit to us. The Fee Agreement contains customary representations, warranties, agreements and obligations of the parties. For the three and nine months ended September 30, 2024, we recorded interest expense of $230,904 and $535,574, respectively.

 

In June 2024, we entered into a Subordinated Business Loan and Security Agreement with Agile Capital Funding, LLC (“Agile”), pursuant to which we obtained a loan with a principal amount of $2,000,000 plus an administrative agent fee paid of $100,000. The Subordinated Business Loan bears an effective interest rate of 147.82% per annum and is payable in 30 weekly installments. The first 4 installments due were $75,000 followed by 26 installments of $103,154. We may prepay the Subordinated Business Loan in whole or in part, but partial repayments do not reduce the total interest payable on the Subordinated Business Loan of $882,000. For the three and nine months ended September 30, 2024, we recorded interest expense of $694,128.

 

Pursuant to the Subordinated Loan Agreement, we granted Agile a security interest in the Collateral that is tertiary to the security interest held by Aion and LendSpark. Upon the occurrence of an event of default, Agile may, among other things, accelerate the Subordinated Business Loan and declare all obligations immediately due and payable or take possession of the Collateral. We may use proceeds from the Subordinated Business Loan for general corporate purposes, which includes working capital, capital expenditures, and repayment of debt.

 

Line of Credit

 

On January 31, 2024, we entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Aion Financial Technologies, Inc. (“Aion”), pursuant to which we may borrow up to $3,500,000. The amount available for borrowing at any one time is limited to 80% of our eligible accounts receivable. The Loan and Security Agreement will bear interest at a rate of 19.25% per annum (based on a 360-day year), payable on the first business day of each month following the accrual thereof. The Loan and Security Agreement, together with accrued and unpaid interest thereon, is due on January 30, 2025 (the “Maturity Date”). Upon providing 30 days written notice we may terminate the Loan and Security Agreement, subject to an early termination fee of $35,000. Upon the occurrence of an “Event of Default” (as defined in the Loan Security Agreement and including the failure to make required payments when due after specified grace periods, certain breaches and certain specified insolvency events), Aion would have the right to accelerate payments due, which from after such acceleration would bear interest at a default rate of 29.25% per annum. The Loan and Security Agreement is secured by our assets.

 

17

 

 

We used proceeds from the Loan and Security Agreement to repay our business loan entered into November 2023 and may use for general corporate purposes, which includes working capital, capital expenditures, and repayment of debt. For the three and nine months ended September 30, 2024, we recorded interest expense of $117,905 and $272,565, respectively. Accrued interest as of September 30, 2024 was zero.

 

Convertible Notes Payable

 

In March 2023, we issued an unsecured convertible note to Hensley & Company in the principal amount of $5,000,000 bearing an interest rate of 10.00% per annum. The principal amount, together with accrued and unpaid interest is due on March 20, 2025. At any time prior to or on the maturity date, Hensley & Company is permitted to convert all or any portion of the outstanding principal amount and all accrued but unpaid interest thereon into shares of our common stock at a conversion price of $18.00 per share. During the three months ended September 30, 2024 and 2023, we recorded interest expense of $125,000, and during the nine months ended September 30, 2024 and 2023, we recorded interest expense of $375,000 and $263,888, respectively. As of September 30, 2024 and December 31, 2023, we had accrued interest of $763,888 and $388,888, respectively. Mr. McCain, a director of our company, is President and Chief Executive Officer of Hensley & Company.

 

In June 2023, we issued an unsecured convertible note in the principal amount of $1,050,000 bearing an interest rate of 10.00% per annum payable monthly. The principal amount, together with accrued and unpaid interest is due on June 7, 2024. At any time prior to or on the maturity date the holder is permitted to convert all of the outstanding principal amount into 4.20% of the authorized units of our then wholly owned subsidiary vCISO, LLC. We recorded interest expense of $34,349 and $27,603 for the three months ended September 30, 2024 and 2023, and $82,809 and $33,083 for the nine months ended September 30, 2024 and 2023, respectively. Accrued interest as of September 30, 2024 and December 31, 2023 was $144,763 and $61,954, respectively.

 

In June 2024, we entered into Amendment #1 to extend the maturity date of the $1,050,000 unsecured convertible note to December 15, 2024. In exchange for an extension of the maturity date, we agreed to repay on September 30, 2024, all accrued, but unpaid interest as of June 30, 2024 on the convertible note. All remaining accrued, but unpaid interest will be due at maturity on December 15, 2024.

 

In October 2023, we issued an unsecured convertible note in the principal amount of $1,000,000 bearing an interest rate of 12.00% per annum payable monthly. The principal amount, together with accrued and unpaid interest is due on October 12, 2024. At any time prior to or on the maturity date the holder is permitted to convert all of the outstanding principal amount into shares of our common stock at a conversion price of $1.7595 per share ($0.1173 on a pre-reverse split basis). We recorded interest expense of $33,476 and $96,791 for the three and nine months ended September 30, 2024. Accrued interest as of September 30, 2024 and December 31, 2023 was $123,774 and $26,983, respectively.

 

In June 2024, we entered into Amendment #1 to extend the maturity date of the $1,000,000 unsecured convertible note to December 15, 2024. In exchange for an extension of the maturity date, we agreed to repay on September 30, 2024, all accrued, but unpaid interest as of June 30, 2024 on the convertible note. All remaining accrued, but unpaid interest will be due at maturity on December 15, 2024.

 

Future minimum payments under the above loans payable and convertible notes payable due as of September 30, 2024 were as follows:

 

      
2024 (remainder of)  $3,753,028 
2025   8,208,945 
2026   33,495 
2027   3,615 
Total future minimum payments   11,999,083 
Less: discount   (82,122)
Total   11,916,961 
Less: current   (11,870,183)
Long term debt, net  $46,778 

 

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NOTE 12 – LEASES

 

We have entered into various non-cancellable operating lease agreements for certain offices. These leases currently have lease periods expiring through 2028. The lease agreements may include one or more options to renew. Renewals were not assumed in our determination of the lease term unless the renewals were deemed to be reasonably assured at lease commencement. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease costs, weighted-average lease term, and discount rates are detailed below.

 

When measuring lease liabilities for leases that were classified as operating leases, we discounted lease payments using our estimated incremental borrowing rate at commencement date of each lease. The weighted average incremental borrowing rate applied was 10.10%. As of September 30, 2024, our leases had a remaining weighted average term of 3.12 years.

 

Operating leases are included in the unaudited condensed consolidated balance sheets as follows:

 

   Classification  September 30,
2024		   December 31,
2023		 
Lease assets             
Operating lease cost ROU assets  Assets  $583,104   $762,228 
Total lease assets     $583,104   $762,228 
              
Lease liabilities             
Operating lease liabilities, current  Current liabilities  $227,911   $219,342 
Operating lease liabilities, non-current  Liabilities   424,018    596,307 
Total lease liabilities     $651,929   $815,649 

 

The components of lease costs, which are included in loss from operations in our unaudited condensed consolidated statements of operations, were as follows:

 

   2024   2023 
  

Nine Months Ended

September 30,

 
   2024   2023 
Leases costs          
Operating lease costs  $221,758   $196,642 
Short term lease cost   36,001    78,307 
Total lease costs  $257,759   $274,949 

 

Future minimum payments under non-cancellable leases for operating leases for the remaining terms of the leases following the nine months ended September 30, 2024 were as follows:

 

Fiscal Year   Operating Leases  
2024 (remainder of)   $ 74,624  
2025     252,513  
2026     199,177  
2027     205,145  
2028     51,896  
Total future minimum lease payments     783,355  
Amount representing interest     (131,426 )
Present value of net future minimum lease payments   $ 651,929  

 

NOTE 13 – CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

 

Our financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents. Although we deposit cash with multiple banks, these deposits, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. These deposits may generally be redeemed upon demand and bear minimal risk.

 

No single customer represented over 10% of our total revenue for any period presented.

 

NOTE 14 – GEOGRAPHIC INFORMATION

 

All of our revenue and property and equipment from continuing operations is located within the U.S.

 

NOTE 15 – ACCUMULATED OTHER COMPREHENSIVE INCOME

 

The following table presents AOCI activity in equity:

 

  

Foreign Currency

Translation

Adjustments

   Total AOCI 
         
Balance as of December 31, 2023  $1,320,177   $1,320,177 
Other comprehensive income   (3,327)   (3,327)
Amounts reclassified from AOCI(1)   (1,320,177)   (1,320,177)
Balance as of September 30, 2024  $(3,327)  $(3,327)

 

(1)Amount reclassified to gain/(loss) from discontinued operations, net of income taxes on the condensed consolidated statements of operations and comprehensive loss.

 

NOTE 16 – SUBSEQUENT EVENTS

 

On November 4 and 12, 2024, we received payments of $105,000 and $600,000, respectively, for future services from Hensley Beverage Company, a related party.

 

19

 

 

ITEM 2. 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 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, 2023.

 

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.

 

Third Quarter 2024 Highlights

 

Our operating results for the nine months ended September 30, 2024 included the following:

 

  ● Total revenue decreased by $2.4 million to $23.3 million for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.
  ● Total gross profit increased to $2.7 million for the nine months ended September 30, 2024, as compared to $1.6 million for the nine months ended September 30, 2023.
  ● Gross profit percentage increased to 11% for the nine months ended September 30, 2024, as compared to 6% for the nine months ended September 30, 2023.
  ● Improved our net loss from continuing operations to $12.7 million for the nine months ended September 30, 2024, as compared to $53.4 million for the nine months ended September 30, 2023.

 

Results of Operations

 

Comparison of the Three Months Ended September 30, 2024 to the Three Months Ended September 30, 2023

 

Our financial results for the three months ended September 30, 2024 are summarized as follows in comparison to the three months ended September 30, 2023:

 

  

Three Months Ended

September 30,

     
   2024   2023   Variance 
Revenue:               
Security managed services  $6,965,518   $7,659,301   $(693,783)
Professional services   437,209    1,025,225    (588,016)
Cybersecurity software   108,570    -    108,570 
Total revenue   7,511,297    8,684,526    (1,173,229)
                
Cost of revenue:               
Security managed services   2,319,234    2,370,100    (50,866)
Professional services   84,947    191,795    (106,848)
Cybersecurity software   29,939    -    29,939 
Cost of payroll   2,982,871    3,934,583    (951,712)
Stock based compensation   1,060,238    317,851    742,387 
Total cost of revenue   6,477,229    6,814,329    (337,100)
Total gross profit   1,034,068    1,870,197    (836,129)
Operating expenses:               
Professional fees   223,149    645,176    (422,027)
Advertising and marketing   1,339    116,314    (114,975)
Selling, general, and administrative   3,083,920    4,395,127    (1,311,207)
Stock-based compensation   1,244,664    677,231    567,433 
Impairment of goodwill   -    -    - 
Total operating expenses   4,553,072    5,833,848    (1,280,776)
                
Loss from operations   (3,519,004)   (3,963,651)   444,647 
Other income (expense):               
Other income (expense)   917,852    253,166    664,686 
Interest expense, net   (1,237,301)   (621,925)   (615,376)
                
Total other income (expense)   (319,449)   (368,759)   49,310 
                
Loss before income taxes  $(3,838,453)  $(4,332,410)  $493,957 

 

20

 

 

Revenue

 

Security managed services revenue decreased by $693,783, or 9%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to lower hardware and software sales.

 

Professional services revenue decreased by $588,016, or 57%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to lower customer projects.

 

Cybersecurity software revenue increased by $108,570, or 100%, for the three months ended September 30, 2024 as compared to the September months ended September 30, 2023, primarily due to the initial launch of our suite of internally developed cybersecurity software products.

 

Expenses

 

Cost of Revenue

 

Security managed services cost of revenue decreased by $50,866, or 2%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to lower hardware and software sales.

 

Professional services cost of revenue decreased by $106,848, or 56%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, due to our decreased use of consultants.

 

Cybersecurity software cost of revenue increased by $29,939, or 100%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to the initial launch of our suite of internally developed cybersecurity software products.

 

Cost of payroll decreased by $951,712, or 24%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to headcount reductions.

 

Stock-based compensation expenses increased by $742,387, or 234%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, due to the timing of the recognition of the reversal of expense for option forfeited by former employees in 2023.

 

Operating Expenses

 

Professional fees decreased by $422,027, or 65%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, due to a decrease in accounting, legal, and other professional fees incurred related to our periodic SEC filings and our efforts to raise additional capital.

 

Advertising and marketing expenses decreased by $114,975, or 99%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, due to utilization of more internal marketing resources.

 

21

 

 

Selling, general, and administrative expenses decreased by $1,311,207, or 30%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to our analysis of our carrying amount of intangible assets being impaired for the three months ended September 30, 2023, reductions in headcount, and lower costs for insurance and lease expenses for the three months ended September 30, 2024.

 

Stock based compensation expenses increased by $567,433, or 84%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, due to the timing of the recognition of the reversal of expense for option forfeited by former employees in 2023.

 

Impairment of goodwill was zero for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, due to our analysis of our carrying amount of goodwill was not impaired in either period.

 

Comparison of the Nine Months Ended September 30, 2024 to the Nine Months Ended September 30, 2023

 

Our financial results for the nine months ended September 30, 2024 are summarized as follows in comparison to the nine months ended September 30, 2023:

 

  

Nine Months Ended

September 30,

     
   2024   2023   Variance 
Revenue:               
Security managed services  $21,204,477   $22,714,377   $(1,509,900)
Professional services   1,835,932    3,055,607    (1,219,675)
Cybersecurity software   304,727    -    304,727 
Total revenue   23,345,136    25,769,984    (2,424,848)
                
Cost of revenue:               
Security managed services   7,207,886    7,552,415    (344,529)
Professional services   375,111    445,583    (70,472)
Cybersecurity software   88,708    -    88,708 
Cost of payroll   9,641,597    12,356,969    (2,715,372)
Stock based compensation   3,357,635    3,783,116    (425,481)
Total cost of revenue   20,670,937    24,138,083    (3,467,146)
Total gross profit   2,674,199    1,631,901    1,042,298 
Operating expenses:               
Professional fees   1,025,410    2,696,815    (1,671,405)
Advertising and marketing   34,099    269,935    (235,836)
Selling, general, and administrative   10,667,794    13,909,737    (3,241,943)
Stock-based compensation   3,604,406    6,421,245    (2,816,839)
Impairment of goodwill   -    31,776,820    (31,776,820)
Total operating expenses   15,331,709    55,074,552    (39,742,843)
                
Loss from operations   (12,657,510)   (53,442,651)   40,785,141 
Other income (expense):               
Other income (expense)   882,934    283,396    599,538 
Interest expense, net   (2,611,067)   (1,528,123)   (1,082,944)
                
Total other income (expense)   (1,728,133)   (1,244,727)   (483,406)
                
Loss before income taxes  $(14,385,643)  $(54,687,378)  $40,301,735 

 

22

 

 

Revenue

 

Security managed services revenue decreased by $1,509,900, or 7%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to lower hardware and software sales.

 

Professional services revenue decreased by $1,219,675, or 40%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to lower customer projects.

 

Cybersecurity software revenue increased by $304,727, or 100%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to the initial launch of our suite of internally developed cybersecurity software products.

 

Expenses

 

Cost of Revenue

 

Security managed services cost of revenue decreased by $344,529, or 5%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to lower hardware and software sales.

 

Professional services cost of revenue decreased by $70,472, or 16%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, due to our decreased use of consultants.

 

Cybersecurity software cost of revenue increased by $87,708, or 100%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to the initial launch of our suite of internally developed cybersecurity software products.

 

Cost of payroll decreased by $2,715,372, or 22%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to headcount reductions.

 

Stock-based compensation expenses decreased by $425,481, or 11%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, due to outstanding option awards becoming fully vested, a decrease in the amount of new stock options awarded to our revenue generating employees, the decline in our share price which produces a lower fair value of our option awards to recognize as stock-based compensation and the timing of the recognition of the reversal of expense for option forfeited by former employees in 2023.

 

Operating Expenses

 

Professional fees decreased by $1,671,405, or 62%, for the nine months ended September 30, 2024 as compared to nine months ended September 30, 2023, due to a decrease in accounting, legal, and other professional fees incurred related to our periodic SEC filings and our efforts to raise additional capital.

 

Advertising and marketing expenses decreased by $235,836, or 87%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, due to utilization of more internal marketing resources.

 

Selling, general, and administrative expenses decreased by $3,241,943, or 23%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to our analysis of our carrying amount of intangible assets being impaired for the nine months ended September 30, 2023, reductions in headcount, and lower costs for insurance and lease expenses for the nine months ended September 30, 2024.

 

Stock based compensation expenses decreased by $2,816,839, or 44%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, due to outstanding option awards becoming fully vested, a decrease in the amount of new stock options awarded to our employees, the decline in our share price which produces a lower fair value of our option awards to recognize as stock-based compensation and the timing of the recognition of the reversal of expense for option forfeited by former employees in 2023.

 

23

 

 

Impairment of goodwill decreased by $31,776,820, or 100%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, due to our analysis of our carrying amount of goodwill being impaired in 2023.

 

Liquidity and Capital Resources

 

The accompanying condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfying liabilities in the normal course of business. For the nine months ended September 30, 2024, we incurred a net loss of $18,723,961 and negative cash flows from operations of $3,582,726 and expect to incur further losses through the end of 2024. In the report accompanying our financial statements for the year ended December 31, 2023, our independent registered public accounting firm stated that our financial statements were prepared assuming that we would continue as a going concern and that they have substantial doubt as to our ability to do so based on our recurring losses from operations and need to raise additional capital. These condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should we be unable to continue as a going concern.

 

As of September 30, 2024, we had $291,190,324 of available funding under our Shelf Registration Statement on Form S-3 from which we may issue our securities to fund current and future operations, assuming there is adequate demand for our securities.

 

Working Capital Deficit

 

Our working capital deficit as of September 30, 2024 in comparison to our working capital deficit as of December 31, 2023, is summarized as follows:

 

   As of 
   September 30,   December 31, 
   2024   2023 
Current assets  $2,998,693   $3,690,125 
Current liabilities   23,029,347    13,094,693 
Working capital deficit  $(20,030,654)  $(9,404,568)

 

The increase in current assets is primarily due to increases in our cash and cash equivalents from borrowings and collection of accounts receivable, offset by a decrease in accounts receivable due to the timing of receipt of customer payments. The increase in current liabilities is primarily due to our $5,000,000 related party convertible note coming due in March 2025, additional borrowings under short-term credit facilities and on our new line of credit, and an increase in accounts payable and accrued expenses.

 

24

 

 

Cash Flows

 

Our cash flows for the nine months ended September 30, 2024 in comparison to our cash flows for the nine months ended September 30, 2023, can be summarized as follows:

 

  

Nine Months ended

September 30,

 
   2024   2023 
Net cash used in operating activities  $(3,582,726)  $(6,704,498)
Net cash provided by/(used in) investing activities   916,905    (135,848)
Net cash provided by financing activities   2,105,679    5,777,702 
Effect of exchange rates on cash and cash equivalents   (59,214)   (39)
Decrease in cash  $(619,356)  $(1,062,683)

 

Operating Activities

 

Net cash used in operating activities was $3,582,726 for the nine months ended September 30, 2024 and was primarily due to cash used to fund a net loss of $18,723,961, adjusted for non-cash expenses in the aggregate of $12,671,400 and additional cash inflow by changes in the levels of operating assets and liabilities, primarily as a result of a decrease in accounts receivables, net, and an increase in deferred revenue. Net cash used in operating activities was $6,704,498 for the nine months ended September 30, 2023 and was primarily due to cash used to fund a net loss of $69,677,615, adjusted for non-cash expenses in the aggregate of $56,748,217 and additional cash inflow by changes in the levels of operating assets and liabilities, primarily as a result of a decrease in accounts receivable and increases in deferred revenue and accounts payable and accrued expenses.

 

Investing Activities

 

Net cash provided by investing activities of $916,905 for the nine months ended September 30, 2024 was primarily due to the sale of our subsidiary vCISO. Net cash used in investing activities of $135,848 for the nine months ended September 30, 2023 was due to purchases of property and equipment.

 

Financing Activities

 

Net cash provided by financing activities for the nine months ended September 30, 2024 was $2,105,679, which was primarily due to cash received from borrowings on our loans payable and lines of credit, net of debt issuance cost, of $6,694,412, offset by $4,743,680 in repayments of our loans payable and lines of credit. Net cash provided by financing activities for the nine months ended September 30, 2023 was $5,777,702, which was primarily due to cash received from the sale of our common stock of $6,682,198, $4,448,641 in net proceeds from our loans payable, and $6,050,000 in proceeds from convertible notes payable, offset by aggregate repayments on loans payable and convertible notes payable of $11,756,420.

 

Based on our current business plan, we believe our cash balance as of the date of this filing, together with anticipated revenues and additional debt or equity financing, will be sufficient to meet our anticipated cash requirement for the near term. Upon obtaining additional debt of equity financing new investors may require that we take the Company private and no longer operate as a publicly traded company. However, there can be no assurance that the current business plan will be achievable. Such conditions raise substantial doubts about our ability to continue as a going concern for one year from the date the condensed consolidated financial statements are issued.

 

Our existence is dependent upon our ability to develop profitable operations. We are devoting substantially all of our efforts to developing our business, reducing overhead costs, and raising capital, although there can be no assurance that our efforts will be successful. No assurance can be given that our actions will result in profitable operations or the resolution of liquidity problems. The accompanying condensed consolidated financial statements do not include any adjustments that might result should we be unable to continue as a going concern.

 

In order to improve our liquidity, in addition to reductions in overhead costs, we are actively pursuing additional debt and/or equity financing through discussions with investment bankers and private investors. There can be no assurance that we will be successful in our efforts to secure additional financing.

 

The financial statements do not include any adjustments relating to the recoverability of assets and the amount or classification of liabilities that might be necessary should we be unable to continue as a going concern.

 

Critical Accounting Policies and Estimates

 

Our critical accounting policies are more fully described in the notes to our condensed consolidated financial statements included herein for the quarter ended September 30, 2024 and in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on April 16, 2024.

 

25

 

 

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 the dates of the financial statements and the reported amounts of revenue and expenses during the periods. Our material estimates and assumptions include the allowance for credit losses, the carrying value of intangible assets and goodwill, deferred tax asset and valuation allowance, the estimated fair value of assets acquired, liabilities assumed and stock issued in business combinations, and assumptions used in the Black-Scholes option pricing model, such as expected volatility, risk-free interest rate, share price, and expected dividend rate. Certain of our estimates, including the carrying amount of intangible assets and goodwill, 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 materially differ from those estimates.

 

Fair Value Measurement

 

The fair value measurement guidance clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in the valuation of an asset or liability. It establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the fair value measurement guidance are described below:

 

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

 

Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; or

 

Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

Intangible Assets

 

Intangible assets are comprised of trademarks, customer bases, non-compete agreements, and intellectual property with original estimated useful lives with a range of 2 to 10 years. Once placed into service, we amortize the cost of intangible assets over their estimated useful lives on a straight-line basis.

 

Goodwill

 

Goodwill represents the excess of the purchase price of the acquired business over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at the reporting unit level at least annually at year end or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and revenue multiple approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit.

 

26

 

 

Impairment of Long-Lived and Intangible Assets

 

We will periodically evaluate the carrying value of long-lived and intangible assets to be held and used when events and circumstances warrant such a review and at least annually. The carrying value of a long-lived and intangible asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived and intangible assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose.

 

Stock-Based Compensation

 

We measure the cost of services received in exchange for an award of equity instruments based on the fair value of the award. The fair value of the award is measured on the grant date. Awards granted to directors are treated on the same basis as awards granted to employees.

 

Revenue Recognition

 

Our agreements with clients are primarily service contracts that range in duration from a few months to one year. We recognize revenue when control of these services is transferred to the client for an amount, referred to as the transaction price, which reflects the consideration to which we are expected to be entitled in exchange for those goods or services.

 

A contract with a client exists only when:

 

  ● the parties to the contract have approved it and are committed to perform their respective obligations;
  ● we can identify each party’s rights regarding the distinct services to be transferred (“performance obligations”);
  ● we can determine the transaction price for the services to be transferred; and
  ● the contract has commercial substance, and it is probable that we will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the client.

 

For the majority of our contracts, we receive non-refundable upfront payments. We do not adjust the promised amount of consideration for the effects of a significant financing component since we expect, at contract inception, that the period between the time of transfer of the promised goods or services to the client and the time the client pays for these goods or services to be generally one year or less. Our credit terms to clients generally average 30 days, although in some cases payments are required in 15 days.

 

We do not disclose the value of unsatisfied performance obligations for contracts with original expected duration of one year or less.

 

Our revenue is categorized and disaggregated as reflected in our statements of operations as follows:

 

Security Managed Services

 

Security managed services revenue primarily consists of compliance, security managed services, SOC managed services, and vCISO. We consider these services to be a single performance obligation, and revenue is recognized as services and materials are provided to the customer.

 

Professional Services

 

Professional services revenue primarily consists of technical assessments, incident response and forensics, training, and other cybersecurity services. We consider these services to be a single performance obligation, and revenue is recognized in the period in which the performance obligations are satisfied.

 

27

 

 

Cybersecurity Software

 

Cybersecurity revenue primarily consists of our internally developed software products CHECKLIGHT Endpoint Security Monitoring, ARGO Security Management, CISO Edge Cloud Security Platform, DISC Net Gen VPN and Skanda Breach Assessment Tool. Each software offering is a single performance obligation, and we begin revenue recognition upon provisioning of our cybersecurity software to our customers and recognize ratably over the duration of the service period. We currently do not bundle our cybersecurity software with other product offerings and as a result, judgment is not required to determine standalone selling price.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Because we are a smaller reporting company, we are not required to provide the information called for by this Item.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

 

In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as September 30, 2024, our disclosure controls and procedures were effective. This does not include an evaluation by our independent registered public accounting firm regarding our internal control over financial reporting.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2024, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are currently not a party to any material legal proceedings.

 

Item 1A. Risk Factors

 

We have disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 16, 2024, risk factors that materially affect our business, financial condition, or results of operations. There have been no material changes from the risk factors previously disclosed.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

In March 2024, we issued 100,000 shares of our common stock to LendSpark Corporation as additional consideration to enter into a loan agreement in which we received gross proceeds of $2,200,000.

 

In July 2024, we issued 100,000 shares of our common stock to Hudson Global Ventures, LLC as consideration for consulting services.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Item 5. Other Information

 

During the quarter ended September 30, 2024, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading agreement” or a “non-Rule 10b5-1 trading agreement” (in each case, defined in Item 408 of Regulation S-K).

 

Item 6. Exhibits

 

        Incorporated by Reference

Exhibit

Number

   Exhibit Description   Form   Exhibit   Filing Date
3.1   Certificate of Amendment of Amended and Restated By-Laws of the Registrant   8-K   3.1   03/07/2024
31.1*   Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer            
31.2*   Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer            
32.1   Section 1350 Certification of Principal Executive Officer            
32.2   Section 1350 Certification of Principal Financial Officer            
101.INS*   Inline XBRL Instance Document            
101.SCH*   Inline XBRL Taxonomy Extension Schema Document            
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase Document            
101.DEF*   Inline XBRL Taxonomy Extension Definition Linkbase Document            
101.LAB*   Inline XBRL Taxonomy Extension Label Linkbase Document            
101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase Document            
104*   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)            

 

*Filed herewith.

#Management contracts and compensatory plans and arrangements.

 

29

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CISO GLOBAL, INC.  
     
By: /s/ David G. Jemmett  
  David G. Jemmett  
  Chief Executive Officer  
  (Principal Executive Officer)  
Date: November 18, 2024  
     
By: /s/ Debra L. Smith  
  Debra L. Smith  
  Chief Financial Officer  
  (Principal Financial Officer and Principal Accounting Officer)  
Date: November 18, 2024  

 

30

 

 

Exhibit 31.1

 

CISO GLOBAL, INC.

CERTIFICATE PURSUANT TO SECTION 302

 

I, David G. Jemmett, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of CISO Global, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

  (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
  (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
  (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
  (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
  (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

By: /s/ David G. Jemmett  
  David G. Jemmett  
  Chief Executive Officer  
  (Principal Executive Officer)  
Date: November 18, 2024  

 

 

 

 

Exhibit 31.2

 

CISO GLOBAL, INC.

CERTIFICATE PURSUANT TO SECTION 302

 

I, Debra L. Smith, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of CISO Global, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

  (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
  (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
  (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
  (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
  (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

By: /s/ Debra L. Smith  
  Debra L. Smith  
  Chief Financial Officer  
  (Principal Financial Officer and Principal Accounting Officer)  
Date: November 18, 2024  

 

 

 

 

Exhibit 32.1

 

CISO GLOBAL, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with this Quarterly Report on Form 10-Q of CISO Global, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

 

By: /s/ David G. Jemmett  
  David G. Jemmett  
  Chief Executive Officer  
  (Principal Executive Officer)  
Date: November 18, 2024  

 

This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of CISO Global, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.

 

 

 

 

Exhibit 32.2

 

CISO GLOBAL, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with this Quarterly Report on Form 10-Q of CISO Global, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to her knowledge:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

 

By: /s/ Debra L. Smith  
  Debra L. Smith  
  Chief Financial Officer  
  (Principal Financial Officer and Principal Accounting Officer)  
Date: November 18, 2024  

 

This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of CISO Global, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.

 

 

 

v3.24.3
Cover - shares
 9 Months Ended
Sep. 30, 2024
Nov. 15, 2024
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Sep. 30, 2024  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2024  
Current Fiscal Year End Date --12-31  
Entity File Number 001-41227  
Entity Registrant Name CISO GLOBAL, INC.  
Entity Central Index Key 0001777319  
Entity Tax Identification Number 83-4210278  
Entity Incorporation, State or Country Code DE  
Entity Address, Address Line One 6900 E. Camelback Road  
Entity Address, Address Line Two Suite 900  
Entity Address, City or Town Scottsdale  
Entity Address, State or Province AZ  
Entity Address, Postal Zip Code 85251  
City Area Code (480)  
Local Phone Number 389-3444  
Title of 12(b) Security Common Stock, $0.00001 par value  
Trading Symbol CISO  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Elected Not To Use the Extended Transition Period false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   11,821,866
v3.24.3
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Current Assets:    
Cash and cash equivalents $ 443,086 $ 241,643
Accounts receivable, net 1,893,094 2,800,209
Prepaid cost of revenue 174,930 244,698
Prepaid expenses and other current assets 264,572 205,919
Contract asset 223,011 197,656
Assets of business held for sale 22,600,715
Total Current Assets 2,998,693 26,290,840
Property and equipment, net 809,862 1,052,637
Right of use asset, net 583,104 762,228
Intangible assets, net 2,193,956 3,546,580
Goodwill 19,900,550 19,900,550
Prepaid cost of revenue, net of current portion 70,736 32,375
Other assets 70,173 70,173
Total Assets 26,627,074 51,655,383
Current Liabilities:    
Accounts payable and accrued expenses 9,664,060 7,597,469
Deferred revenue 1,267,193 1,371,637
Lease liability 227,911 219,342
Loans payable 2,686,087 1,856,245
Line of credit 2,134,096
Liabilities of business held for sale 16,666,096
Total Current Liabilities 23,029,347 29,760,789
Long-term Liabilities:    
Deferred revenue, net of current portion 86,694 84,294
Loans payable, net of current portion 46,778 74,542
Convertible notes payable, related party 5,000,000
Lease liability, net of current portion 424,018 596,307
Total Liabilities 23,586,837 35,515,932
Commitments and Contingencies
Stockholders’ Equity:    
Common stock, $.00001 par value; 300,000,000 shares authorized; 11,821,866 and 11,949,959 issued and outstanding at September 30, 2024 and December 31, 2023, respectively 123 119
Preferred stock, $.00001 par value; 50,000,000 shares authorized; 0 shares issued and outstanding on September 30, 2024 and December 31, 2023, respectively
Additional paid-in capital 180,076,826 172,837,842
Treasury stock, at cost (502,137 and zero shares) (290,737)
Accumulated translation adjustment (3,327) 1,320,177
Accumulated deficit (176,742,648) (158,018,687)
Total Stockholders’ Equity 3,040,237 16,139,451
Total Liabilities and Stockholders’ Equity 26,627,074 51,655,383
Nonrelated Party [Member]    
Current Liabilities:    
Convertible notes payable 2,050,000 2,050,000
Related Party [Member]    
Current Liabilities:    
Convertible notes payable $ 5,000,000
v3.24.3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Sep. 30, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Common stock, par value $ 0.00001 $ 0.00001
Common stock, shares authorized 300,000,000 300,000,000
Common stock, shares issued 11,821,866 11,949,959
Common stock, shares outstanding 11,821,866 11,949,959
Preferred stock, par value $ 0.00001 $ 0.00001
Preferred stock, shares authorized 50,000,000 50,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Treasury stock, common shares 502,137 0
v3.24.3
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Revenue:        
Total revenue $ 7,511,297 $ 8,684,526 $ 23,345,136 $ 25,769,984
Cost of revenue:        
Total cost of revenue 6,477,229 6,814,329 20,670,937 24,138,083
Total gross profit 1,034,068 1,870,197 2,674,199 1,631,901
Operating expenses:        
Professional fees 223,149 645,176 1,025,410 2,696,815
Advertising and marketing 1,339 116,314 34,099 269,935
Selling, general and administrative 3,083,920 4,395,127 10,667,794 13,909,737
Stock based compensation 1,244,664 677,231 3,604,406 6,421,245
Impairment of goodwill 31,776,820
Total operating expenses 4,553,072 5,833,848 15,331,709 55,074,552
Loss from operations (3,519,004) (3,963,651) (12,657,510) (53,442,651)
Other income (expense):        
Other income (expense) 917,852 253,166 882,934 283,396
Interest expense, net (1,237,301) (621,925) (2,611,067) (1,528,123)
Total other income (expense) (319,449) (368,759) (1,728,133) (1,244,727)
Loss from continuing operations before income taxes (3,838,453) (4,332,410) (14,385,643) (54,687,378)
Benefit from income taxes
Loss from continuing operations (3,838,453) (4,332,410) (14,385,643) (54,687,378)
Gain/(loss) from discontinued operations, net of income taxes [1] 160,567 (1,174,853) (4,338,318) (14,990,237)
Net Loss (3,677,886) (5,507,263) (18,723,961) (69,677,615)
Foreign currency translation adjustment (680) (1,392,395) (3,327) 228,331
Comprehensive loss $ (3,678,566) $ (6,899,658) $ (18,727,288) $ (69,449,284)
Continuing operations, basic $ (0.33) $ (0.37) $ (1.20) $ (5.04)
Continuing operations, diluted (0.33) (0.37) (1.20) (5.04)
Discontinuing operations, basic 0.01 (0.10) (0.36) (1.38)
Discontinued operations, diluted 0.01 (0.10) (0.36) (1.38)
Net loss per common share - basic (0.32) (0.47) (1.56) (6.42)
Net loss per common share - diluted $ (0.32) $ (0.47) $ (1.56) $ (6.42)
Weighted average shares outstanding - basic 11,693,367 11,809,741 12,001,220 10,856,255
Weighted average shares outstanding - diluted 11,693,367 11,809,741 12,001,220 10,856,255
Security Managed Services [Member]        
Revenue:        
Total revenue $ 6,965,518 $ 7,659,301 $ 21,204,477 $ 22,714,377
Cost of revenue:        
Total cost of revenue 2,319,234 2,370,100 7,207,886 7,552,415
Professional Services [Member]        
Revenue:        
Total revenue 437,209 1,025,225 1,835,932 3,055,607
Cost of revenue:        
Total cost of revenue 84,947 191,795 375,111 445,583
Cybersecurity Software [Member]        
Revenue:        
Total revenue 108,570 304,727
Cost of revenue:        
Total cost of revenue 29,939 88,708
Cost of Payroll [Member]        
Cost of revenue:        
Total cost of revenue 2,982,871 3,934,583 9,641,597 12,356,969
Stock Based Compensation [Member]        
Cost of revenue:        
Total cost of revenue $ 1,060,238 $ 317,851 $ 3,357,635 $ 3,783,116
[1] Includes recognized loss on disposal of $3,189,232 for the nine months ended September 30, 2024
v3.24.3
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (Parenthetical)
 9 Months Ended
Sep. 30, 2024
USD ($)
Income Statement [Abstract]  
Loss on disposal $ 3,189,232
v3.24.3
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)
Common Stock [Member]
Preferred Stock [Member]
Additional Paid-in Capital [Member]
Treasury Stock, Common [Member]
AOCI Attributable to Parent [Member]
Retained Earnings [Member]
Total
Balance at Dec. 31, 2022 $ 97 $ 153,170,351 $ 1,062,247 $ (77,787,604) $ 76,445,091
Balance, shares at Dec. 31, 2022 9,697,921          
Stock based compensation - stock options 9,190,027 9,190,027
Stock based compensation - common stock $ 2 733,498 733,500
Stock based compensation - common stock, shares 233,333            
Stock issued for cash $ 18 6,682,180 6,682,198
Stock issued for cash, shares 1,782,658            
Foreign currency translation 228,331 228,331
Net loss (69,677,615) (69,677,615)
Exercise of options $ 1 491,852 491,853
Exercise of options, shares 69,378            
Stock issued for SB Cyber acquisition 99,000 99,000
Stock issued for acquisition, shares 33,335            
Balance at Sep. 30, 2023 $ 118 170,366,908 1,290,578 (147,465,219) 24,192,385
Balance, shares at Sep. 30, 2023 11,816,625          
Balance at Dec. 31, 2023 $ 119 172,837,842 1,320,177 (158,018,687) 16,139,451
Balance, shares at Dec. 31, 2023 11,949,959          
Stock based compensation - stock options 6,904,141 6,904,141
Stock based compensation - common stock $ 1 57,899 57,900
Stock based compensation - common stock, shares 100,000            
Stock issued for cash $ 2 154,945 154,947
Stock issued for cash, shares 126,688            
Stock issued as lending discount $ 1 121,999 122,000
Stock issued as lending discount, shares 100,000            
Stock adjustment after reverse stock split
Stock adjustment after reverse stock split, shares 47,356            
Repurchase of treasury stock related to disposition of assets (290,737) (290,737)
Foreign currency translation (3,327) (3,327)
Reclassification of foreign currency translation to net loss (1,320,177) [1] (1,320,177)
Net loss (18,723,961) (18,723,961)
Balance at Sep. 30, 2024 $ 123 $ 180,076,826 $ (290,737) $ (3,327) $ (176,742,648) $ 3,040,237
Balance, shares at Sep. 30, 2024 12,324,003          
[1] Amount reclassified to gain/(loss) from discontinued operations, net of income taxes on the condensed consolidated statements of operations and comprehensive loss.
v3.24.3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Cash flows from operating activities:    
Net loss $ (18,723,961) $ (69,677,615)
Adjustments to reconcile net loss to net cash used in operating activities:    
Stock based compensation - stock options 6,904,141 9,190,027
Stock based compensation - common stock 57,900 733,500
Depreciation and amortization 1,949,506 2,411,989
Right of use amortization 179,124 165,291
Other 391,497 93,199
Impairment of intangible assets 3,116,039
Impairment of goodwill 41,038,172
Loss on assets held for sale 3,189,232
Gain on sale of vCISO (1,000,000)
Changes in operating assets and liabilities:    
Accounts receivable, net 2,367,571 1,689,837
Inventory 161,586 (66,296)
Contract assets (25,355) 67,440
Prepaids and other current assets 166,631 (232,829)
Accounts payable and accrued expenses 667,381 4,650,420
Lease liability (163,720) (307,816)
Deferred revenue 295,741 424,144
Net cash used in operating activities (3,582,726) (6,704,498)
Cash flows from investing activities:    
Cash acquired in acquisitions, net 30,430
Cash received from sale of vCISO 1,000,000
Purchases of property and equipment (83,095) (166,278)
Net cash provided by/(used in) investing activities 916,905 (135,848)
Cash flows from financing activities:    
Proceeds from sale of common stock 154,947 6,682,198
Proceeds from stock option exercise 491,853
Proceeds from loan payable 4,273,823 4,448,641
Proceeds from convertible notes payable, related party 5,000,000
Proceeds from convertible note payable 1,050,000
Proceeds from lines of credit 2,564,589 173,477
Payment on lines of credit (466,555) (174,547)
Payment on loans payable (4,277,125) (9,206,420)
Payment of convertible note payable (2,550,000)
Payment of debt issuance cost (144,000) (137,500)
Net cash provided by financing activities 2,105,679 5,777,702
Effect of exchange rates on cash and cash equivalents (59,214) (39)
Net decrease in cash and cash equivalents (619,356) (1,062,683)
Total cash and cash equivalents, beginning of period 1,062,442 1,833,163
Total cash and cash equivalents, end of period 443,086 770,480
Reconciliation of cash and cash equivalents to the condensed consolidated financial statements    
Cash from continuing operations 241,643 1,404,075
Cash from discontinued operations 820,799 429,088
Cash from continuing operations 443,086 588,504
Cash from discontinued operations 181,976
Cash paid for:    
Interest 1,780,035 2,904,020
Income taxes
Supplemental disclosure of non-cash transactions:    
Operating lease assets obtained in exchange for operating lease obligations 733,782
Common stock issued in SB Cyber acquisition 99,000
Common stock issued as a lending discount $ 122,000
v3.24.3
Pay vs Performance Disclosure - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Pay vs Performance Disclosure [Table]        
Net Income (Loss) $ (3,677,886) $ (5,507,263) $ (18,723,961) $ (69,677,615)
v3.24.3
Insider Trading Arrangements
 3 Months Ended
Sep. 30, 2024
Insider Trading Arrangements [Line Items]  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
v3.24.3
ORGANIZATION OF BUSINESS AND GOING CONCERN
 9 Months Ended
Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
ORGANIZATION OF BUSINESS AND GOING CONCERN

NOTE 1 – ORGANIZATION OF BUSINESS AND GOING CONCERN

 

Description of the Business

 

We are a cybersecurity, compliance and software company comprised of highly trained and seasoned security professionals who work with clients to enhance or create a better cyber posture in their organization. We provide a full range of cybersecurity consulting, related services and cybersecurity software, encompassing all three pillars of compliance, cybersecurity, and culture. Our services include secured managed services, compliance services, security operations center (“SOC”) services, virtual Chief Information Security Officer (“vCISO”) services, incident response, certified forensics, technical assessments, and cybersecurity training. We believe that culture is the foundation of every successful cybersecurity and compliance program. To deliver that outcome, we developed our unique offering of MCCP+ (“Managed Compliance & Cybersecurity Provider + Culture”), which is a holistic solution that provides all three of these pillars under one roof from a dedicated team of subject matter experts. In contrast to the majority of cybersecurity firms that are focused on a specific technology or service, we seek to differentiate ourselves by remaining technology agnostic, focusing on accumulating highly sought-after topic experts. 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 bringing together a world-class team of technological experts with multi-faceted expertise in the 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, thereby setting us apart from competitors and in-house security teams. 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.

 

Basis of Presentation

 

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), the instructions to Form 10-Q pursuant to regulations of the SEC, and include our accounts and the accounts of our subsidiaries. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although, we believe that the disclosures made are adequate to make the information not misleading. All material intercompany accounts and transactions have been eliminated.

 

Our interim financial statements are unaudited, and in our opinion, include all adjustments of a normal recurring nature necessary for the fair presentation of the periods presented. The results for the interim periods are not necessarily indicative of the results to be expected for any subsequent period or for the year ending December 31, 2024. These unaudited condensed consolidated financial statements and related notes should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2023.

 

Going Concern

 

The accompanying 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. However, due to losses incurred, substantial doubt about our ability to continue as a going concern exists.

 

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, which may result in us taking the Company private and no longer operating as a publicly traded company, and restructuring operations to grow revenues and decrease expenses. However, we may be unable to access further equity or debt financing when needed. As such, there can be no assurance that we will be able to obtain additional liquidity when needed or under acceptable terms, if at all.

 

 

The ability for us to continue as a going concern is dependent upon our ability to successfully accomplish the plan and eventually attain profitable operations. The condensed consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if we are unable to continue as a going concern.

 

Reclassifications

 

Reclassifications of certain immaterial prior period amounts have been made to conform to the current period presentation.

 

Use of Estimates

 

GAAP requires management to make estimates and assumptions that affect the reported amounts in our unaudited condensed consolidated financial statements. We periodically evaluate our estimates and adjust prospectively, if necessary. We believe our estimates and assumptions are reasonable; however, actual results could materially differ.

 

We believe the critical accounting policies discussed below affect our more significant judgments and estimates used in the preparation of the accompanying unaudited condensed consolidated financial statements. Material estimates include the allowance for credit losses, the carrying value of intangible assets and goodwill, deferred tax asset and valuation allowance, the estimated fair value of assets acquired, liabilities assumed and stock issued in business combinations, and assumptions used in the Black-Scholes option pricing model, such as expected volatility, risk-free interest rate, share price, and expected dividend rate.

 
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Revenue

 

Our revenue is derived from three major types of services to clients: security managed services, professional services and software. With respect to security managed services, we provide culture education and enablement, tools and technology provisioning, data and privacy monitoring, regulations and compliance monitoring, remote infrastructure administration, and cybersecurity services, including, but not limited to, antivirus and patch management. With respect to professional services, we provide cybersecurity consulting, compliance auditing, vulnerability assessment and penetration testing, and disaster recovery and data backup solutions.

 

Our revenue is categorized and disaggregated as reflected in our unaudited condensed consolidated statement of operations as follows:

 

Security Managed Services

 

Security managed services revenue primarily consists of risk compliance, cyber defense operations, and secured managed services. We consider these services to be a single performance obligation, and revenue is recognized as services and materials are provided to the customer.

 

Professional Services

 

Professional services revenue primarily consists of security testing and training, and incident response and digital forensics. We consider these services to be a single performance obligation, and revenue is recognized in the period in which the performance obligations are satisfied.

 

Cybersecurity Software

 

Cybersecurity software revenue primarily consists of our internally developed cybersecurity software designed to provide a security management platform, protect users from untrusted and malicious online threats, provide proactive security monitoring, and deliver continuous security assessments. We consider these services to be a single performance obligation, and revenue is recognized in the period in which the performance obligations are satisfied.

 

 

Accounts Receivable

 

Accounts receivable are reported at their outstanding unpaid principal balances, net of allowances for credit losses. We periodically assess our accounts and other receivables for collectability on a specific identification basis. We provide for allowances for credit losses based on management’s estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate. Payments are generally due within 30 days of invoice. We write-off accounts receivable against the allowance for credit losses when a balance is determined to be uncollectible. As of September 30, 2024 and December 31, 2023, our allowance for credit losses was $178,477 and $219,141, respectively.

 

Reverse Stock Split

 

On February 29, 2024, our board of directors approved a 1-for-15 reverse stock split of our common stock. The record date for the reverse stock split was the close of business on March 7, 2024, with share distribution occurring on March 8, 2024. As a result of the reverse stock split, stockholders received one share of CISO Global, Inc. common stock, par value $0.00001, for each 15 shares they held as of the record date. All share and per share amounts have been retroactively restated for the effects of this reverse stock split. Common stock underlying our outstanding warrants, convertible notes, and options have also been adjusted, and the conversion and exercise prices have also been adjusted.

 

Net Loss per Common Share

 

Net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. For dilutive securities, all outstanding options and warrants are considered potentially outstanding common stock. The dilutive effect, if any, of stock options is calculated using the treasury stock method. All outstanding convertible notes are considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method. Since the effect of common stock equivalents are anti-dilutive with respect to losses, the options, warrants and shares issuable upon conversion thereof have been excluded from our computation of net loss per common share for the three and nine months ended September 30, 2024 and 2023.

 

Our shares of outstanding common stock and earnings per share calculation have been retroactively restated for all periods presented to reflect our 1-for-15 reverse stock split. The following tables summarize the securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive due to our net loss position even though the exercise price could be less than the average market price of the common shares:

  

   September 30,
2024		   September 30,
2023		 
Stock options   1,550,718    2,254,697 
Warrants   49,614    49,614 
Convertible debt   888,560    277,778 
Total   2,488,892    2,582,089 

 

Deferred Revenue

 

Deferred revenue primarily consists of billings or payments received from customers in advance of revenue recognized for the services provided to our customers or annual licenses and is recognized as services are performed or ratably over the life of the license. We generally invoice customers in advance or in milestone-based installments.

 

Deferred revenue consisted of the following:

  

  

September 30,

2024

   December 31,
2023		 
Current:          
Security managed services  $660,962   $578,941 
Professional services   483,098    792,696 
Cybersecurity software   123,133    - 
Total deferred revenue - current  $1,267,193   $1,371,637 
Long-term:          
Security managed services  $86,694   $84,294 
Total deferred revenue – long term  $86,694   $84,294 

 

 

The increase in the deferred revenue balance is primarily driven by payments received in advance of satisfying our performance obligations, offset by $1,212,483 of revenue recognized during 2024, which was included in the deferred revenue balance as of December 31, 2023. The deferred revenue balance as of September 30, 2024 represents our remaining performance obligations that will be recognized as revenue over the period in which the performance obligations are satisfied, and is expected to be recognized in revenue as follows:

  

   Remainder of 2024   2025   2026   2027   2028   Thereafter   Total 
Security managed services  $309,196   $364,770   $44,751   $20,563   $5,290   $3,086   $747,656 
Professional services   483,098    -    -    -    -    -    483,098 
Cybersecurity software   71,566    51,567    -    -    -    -    123,133 
Total deferred revenue  $863,860   $416,337   $44,751   $20,563   $5,290   $3,086   $1,353,887 

 

Income Taxes

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities, including tax loss and credit carry forwards, are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

We utilize ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the unaudited condensed consolidated financial statements or tax returns. We account for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely than not” that a deferred tax asset will not be realized. At September 30, 2024, our net deferred tax asset has been fully reserved.

 

For uncertain tax positions that meet a “more likely than not” threshold, we recognize the benefit of uncertain tax positions in the unaudited condensed consolidated financial statements. Our practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the unaudited condensed consolidated statements of operations when a determination is made that such expense is likely.

 

Recent Accounting Pronouncements

 

In November 2023, the Financial Standards Accounting Board (FASB) issued guidance to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. This update is effective for our 2024 fiscal year and interim periods in fiscal year 2025, with early adoption permitted. We are currently evaluating the impact that the adoption of this standard will have on our condensed consolidated financial statements.

 

In December 2023, the FASB issued guidance to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this guidance require additional disclosures about income taxes, primarily focused on the disclosures of income taxes paid and the rate reconciliation table. The new guidance will be effective for the 2025 fiscal year, with early adoption permitted. We are currently evaluating the impact of this standard on our disclosures within our consolidated financial statements.

 

 
v3.24.3
DISPOSITIONS
 9 Months Ended
Sep. 30, 2024
Discontinued Operations and Disposal Groups [Abstract]  
DISPOSITIONS

NOTE 3 – DISPOSITIONS

 

Latin America

 

On July 1, 2024, we entered into a stock purchase agreement with Southford Equities, Inc. (the “Arkavia SPA”) to sell 100% of the outstanding shares of our wholly owned subsidiary Ocean Point Equities, Inc., in exchange for 194,267 shares of our common stock owned by the owners of Southford Equities, Inc. and nominal cash consideration ($1.00 dollar).

 

On July 1, 2024, we entered into a stock purchase agreement with CT Group, LP, Datadeck LP, Woodface, LP, VMT Technologies, LP and Quijote Ventures, LP (the “CUATROi SPA”) to sell 100% of the outstanding shares of our wholly owned subsidiaries Servicios Informaticos CUATROi SpA, Comercializadora CUATROi SpA, CUATROi Peru, SAC, and CUATROi SAS, in exchange for 135,795 shares of our common stock owned by the owners of CT Group, LP, Datadeck LP, Woodface, LP, VMT Technologies, LP and Quijote Ventures, LP and nominal cash consideration ($5.00 dollars).

 

On July 1, 2024, we entered into a stock purchase agreement with Itada Equities, Inc. (the “NLT SPA”) to sell 100% of the outstanding shares of our wholly owned subsidiaries NLT Networks, S.P.A., NLT Technologias, Limitada, NLT Servicios Profesionales, S.P.A. and White and Blue Solutions, LLC., in exchange for 172,075 shares of our common stock owned by the owners of Itada Equities, Inc. and nominal cash consideration ($1.00 dollar).

 

We committed to a formal plan to sell our former Latin America subsidiaries to focus on our US-based operations and development and marketing of our internally developed cybersecurity software. The operating results of our former Latin America subsidiaries are reported within discontinued operations on our condensed consolidated statements of operation through July 1, 2024. As a result of the sale, we recorded a loss on disposal of $4,338,318, which includes the release of associated accumulated translation adjustment from the net assets disposed of.

 

The following table reflects the major classes of assets and liabilities disposed of pursuant to the Arkavia SPA, CUATROi SPA and NLT SPA.

 

   July 1,
2024		 
     
Cash and cash equivalents  $190,567 
Accounts receivable, net   1,261,581 
Inventory   52,511 
Prepaid cost of revenue   3,315,675 
Prepaid expenses and other assets   393,594 
Property and equipment   2,209,044 
Intangible assets, net   184,600 
Goodwill   7,520,046 
Total assets  $15,127,618 
      
Accounts payable and accrued expenses  $6,557,367 
Deferred revenue   3,948,982 
Loans payable   3,489,242 
Total liabilities  $13,995,591 

 

The table below provides the total revenue and loss of the discontinued operations presented in our statements of operations.

 

   2024   2023   2024   2023 
  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
   2024   2023   2024   2023 
                 
Revenue  $-   $5,380,595   $8,387,171   $17,546,812 
                     
Cost of revenue   -    4,770,252    7,092,426    15,287,255 
Operating expenses   -    1,265,951    2,097,362    16,939,183 
Other expense   -    519,245    346,469    746,289 
Loss from discontinued operations before income taxes   -    (1,174,853)   (1,149,086)   (15,425,915)
Benefit from income taxes   -    -    -    435,678 
Gain/(loss) from assets held for sale, net of tax   160,567    -    (3,189,232)   - 
Gain/(loss) from discontinued operations  $160,567   $(1,174,853)  $(4,338,318)  $(14,990,237)

 

Cash flows from operating activities of discontinued operations was $223,831 and $738,860 for the nine months ended September 30, 2024 and 2023, respectively.

 

Cash used in investing activities of discontinued operations was $83,095 and $77,932 for the nine months ended September 30, 2024 and 2023, respectively.

 

vCISO

 

In September 2024, we entered into an Intellectual Property Purchase Agreement in which we sold our wholly-owned subsidiary vCISO, LLC. (“vCISO”), for cash proceeds of $1,000,000. vCISO owns substantially all of our internally developed intellectual property currently marketed to our customers and also being developed for future deployment. As a condition of closing the Intellectual Property Purchase Agreement, we concurrently entered into a License-Back and Buy-Back Agreement which provides us with a perpetual, transferable and royalty-free license to use the intellectual property rights to sell such software to our customers. The license is exclusive for our use for the initial six months of this agreement. In exchange for these rights, we have agreed to continue development of the intellectual property at our own cost.

 

We also retain the right to buy back the intellectual property at a price of $1,500,000, if such right is exercised within six months from the date of the agreement, $1,750,000 if repurchased within six to twelve months, or at an agreed upon purchase price if repurchased after twelve months.

 

vCISO did not hold any assets or liabilities reported in our condensed consolidated financial statements, as a result, we recorded a $1,000,000 gain on the disposition of vCISO.

 
v3.24.3
PREPAID EXPENSES AND OTHER CURRENT ASSETS
 9 Months Ended
Sep. 30, 2024
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
PREPAID EXPENSES AND OTHER CURRENT ASSETS

NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consisted of:

 

  

September 30,

2024

  

December 31,

2023

 
Prepaid expenses  $226,348   $146,521 
Prepaid insurance   38,224    59,398 
Total prepaid expenses and other current assets  $264,572   $205,919 

 

 
v3.24.3
PROPERTY AND EQUIPMENT
 9 Months Ended
Sep. 30, 2024
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT

NOTE 5 – PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

  

September 30,

2024

  

December 31,

2023

 
Computer equipment  $414,214   $414,214 
Leasehold improvements   25,791    25,791 
Furniture and fixtures   75,698    75,698 
Software   879,642    879,642 
Property and equipment gross   1,395,345    1,395,345 
Less: accumulated depreciation   (585,483)   (342,708)
Property and equipment, net  $809,862   $1,052,637 

 

Total depreciation expense was $79,481 and $46,992 for the three months ended September 30, 2024 and 2023, respectively and was $242,775 and $138,639 for the nine months ended September 30, 2024 and 2023, respectively.

 
v3.24.3
INTANGIBLE ASSETS AND GOODWILL
 9 Months Ended
Sep. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
INTANGIBLE ASSETS AND GOODWILL

NOTE 6 – INTANGIBLE ASSETS AND GOODWILL

 

Goodwill

 

The following table summarizes the changes in goodwill during the nine months ended September 30, 2024:

 

Balance as of December 31, 2023     
Goodwill  $71,525,609 
Accumulated impairment losses   (51,625,059)
    19,900,550 
      
Balance September 30, 2024     
Goodwill   71,525,609 
Accumulated impairment losses   (51,625,059)
   $19,900,550 

 

Intangible Assets

 

Intangible assets, net are summarized as follows:

 

   Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount 
   September 30, 2024 
   Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount 
Tradenames – trademarks  $3,835,981   $(2,914,386)  $921,595 
Customer base   572,048    (298,311)   273,737 
Non-compete agreements   487,400    (485,198)   2,202 
Intellectual property/technology   2,455,879    (1,459,457)   996,422 
Intangible Asset  $7,351,308   $(5,157,352)  $2,193,956 

 

   Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount 
   December 31, 2023 
   Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount 
Tradenames – trademarks  $3,835,981   $(2,138,946)  $1,697,035 
Customer base   572,048    (245,357)   326,691 
Non-compete agreements   487,400    (450,181)   37,219 
Intellectual property/technology   2,455,879    (970,244)   1,485,635 
Intangible Asset  $7,351,308   $(3,804,728)  $3,546,580 

 

 

The weighted average remaining useful life of identifiable amortizable intangible assets is 2.32 years as of September 30, 2024.

 

Amortization of identifiable intangible assets for the three months ended September 30, 2024 and 2023 was $400,905 and $377,210, respectively, and $1,352,624 and $1,427,708 for the nine months ended September 30, 2024 and 2023, respectively.

 

Based on the balance of intangible assets at September 30, 2024, expected future amortization expense is as follows:

 

      
2024 (remainder of)  $391,740 
2025   921,139 
2026   709,464 
2027   73,213 
2028   49,200 
Thereafter   49,200 
Future Amortization Expense  $2,193,956 

 
v3.24.3
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
 9 Months Ended
Sep. 30, 2024
Payables and Accruals [Abstract]  
ACCOUNTS PAYABLE AND ACCRUED EXPENSES

NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consisted of the following amounts:

 

   September 30,
2024		   December 31,
2023		 
Accounts payable  $5,625,306   $4,766,294 
Accrued payroll and bonuses   1,368,748    1,167,804 
Accrued expenses   1,574,359    1,032,270 
Accrued commissions   45,229    100,000 
Indirect taxes payable   16,851    53,277 
Accrued interest   1,033,567    477,824 
Total accounts payable and accrued expenses  $9,664,060   $7,597,469 

 
v3.24.3
RELATED PARTY TRANSACTIONS
 9 Months Ended
Sep. 30, 2024
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

Note 8 – RELATED PARTY TRANSACTIONS

 

Independent Consulting Agreement with Stephen Scott

 

In July 2023, we entered into an Independent Consulting Agreement with Stephen Scott, a significant stockholder due to his beneficial ownership, to provide, on a non-exclusive basis, advisory and consulting services relating to our strategic and business development, intellectual property development, banking relationships, and strategic M&A for a period of one year. Mr. Scott will receive a consulting fee of $15,000 per month for such services under the terms of this agreement. During the three months ended September 30, 2024 and 2023, we paid consulting fees to Mr. Scott in the amount of $45,000 and $45,000, respectively, and $135,000 and $114,000 during the nine months ended September 30, 2024 and 2023, respectively.

 

Managed Services Agreement with Hensley Beverage Company – Related Party

 

In July 2021, we entered into a 1-year Managed Services Agreement with Hensley Beverage Company to provide secured managed services. We also may be engaged by Hensley Beverage Company from time to time to provide other related services outside the scope of the Managed Services Agreement. While the agreement provides for a term through December 31, 2021, the agreement will continue until terminated by either party. For the three months ended September 30, 2024 and 2023, we received $385,998 and $416,058, respectively, and for the nine months ended September 30, 2024 and 2023, we received $1,561,911 and $923,150, respectively, from Hensley Beverage Company for contracted services, and had an outstanding receivable balance of zero and $176,944 as of September 30, 2024 and December 31, 2023, respectively. The payments received during the nine months ended September 30, 2024, included a payment of $543,743 for future services, of which $193,734 remains outstanding. Andy McCain, a director of our company, is President and Chief Executive Officer of Hensley & Company, d/b/a Hensley Beverage Company.

 

Convertible Note Payable with Hensley & Company

 

In March 2023, we issued an unsecured convertible note to Hensley & Company in the principal amount of $5,000,000 bearing an interest rate of 10.00% per annum. The principal amount, together with accrued and unpaid interest is due on March 20, 2025. At any time prior to or on the maturity date, Hensley & Company is permitted to convert all or any portion of the outstanding principal amount and all accrued but unpaid interest thereon into shares of our common stock at a conversion price of $18.00 per share. During the three months ended September 30, 2024 and 2023, we recorded interest expense of $125,000, and during the nine months ended September 30, 2024 and 2023, we recorded interest expense of $375,000 and $263,888, respectively. As of September 30, 2024 and December 31, 2023, we had accrued interest of $763,888 and $388,888, respectively. Mr. McCain, a director of our company, is President and Chief Executive Officer of Hensley & Company.

 

 
v3.24.3
STOCKHOLDERS’ EQUITY
 9 Months Ended
Sep. 30, 2024
Equity [Abstract]  
STOCKHOLDERS’ EQUITY

Note 9 – STOCKHOLDERS’ EQUITY

 

Options

 

We granted stock options vesting solely upon the continued service of the recipient. We recognize the accounting grant date fair value of equity-based awards as compensation expense over the required service period of each award.

 

The following table summarizes stock option activity:

 

   Shares  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining

Contractual

Life

(in years)

  

Aggregate

Intrinsic

Value

 
Outstanding at January 1, 2024   2,105,168   $31.63    -    - 
Granted   33,953    1.68    -    - 
Exercised   -    -    -    - 
Expired or cancelled   (588,403)   15.30    -    - 
Outstanding at September 30, 2024   1,550,718   $36.95    4.60   $23,326 
Exercisable at September 30, 2024   1,243,493   $36.73    3.87   $23,326 

 

Total compensation expense related to the options was $2,247,002 and $554,249 for the three months ended September 30, 2024 and 2023, respectively, and $6,904,141 and $9,190,027 for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, there was future compensation expense of $8,179,967 with a weighted average recognition period of 1.17 years related to the options.

 

The weighted-average grant-date fair value of options granted during the three months ended September 30, 2024 was zero. The total intrinsic value of options exercised during the three and nine months ended September 30, 2024, was zero.

 

During the nine months ended September 30, 2024, 257,811 options vested, net of forfeitures.

 

Warrant Activity Summary

 

The following table summarizes warrant activity:

 

   Shares  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining

Contractual

Life

(in years)

  

Aggregate

Intrinsic

Value

 
Outstanding at January 1, 2024   49,614   $17.56    4.12    - 
Granted   -    -    -    - 
Exercised   -    -    -    - 
Expired or cancelled   -    -    -    - 
Outstanding at September 30, 2024   49,614   $17.56    3.37   $- 
Exercisable at September 30, 2024   49,614   $17.56    3.37   $- 

 

 
v3.24.3
COMMITMENTS AND CONTINGENCIES
 9 Months Ended
Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 10 – COMMITMENTS AND CONTINGENCIES

 

Legal Claims

 

There are no material pending legal proceedings in which we or any of our subsidiaries are a party or in which any of our directors, officers or affiliates, any owner of record or beneficially of more than 5% of any class of our voting securities, or security holder is a party adverse to us or has a material interest adverse to us.

 

Indirect Taxes

 

We are subject to indirect taxation in some, but not all, of the various states and foreign jurisdictions in which we conduct business. Laws and regulations attempting to subject commerce conducted over the Internet to various indirect taxes are becoming more prevalent, both in the U.S. and internationally, and may impose additional burdens on us in the future. Increased regulation could negatively affect our business directly, as well as the business of our customers. Taxing authorities may impose indirect taxes on the Internet-related revenue we generated based on regulations currently being applied to similar, but not directly comparable industries. There are many transactions and calculations where the ultimate indirect tax determination is uncertain. In addition, domestic and international indirect taxation laws are complex and subject to change. We may be audited in the future, which could result in changes to our indirect tax estimates. We continually evaluate those jurisdictions in which nexus exists, and believe we maintain adequate indirect tax accruals.

 

As of September 30, 2024 and December 31, 2023, our accrual for estimated indirect tax liabilities was $16,851 and $53,277, respectively, reflecting our best estimate of the potential liability based on an analysis of our business activities, revenues subject to indirect taxes, and applicable regulations. Although we believe our indirect tax estimates and associated liabilities are reasonable, the final determination of indirect tax audits, litigation, or settlements could be materially different than the amounts established for indirect tax contingencies.

 

Warranties

 

Our services are generally warranted to deliver and operate in a manner consistent with general industry standards that are reasonably applicable and materially conform with our documentation under normal use and circumstances.

 

We offer a limited warranty to certain customers, subject to certain conditions, to cover certain costs incurred by the customer in case of a security breach. We have entered into an insurance policy to cover our potential liability arising from this limited warranty arrangement. We have not incurred any material costs related to such obligations and have not accrued any liabilities related to such obligations in the unaudited condensed consolidated financial statements as of September 30, 2024 and December 31, 2023.

 

In addition, we also indemnify certain of our directors and executive officers against certain liabilities that may arise while they are serving in good faith in their company capacities. We maintain director and officer liability insurance coverage that would generally enable us to recover a portion of any future amounts paid.

 
v3.24.3
LOANS PAYABLE AND LINES OF CREDIT
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
LOANS PAYABLE AND LINES OF CREDIT

NOTE 11 – LOANS PAYABLE AND LINES OF CREDIT

 

Loans Payable

 

Loans payable was as follows:

 

    Interest Rate     Maturities     September 30,
2024		     December 31,
2023		  
                         
Term loans     4.00% – 71.55 %     2024 - 2027     $ 2,732,865     $ 1,930,787  
Less, current portion                     (2,686,087 )     (1,856,245 )
Long term loans payable                   $ 46,778     $ 74,542  

 

 

Term Loans

 

Various subsidiaries in the United States are borrowers under certain term loans. These term loans require monthly principal and interest payments. These term loans are secured by various assets owned by our subsidiaries. We recorded aggregate interest expense on these term loans of $1,563 and $8,536 for the three months ended September 30, 2024 and 2023, respectively, and $5,558 and $47,015 for the nine months ended September 30, 2024 and 2023, respectively. Accrued interest as of September 30, 2024 and December 31, 2023 was zero. The aggregate effective interest rate of the term loans is 5.70%.

 

In November 2023, we entered into a business loan and security agreement with LendSpark Corporation, pursuant to which we obtained a loan with a principal amount of $2,200,000 and paid an origination fee of $44,000. The business loan bears interest at a rate of 53.44% per annum and is payable in 52 weekly installments of $53,731. We may prepay the loan in whole or in part, but partial repayments do not reduce the total interest payable on the loan, of $594,000. The business loan is secured by all of the assets of our US subsidiaries. The proceeds of the loan were used to repay in full the amount owned under our cash advance agreements that we entered into in March and August 2023. For the three and nine months ended September 30, 2024, we recorded interest expense of zero and $564,529, respectively.

 

In connection with the business loan, we entered into a fee agreement, pursuant to which we issued 133,334 shares (2,000,000 on a pre-reverse split basis) of our common stock as partial consideration for the lender to enter into the business loan and extend credit to us. We recorded the issuance of our common stock as a discount to the business loan, which is amortized using the effective interest method over the term of the loan.

 

On March 28, 2024, under a trouble debt restructuring, we entered into a Business Loan and Security Agreement (the “Loan Agreement” with LendSpark Corporation (the “Lender”), pursuant to which we obtained a restructured loan with a principal amount of $2,200,000 (the “Restructured Loan”) from the Lender. Pursuant to the Loan Agreement, we paid the Lender a $44,000 origination fee. The Restructured Loan bears interest at a rate of 51.73% per annum and is payable in 52 weekly installments of $53,308, commencing on April 5, 2024. We may prepay the Loan in whole or in part, but partial repayments do not reduce the total interest payable on the Loan.

 

Pursuant to the Loan Agreement, we granted the Lender a security interest in all if our assets and the assets of our U.S. subsidiaries (the “Collateral”) that is secondary to the security interest held by Aion. Upon the occurrence of an event of default, the Lender may, among other things, accelerate the Loan and declare all obligations immediately due and payable or take possession of the Collateral.

 

In connection with Restructured Loan, we entered into a Fee Agreement (the “Fee Agreement”) with the Lender pursuant to which we issued 100,000 shares of our common stock, par value $0.00001 per share (the “Shares”) as partial consideration for the Lender’s agreement to enter into the Loan Agreement and extend credit to us. The Fee Agreement contains customary representations, warranties, agreements and obligations of the parties. For the three and nine months ended September 30, 2024, we recorded interest expense of $230,904 and $535,574, respectively.

 

In June 2024, we entered into a Subordinated Business Loan and Security Agreement with Agile Capital Funding, LLC (“Agile”), pursuant to which we obtained a loan with a principal amount of $2,000,000 plus an administrative agent fee paid of $100,000. The Subordinated Business Loan bears an effective interest rate of 147.82% per annum and is payable in 30 weekly installments. The first 4 installments due were $75,000 followed by 26 installments of $103,154. We may prepay the Subordinated Business Loan in whole or in part, but partial repayments do not reduce the total interest payable on the Subordinated Business Loan of $882,000. For the three and nine months ended September 30, 2024, we recorded interest expense of $694,128.

 

Pursuant to the Subordinated Loan Agreement, we granted Agile a security interest in the Collateral that is tertiary to the security interest held by Aion and LendSpark. Upon the occurrence of an event of default, Agile may, among other things, accelerate the Subordinated Business Loan and declare all obligations immediately due and payable or take possession of the Collateral. We may use proceeds from the Subordinated Business Loan for general corporate purposes, which includes working capital, capital expenditures, and repayment of debt.

 

Line of Credit

 

On January 31, 2024, we entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Aion Financial Technologies, Inc. (“Aion”), pursuant to which we may borrow up to $3,500,000. The amount available for borrowing at any one time is limited to 80% of our eligible accounts receivable. The Loan and Security Agreement will bear interest at a rate of 19.25% per annum (based on a 360-day year), payable on the first business day of each month following the accrual thereof. The Loan and Security Agreement, together with accrued and unpaid interest thereon, is due on January 30, 2025 (the “Maturity Date”). Upon providing 30 days written notice we may terminate the Loan and Security Agreement, subject to an early termination fee of $35,000. Upon the occurrence of an “Event of Default” (as defined in the Loan Security Agreement and including the failure to make required payments when due after specified grace periods, certain breaches and certain specified insolvency events), Aion would have the right to accelerate payments due, which from after such acceleration would bear interest at a default rate of 29.25% per annum. The Loan and Security Agreement is secured by our assets.

 

 

We used proceeds from the Loan and Security Agreement to repay our business loan entered into November 2023 and may use for general corporate purposes, which includes working capital, capital expenditures, and repayment of debt. For the three and nine months ended September 30, 2024, we recorded interest expense of $117,905 and $272,565, respectively. Accrued interest as of September 30, 2024 was zero.

 

Convertible Notes Payable

 

In March 2023, we issued an unsecured convertible note to Hensley & Company in the principal amount of $5,000,000 bearing an interest rate of 10.00% per annum. The principal amount, together with accrued and unpaid interest is due on March 20, 2025. At any time prior to or on the maturity date, Hensley & Company is permitted to convert all or any portion of the outstanding principal amount and all accrued but unpaid interest thereon into shares of our common stock at a conversion price of $18.00 per share. During the three months ended September 30, 2024 and 2023, we recorded interest expense of $125,000, and during the nine months ended September 30, 2024 and 2023, we recorded interest expense of $375,000 and $263,888, respectively. As of September 30, 2024 and December 31, 2023, we had accrued interest of $763,888 and $388,888, respectively. Mr. McCain, a director of our company, is President and Chief Executive Officer of Hensley & Company.

 

In June 2023, we issued an unsecured convertible note in the principal amount of $1,050,000 bearing an interest rate of 10.00% per annum payable monthly. The principal amount, together with accrued and unpaid interest is due on June 7, 2024. At any time prior to or on the maturity date the holder is permitted to convert all of the outstanding principal amount into 4.20% of the authorized units of our then wholly owned subsidiary vCISO, LLC. We recorded interest expense of $34,349 and $27,603 for the three months ended September 30, 2024 and 2023, and $82,809 and $33,083 for the nine months ended September 30, 2024 and 2023, respectively. Accrued interest as of September 30, 2024 and December 31, 2023 was $144,763 and $61,954, respectively.

 

In June 2024, we entered into Amendment #1 to extend the maturity date of the $1,050,000 unsecured convertible note to December 15, 2024. In exchange for an extension of the maturity date, we agreed to repay on September 30, 2024, all accrued, but unpaid interest as of June 30, 2024 on the convertible note. All remaining accrued, but unpaid interest will be due at maturity on December 15, 2024.

 

In October 2023, we issued an unsecured convertible note in the principal amount of $1,000,000 bearing an interest rate of 12.00% per annum payable monthly. The principal amount, together with accrued and unpaid interest is due on October 12, 2024. At any time prior to or on the maturity date the holder is permitted to convert all of the outstanding principal amount into shares of our common stock at a conversion price of $1.7595 per share ($0.1173 on a pre-reverse split basis). We recorded interest expense of $33,476 and $96,791 for the three and nine months ended September 30, 2024. Accrued interest as of September 30, 2024 and December 31, 2023 was $123,774 and $26,983, respectively.

 

In June 2024, we entered into Amendment #1 to extend the maturity date of the $1,000,000 unsecured convertible note to December 15, 2024. In exchange for an extension of the maturity date, we agreed to repay on September 30, 2024, all accrued, but unpaid interest as of June 30, 2024 on the convertible note. All remaining accrued, but unpaid interest will be due at maturity on December 15, 2024.

 

Future minimum payments under the above loans payable and convertible notes payable due as of September 30, 2024 were as follows:

 

      
2024 (remainder of)  $3,753,028 
2025   8,208,945 
2026   33,495 
2027   3,615 
Total future minimum payments   11,999,083 
Less: discount   (82,122)
Total   11,916,961 
Less: current   (11,870,183)
Long term debt, net  $46,778 

 

 
v3.24.3
LEASES
 9 Months Ended
Sep. 30, 2024
Leases  
LEASES

NOTE 12 – LEASES

 

We have entered into various non-cancellable operating lease agreements for certain offices. These leases currently have lease periods expiring through 2028. The lease agreements may include one or more options to renew. Renewals were not assumed in our determination of the lease term unless the renewals were deemed to be reasonably assured at lease commencement. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease costs, weighted-average lease term, and discount rates are detailed below.

 

When measuring lease liabilities for leases that were classified as operating leases, we discounted lease payments using our estimated incremental borrowing rate at commencement date of each lease. The weighted average incremental borrowing rate applied was 10.10%. As of September 30, 2024, our leases had a remaining weighted average term of 3.12 years.

 

Operating leases are included in the unaudited condensed consolidated balance sheets as follows:

 

   Classification  September 30,
2024		   December 31,
2023		 
Lease assets             
Operating lease cost ROU assets  Assets  $583,104   $762,228 
Total lease assets     $583,104   $762,228 
              
Lease liabilities             
Operating lease liabilities, current  Current liabilities  $227,911   $219,342 
Operating lease liabilities, non-current  Liabilities   424,018    596,307 
Total lease liabilities     $651,929   $815,649 

 

The components of lease costs, which are included in loss from operations in our unaudited condensed consolidated statements of operations, were as follows:

 

   2024   2023 
  

Nine Months Ended

September 30,

 
   2024   2023 
Leases costs          
Operating lease costs  $221,758   $196,642 
Short term lease cost   36,001    78,307 
Total lease costs  $257,759   $274,949 

 

Future minimum payments under non-cancellable leases for operating leases for the remaining terms of the leases following the nine months ended September 30, 2024 were as follows:

 

Fiscal Year   Operating Leases  
2024 (remainder of)   $ 74,624  
2025     252,513  
2026     199,177  
2027     205,145  
2028     51,896  
Total future minimum lease payments     783,355  
Amount representing interest     (131,426 )
Present value of net future minimum lease payments   $ 651,929  

 
v3.24.3
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
 9 Months Ended
Sep. 30, 2024
Risks and Uncertainties [Abstract]  
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

NOTE 13 – CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

 

Our financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents. Although we deposit cash with multiple banks, these deposits, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. These deposits may generally be redeemed upon demand and bear minimal risk.

 

No single customer represented over 10% of our total revenue for any period presented.

 
v3.24.3
GEOGRAPHIC INFORMATION
 9 Months Ended
Sep. 30, 2024
Segment Reporting [Abstract]  
GEOGRAPHIC INFORMATION

NOTE 14 – GEOGRAPHIC INFORMATION

 

All of our revenue and property and equipment from continuing operations is located within the U.S.

 
v3.24.3
ACCUMULATED OTHER COMPREHENSIVE INCOME
 9 Months Ended
Sep. 30, 2024
Equity [Abstract]  
ACCUMULATED OTHER COMPREHENSIVE INCOME

NOTE 15 – ACCUMULATED OTHER COMPREHENSIVE INCOME

 

The following table presents AOCI activity in equity:

 

  

Foreign Currency

Translation

Adjustments

   Total AOCI 
         
Balance as of December 31, 2023  $1,320,177   $1,320,177 
Other comprehensive income   (3,327)   (3,327)
Amounts reclassified from AOCI(1)   (1,320,177)   (1,320,177)
Balance as of September 30, 2024  $(3,327)  $(3,327)

 

(1)Amount reclassified to gain/(loss) from discontinued operations, net of income taxes on the condensed consolidated statements of operations and comprehensive loss.

 
v3.24.3
SUBSEQUENT EVENTS
 9 Months Ended
Sep. 30, 2024
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 16 – SUBSEQUENT EVENTS

 

On November 4 and 12, 2024, we received payments of $105,000 and $600,000, respectively, for future services from Hensley Beverage Company, a related party.
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Revenue

Revenue

 

Our revenue is derived from three major types of services to clients: security managed services, professional services and software. With respect to security managed services, we provide culture education and enablement, tools and technology provisioning, data and privacy monitoring, regulations and compliance monitoring, remote infrastructure administration, and cybersecurity services, including, but not limited to, antivirus and patch management. With respect to professional services, we provide cybersecurity consulting, compliance auditing, vulnerability assessment and penetration testing, and disaster recovery and data backup solutions.

 

Our revenue is categorized and disaggregated as reflected in our unaudited condensed consolidated statement of operations as follows:

 

Security Managed Services

 

Security managed services revenue primarily consists of risk compliance, cyber defense operations, and secured managed services. We consider these services to be a single performance obligation, and revenue is recognized as services and materials are provided to the customer.

 

Professional Services

 

Professional services revenue primarily consists of security testing and training, and incident response and digital forensics. We consider these services to be a single performance obligation, and revenue is recognized in the period in which the performance obligations are satisfied.

 

Cybersecurity Software

 

Cybersecurity software revenue primarily consists of our internally developed cybersecurity software designed to provide a security management platform, protect users from untrusted and malicious online threats, provide proactive security monitoring, and deliver continuous security assessments. We consider these services to be a single performance obligation, and revenue is recognized in the period in which the performance obligations are satisfied.

 

 
Accounts Receivable

Accounts Receivable

 

Accounts receivable are reported at their outstanding unpaid principal balances, net of allowances for credit losses. We periodically assess our accounts and other receivables for collectability on a specific identification basis. We provide for allowances for credit losses based on management’s estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate. Payments are generally due within 30 days of invoice. We write-off accounts receivable against the allowance for credit losses when a balance is determined to be uncollectible. As of September 30, 2024 and December 31, 2023, our allowance for credit losses was $178,477 and $219,141, respectively.

 
Reverse Stock Split

Reverse Stock Split

 

On February 29, 2024, our board of directors approved a 1-for-15 reverse stock split of our common stock. The record date for the reverse stock split was the close of business on March 7, 2024, with share distribution occurring on March 8, 2024. As a result of the reverse stock split, stockholders received one share of CISO Global, Inc. common stock, par value $0.00001, for each 15 shares they held as of the record date. All share and per share amounts have been retroactively restated for the effects of this reverse stock split. Common stock underlying our outstanding warrants, convertible notes, and options have also been adjusted, and the conversion and exercise prices have also been adjusted.

 
Net Loss per Common Share

Net Loss per Common Share

 

Net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. For dilutive securities, all outstanding options and warrants are considered potentially outstanding common stock. The dilutive effect, if any, of stock options is calculated using the treasury stock method. All outstanding convertible notes are considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method. Since the effect of common stock equivalents are anti-dilutive with respect to losses, the options, warrants and shares issuable upon conversion thereof have been excluded from our computation of net loss per common share for the three and nine months ended September 30, 2024 and 2023.

 

Our shares of outstanding common stock and earnings per share calculation have been retroactively restated for all periods presented to reflect our 1-for-15 reverse stock split. The following tables summarize the securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive due to our net loss position even though the exercise price could be less than the average market price of the common shares:

  

   September 30,
2024		   September 30,
2023		 
Stock options   1,550,718    2,254,697 
Warrants   49,614    49,614 
Convertible debt   888,560    277,778 
Total   2,488,892    2,582,089 

 
Deferred Revenue

Deferred Revenue

 

Deferred revenue primarily consists of billings or payments received from customers in advance of revenue recognized for the services provided to our customers or annual licenses and is recognized as services are performed or ratably over the life of the license. We generally invoice customers in advance or in milestone-based installments.

 

Deferred revenue consisted of the following:

  

  

September 30,

2024

   December 31,
2023		 
Current:          
Security managed services  $660,962   $578,941 
Professional services   483,098    792,696 
Cybersecurity software   123,133    - 
Total deferred revenue - current  $1,267,193   $1,371,637 
Long-term:          
Security managed services  $86,694   $84,294 
Total deferred revenue – long term  $86,694   $84,294 

 

 

The increase in the deferred revenue balance is primarily driven by payments received in advance of satisfying our performance obligations, offset by $1,212,483 of revenue recognized during 2024, which was included in the deferred revenue balance as of December 31, 2023. The deferred revenue balance as of September 30, 2024 represents our remaining performance obligations that will be recognized as revenue over the period in which the performance obligations are satisfied, and is expected to be recognized in revenue as follows:

  

   Remainder of 2024   2025   2026   2027   2028   Thereafter   Total 
Security managed services  $309,196   $364,770   $44,751   $20,563   $5,290   $3,086   $747,656 
Professional services   483,098    -    -    -    -    -    483,098 
Cybersecurity software   71,566    51,567    -    -    -    -    123,133 
Total deferred revenue  $863,860   $416,337   $44,751   $20,563   $5,290   $3,086   $1,353,887 

 
Income Taxes

Income Taxes

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities, including tax loss and credit carry forwards, are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

We utilize ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the unaudited condensed consolidated financial statements or tax returns. We account for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely than not” that a deferred tax asset will not be realized. At September 30, 2024, our net deferred tax asset has been fully reserved.

 

For uncertain tax positions that meet a “more likely than not” threshold, we recognize the benefit of uncertain tax positions in the unaudited condensed consolidated financial statements. Our practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the unaudited condensed consolidated statements of operations when a determination is made that such expense is likely.

 
Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In November 2023, the Financial Standards Accounting Board (FASB) issued guidance to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. This update is effective for our 2024 fiscal year and interim periods in fiscal year 2025, with early adoption permitted. We are currently evaluating the impact that the adoption of this standard will have on our condensed consolidated financial statements.

 

In December 2023, the FASB issued guidance to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this guidance require additional disclosures about income taxes, primarily focused on the disclosures of income taxes paid and the rate reconciliation table. The new guidance will be effective for the 2025 fiscal year, with early adoption permitted. We are currently evaluating the impact of this standard on our disclosures within our consolidated financial statements.

 

 
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
SUMMARY OF SECURITIES EXCLUDED FROM DILUTED PER SHARE

  

   September 30,
2024		   September 30,
2023		 
Stock options   1,550,718    2,254,697 
Warrants   49,614    49,614 
Convertible debt   888,560    277,778 
Total   2,488,892    2,582,089 
SCHEDULE OF DEFERRED REVENUE

Deferred revenue consisted of the following:

  

  

September 30,

2024

   December 31,
2023		 
Current:          
Security managed services  $660,962   $578,941 
Professional services   483,098    792,696 
Cybersecurity software   123,133    - 
Total deferred revenue - current  $1,267,193   $1,371,637 
Long-term:          
Security managed services  $86,694   $84,294 
Total deferred revenue – long term  $86,694   $84,294 
SCHEDULE OF PERFORMANCE OBLIGATIONS EXPECTED TO RECOGNIZED REVENUE

  

   Remainder of 2024   2025   2026   2027   2028   Thereafter   Total 
Security managed services  $309,196   $364,770   $44,751   $20,563   $5,290   $3,086   $747,656 
Professional services   483,098    -    -    -    -    -    483,098 
Cybersecurity software   71,566    51,567    -    -    -    -    123,133 
Total deferred revenue  $863,860   $416,337   $44,751   $20,563   $5,290   $3,086   $1,353,887 
v3.24.3
DISPOSITIONS (Tables)
 9 Months Ended
Sep. 30, 2024
Discontinued Operations and Disposal Groups [Abstract]  
SCHEDULE OF DISCONTINUED OPERATIONS BALANCE SHEETS AND INCOME STATEMENT

The following table reflects the major classes of assets and liabilities disposed of pursuant to the Arkavia SPA, CUATROi SPA and NLT SPA.

 

   July 1,
2024		 
     
Cash and cash equivalents  $190,567 
Accounts receivable, net   1,261,581 
Inventory   52,511 
Prepaid cost of revenue   3,315,675 
Prepaid expenses and other assets   393,594 
Property and equipment   2,209,044 
Intangible assets, net   184,600 
Goodwill   7,520,046 
Total assets  $15,127,618 
      
Accounts payable and accrued expenses  $6,557,367 
Deferred revenue   3,948,982 
Loans payable   3,489,242 
Total liabilities  $13,995,591 

 

The table below provides the total revenue and loss of the discontinued operations presented in our statements of operations.

 

   2024   2023   2024   2023 
  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
   2024   2023   2024   2023 
                 
Revenue  $-   $5,380,595   $8,387,171   $17,546,812 
                     
Cost of revenue   -    4,770,252    7,092,426    15,287,255 
Operating expenses   -    1,265,951    2,097,362    16,939,183 
Other expense   -    519,245    346,469    746,289 
Loss from discontinued operations before income taxes   -    (1,174,853)   (1,149,086)   (15,425,915)
Benefit from income taxes   -    -    -    435,678 
Gain/(loss) from assets held for sale, net of tax   160,567    -    (3,189,232)   - 
Gain/(loss) from discontinued operations  $160,567   $(1,174,853)  $(4,338,318)  $(14,990,237)
v3.24.3
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)
 9 Months Ended
Sep. 30, 2024
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of:

 

  

September 30,

2024

  

December 31,

2023

 
Prepaid expenses  $226,348   $146,521 
Prepaid insurance   38,224    59,398 
Total prepaid expenses and other current assets  $264,572   $205,919 
v3.24.3
PROPERTY AND EQUIPMENT (Tables)
 9 Months Ended
Sep. 30, 2024
Property, Plant and Equipment [Abstract]  
SCHEDULE OF PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

 

  

September 30,

2024

  

December 31,

2023

 
Computer equipment  $414,214   $414,214 
Leasehold improvements   25,791    25,791 
Furniture and fixtures   75,698    75,698 
Software   879,642    879,642 
Property and equipment gross   1,395,345    1,395,345 
Less: accumulated depreciation   (585,483)   (342,708)
Property and equipment, net  $809,862   $1,052,637 
v3.24.3
INTANGIBLE ASSETS AND GOODWILL (Tables)
 9 Months Ended
Sep. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
SCHEDULE OF CHANGES IN GOODWILL

The following table summarizes the changes in goodwill during the nine months ended September 30, 2024:

 

Balance as of December 31, 2023     
Goodwill  $71,525,609 
Accumulated impairment losses   (51,625,059)
    19,900,550 
      
Balance September 30, 2024     
Goodwill   71,525,609 
Accumulated impairment losses   (51,625,059)
   $19,900,550 
SUMMARY OF INTANGIBLE ASSETS

Intangible assets, net are summarized as follows:

 

   Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount 
   September 30, 2024 
   Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount 
Tradenames – trademarks  $3,835,981   $(2,914,386)  $921,595 
Customer base   572,048    (298,311)   273,737 
Non-compete agreements   487,400    (485,198)   2,202 
Intellectual property/technology   2,455,879    (1,459,457)   996,422 
Intangible Asset  $7,351,308   $(5,157,352)  $2,193,956 

 

   Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount 
   December 31, 2023 
   Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount 
Tradenames – trademarks  $3,835,981   $(2,138,946)  $1,697,035 
Customer base   572,048    (245,357)   326,691 
Non-compete agreements   487,400    (450,181)   37,219 
Intellectual property/technology   2,455,879    (970,244)   1,485,635 
Intangible Asset  $7,351,308   $(3,804,728)  $3,546,580 
SCHEDULE OF FUTURE AMORTIZATION EXPENSE

Based on the balance of intangible assets at September 30, 2024, expected future amortization expense is as follows:

 

      
2024 (remainder of)  $391,740 
2025   921,139 
2026   709,464 
2027   73,213 
2028   49,200 
Thereafter   49,200 
Future Amortization Expense  $2,193,956 
v3.24.3
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)
 9 Months Ended
Sep. 30, 2024
Payables and Accruals [Abstract]  
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following amounts:

 

   September 30,
2024		   December 31,
2023		 
Accounts payable  $5,625,306   $4,766,294 
Accrued payroll and bonuses   1,368,748    1,167,804 
Accrued expenses   1,574,359    1,032,270 
Accrued commissions   45,229    100,000 
Indirect taxes payable   16,851    53,277 
Accrued interest   1,033,567    477,824 
Total accounts payable and accrued expenses  $9,664,060   $7,597,469 
v3.24.3
STOCKHOLDERS’ EQUITY (Tables)
 9 Months Ended
Sep. 30, 2024
Equity [Abstract]  
SCHEDULE OF STOCK OPTIONS ACTIVITY

The following table summarizes stock option activity:

 

   Shares  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining

Contractual

Life

(in years)

  

Aggregate

Intrinsic

Value

 
Outstanding at January 1, 2024   2,105,168   $31.63    -    - 
Granted   33,953    1.68    -    - 
Exercised   -    -    -    - 
Expired or cancelled   (588,403)   15.30    -    - 
Outstanding at September 30, 2024   1,550,718   $36.95    4.60   $23,326 
Exercisable at September 30, 2024   1,243,493   $36.73    3.87   $23,326 
SCHEDULE OF STOCK WARRANT ACTIVITY

The following table summarizes warrant activity:

 

   Shares  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining

Contractual

Life

(in years)

  

Aggregate

Intrinsic

Value

 
Outstanding at January 1, 2024   49,614   $17.56    4.12    - 
Granted   -    -    -    - 
Exercised   -    -    -    - 
Expired or cancelled   -    -    -    - 
Outstanding at September 30, 2024   49,614   $17.56    3.37   $- 
Exercisable at September 30, 2024   49,614   $17.56    3.37   $- 
v3.24.3
LOANS PAYABLE AND LINES OF CREDIT (Tables)
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
SCHEDULE OF LOAN PAYABLE

Loans payable was as follows:

 

    Interest Rate     Maturities     September 30,
2024		     December 31,
2023		  
                         
Term loans     4.00% – 71.55 %     2024 - 2027     $ 2,732,865     $ 1,930,787  
Less, current portion                     (2,686,087 )     (1,856,245 )
Long term loans payable                   $ 46,778     $ 74,542  
SCHEDULE OF FUTURE MINIMUM PAYMENTS FOR LONG TERM DEBT

Future minimum payments under the above loans payable and convertible notes payable due as of September 30, 2024 were as follows:

 

      
2024 (remainder of)  $3,753,028 
2025   8,208,945 
2026   33,495 
2027   3,615 
Total future minimum payments   11,999,083 
Less: discount   (82,122)
Total   11,916,961 
Less: current   (11,870,183)
Long term debt, net  $46,778 
v3.24.3
LEASES (Tables)
 9 Months Ended
Sep. 30, 2024
Leases  
SCHEDULE OF LEASE COST AND OTHER SUPPLEMENT LEASE INFORMATION

Operating leases are included in the unaudited condensed consolidated balance sheets as follows:

 

   Classification  September 30,
2024		   December 31,
2023		 
Lease assets             
Operating lease cost ROU assets  Assets  $583,104   $762,228 
Total lease assets     $583,104   $762,228 
              
Lease liabilities             
Operating lease liabilities, current  Current liabilities  $227,911   $219,342 
Operating lease liabilities, non-current  Liabilities   424,018    596,307 
Total lease liabilities     $651,929   $815,649 
SCHEDULE OF LEASE COSTS

The components of lease costs, which are included in loss from operations in our unaudited condensed consolidated statements of operations, were as follows:

 

   2024   2023 
  

Nine Months Ended

September 30,

 
   2024   2023 
Leases costs          
Operating lease costs  $221,758   $196,642 
Short term lease cost   36,001    78,307 
Total lease costs  $257,759   $274,949 
SCHEDULE OF FUTURE MINIMUM UNDER NON-CANCELLABLE LEASES FOR OPERATING LEASES

Future minimum payments under non-cancellable leases for operating leases for the remaining terms of the leases following the nine months ended September 30, 2024 were as follows:

 

Fiscal Year   Operating Leases  
2024 (remainder of)   $ 74,624  
2025     252,513  
2026     199,177  
2027     205,145  
2028     51,896  
Total future minimum lease payments     783,355  
Amount representing interest     (131,426 )
Present value of net future minimum lease payments   $ 651,929  
v3.24.3
ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables)
 9 Months Ended
Sep. 30, 2024
Equity [Abstract]  
SCHEDULE OF ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table presents AOCI activity in equity:

 

  

Foreign Currency

Translation

Adjustments

   Total AOCI 
         
Balance as of December 31, 2023  $1,320,177   $1,320,177 
Other comprehensive income   (3,327)   (3,327)
Amounts reclassified from AOCI(1)   (1,320,177)   (1,320,177)
Balance as of September 30, 2024  $(3,327)  $(3,327)

 

(1)Amount reclassified to gain/(loss) from discontinued operations, net of income taxes on the condensed consolidated statements of operations and comprehensive loss.

 
v3.24.3
SUMMARY OF SECURITIES EXCLUDED FROM DILUTED PER SHARE (Details) - shares
 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from the diluted per share calculation 2,488,892 2,582,089
Share-Based Payment Arrangement, Option [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from the diluted per share calculation 1,550,718 2,254,697
Warrant [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from the diluted per share calculation 49,614 49,614
Convertible Debt [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from the diluted per share calculation 888,560 277,778
v3.24.3
SCHEDULE OF DEFERRED REVENUE (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Current:    
Total deferred revenue - current $ 1,267,193 $ 1,371,637
Long-term:    
Total deferred revenue – long term 86,694 84,294
Security Managed Services [Member]    
Current:    
Total deferred revenue - current 660,962 578,941
Long-term:    
Total deferred revenue – long term 86,694 84,294
Professional Services [Member]    
Current:    
Total deferred revenue - current 483,098 792,696
Cybersecurity Software [Member]    
Current:    
Total deferred revenue - current $ 123,133
v3.24.3
SCHEDULE OF PERFORMANCE OBLIGATIONS EXPECTED TO RECOGNIZED REVENUE (Details)
Sep. 30, 2024
USD ($)
Product Information [Line Items]  
Total deferred revenue $ 1,353,887
Security Managed Services [Member]  
Product Information [Line Items]  
Total deferred revenue 747,656
Professional Services [Member]  
Product Information [Line Items]  
Total deferred revenue 483,098
Cybersecurity Software [Member]  
Product Information [Line Items]  
Total deferred revenue 123,133
2024 [Member]  
Product Information [Line Items]  
Total deferred revenue 863,860
2024 [Member] | Security Managed Services [Member]  
Product Information [Line Items]  
Total deferred revenue 309,196
2024 [Member] | Professional Services [Member]  
Product Information [Line Items]  
Total deferred revenue 483,098
2024 [Member] | Cybersecurity Software [Member]  
Product Information [Line Items]  
Total deferred revenue 71,566
2025 [Member]  
Product Information [Line Items]  
Total deferred revenue 416,337
2025 [Member] | Security Managed Services [Member]  
Product Information [Line Items]  
Total deferred revenue 364,770
2025 [Member] | Professional Services [Member]  
Product Information [Line Items]  
Total deferred revenue
2025 [Member] | Cybersecurity Software [Member]  
Product Information [Line Items]  
Total deferred revenue 51,567
2026 [Member]  
Product Information [Line Items]  
Total deferred revenue 44,751
2026 [Member] | Security Managed Services [Member]  
Product Information [Line Items]  
Total deferred revenue 44,751
2026 [Member] | Professional Services [Member]  
Product Information [Line Items]  
Total deferred revenue
2026 [Member] | Cybersecurity Software [Member]  
Product Information [Line Items]  
Total deferred revenue
2027 [Member]  
Product Information [Line Items]  
Total deferred revenue 20,563
2027 [Member] | Security Managed Services [Member]  
Product Information [Line Items]  
Total deferred revenue 20,563
2027 [Member] | Professional Services [Member]  
Product Information [Line Items]  
Total deferred revenue
2027 [Member] | Cybersecurity Software [Member]  
Product Information [Line Items]  
Total deferred revenue
2028 [Member]  
Product Information [Line Items]  
Total deferred revenue 5,290
2028 [Member] | Security Managed Services [Member]  
Product Information [Line Items]  
Total deferred revenue 5,290
2028 [Member] | Professional Services [Member]  
Product Information [Line Items]  
Total deferred revenue
2028 [Member] | Cybersecurity Software [Member]  
Product Information [Line Items]  
Total deferred revenue
Thereafter [Member]  
Product Information [Line Items]  
Total deferred revenue 3,086
Thereafter [Member] | Security Managed Services [Member]  
Product Information [Line Items]  
Total deferred revenue 3,086
Thereafter [Member] | Professional Services [Member]  
Product Information [Line Items]  
Total deferred revenue
Thereafter [Member] | Cybersecurity Software [Member]  
Product Information [Line Items]  
Total deferred revenue
v3.24.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
 9 Months Ended
Feb. 29, 2024
Sep. 30, 2024
Dec. 31, 2023
Accounting Policies [Abstract]      
Allowances for doubtful accounts   $ 178,477 $ 219,141
Reverse stock split 1-for-15 reverse stock split 1-for-15 reverse stock split  
Reverse stock split shares 1    
Common stock, par value $ 0.00001 $ 0.00001 $ 0.00001
Common stock, shares issued 15 11,821,866 11,949,959
Deferred revenue recognized   $ 1,212,483  
v3.24.3
SCHEDULE OF DISCONTINUED OPERATIONS BALANCE SHEETS AND INCOME STATEMENT (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Jul. 01, 2024
Dec. 31, 2023
Dec. 31, 2022
Discontinued Operations and Disposal Groups [Abstract]              
Cash and cash equivalents $ 181,976 $ 181,976 $ 190,567 $ 820,799 $ 429,088
Accounts receivable, net         1,261,581    
Inventory         52,511    
Prepaid cost of revenue         3,315,675    
Prepaid expenses and other assets         393,594    
Property and equipment         2,209,044    
Intangible assets, net         184,600    
Goodwill         7,520,046    
Total assets         15,127,618    
Accounts payable and accrued expenses         6,557,367    
Deferred revenue         3,948,982    
Loans payable         3,489,242    
Total liabilities         $ 13,995,591    
Revenue 5,380,595 8,387,171 17,546,812      
Cost of revenue 4,770,252 7,092,426 15,287,255      
Operating expenses 1,265,951 2,097,362 16,939,183      
Other expense 519,245 346,469 746,289      
Loss from discontinued operations before income taxes (1,174,853) (1,149,086) (15,425,915)      
Benefit from income taxes 435,678      
Gain/(loss) from assets held for sale, net of tax 160,567 (3,189,232)      
Gain/(loss) from discontinued operations [1] $ 160,567 $ (1,174,853) $ (4,338,318) $ (14,990,237)      
[1] Includes recognized loss on disposal of $3,189,232 for the nine months ended September 30, 2024
v3.24.3
DISPOSITIONS (Details Narrative) - USD ($)
 1 Months Ended 9 Months Ended
Jul. 01, 2024
Sep. 30, 2024
Sep. 30, 2024
Sep. 30, 2023
Loss on disposal $ 4,338,318      
Cash flows from operating activities of discontinued operations     $ 223,831 $ 738,860
Cash used in investing activities of discontinued operations     83,095 77,932
Cash proceeds     $ 1,000,000
Purchase Agreement [Member]        
Cash proceeds   $ 1,000,000    
Intellectual property   1,500,000    
Stock repurchased   1,750,000    
Gain on disposition   $ 1,000,000    
Common Stock [Member] | Southford Equities Inc [Member]        
Shares of our common stock 194,267      
Nominal cash consideration $ 1.00      
Common Stock [Member] | Quijote Ventures LP [Member]        
Shares of our common stock 135,795      
Nominal cash consideration $ 5.00      
Common Stock [Member] | Itada Equities Inc [Member]        
Shares of our common stock 172,075      
Nominal cash consideration $ 1.00      
Southford Equities Inc [Member] | Common Stock [Member]        
Sell outstanding shares 100.00%      
Quijote Ventures LP [Member] | Common Stock [Member]        
Sell outstanding shares 100.00%      
Itada Equities Inc [Member] | Common Stock [Member]        
Sell outstanding shares 100.00%      
v3.24.3
SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]    
Prepaid expenses $ 226,348 $ 146,521
Prepaid insurance 38,224 59,398
Total prepaid expenses and other current assets $ 264,572 $ 205,919
v3.24.3
SCHEDULE OF PROPERTY AND EQUIPMENT (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Property, Plant and Equipment [Line Items]    
Property and equipment gross $ 1,395,345 $ 1,395,345
Less: accumulated depreciation (585,483) (342,708)
Property and equipment, net 809,862 1,052,637
Computer Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment gross 414,214 414,214
Leasehold Improvements [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment gross 25,791 25,791
Furniture and Fixtures [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment gross 75,698 75,698
Software Development [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment gross $ 879,642 $ 879,642
v3.24.3
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Property, Plant and Equipment [Abstract]        
Depreciation expense $ 79,481 $ 46,992 $ 242,775 $ 138,639
v3.24.3
SCHEDULE OF CHANGES IN GOODWILL (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract]    
Goodwill, gross $ 71,525,609 $ 71,525,609
Accumulated impairment losses (51,625,059) (51,625,059)
Goodwill $ 19,900,550 $ 19,900,550
v3.24.3
SUMMARY OF INTANGIBLE ASSETS (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Finite-Lived Intangible Assets [Line Items]    
Finite-Lived Intangible Assets, Gross $ 7,351,308 $ 7,351,308
Finite-Lived Intangible Assets, Accumulated Amortization (5,157,352) (3,804,728)
Finite-Lived Intangible Assets, Net 2,193,956 3,546,580
Trademarks and Trade Names [Member]    
Finite-Lived Intangible Assets [Line Items]    
Finite-Lived Intangible Assets, Gross 3,835,981 3,835,981
Finite-Lived Intangible Assets, Accumulated Amortization (2,914,386) (2,138,946)
Finite-Lived Intangible Assets, Net 921,595 1,697,035
Customer Base [Member]    
Finite-Lived Intangible Assets [Line Items]    
Finite-Lived Intangible Assets, Gross 572,048 572,048
Finite-Lived Intangible Assets, Accumulated Amortization (298,311) (245,357)
Finite-Lived Intangible Assets, Net 273,737 326,691
Noncompete Agreements [Member]    
Finite-Lived Intangible Assets [Line Items]    
Finite-Lived Intangible Assets, Gross 487,400 487,400
Finite-Lived Intangible Assets, Accumulated Amortization (485,198) (450,181)
Finite-Lived Intangible Assets, Net 2,202 37,219
Intellectual Property [Member]    
Finite-Lived Intangible Assets [Line Items]    
Finite-Lived Intangible Assets, Gross 2,455,879 2,455,879
Finite-Lived Intangible Assets, Accumulated Amortization (1,459,457) (970,244)
Finite-Lived Intangible Assets, Net $ 996,422 $ 1,485,635
v3.24.3
SCHEDULE OF FUTURE AMORTIZATION EXPENSE (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract]    
2024 (remainder of) $ 391,740  
2025 921,139  
2026 709,464  
2027 73,213  
2028 49,200  
Thereafter 49,200  
Future Amortization Expense $ 2,193,956 $ 3,546,580
v3.24.3
INTANGIBLE ASSETS AND GOODWILL (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]        
Weighted average remaining useful life     2 years 3 months 25 days  
Amortization of identifiable intangible assets $ 400,905 $ 377,210 $ 1,352,624 $ 1,427,708
v3.24.3
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Payables and Accruals [Abstract]    
Accounts payable $ 5,625,306 $ 4,766,294
Accrued payroll and bonuses 1,368,748 1,167,804
Accrued expenses 1,574,359 1,032,270
Accrued commissions 45,229 100,000
Indirect taxes payable 16,851 53,277
Accrued interest 1,033,567 477,824
Total accounts payable and accrued expenses $ 9,664,060 $ 7,597,469
v3.24.3
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended
Jun. 30, 2024
Jul. 30, 2023
Mar. 31, 2023
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Related Party Transaction [Line Items]                
Consulting fees       $ 223,149 $ 645,176 $ 1,025,410 $ 2,696,815  
Maturity date Sep. 30, 2024              
Interest expense           535,574    
Accrued interest           763,888   $ 388,888
Unsecured Debt [Member]                
Related Party Transaction [Line Items]                
Debt instrument face amount     $ 5,000,000          
Debt instrument interest rate     10.00%          
Maturity date     Mar. 20, 2025          
Conversion price     $ 18.00          
Interest expense       125,000 125,000 375,000 263,888  
Hensley Beverage Company [Member] | Related Party [Member]                
Related Party Transaction [Line Items]                
Outstanding receivable balance       193,734   193,734    
Independent Consulting Agreement [Member] | Stephen Scott [Member]                
Related Party Transaction [Line Items]                
Consulting fees   $ 15,000   45,000 45,000 135,000 114,000  
One Year Managed Services Agreement [Member] | Hensley Beverage Company [Member] | Related Party [Member]                
Related Party Transaction [Line Items]                
Revenues       385,998 $ 416,058 1,561,911 $ 923,150  
Outstanding receivable balance       $ 0   0   $ 176,944
Costs and expenses, related party           $ 543,743    
v3.24.3
SCHEDULE OF STOCK OPTIONS ACTIVITY (Details) - Equity Option [Member]
 9 Months Ended
Sep. 30, 2024
USD ($)
$ / shares
shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Number of Shares, Outstanding | shares 2,105,168
Weighted Average Exercise Price, Outstanding | $ / shares $ 31.63
Aggregate Intrinsic Value, Outstanding | $
Number of Shares, Granted | shares 33,953
Weighted Average Exercise Price, Granted | $ / shares $ 1.68
Number of Shares, Exercised | shares
Weighted Average Exercise Price, Exercised | $ / shares
Number of Shares, Expired or cancelled | shares (588,403)
Weighted Average Exercise Price, Expired or cancelled | $ / shares $ 15.30
Number of Shares, Outstanding | shares 1,550,718
Weighted Average Exercise Price, Outstanding | $ / shares $ 36.95
Weighted Average Remaining Contractual Life (in years), Outstanding 4 years 7 months 6 days
Aggregate Intrinsic Value, Outstanding | $ $ 23,326
Number of Shares, Exercisable | shares 1,243,493
Weighted Average Exercise Price, Exercisable | $ / shares $ 36.73
Weighted Average Remaining Contractual Life (in years), Outstanding, Exercisable 3 years 10 months 13 days
Aggregate Intrinsic Value, Exercisable | $ $ 23,326
v3.24.3
SCHEDULE OF STOCK WARRANT ACTIVITY (Details) - Warrant [Member]
 9 Months Ended
Sep. 30, 2024
USD ($)
$ / shares
shares
Accumulated Other Comprehensive Income (Loss) [Line Items]  
Number of Warrants, Outstanding | shares 49,614
Weighted Average Exercise Price, Outstanding | $ / shares $ 17.56
Weighted Average Remaining Contractual Life (in years), Outstanding 4 years 1 month 13 days
Aggregate Intrinsic Value, Outstanding | $
Number of Warrants, Granted | shares
Weighted Average Exercise Price, Granted | $ / shares
Number of Warrants, Exercised | shares
Weighted Average Exercise Price, Exercised | $ / shares
Number of Warrants, Expired or cancelled | shares
Weighted Average Exercise Price, Expired or cancelled | $ / shares
Number of Warrants, Outstanding | shares 49,614
Weighted Average Exercise Price, Outstanding | $ / shares $ 17.56
Weighted Average Remaining Contractual Life (in years), Outstanding 3 years 4 months 13 days
Aggregate Intrinsic Value, Outstanding | $
Number of Shares, Exercisable | shares 49,614
Weighted Average Exercise Price, Exercisable | $ / shares $ 17.56
Weighted Average Remaining Contractual Life (in years), Exercisable 3 years 4 months 13 days
Aggregate Intrinsic Value, Exercisable | $
v3.24.3
STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Equity [Abstract]        
Stock based compensation $ 2,247,002 $ 554,249 $ 6,904,141 $ 9,190,027
Unrecognized stock-based compensation expense $ 8,179,967   $ 8,179,967  
Unrecognized stock-based compensation expense, recognition period     1 year 2 months 1 day  
Weighted average grant date fair value of options $ 0      
Intrinsic value of options exercised $ 0   $ 0  
Options vested, net of forfeitures     257,811  
v3.24.3
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)
 9 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Commitments and Contingencies Disclosure [Abstract]    
Description for voting securities beneficially of more than 5% of any class of our voting securities, or security holder is a party adverse to us or has a material interest adverse to us.  
Indirect tax liabilities $ 16,851 $ 53,277
v3.24.3
SCHEDULE OF LOAN PAYABLE (Details) - USD ($)
 9 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Short-Term Debt [Line Items]    
Less current portion $ (2,686,087) $ (1,856,245)
Long term loans payable 46,778 74,542
Term Loans One [Member]    
Short-Term Debt [Line Items]    
Loans payable $ 2,732,865 $ 1,930,787
Term Loans One [Member] | Minimum [Member]    
Short-Term Debt [Line Items]    
Line of credit facility interest rate percentage 4.00%  
Line of credit maturity description 2024  
Term Loans One [Member] | Maximum [Member]    
Short-Term Debt [Line Items]    
Line of credit facility interest rate percentage 71.55%  
Line of credit maturity description 2027  
v3.24.3
SCHEDULE OF FUTURE MINIMUM PAYMENTS FOR LONG TERM DEBT (Details)
Sep. 30, 2024
USD ($)
Debt Disclosure [Abstract]  
2024 (remainder of) $ 3,753,028
2025 8,208,945
2026 33,495
2027 3,615
Total future minimum payments 11,999,083
Less: discount (82,122)
Total 11,916,961
Less: current (11,870,183)
Long term debt, net $ 46,778
v3.24.3
LOANS PAYABLE AND LINES OF CREDIT (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended 9 Months Ended
Mar. 28, 2024
Jan. 31, 2024
Jun. 30, 2024
Nov. 30, 2023
Oct. 31, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Short-Term Debt [Line Items]                        
Interest expense                   $ 535,574    
Maturity date     Sep. 30, 2024                  
Unsecured convertible debt     $ 1,050,000                  
Convertible Notes Payable [Member]                        
Short-Term Debt [Line Items]                        
Interest expense               $ 33,476   96,791    
Accrued interest               123,774   $ 123,774   $ 26,983
Maturity date     Sep. 30, 2024                  
Unsecured convertible debt     $ 1,000,000                  
Common Stock [Member]                        
Short-Term Debt [Line Items]                        
New shares issues                   133,334    
Prereverse Split Basis [Member]                        
Short-Term Debt [Line Items]                        
New shares issues                   2,000,000    
Loan and Security Agreement [Member]                        
Short-Term Debt [Line Items]                        
Interest expense               0   $ 564,529    
Accrued interest       $ 594,000       0   0    
Debt instrument face amount $ 2,200,000   2,000,000 2,200,000                
Debt instrumental Fee amount $ 44,000   $ 100,000 $ 44,000                
Debt Long term bearing variable interest 51.73%   147.82% 53.44%                
Debt installments payment $ 53,308   $ 103,154 $ 53,731                
Debt instrument payments description     We may prepay the Subordinated Business Loan in whole or in part, but partial repayments do not reduce the total interest payable on the Subordinated Business Loan of $882,000. For the three and nine months ended September 30, 2024,                  
Interest expense               694,128   694,128    
Borrowing amount   $ 3,500,000                    
Borrowing percentage   80.00%                    
Interest rate percentage   19.25%                    
Maturity date   Jan. 30, 2025                    
Termination fee   $ 35,000                    
Bear interest rate percentage   29.25%                    
Interest expense               117,905   272,565    
Loan and Security Agreement [Member] | First 4 Installments [Member]                        
Short-Term Debt [Line Items]                        
Debt installments payment     $ 75,000                  
Fee Agreement [Member]                        
Short-Term Debt [Line Items]                        
Interest expense               230,904        
Fee Agreement [Member] | Common Stock [Member]                        
Short-Term Debt [Line Items]                        
New shares issues 100,000                      
Shares Issued, Price Per Share $ 0.00001                      
Term Loans One [Member]                        
Short-Term Debt [Line Items]                        
Interest expense               1,563 $ 8,536 5,558 $ 47,015  
Accrued interest               $ 0   $ 0   0
Aggregate effective interest rate               5.70% 5.70% 5.70% 5.70%  
Unsecured Debt [Member]                        
Short-Term Debt [Line Items]                        
Accrued interest               $ 144,763   $ 144,763   61,954
Unsecured Debt [Member] | Mr Mc Cain [Member]                        
Short-Term Debt [Line Items]                        
Interest expense               125,000 $ 125,000 375,000 $ 263,888  
Unsecured Debt [Member] | Convertible Notes Payable [Member]                        
Short-Term Debt [Line Items]                        
Interest expense               34,349 $ 27,603 82,809 $ 33,083  
Debt instrument face amount         $ 1,000,000 $ 1,050,000 $ 5,000,000          
Debt instrument interest rate stated percentage         12.00% 10.00% 10.00%          
Maturity date         Oct. 12, 2024 Jun. 07, 2024 Mar. 20, 2025          
Debt instrument Conversion price         $ 1.7595   $ 18.00          
Unsecured Debt [Member] | Convertible Notes Payable [Member] | VCISO LLC [Member]                        
Short-Term Debt [Line Items]                        
Debt instrument interest rate stated percentage           4.20%            
Convertible Note Payable [Member] | Mr Mc Cain [Member]                        
Short-Term Debt [Line Items]                        
Accrued interest               $ 763,888   $ 763,888   $ 388,888
Prereverse Split Basis [Member] | Convertible Notes Payable [Member]                        
Short-Term Debt [Line Items]                        
Debt instrument Conversion price         $ 0.1173              
v3.24.3
SCHEDULE OF LEASE COST AND OTHER SUPPLEMENT LEASE INFORMATION (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Leases    
Operating lease cost ROU assets $ 583,104 $ 762,228
Total lease assets 583,104 762,228
Operating lease liabilities, current 227,911 219,342
Operating lease liabilities, non-current 424,018 596,307
Total lease liabilities $ 651,929 $ 815,649
v3.24.3
SCHEDULE OF LEASE COSTS (Details) - USD ($)
 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Leases    
Operating lease costs $ 221,758 $ 196,642
Short term lease cost 36,001 78,307
Total lease costs $ 257,759 $ 274,949
v3.24.3
SCHEDULE OF FUTURE MINIMUM UNDER NON-CANCELLABLE LEASES FOR OPERATING LEASES (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Leases    
2024 (remainder of) $ 74,624  
2025 252,513  
2026 199,177  
2027 205,145  
2028 51,896  
Total future minimum lease payments 783,355  
Amount representing interest (131,426)  
Present value of net future minimum lease payments $ 651,929 $ 815,649
v3.24.3
LEASES (Details Narrative)
Sep. 30, 2024
Leases  
Weighted average incremental borrowing rate 10.10%
Operating lease, weighted average remaining lease term 3 years 1 month 13 days
v3.24.3
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS (Details Narrative)
 9 Months Ended
Sep. 30, 2024
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | No Single Customer [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 10.00%
v3.24.3
SCHEDULE OF ACCUMULATED OTHER COMPREHENSIVE INCOME (Details)
 9 Months Ended
Sep. 30, 2024
USD ($)
Accumulated Other Comprehensive Income (Loss) [Line Items]  
Balance as of December 31, 2023 $ 1,320,177
Other comprehensive income (3,327)
Amounts reclassified from AOCI (1,320,177)
Balance as of September 30, 2024 (3,327)
AOCI Attributable to Parent [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
Amounts reclassified from AOCI (1,320,177) [1]
Foreign Currency Gain (Loss) [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
Balance as of December 31, 2023 1,320,177
Other comprehensive income (3,327)
Balance as of September 30, 2024 (3,327)
Foreign Currency Gain (Loss) [Member] | AOCI Attributable to Parent [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
Amounts reclassified from AOCI $ (1,320,177) [1]
[1] Amount reclassified to gain/(loss) from discontinued operations, net of income taxes on the condensed consolidated statements of operations and comprehensive loss.
v3.24.3
SUBSEQUENT EVENTS (Details Narrative) - USD ($)
Nov. 12, 2024
Nov. 04, 2024
Hensley Beverage [Member] | Subsequent Event [Member]    
Subsequent Event [Line Items]    
Stock issued during period value issued for services $ 600,000 $ 105,000
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