CISO Global, Inc. 10-K

ITEM 9A. 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 ensure 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 Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Our management, with the participation of our Chief Executive Officer and Chief 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 on this evaluation, our CEO and CFO concluded that, as of December 31, 2023, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports we file or submit 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 CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Description of Material Weakness as of December 31, 2022 The ineffectiveness of our internal control over financial reporting was due to the following material weaknesses which are indicative of many small companies with small number of staff: ● lack of risk assessment procedures on internal controls to detect financial reporting risks in a timely manner; and ● lack of documentation on policies and procedures that are critical to the accomplishment of financial reporting objectives. - 35 - Remediation As a result of identification of the material weakness noted above, we implemented a remediation plan that addressed the material weakness in internal control over financial reporting. We designed, documented, and implemented new controls to assess risks on internal controls over financial reporting and policies and procedures critical to financial reporting objectives. We have evaluated the design and operating effectiveness of the controls implemented and concluded that the controls are adequately designed and have operated effectively for a sufficient period to conclude that the material weakness has been remediated. Limitations on Effectiveness of Controls and Procedures Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Changes in Internal Control Over Financial Reporting During the year ended December 31, 2023, we completed formal risk assessment procedures and documentation of policies and procedures critical to the accomplishment of financial reporting objectives. Other than the remediation of our material weakness, 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 year ended December 31, 2023, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting is a process designed under the supervision of its principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its consolidated financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Based on our assessment under this framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2023. Our independent registered public accounting firm will not be required to report on the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company” nor a non-accelerated filer. ITEM 9B. OTHER INFORMATION Not applicable. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. - 36 - PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth certain information regarding our Directors and Executive Officers. The age of each Director and Executive Officer listed below is given as of April 9, 2024. Name Age Position David G. Jemmett 57 Chief Executive Officer and Director Kyle J. Young 41 Interim Chief Operating Officer Debra L. Smith 53 Chief Financial Officer and Director Ret. General Robert C. Oaks (3) 88 Director Reid S. Holbrook (1) (2) (3) 76 Director Andrew K. McCain (1) (2) 61 Director Ernst M. (KiKi) VanDeWeghe, III (1) (2) (3) 65 Director Brett Chugg 55 Director (1) Member of the Audit Committee (2) Member of the Compensation Committee (3) Member of the Governance and Nominating Committee Our Executive Officers David G. Jemmett – Chief Executive Officer and Director Mr. Jemmett has served as our Chief Executive Officer and a director of our company since our formation in March 2019. He also founded GenResults in June 2015, which we subsequently acquired in April 2019. From January 2014 to December 2014, Mr. Jemmett served as Chief Executive Officer of NantCloud, LLC, a provider of secure cloud-hosted applications for healthcare customers, and Chief Technology Officer of NantWorks, LLC, a parent company for the “Nant” family of companies. From 2005 to 2013, Mr. Jemmett served as founder and Chief Executive Officer of ClearDATA Networks Corporation, a HIPAA compliant hosting company specializing in healthcare. He has been a guest speaker on CBS, CNN, MSNBC and CSPAN, and has spoken before the U.S. Senate Subcommittee on Telecommunications and Internet Security regarding internet technologies in 1998. We believe Mr. Jemmett is qualified to serve as a director of our company due to his extensive business background, his experience in the cybersecurity industry, and his significant equity ownership in our company. Kyle J. Young – Interim Chief Operating Officer Mr. Young has served as our Interim Chief Operating Officer since March 2023. Previously Mr. Young served as our Executive Vice President, Operations from January 2022 to March 2023 and as our Vice President, Operations from February 2021 to January 2022. Mr. Young served in various roles at BeyondTrust Software, a U.S.-based cybersecurity vendor, from December 2007 to February 2022, most recently serving as its Vice President, Business and Sales Operations. Mr. Young holds a bachelor’s degree in Speech Communications & Rhetoric from the University of Illinois Urbana-Champaign. Debra L. Smith – Chief Financial Officer and Director Ms. Smith has served as our Chief Financial Officer since June 2021. Ms. Smith served as our Executive Vice President of Finance and Accounting from February 2021 to June 2021. Prior to joining our company, Ms. Smith served as Executive Vice President of Finance at Arrivia Inc. from January 2020 to February 2021 and Controller and, subsequently, Chief Accounting Officer at BeyondTrust from October 2016 to January 2020. Ms. Smith received a Bachelor of Science degree in Accounting, Summa Cum Laude, from DeVry University and a Master’s degree in Counseling with Honors from Argosy University. - 37 - Our Directors Ret. General Robert C. Oaks – Director Ret. General Oaks has served as a director of our company since May 2019. He is a retired U.S. Air Force general who served as commander in chief of the U.S. Air Forces in Europe, and commander, Allied Air Forces Central Europe, with headquarters at Ramstein Air Base, Germany. He retired as a four-star General and Commander and Chief of U.S. Air Forces Europe and NATO Central Europe in 1994 after serving 34 years. Following his retirement, Ret. General Oaks was employed at U.S. Airways as Senior Vice President from 1994 to 2000. In 2000, Oaks resigned from this position when he was called to serve the LDS Church, where he served until 2009, when he was released as a general authority. He earned a Bachelor of Science degree in Military Science from the U.S. Air Force Academy and a Master’s degree in Business Administration from Ohio State University prior to graduating from the Naval War College. Ret. General Oaks currently serves as the official Liaison for the Church of Jesus Christ to the U.S. Armed Forces. We believe Ret. General Oaks is qualified for service as a director of our company due to his experience with national security issues, including cybersecurity, through his extensive military service. Reid S. Holbrook – Director Mr. Holbrook has served as a director of our company since May 2019. Since 2013, Mr. Holbrook has been a Principal at Mountain Summit Advisors, a specialty firm focused on mergers and acquisitions of primarily healthcare technology and services companies, and a strategic advisor to Health Catalyst, a company focused on data analytics and warehousing primarily in healthcare. He served as the Executive Vice President of Medicity, a population health management company with solutions for health information exchange, business intelligence, and provider and patient engagement, from 2002 to 2013. In 1998, Mr. Holbrook founded KLAS where he remains as a board member. He has served in executive positions at IHC, GTE, Sunquest Information Systems, Integrated Medical Networks and is a founder of Park City Solutions. Mr. Holbrook is a HIMSS Fellow. He holds a Master of Science from Utah State University and a Bachelor of Science from Brigham Young University. We believe Mr. Holbrook is qualified for service as a director of our company as a result of his significant experience in the healthcare technology sector. Andrew K. McCain – Director Mr. McCain has served as a director of our company since May 2019. He has served as the President and Chief Executive Officer for Hensley Beverage Company since January 2024, and previously served as President and Chief Operating Officer from 2014 through January 2024. He is a board member of the Arizona Super Bowl Host Committee, the Arizona 2016 College Football Championship Local Organizing Committee, Chairman of Hensley Employee Foundation, and a Patrons Committee member of United Methodist Outreach Ministries’ New Day Centers. He is past Chairman of the Board of the Fiesta Bowl, past Chairman of the Anheuser-Busch National Wholesaler Advisory Panel, and past Chairman of the Greater Phoenix Chamber of Commerce. Mr. McCain received his Bachelor of Arts in Mathematics in 1984 and an MBA in 1986 from Vanderbilt University. We believe Mr. McCain is qualified for service as a director of our company due to his significant business experience and leadership. Ernst M. (Kiki) VanDeWeghe, III – Director Mr. VanDeWeghe has served as a director of our company since May 2021. He has served as the Executive Vice President, Basketball Operations of the National Basketball Association since 2013. Prior to that, Mr. VanDeWeghe was the general manager of the Denver Nuggets and the New Jersey Nets and a head coach of the New Jersey Nets. Prior to that he played professionally for the Los Angeles Clippers, New York Knicks, Portland Trail Blazers, and the Denver Nuggets. Mr. VanDeWeghe attended UCLA where he received a degree in Economics. We believe Mr. VanDeWeghe is qualified for service as a director of our company due to his business acumen and experience as an organizational leader. - 38 - Brett Chugg – Director Mr. Chugg has served as a director of our company since February 2024. He has most recently served as Senior Managing Director at Koch Disruptive Technologies, a venture and growth equity investment group at Koch Industries and in other roles with Koch Industries since 1998. Mr. Chugg has also served as a Director on several high-growth company boards. Mr. Chugg attended Weber State University where he received a degree in English and received his MBA in 1998 from Bringham Young University. We believe Mr. Chugg is qualified to serve as a director due to his experience as an investor and leader in technology with global and multi-industry experience. Board Constitution Our Board of Directors currently consists of seven members. All directors hold office until the next annual meeting of stockholders. At each annual meeting of stockholders, the successors to directors whose terms then expire are elected to serve from the time of election and qualification until the next annual meeting following election. Director Independence Our Board of Directors is comprised of a majority of independent directors, as “independence,” is defined by the listing standards of The Nasdaq Stock Market and by the SEC. Our Board of Directors has concluded that each of Messrs. Oaks, Holbrook, McCain, and Mr. VanDeWeghe are “independent”, having concluded that any relationship between such director and our company, in its opinion, does not interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Mr. Jemmett and Ms. Smith are employee directors. Mr. Scott served on our Board of Directors since April 2019 and resigned in May 2023. Mr. Scott was an independent director. Board Committees Our Board of Directors has three standing committees: the Audit Committee, the Compensation Committee, and Governance and Nominating Committee. Audit Committee The Audit Committee of our Board of Directors was established in accordance with Rule 10A-3 promulgated under the Exchange Act. The current members of our Audit Committee are Messrs. McCain, Holbrook, and VanDeWeghe, with Mr. McCain serving as the chair. Each member of the Audit Committee meets the independence and other requirements to serve on our Audit Committee under The Nasdaq Stock Market Rules and the rules of the SEC. In addition, our Board of Directors determined that each of Messrs. McCain and Holbrook is considered an “audit committee financial expert” as defined in the rules of the SEC. The Audit Committee was formed in 2021. Our Board of Directors has adopted a written charter for the Audit Committee, a copy of which is posted in the Investor Resources and Corporate Governance section of our website at www.ciso.inc/investor-relations/charter-of-the-audit-committee . The principal functions of the Audit Committee are to oversee our accounting and financial reporting processes and the audits of our consolidated financial statements; oversee our relationship with our independent auditors, including selecting, evaluating, and setting the compensation of, and approving all audit and non-audit services to be performed by the independent auditors; and facilitate communication among our independent registered public accounting firm and our financial and senior management. Compensation Committee We have a standing Compensation Committee of our Board of Directors. The members of our Compensation Committee are Messrs. Holbrook, VanDeWeghe, and McCain, with Mr. Holbrook serving as the chair. Each member of the Compensation Committee meets the independence and other requirements to serve on our Compensation Committee under The Nasdaq Stock Market Rules and the rules of the SEC. The Compensation Committee was formed in 2021. Our Board of Directors has adopted a written charter for the Compensation Committee, a copy of which is posted in the Investor Resources and Corporate Governance section of our website at www.ciso.inc/investor-relations/charter-of-the-compensation-committee . The Compensation Committee has responsibilities relating to the performance evaluation and the compensation of our Chief Executive Officer; the compensation of our executive officers and directors; and our significant compensation arrangements, plans, policies, and programs, including our stock compensation plans. Certain of our executive officers, our outside counsel, and consultants may occasionally attend the meetings of the Compensation Committee. However, no officer of our company is present during discussions or deliberations regarding that officer’s own compensation. - 39 - Governance and Nominating Committee We have a standing Governance and Nominating Committee of our Board of Directors. The current members of our Governance and Nominating Committee are Messrs. Oaks, Holbrook and VanDeWeghe, with Mr. VanDeWeghe serving as the chair. Each of Messrs. Oaks, Holbrook and VanDeWeghe meets the independence and other requirements to serve on our Governance and Nominating Committee under The Nasdaq Stock Market Rules and the rules of the SEC. The Governance and Nominating Committee was formed in 2021. Our Board of Directors has adopted a written charter for the Governance and Nominating Committee, a copy of which is posted in the Investor Resources and Corporate Governance section of our website at www.ciso.inc/investor-relations/charter-of-the-nominating-and-corporate-governance-committee . The Governance and Nominating Committee considers the performance of the members of our Board of Directors and nominees for director positions and evaluates and oversees corporate governance and related issues. The goal of the Governance and Nominating Committee is to ensure that our directors possess a variety of perspectives and skills derived from high-quality business and professional experience. The Governance and Nominating Committee seeks to achieve a balance of knowledge, experience, and capability on our Board of Directors. To this end, the Governance and Nominating Committee seeks nominees with the highest professional and personal ethics and values, an understanding of our business and industry, diversity of business experience and expertise, a high level of education, broad-based business acumen, and the ability to think strategically. Although the Governance and Nominating Committee uses these and other criteria to evaluate potential nominees to our Board of Directors, it has no stated minimum criteria for such nominees. The Governance and Nominating Committee does not use different standards to evaluate nominees depending on whether they are proposed by our directors and management or by our stockholders. To date, we have not paid any third parties to assist us in this process. Code of Ethics We have adopted a Code of Ethics and Business Conduct (“Code of Ethics”) that sets forth various policies and procedures to promote ethical behavior and that applies to all our directors, officers and employees. The Code of Ethics is publicly available on our website at www.ciso.inc. Amendments to the Code of Ethics and any grant of a waiver from a provision of the Code of Ethics requiring disclosure under applicable SEC rules will be disclosed on our website. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act, requires officers and directors of our company and persons who beneficially own more than 10% of a registered class of our company’s equity securities to file initial statements of beneficial ownership of common stock (Form 3) and statements of changes in beneficial ownership of common stock (Forms 4 or 5) with the SEC. Officers, directors, and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all such forms they file. Based solely on our review of such reports and certain representations from each reporting person, we believe that during 2023, all Section 16(a) filing requirements were satisfied on a timely basis. - 40 - ITEM 11. EXECUTIVE COMPENSATION The following table shows the total compensation paid or accrued during the years ended December 31, 2023 and 2022 to our Chief Executive Officer, and our next two most highly compensated executive officers who were serving as executive officers on December 31, 2023, (collectively, our “named executive officers”). Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($) Option Awards ($) (1) Non-Equity Incentive Plan Compensation ($) Non-qualified Deferred Compensation Earnings ($) All Other Compensation ($) (2) Total ($) David G. Jemmett 2023 315,105 62,500 - - - - 14,118 391,723 Chief Executive Officer 2022 250,000 116,651 - - - - 225 366,876 Debra L. Smith 2023 280,642 53,125 - - - - 7,576 341,343 Chief Financial Officer 2022 200,000 60,500 - 892,200 - - 225 1,152,925 Kyle J. Young 2023 274,392 48,000 - - - - 12,168 334,560 Interim Chief Operating Officer (3) 2022 - - - - - - - - (1) The amounts in this column reflect the fair value on the grant date of the option awards granted to the named executive officer, calculated in accordance with ASC Topic 718. Stock options were valued using the Black-Scholes model. The grant-date fair value does not necessarily reflect the value of shares which may be received in the future with respect to these awards. The grant-date fair value of the stock options in this column is a non-cash expense that reflects the fair value of the stock options on the grant date and therefore does not affect our cash balance. The fair value of the stock options will likely vary from the actual value the holder receives because the actual value depends on the number of options exercised and the market price of our common stock on the date of exercise. For a discussion of the assumptions made in the valuation of the stock options, see Note 10 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. (2) The amounts in the “All Other Compensation” column consist of certain benefits provided to our NEOs, which are generally available to our similarly situated employees, including 401(k) company matching and technology stipend. For Mr. Jemmett, the amounts in this column consist of 401(k) company matching contributions ($13,218) and a technology stipend ($900). For Mr. Young, the amounts in this column consist of 401(k) company matching contributions of ($11,268) and a technology stipend ($900). (3) Mr. Young was appointed to serve as our Interim Chief Operating Officer on March 31, 2023. - 41 - Outstanding Equity Awards as of December 31, 2023 The following table summarizes the outstanding equity awards held by each named executive officer as of December 31, 2023. Name Grant Date Number of Shares Underlying Unexercised Options (#) Exercisable Number of Shares Underlying Unexercised Options (#) Unexercisable Option Exercise Price ($) Option Expiration Date David G. Jemmett - - - - - Debra L. Smith February 1, 2021 (1) 33,332 - 30.00 February 1, 2026 December 31, 2021 (2) 166 166 75.00 December 31, 2031 January 14, 2022 (1)(3) 21,863 11,470 45.30 January 14, 2032 Kyle J. Young February 1, 2021 (1) 33,332 - 30.00 February 1, 2026 December 31, 2021 (2) 166 166 75.00 December 31, 2031 January 14, 2022 (1)(3) 21,863 11,470 45.30 January 14, 2032 (1) 30% of the shares underlying this option vested on the one-year anniversary of the grant date with the remainder vesting month over the subsequent 24-month period. (2) 25% of the shares underlying this option vested on the one-year anniversary of the grant date with the remainder vesting monthly over the subsequent 36-month period. (3) On August 22, 2022, we repriced these option grants to reflect an exercise price equal to the fair value of our common stock. Vesting provisions of these option grant remained on the same terms as the original option grant. Retirement Plans We maintain a tax-qualified Section 401(k) retirement savings plan for our executive officerss and other employees who satisfy the eligibility requirements. Under this plan, participants may elect to make pre-tax or Roth contributions of up to a certain portion of their current compensation, not to exceed the applicable statutory income tax limitation. We provided matching contributions made by participants in the plan up to a maximum of 3.5% of eligible compensation annually, subject to limitations in our 401(k) plan applicable to highly compensated employees. We intend for the plan to qualify under Section 401(a) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), enabling contributions by participants to the plan, and income earned on plan contributions, to not be taxable to participants until withdrawn from the plan. Employment Agreements with our Named Executive Officers David G. Jemmett On September 30, 2019, we entered into an employment agreement with Mr. Jemmett to serve as our Chief Executive Officer (the “Jemmett Employment Agreement”). The Jemmett Employment Agreement is evergreen and can be terminated by either party. Pursuant to the Jemmett Employment Agreement, the Board of Directors approved an increase to Mr. Jemmett’s annual base salary from $250,000 to $375,000 and may be increased hereafter from time to time at the discretion of the Board of Directors. Mr. Jemmett’s base salary may be increased in accordance with our normal compensation and performance review policies. He is entitled to receive a discretionary annual bonus of up to 100% of his annual base salary, at the discretion of our Board of Directors, based on performance and our objectives. Subject to approval by our Board of Directors, Mr. Jemmett is entitled to stock options under our 2019 Equity Incentive Plan. The stock options will vest at 33% on the one-year anniversary of the Jemmett Employment Agreement and the remaining 66% of the options will vest monthly over the next 12 months. As of December 31, 2022, our Board of Directors had not approved or granted any stock options to Mr. Jemmett. On December 31, 2022, a bonus of $62,500 was accrued for Mr. Jemmett and subsequently paid in equal installments on April 28, May 31, and June 30, 2023. Mr. Jemmett is also eligible to participate in our standard benefit plans. - 42 - Debra L. Smith On December 31, 2020, we entered into an employment agreement with Ms. Smith to serve as our Executive Vice President of Finance, effective as of February 1, 2021 (the “Smith Employment Agreement”). Pursuant to the Smith Employment Agreement, the Board of Directors approved an increase to Ms. Smith’s annual base salary from $200,000 to $350,000 and may be increased hereafter from time to time at the discretion of the Board of Directors. Ms. Smith also earns a guaranteed bonus of $60,000 to be paid quarterly, and an additional $60,000 at the end of each fiscal year at the discretion of our Board of Directors. A bonus of $53,125 was accrued for Ms. Smith and subsequently paid in installments on March 31, April 28, May 31, and June 30, 2023. Ms. Smith is also eligible to participate in our standard benefit plans. On June 18, 2021, we appointed Ms. Smith to serve as Chief Financial Officer. The terms of the original Smith Employment Agreement remained in force. Kyle J. Young On March 31, 2023, we entered into an employment agreement with Mr. Young to serve as our Chief Operating Officer (the “Young Employment Agreement”). The Young Employment Agreement is evergreen and can be terminated by either party. Pursuant to the Young Employment Agreement, the Board of Directors approved an increase to Mr. Young’s annual base salary from $200,000 to $350,000, and an annual bonus between 20% and 100% of base annual salary at the discretion of our Board of Directors. A bonus of $47,500 was accrued for Mr. Young and subsequently paid in installments on April 28, May 31, and June 30, 2023. Mr. Young is also eligible to participate in our standard benefit plans. Director Compensation The following table sets forth for each non-employee director certain information concerning their compensation for the year ended December 31, 2023: Name (1) Fees Earned or Paid in Cash ($) Stock Awards ($) Option Awards ($) (2) Non-equity Incentive Plan Compensation ($) Nonqualified Deferred Compensation Earnings ($) All Other Compensation ($) Total ($) Reid S. Holbrook - - - - - - - Andrew K. McCain - - - - - - - Ret. General Robert C. Oaks - - - - - - - Stephen Scott (3) - - - - - $ 159,000 $ 159,000 Ernest M. (Kiki) VanDeWeghe, III - - - - - - - Notes : (1) All directors receive reimbursement for reasonable out-of-pocket expenses in attending Board meetings and for participating in our business. (2) The amounts in this column reflect the fair value on the grant date of the option awards granted to the named executive, calculated in accordance with ASC Topic 718. Stock options were valued using the Black-Scholes model. The grant-date fair value does not necessarily reflect the value of shares which may be received in the future with respect to these awards. The grant-date fair value of the stock options in this column is a non-cash expense that reflects the fair value of the stock options on the grant date and therefore does not affect our cash balance. The fair value of the stock options will likely vary from the actual value the holder receives because the actual value depends on the number of options exercised and the market price of our common stock on the date of exercise. For a discussion of the assumptions made in the valuation of the stock options, see Note 10 to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2022. (3) Mr. Scott received payment of $11,500 per month under the terms of an independent consulting agreement to provide services relating to our strategic and business development, and sales and marketing. In July 2023, we entered into a new independent consulting agreement with Mr. Scott to provide similar services for payment for $15,000 per month. Mr. Scott resigned as a Director on May 10, 2023. - 43 - ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth certain information with respect to the beneficial ownership of our common stock as of April 5, 2024 for (a) the named executive officers, (b) each of our directors, (c) all of our current directors and executive officers as a group and (d) each stockholder known by us to own beneficially more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. We deem shares of common stock that may be acquired by an individual or group within 60 days of April 5, 2024 pursuant to the exercise of options or warrants to be outstanding for the purpose of computing the percentage ownership of such individual or group but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them based on information provided to us by these stockholders. Percentage of ownership is based on 12,232,379 shares of common stock outstanding on April 5, 2024. Security Ownership of Certain Beneficial Holders Name and Address of Beneficial Owner (1) Amount and Nature of Beneficial Ownership Percent Jemmett Enterprises, LLC 4,429,000 (2) 36.21 % Stephen H. Scott, Jr. 1,203,335 (3) 9.84 % Security Ownership of Directors and Executive Officers Name and Address of Beneficial Owner (1) Amount and Nature of Beneficial Ownership Percent David G. Jemmett 4,629,001 (4) 37.84 % Debra L. Smith 59,090 (5) * Kyle J. Young 59,090 (6) * Ret. General Robert C. Oaks 26,666 (7) * Reid S. Holbrook 26,666 (7) * Andrew K. McCain 529,444 (8) 4.22 % Kiki VanDeWeghe 13,333 (9) * Brett Chugg — — Directors & Executive Officers as a Group (8 persons) 5,343,290 (10) 42.00 % Notes : * Less than 1% of the outstanding shares of common stock. (1) Unless otherwise indicated, the address of record is c/o CISO Global, Inc., 6900 E. Camelback Road, Suite 900, Scottsdale, Arizona 85251. (2) Mr. Jemmett is the managing member of Jemmett Enterprises, LLC and has voting and dispositive power over such shares. (3) Consists of (i) 853,334 shares held directly by Mr. Scott; (ii) 333,334 shares beneficially held by TVMT LLC; and (iii) 16,667 shares beneficially held by JLS 401k Trust. (4) Consists of (i) 4,429,000 shares held by Jemmett Enterprises, LLC, of which Mr. Jemmett is the managing member and has voting and dispositive power over such shares; (ii) 133,334 shares held by Xander LLC, of which Mr. Jemmett and his wife are the sole members and have voting and dispositive power over such shares; and (iii) 66,667 shares held by Dana Borgman Trust. (5) Consists of 59,090 shares issuable upon exercise of options exercisable within 60 days after April 5, 2024. (6) Consists of 59,090 shares issuable upon exercise of options exercisable within 60 days after April 5, 2024. (7) Consists of 26,666 shares issuable upon the exercise of options exercisable within 60 days after April 5, 2024. (8) Consists of (i) 25,000 shares held indirectly as executor of the Andrew and Lucy McCain Family Trust, for which Mr. McCain has voting and dispositive power; (ii) 200,000 shares held by Hensley & Company, for which Mr. McCain has voting and dispositive power; (iii) 26,666 shares issuable upon the exercise of options exercisable within 60 days after April 5, 2024; and (iv) 277,778 shares issuable upon the conversion of a note payable held by Hensley & Company. (9) Consists of 13,333 shares issuable upon the exercise of options exercisable within 60 days after April 5, 2024. (10) Includes 211,511 shares issuable upon the exercise of stock options and 277,778 shares issuable upon conversion of a note payable. - 44 - The following table sets forth information with respect to our common stock that may be issued upon the exercise of stock options under our equity compensation plans as of December 31, 2023: Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options Weighted-Average Exercise Price of Outstanding Options Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (a) (b) (c) Equity compensation plans approved by security holders 2,105,168 $ 31.63 4,232,853 Equity compensation plans not approved by security holders — — — Total 2,105,168 $ 31.63 4,232,853 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Transactions with Related Persons Except as set out below, during the year ended December 31, 2023, there were no transactions, or currently proposed transactions, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest: ● any director or executive officer of our company; ● any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; ● any promoters and control persons; and ● any member of the immediate family (including spouse, parents, children, siblings and in laws) of any of the foregoing persons. Independent Consulting Agreement with Stephen Scott In August 2020, we entered into an Independent Consulting Agreement with Stephen Scott, a then director of our company, with respect to advisory and consulting services relating to our strategic and business development, and sales and marketing. Mr. Scott received a consulting fee of $11,500 per month for such services. In July 2023, we entered into an Independent Consulting Agreement with Mr. Scott, 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 years ended December 31, 2023 and 2022, we paid consulting fees to Mr. Scott in the amounts of $159,000 and $138,000, respectively. Managed Services Agreement with Hensley Beverage Company In July 2021, we entered into a 1-year Managed Services Agreement with Hensley Beverage Company, an entity affiliated with Mr. McCain, a director of our 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 years ended December 31, 2023 and 2022, we received $1,417,398 and $850,445, respectively from Hensley Beverage Company for contracted services and had an outstanding receivable balance of $152,213 and $15,737 as of December 31, 2023 and 2022, respectively. Convertible Note Payable with Hensley Beverage 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 and unpaid interest thereon into shares of our common stock at a conversion price of $18.00 per share ($1.20 on a pre-reverse split basis). During the year ended December 31, 2023, we recorded interest expense of $388,888 and as of December 31, 2023, we had accrued interest of $388,888. Andy McCain, a director of our company, is President and Chief Executive officer of Hensley & Company. Director Independence See “Directors, Executive Officers and Corporate Governance – Director Independence” and “Directors, Executive Officers and Corporate Governance – Board Committees” in Item 10 above. - 45 - ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Our Audit Committee has appointed Semple, Marchal & Cooper, LLP (“SMC”) to audit the consolidated financial statements of our company for the fiscal year ending December 31, 2023. The following table sets forth the fees billed to our company for professional services rendered by SMC for the years ended December 31, 2023 and 2022: Services 2023 2022 Audit fees (1) $ 498,395 $ 369,481 Audit-related fees (2) 51,863 104,663 Tax fees (3) 65,827 50,213 All other fees 17,235 - Total fees $ 633,320 $ 524,357 (1) Audit fees consisted of billing for professional services normally provided in connection with statutory and regulatory filings, including (i) fees associated with the audits of our financial statements for the years ended December 31, 2023 and 2022 and, (ii) fees associated with quarterly reviews for the quarters ended March 31, 2023 and 2022, June 30, 2023 and 2022, and September 30, 2023 and 2022. (2) Audit related fees consisted of billings for professional services for reviews of our periodic filings under form 10-K and 10-Q and acquisition audits for the years ended December 31, 2023 and 2022. (3) Tax fees consisted primarily of tax related advisory and preparation services. Audit Committee Pre-Approval Policies The charter of our Audit Committee provides that the authority and responsibilities of our Audit Committee include the pre-approval of all audit and permitted non-audit and tax services that may be provided by our independent auditors or other registered public accounting firms, and the establishment of policies and procedures for the Audit Committee’s pre-approval of permitted services by our independent auditors or other registered public accounting firms on an on-going basis. For audit services, each year our independent auditor provides our Audit Committee with an engagement letter outlining the scope of the audit services proposed to be performed during the year, which must be formally accepted by our Audit Committee before the audit commences prior to engagement of an independent auditor for next year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of three categories of services to our Audit Committee for approval. All of the services provided by SMC described above under the caption “Audit-Related Fees” were approved by our Audit Committee pursuant to our Audit Committee’s pre-approval policies. - 46 - PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as a part of the report: (1) For a list of the financial statements included herein, see the index to the financial statements beginning on page F-1 of this Annual Report on Form 10-K, incorporated into this Item by reference. (2) Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto. (b) Exhibits. Exhibit Incorporated by Reference Number Exhibit Description Form Exhibit Filing Date 2.1 Agreement for the Purchase and Sale of Limited Liability Company Interests of GenResults, LLC dated April 12, 2019 10-12G 10.1 10/2/2019 2.2** Agreement and Plan of Merger by and among the Registrant, TalaTek, LLC, TalaTek Merger Sub and Baan Alsinawi dated September 23, 2019 10-12G 2.2 10/2/2019 2.3 Stock Purchase Agreement by and among the Registrant, Technologyville, Inc. and Brian Yelm dated May 25, 2020 8-K 10.1 5/29/2020 2.4 Share Purchase Agreement among the Registrant, Clear Skies Security, LLC and all of its Members dated July 31, 2020 8-K 10.1 8/6/2020 2.5** Agreement and Plan of Merger by and among the Registrant, Alpine Merger Sub, LLC, Alpine Security, LLC and Christian Espinosa dated December 16, 2020 8-K 10.1 12/21/2020 2.6** Amended and Restated Agreement and Plan of Merger by and among the Registrant, Catapult Acquisition Merger Sub, LLC, Catapult Acquisition Corporation, the shareholders of Catapult Acquisition Corporation and Darek Hahn dated July 26, 2021 8-K 10.1 08/02/2021 2.7** Stock Purchase Agreement by and among the Registrant, Atlantic Technology Systems, Inc., Atlantic Technology Enterprises, Inc., and James Montagne and Miriam Montagne as sole shareholders, dated October 1, 2021 8-K 10.1 10/07/2021 2.8** Agreement and Plan of Merger by and among the Registrant, RED74 Merger Sub, LLC, RED74 LLC, Ticato Holdings, Inc. and Tim Coleman dated October 8, 2021 8-K 10.1 11/15/2021 2.9** Stock Purchase Agreement by and among the Registrant, Southford Equities, Inc., a British Virgin Islands based company and David Esteban Alfaro Medina, Roberto Andrés Arriagada Poblete and Camilo Orlando Garrido Briones dated December 1, 2021 8-K 10.1 12/06/2021 2.10 Stock Purchase Agreement among the Registrant and certain shareholders of True Digital Security Inc. dated January 5, 2022 8-K 10.1 01/06/2022 2.11** Agreement and Plan of Merger among the Registrant and certain shareholders of True Digital Security Inc. dated January 5, 2022 8-K 10.2 01/06/2022 3.1 Second Amended and Restated Certificate of Incorporation of the Registrant 10-Q 3.1 08/15/2022 3 .1(a) Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant 8-K 3.1 04/10/2023 3.1(b) C ertificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant 8-K 3.1 03/07/2024 3.2 Second Amended and Restated By-laws of the Registrant 8-K 3.1 10/10/2023 4.1 Form of Common Stock Certificate of the Registrant 10-K 4.1 03/30/2020 4.2 Description of Securities Registered under Section 12 of the Exchange Act 10-K 4.2 03/31/2023 4.3 Form of Underwriter Warrant S-1 4.3 12/14/2021 4.4 Form of Placement Agent Warrant 8-K 4.1 05/17/2023 10.1 Stock Repurchase Agreement between the Registrant and Alan Kierman dated September 1, 2019 10-K 10.4 03/30/2020 10.2# 2019 Equity Incentive Plan, as amended 10-Q 10.3 08/15/2022 10.3(a)# Form of Stock Option Agreement 10-K 10.3 04/15/2022 10.4# Employment Agreement between the Registrant and David G. Jemmett dated September 30, 2019 10-12G 10.2 010/2/2019 10.5 Purchase Agreement and 5% Unsecured Convertible Note by the Registrant payable to Neil Stinchcombe dated October 27, 2021 8-K 10.1 11/02/2021 10.5(a) Letter Agreement between the Registrant and Neil Stinchcombe dated March 27, 2023 10-K 10.5(a) 03/31/2023 10.6# Employment Agreement by and between Debra L. Smith and the Registrant dated December 31, 2020 10-K 10.10 04/15/2022 10.7# Employment Agreement by and between David A. Bennett and the Registrant dated February 12, 2022 10-K 10.7 03/31/2023 10.8# Employment Agreement by and between Ashley N. Devoto and the Registrant dated December 23, 2021 10-K 10.8 03/31/2023 10.9 Form of Lockup Agreement S-1/A 10.14 01/07/2022 10.10 Purchase Agreement, dated March 20, 2023, by and between the Registrant and Hensley & Company dba Hensley Beverage Company 8-K 10.1 03/20/2023 10.11 10% Unsecured Convertible Note by the Registrant payable to Hensley & Company, dated March 20, 2023 8-K 10.2 03/20/2023 10.12# Employment Agreement by and between Kyle J. Young and the Registrant dated March 30, 2023 10-K 10.12 03/31/2023 10.13# 2023 Equity Incentive Plan S-8 10.2 10/31/2023 10.14 Placement Agency Agreement, dated May 16, 2023, by and between the Registrant and each Purchaser thereto 8-K 10.2 05/17/2023 10.15 Form of Securities Purchase Agreement, dated May 16, 2023, by and between the Registrant and each Purchasers thereto 8-K 10.1 05/17/2023 21.1* Subsidiaries of the Registrant 23.1* Consent of Semple, Marchal & Cooper LLP 23.2* Consent of Baker Tilly Chile Ltda. 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 97.1* CISO Global, Inc. Executive Officer Incentive Compensation Recovery Policy 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Schema Document 101.CAL Inline XBRL Calculation Linkbase Document 101.DEF Inline XBRL Definition Linkbase Document 101.LAB Inline XBRL Label Linkbase Document 101.PRE Inline XBRL Presentation Linkbase Document 104 Cover Page Interactive Data File (Embedded within the Inline XBRL document) *Filed herewith. **Certain exhibits, annexes, and/or schedules have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. We agree to furnish supplementally a copy of any omitted exhibit, annex, or schedule to the Securities and Exchange Commission upon request. # Management contracts and compensatory plans and arrangements. ITEM 16. FORM 10-K SUMMARY Not applicable. - 47 - SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 Name: David G. Jemmett Title: Chief Executive Officer (Principal Executive Officer) Date: April 16, 2024 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ David G. Jemmett Name: David G. Jemmett Title: Chief Executive Officer and Director (Principal Executive Officer) Date: April 16, 2024 By: /s/ Debra L. Smith Name: Debra L. Smith Title: Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) Date: April 16, 2024 By: /s/ Robert C. Oaks Name: Ret. General Robert C. Oaks Title: Director Date: April 16, 2024 By: /s/ Reid S. Holbrook Name: Reid S. Holbrook Title: Director Date: April 16, 2024 By: /s/ Andrew K. McCain Name: Andrew K. McCain Title: Director Date: April 16, 2024 By: /s/ Ernest M. (Kiki) VanDeWeghe, III Name: Ernest M. (Kiki) VanDeWeghe, III Title: Director Date: April 16, 2024 By: /s/ Brett Chugg Name: Brett Chugg Title: Director Date: April 16, 2024 - 48 - CISO GLOBAL, INC. CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 TABLE OF CONTENTS Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID # 178 ) F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID # 3172) F-3 CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets as of December 31, 2023 and 2022 F-5 Consolidated Statements of Operations and Comprehensive Loss For the Years Ended December 31, 2023 and 2022 F-6 Consolidated Statements of Changes in Stockholders’ Equity For the Years Ended December 31, 2023 and 2022 F-7 Consolidated Statements of Cash Flows For the Years Ended December 31, 2023 and 2022 F-8 Notes to Consolidated Financial Statements For the Years Ended December 31, 2023 and 2022 F-9 F- 1 Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders of CISO Global, Inc. and Subsidiaries Scottsdale, Arizona Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of CISO Global, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2023 and 2022, and the results of its consolidated operations and its cash flows for the years then ended , in conformity with accounting principles generally accepted in the United States of America. We did not audit the combined financial statements of the Company’s wholly-owned “South American Subsidiaries,” which include the consolidated balance sheets of Arkavia Networks SpA. and its wholly-owned subsidiaries Arkavia Networks Limitada and Arkavia Networks, as of December 31, 2023 and 2022, and the related consolidated statements of operations, stockholder’s equity, and cash flows for the years ended December 31, 2023 and 2022; the combined balance sheets of Servicios Informaticos CUATROi, S.P.A., Comercializadora CUATROi S.P.A., CUATROi Peru S.A.C., and CUATROi S.A.S. (entities under common ownership and management) as of December 31, 2023 and 2022 and the related combined statements of operations, stockholder’s equity, and cash flows for the year ended December 31, 2023 and the period from August 26, 2022 (Acquisition) to December 31, 2022; and the combined balance sheets of NLT Networks, S.P.A., NLT Tecnologias, Limitada, NLT Servicios Profesionales, S.P.A. and White and Blue Solutions, LLC (entities under common ownership and management) as of December 31, 2023 and 2022 and the related combined statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2023 and the period from September 1, 2022 (Acquisition) to December 31, 2022; and the related notes (collectively “combined financial statements”). The combined financial statements of the South American Subsidiaries reflect total assets of $21.9 million and $39.5 million at December 31, 2023 and 2022, respectively, and total revenues of $23.1 and $10.0 million for the periods then ended. Those statements were audited by another auditor whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the South American Subsidiaries, is based solely on the report of the other auditors. Going Concern Uncertainty The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, negative cash flows from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Semple, Marchal & Cooper, LLP Certified Public Accountants We have served as the Company’s auditor since 2019. Phoenix, Arizona April 16, 2024 F- 2 F- 3 F- 4 CISO GLOBAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2023 December 31, 2022 ASSETS Current Assets: Cash and cash equivalents $ 1,062,442 $ 1,833,163 Accounts receivable, net 5,685,727 7,862,297 Inventory 218,890 11,803 Prepaid cost of revenue 2,592,828 2,634,667 Prepaid expenses and other current assets 1,200,271 1,724,650 Contract assets 197,656 332,215 Total Current Assets 10,957,814 14,398,795 Property and equipment, net 3,677,474 4,680,495 Right of use asset, net 762,228 255,687 Intangible assets, net 3,778,244 8,475,229 Goodwill 31,519,844 76,664,017 Prepaid cost of revenue, net of current portion 888,255 - Other assets 71,523 22,592 Total Assets $ 51,655,382 $ 104,496,815 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable and accrued expenses $ 15,951,327 $ 8,310,337 Deferred revenue 4,158,969 4,472,140 Lease liability 219,342 121,731 Loans payable 3,691,464 7,758,831 Convertible notes payable 2,050,000 2,550,000 Total Current Liabilities 26,071,102 23,213,039 Long-term Liabilities: Deferred revenue, net of current portion 1,099,734 - Loans payable, net of current portion 2,748,788 4,243,802 Convertible notes payable, related party 5,000,000 - Lease liability, net of current portion 596,307 159,205 Deferred tax liability - 435,678 Total Liabilities 35,515,931 28,051,724 Commitments and Contingencies - - Stockholders’ Equity: Common stock, $ .00001 par value; 300,000,000 shares authorized; 11,949,959 and 9,697,921 issued outstanding at December 31, 2023 and December 31, 2022, respectively 119 97 Preferred stock, $ .00001 par value; 50,000,000 shares authorized; 0 shares issued and outstanding on December 31, 2023 and December 31, 2022, respectively - - Additional paid-in capital 172,837,842 153,170,351 Accumulated translation adjustment 1,320,177 1,062,247 Accumulated deficit ( 158,018,687 ) ( 77,787,604 ) Total Stockholders’ Equity 16,139,451 76,445,091 Total Liabilities and Stockholders’ Equity $ 51,655,382 $ 104,496,815 The accompanying footnotes are an integral part of these consolidated financial statements. F- 5 CISO GLOBAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS December 31, 2023 December 31, 2022 Year Ended December 31, 2023 December 31, 2022 Revenue: Security managed services $ 50,078,925 $ 40,920,420 Professional services 6,979,832 5,629,197 Total revenue 57,058,757 46,549,617 Cost of revenue: Security managed services 23,671,605 15,431,523 Professional services 900,582 844,287 Cost of payroll 21,613,207 20,036,182 Stock based compensation 4,823,829 7,512,304 Total cost of revenue 51,009,223 43,824,296 Total gross profit 6,049,534 2,725,321 Operating expenses: Professional fees 3,695,187 2,067,603 Advertising and marketing 474,121 804,218 Selling, general and administrative 26,744,543 23,106,451 Stock based compensation 7,712,671 9,885,191 Impairment of goodwill 45,194,717 - Total operating expenses 83,821,239 35,863,463 Loss from operations ( 77,771,705 ) ( 33,138,142 ) Other income (expense): Other income (expense) ( 13,640 ) 43,332 Interest expense, net ( 2,881,416 ) ( 680,921 ) Total other income (expense) ( 2,895,056 ) ( 637,589 ) Loss before income taxes ( 80,666,761 ) ( 33,775,731 ) Benefit from income taxes ( 435,678 ) ( 549 ) Net loss ( 80,231,083 ) ( 33,775,182 ) Foreign currency translation adjustment 257,930 1,062,247 Comprehensive loss $ ( 79,973,153 ) $ ( 32,712,935 ) Net loss per common share - basic and diluted (Note 3) $ ( 7.22 ) $ ( 3.64 ) Weighted average shares outstanding - basic 11,117,316 9,275,554 Weighted average shares outstanding - diluted 11,117,316 9,275,554 The accompanying footnotes are an integral part of these consolidated financial statements. F- 6 CISO GLOBAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (NOTE 3) Shares Amount Shares Amount Capital Gain/(Loss) Deficit Total Accumulated Additional Other Common Stock Preferred Stock Paid-in Comprehensive Accumulated Shares Amount Shares Amount Capital Gain/(Loss) Deficit Total 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 - - - - 11,469,667 - - 11,469,667 Stock based compensation - common stock 233,333 2 - - 733,498 - - 733,500 Stock issued for cash 1,782,658 18 - - 6,655,475 - - 6,655,493 Exercise of options 69,378 1 - - 491,852 - - 491,853 Stock issued for SB Cyber acquisition 33,335 - - - 99,000 - - 99,000 Stock issued as lending discount 133,334 1 - - 217,999 218,000 Foreign currency translation - - - - - 257,930 - 257,930 Net loss - - - - - - ( 80,231,083 ) ( 80,231,083 ) Balance at December 31, 2023 11,949,959 $ 119 - $ - $ 172,837,842 $ 1,320,177 $ ( 158,018,687 ) $ 16,139,451 Balance at January 1, 2022 8,328,397 $ 83 - $ - $ 69,310,544 $ - $ ( 44,012,422 ) $ 25,298,205 Balance 8,328,397 83 - - $ 69,310,544 $ - $ ( 44,012,422 ) $ 25,298,205 Stock based compensation - stock options - - - - 15,464,587 - - 15,464,587 Stock based compensation - common stock 60,655 1 - - 2,266,233 - - 2,266,234 Stock issued for cash 23,499 - - - 1,167,289 - - 1,167,289 Exercise of options 179,268 2 - - 1,480,140 - - 1,480,142 Stock issued for cash in public offering 137,334 1 - - 9,521,797 - - 9,521,798 Stock issued for True Digital acquisition 548,600 6 - - 34,726,374 - - 34,726,380 Stock issued for acquisition 548,600 6 - - 34,726,374 - - 34,726,380 Stock issued for VelocIT acquisition 17,112 - - - - - - - Stock issued for Red74 acquisition 2,267 - - - - - - - Stock issued for Creatrix acquisition 40,000 1 - - 3,629,999 - - 3,630,000 Stock issued for CyberViking acquisition 33,267 - - - 1,836,320 - - 1,836,320 Stock issued for CUATROi acquisition 144,463 1 - - 6,847,473 - - 6,847,474 Stock issued for NLT Secure acquisition 183,059 2 - - 6,919,595 - - 6,919,597 Foreign currency translation - - - - - 1,062,247 - 1,062,247 Net loss - - - - - - ( 33,775,182 ) ( 33,775,182 ) Balance at December 31, 2022 9,697,921 $ 97 - $ - $ 153,170,351 $ 1,062,247 $ ( 77,787,604 ) $ 76,445,091 Balance 9,697,921 $ 97 - $ - $ 153,170,351 $ 1,062,247 $ ( 77,787,604 ) $ 76,445,091 The accompanying footnotes are an integral part of these consolidated financial statements. F- 7 CISO GLOBAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS December 31, 2023 December 31, 2022 Cash flows from operating activities: Net loss $ ( 80,231,083 ) $ ( 33,775,182 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock based compensation - stock options 11,469,667 15,464,587 Stock based compensation - common stock 733,500 1,932,908 Depreciation and amortization 3,144,047 3,071,917 Right of use amortization 227,241 247,474 Other 200,317 35,782 Impairment of intangible assets 3,116,039 - Impairment of goodwill 45,194,717 - Changes in operating assets and liabilities: Accounts receivable, net 2,085,883 ( 979,898 ) Inventory ( 217,664 ) 173,156 Contract assets 134,559 ( 166,908 ) Prepaids and other current assets ( 493,328 ) ( 2,625,108 ) Accounts payable and accrued expenses 8,125,856 4,237,986 Lease liability ( 199,069 ) ( 206,870 ) Settlement liability - ( 470,000 ) Deferred revenue 789,206 2,379,149 Net cash used in operating activities ( 5,920,112 ) ( 10,681,007 ) Cash flows from investing activities: Purchases of property and equipment ( 213,629 ) ( 512,247 ) Cash acquired/(paid) in acquisitions, net 30,430 ( 5,536,697 ) Proceeds from the sale of property and equipment 23,041 - Net cash used in investing activities ( 160,158 ) ( 6,048,944 ) Cash flows from financing activities: Proceeds from sale of common stock 6,655,493 10,689,087 Proceeds from stock option exercise 491,853 1,480,142 Proceeds from loan payable 6,852,408 5,000,000 Proceeds from convertible notes payable, related party 5,000,000 - Proceeds from convertible note payable 2,050,000 1,000,000 Proceeds from line of credit 264,723 86,585 Payment on line of credit ( 261,591 ) - Payment on loans payable ( 12,118,340 ) ( 369,829 ) Payment on notes payable, related party - ( 2,083,076 ) Payment of convertible note payable ( 2,550,000 ) - Payment of debt issuance cost ( 191,500 ) ( 25,000 ) Net cash provided by financing activities 6,193,046 15,777,909 Effect of exchange rates on cash and cash equivalents ( 883,497 ) 60,170 Net decrease in cash and cash equivalents ( 770,721 ) ( 891,872 ) Cash and cash equivalents - beginning of the period 1,833,163 2,725,035 Cash and cash equivalents - end of the period $ 1,062,442 $ 1,833,163 Supplemental cash flow information: Cash paid for: Interest $ 2,376,477 $ 512,374 Income taxes $ - $ - Supplemental disclosure of non-cash transactions: Operating lease assets obtained in exchange for operating lease obligations $ 733,782 $ 476,986 Common stock issued in True Digital acquisition $ - $ 34,726,380 Common stock issued in Creatrix acquisition $ - $ 3,630,000 Common stock issued in VelocIT acquisition $ - $ - Common stock issued in RED 74 acquisition $ - $ - Common stock issued in CyberViking acquisition $ - $ 1,836,320 Common stock issued in CUATROi acquisition $ - $ 6,847,474 Common stock issued in NLT Secure acquisition $ - $ 6,919,597 Common stock issued in SB Cyber acquisition $ 99,000 $ - Common stock issued in acquisition $ 99,000 $ - Common stock issued as a lending discount $ 218,000 $ - The accompanying footnotes are an integral part of these consolidated financial statements. F- 8 CISO GLOBAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS Unless otherwise indicated or the context requires otherwise, the terms ““we,” “us,” “our,” and “our company” refer to CISO Global, Inc., a Delaware corporation (“CISO Global”), and our wholly owned subsidiaries. All dollar amounts are expressed in United States dollars. Nature of the Business We are a cybersecurity and compliance 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 and related services, 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. NOTE 2 – LIQUIDITY AND GOING CONCERN CONSIDERATIONS 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 the Company’s 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, and restructuring of 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 described in the Growth Strategy paragraph and eventually attain profitable operations. The 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 the Company were unable to continue as a going concern. F- 9 NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding our consolidated financial statements. Such consolidated financial statements and accompanying notes are the representations of our management, who is responsible for their integrity and objectivity. 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. Consolidation The consolidated financial statements include the accounts of our company and our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Prior Period Reclassifications Reclassification of certain immaterial prior period amounts have been made to conform to the current period presentation. Use of Estimates Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. We believe the following critical accounting policies affect our more material judgments and estimates used in the preparation of the accompanying 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-Merton pricing model, such as expected volatility, risk-free interest rate, share price, expected dividend rate, and the adequacy of insurance reserves. Revenue Our revenues are derived from two major types of services to clients: security managed services and professional services. 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 managed services offerings typically are paid in advance of providing services. We have determined that our contracts do not include a significant financing component. Payments received in advance of our performance are initially recorded as deferred revenue and then recognized as revenue on a straight-line basis over the term of the contract. Revenue is recognized net of allowances for applicable transaction-based taxes collected from customers. Our revenue is categorized and disaggregated as reflected in our consolidated statements of operations and comprehensive loss, as follows: Security Managed Services We have three distinct revenue streams under cybersecurity security managed services: risk and compliance, cyber defense operations, and secured managed services. We derive revenue from risk and compliance by ensuring our customers implement the right controls, properly prioritizing risks, and investing in the appropriate remediation, so our customers can achieve compliance, adhere to industry standards and guidelines, and manage continuous monitoring over time. We derive revenue from cyber defense operations through security focused end-to-end network and device management solutions for companies that want to outsource their administration needs to a team of senior engineers who provide modern strategy, insights, support, SOC-as-a-service, which is a subscription-based service that manages and monitors clients’ logs, devices, clouds, network, and assets for possible cyber threats. Secured managed services include road mapping the future state for the client and providing our knowledgeable expertise to help them achieve their security needs. F- 10 Performance Obligations Our contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. We have determined the performance obligations for the following services: Risk and Compliance : We have determined that services provided under risk and compliance contains a single performance obligation. We recognize revenue as earned based on time and material. Cyber Defense Operations : We consider these services to be one performance obligation, although they may include various parts (e.g., support desk, vulnerability identification and patching, firewall management, etc. (referred to generally as the “parts”)). These parts are not viewed as being distinct, but rather a collection of interrelated parts that are combined to fill a functional need over a period of time (managed IT service). As such, the parts are not viewed as distinct as the parts are not separable in the contract. We bill the client on a monthly basis under the annual contract, and revenue is recognized as earned ratably over the contract term. Secured Managed Services : We have determined that secure IT and architecture services is viewed by our company as one performance obligation, although it may include various parts (e.g., strategy, advisory, architecture, design, security and oversight (referred to generally as the “parts”)). This position is based on the fact that these various parts are not viewed as being distinct. Revenue is recognized as earned based on time and materials. Professional Services We have two distinct revenue streams under professional services: incident response and digital forensics, and security testing and training. We derive revenue from security testing and training by utilizing the same tools and techniques a malicious cybercriminal would use to try to gain unauthorized access to highly guarded corporate systems and data to evaluate technical controls and quantify business risks in a meaningful way. We also offer cybersecurity awareness training required under most compliance frameworks, and recommended as a best practice under National Institute of Standards and Technology standards, to help reduce the risk of a successful cyber-attack. We derive revenue from the sale of hardware and software for customer’s IT infrastructure along with occasional staffing services. We derive revenue from incident response and digital forensics by providing our customers with certified experts experienced in locating and neutralizing threat actors who have breached their environments. Our team is able to identify and contain a cyberattack quickly, implement patches or configuration changes to prevent re-infection, perform forensic analysis to determine root cause, and provide a plan of attack for improvements that will prevent a similar attack from succeeding in the future. Performance Obligations Our contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. We have determined the performance obligations for the following services: Security Testing and Training : We have determined that security testing and training is viewed by our company as one performance obligation. Revenue is recognized at a point in time when the result of the assessment is turned over to the customer, as earned based on time and materials, or upon delivery of equipment to the client. Incident Response and Digital Forensics : We consider these services to be one performance obligation, although they may include various parts (e.g., determine the source, cause, and prevention of recurrence etc. (referred to generally as the “parts”)). These parts are not viewed as being distinct. We recognize revenue as earned based on time and material. F- 11 Cash and Cash Equivalents We consider all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Accounts Receivable Accounts receivable are generally unsecured, non-interest bearing and reported at their outstanding unpaid principal balances, net of allowances for credit losses. We provide for allowances for credit losses based on our 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 December 31, 2023 and 2022, our allowance for credit losses was $ 219,141 and $ 270,011 , respectively. Prepaid cost of revenue Prepaid cost of revenue represents amounts charged by our vendors for licenses that we resell to our customers. These amounts are amortized to cost of revenue over the same period revenue is recognized for the related contract with our customers. Property and Equipment Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, generally between three and five years . Expenditures that enhance the useful lives of the assets are capitalized and depreciated. Maintenance and repairs are charged to expense as incurred. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations. Impairment of Long-Lived Assets We review long-lived assets, including finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets. During the year ended December 31, 2023, we recognized losses on impairment of goodwill and intangible assets of $ 45,194,717 and $ 3,116,039 , respectively. During the year ended December 31, 2022, we did not record a loss on impairment. Intangible Assets We record our intangible assets at estimated fair value in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other . Finite lived intangible assets are amortized over their estimated useful life using the straight-line method, which is determined by identifying the period over which the cash flows from the asset are expected to be generated. F- 12 Goodwil l 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 least annually during the fourth quarter, at the reporting unit level 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 a market approach. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. Failure to maintain a similar market value may cause a future impairment of goodwill at the reporting unit level. Advertising and Marketing Costs We expense advertising and marketing costs as they are incurred. Advertising and marketing expenses were $ 474,121 and $ 804,218 for the years ended December 31, 2023 and 2022, respectively, and are recorded in operating expenses on the consolidated statements of operations. Fair Value Measurements As defined in ASC 820, Fair Value Measurements and Disclosures , fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs 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 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement. Level 1: Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2: Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. Level 3: Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. The significant unobservable inputs used in the fair value measurement for nonrecurring fair value measurements of long-lived assets include pricing models, discounted cash flow methodologies and similar techniques. Fair Value of Financial Instruments The carrying value of cash, accounts receivable, accounts payable and accrued expenses, and other current liabilities approximate their fair values using Level 3 inputs, based on the short-term maturity of these instruments. The carrying amount of loans and notes payable approximate the estimated fair value for this financial instrument as management believes that such debt and interest payable on the notes approximates our incremental borrowing rate. The long-lived assets (i.e., goodwill and intangible assets) were valued utilizing Level 3 inputs. Significant unobservable inputs used in fair value measurement of the intangible assets include projected revenue, gross profit and operating expenses, income tax rates, discount rates, royalty rates, and attrition rates. F- 13 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. All outstanding options 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 is anti-dilutive with respect to losses, the options and shares issuable upon conversion have been excluded from our computation of net loss per common share for the years ended December 31, 2023 and 2022. On March 8, 2024, we filed an amendment to our certificate of incorporation to effectuate a 1-for-15 reverse stock split. Our shares of outstanding common stock and earnings per share calculation have been retroactively restated for all periods presented. 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: SUMMARY OF SECURITIES EXCLUDED FROM DILUTED PER SHARE December 31, 2023 December 31, 2022 Stock options 2,105,168 2,426,428 Warrants 49,614 9,614 Convertible debt 846,122 28,715 Total 3,000,904 2,464,757 Stock-Based Compensation We apply the provisions of ASC 718, Compensation – Stock Compensation , which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and nonemployees, in the consolidated statements of operations. For stock options issued to employees and members of our Board of Directors for their services, we estimate the grant date fair value of each option using the Black-Scholes-Merton option pricing model. The use of the Black-Scholes-Merton option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock. For awards subject to service-based vesting conditions, including those with a graded vesting schedule, we recognize stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting term. Forfeitures are recorded as they are incurred. Due to our company’s limited history and lack of public market for its common stock, we used the average of historical share prices of our common stock and that of similar companies within our industry to calculate volatility for use in the Black-Scholes-Merton option pricing model. We issued shares of our stock to vendors and nonemployee for services provided. We recognize the accounting grant date fair value of the stock award as compensation expense over the required service period of each award. Shares issued for services are measured based on the fair market value of the underlying common stock on their respective accounting grant dates. New shares are issued upon the exercise of stock options. 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. D eferred revenue consisted of the following: SCHEDULE OF DEFERRED REVENUE December 31, 2023 December 31, 2022 Current: Security managed services $ 3,366,273 $ 3,609,087 Professional services 792,696 863,053 Total deferred revenue - current $ 4,158,969 $ 4,472,140 Long-term: Security managed services $ 1,099,734 $ - Total deferred revenue – long term $ 1,099,734 $ - F- 14 The increase in the deferred revenue balance is primarily driven by payments received in advance of satisfying our performance obligations, offset by $ 4,120,260 of revenue recognized during 2023, which was included in the deferred revenue balance as of December 31, 2022. The deferred revenue balance as of December 31, 2023 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: SCHEDULE OF PERFORMANCE OBLIGATIONS EXPECTED TO RECOGNIZED REVENUE 2024 2025 Total Security managed services $ 3,366,273 $ 1,099,734 $ 4,466,007 Professional services 792,696 - 792,696 Total deferred revenue $ 4,158,969 $ 1,099,734 $ 5,258,703 Foreign Currency Our functional and reporting currency is the U.S. dollar. For certain of our foreign subsidiaries whose functional currency is other than the U.S. dollar, we translate revenue and expense transactions at average exchange rates. We translate assets and liabilities at period-end exchange rates and include foreign currency translation gains and losses as a component of accumulated other comprehensive income. Leases Leases in which our company is the lessee are comprised of corporate offices and property and equipment. All of the leases are classified as operating leases. We lease multiple office spaces with a remaining weighted average term of 3.76 years. Right-of-use (“ROU”) assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that we will exercise that option. In accordance with ASC 842, Leases , we recognized a ROU asset and corresponding lease liability on our consolidated balance sheet for long-term office leases and a vehicle operating lease agreement. See Note 14 – Leases for further discussion, including the impact on our consolidated financial statements and related disclosures. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carry forwards, and liabilities 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 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 December 31, 2023 and 2022, our net deferred tax asset has been fully reserved. F- 15 For uncertain tax positions that meet a “more likely than not” threshold, we recognize the benefit of uncertain tax positions in the consolidated financial statements. Our practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the consolidated statements of operations when a determination is made that such expense is likely. Emerging Growth Company Status We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. The JOBS Act does not preclude an emerging growth company from early adopting new or revised accounting standards. We expect to use the extended transition period for any new or revised accounting standards during the period which we remain an emerging growth company. Recently Issued Accounting Standards In October 2021, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with ASC Topic 606 as if the acquirer had originated the contracts. The ASU is applied prospectively and is effective for us for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this standard did not have a material impact on our consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topics 740): Improvements to Income Tax Disclosures to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. W e are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures. NOTE 4 – ACQUISITIONS True Digital Security, Inc. Acquisition On January 5, 2022, we entered into the True Digital Stock Purchase Agreement with certain stockholders of True Digital and the True Digital Merger Agreement with True Digital and certain of its other stockholders. On January 19, 2022, the transactions contemplated by the True Digital Stock Purchase Agreement and the True Digital Merger Agreement were consummated, with True Digital becoming a wholly owned subsidiary of our company (the “True Digital Acquisition”). True Digital’s outstanding common stock was exchanged for $ 6,153,000 in cash and 548,600 shares of our common stock. F- 16 The following table summarizes the allocation of the purchase price to the fair values of the assets acquired and the liabilities assumed as of the transaction date: SUMMARY OF SIGNIFICANT FAIR VALUE ASSETS ACQUIRED AND LIABILITIES Consideration $ 40,879,380 Tangible assets acquired: Cash 485,232 Accounts receivable 1,404,386 Contract assets 131,342 Prepaid expenses and other current assets 196,825 Property and equipment 906,006 Other assets 17,505 Total tangible assets 3,141,296 Intangible assets acquired: Tradename - trademarks 1,744,200 Intellectual property 1,137,000 Non-competes 124,900 Total intangible assets 3,006,100 Assumed liabilities: Accounts payable and accrued expenses 1,283,003 Deferred revenue 1,956,600 Line of credit 283,244 Loans payable 181,741 Loans payable - shareholder 543,581 Total assumed liabilities 4,248,169 Net assets acquired 1,899,227 Goodwill (a) $ 38,980,153 (a) Goodwill and intangibles are not deductible for tax purposes. Creatrix, Inc. Acquisition On June 1, 2022, we entered into a stock purchase agreement with the stockholders of Creatrix, pursuant to which Creatrix became our wholly owned subsidiary. We anticipate that this will expand our professional services offerings and capabilities. Creatrix offers recognized expertise in identity management as wells as systems integration and software engineering and specializes in biometrics, vetting, credentialing, and case management. The following table summarizes the allocation of the purchase price to the fair values of the assets acquired and the liabilities assumed as of the transaction date: SUMMARY OF SIGNIFICANT FAIR VALUE ASSETS ACQUIRED AND LIABILITIES Consideration paid $ 3,630,000 Tangible assets acquired: Cash 3,572 Accounts receivable 125,908 Contract assets 33,965 Prepaid expenses and other current assets 3,597 Total tangible assets 167,042 Assumed liabilities: Accounts payable and accrued expenses 48,001 Loans payable 56,687 Total assumed liabilities 104,688 Net assets acquired 62,354 Goodwill (a) $ 3,567,646 (a) Goodwill is not deductible for tax purposes. F- 17 CyberViking, LLC Acquisition On July 1, 2022, we entered into a stock purchase agreement with the interest holders of CyberViking and its interest holders, pursuant to which we acquired all of the issued and outstanding units of CyberViking, with CyberViking becoming a wholly owned subsidiary of our company. We anticipate that this will expand our professional services offerings and capabilities. CyberViking specializes in application security services, incident response, and threat hunting as well as the creation and management of security operation centers. We did not acquire assets nor assume liabilities in our purchase of CyberViking, as a result the $ 1,836,320 of consideration paid is recognized as goodwill. The goodwill is not deductible for tax purposes. CUATROi Acquisition On August 25, 2022, we entered into a stock purchase agreement with CUATROi and its partners, pursuant to which CUATROi became our wholly owned subsidiary. We anticipate that this will expand our professional services offerings and capabilities. CUATROi is a cloud, managed services provider and cybersecurity company with offices in South America. The aggregate purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess recorded to goodwill. The following table summarizes the allocation of the purchase price to the fair values of the assets acquired and the liabilities assumed as of the transaction date: SUMMARY OF SIGNIFICANT FAIR VALUE ASSETS ACQUIRED AND LIABILITIES Consideration paid $ 6,847,474 Tangible assets acquired: Cash 77,804 Accounts receivable 478,210 Prepaid expenses and other current assets 51,464 Property and equipment 434,816 Total tangible assets 1,042,294 Intangible assets acquired: Customer base 1,240,000 Total intangible assets 1,240,000 Assumed liabilities: Accounts payable and accrued expenses 242,830 Loans payable 850,199 Total assumed liabilities 1,093,029 Net assets acquired 1,189,265 Goodwill (a) $ 5,658,209 (a) Goodwill and intangibles are not deductible for tax purposes. NLT Secure Acquisition On September 1, 2022, we entered into a stock purchase agreement with NLT Secure and its interest holders, pursuant to which we acquired all of the issued and outstanding units of NLT Secure becoming a wholly owned subsidiary of our company. We anticipate that this will expand our professional services offerings and capabilities. NLT Secure provides a broad range of security solutions and managed services to organizations throughout South America. F- 18 The aggregate purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimate fair values as of the acquisition date, with the excess recorded to goodwill. The following table summarizes the allocation of the purchase price to the fair values of the assets acquired and the liabilities assumed as of the transaction date: SUMMARY OF SIGNIFICANT FAIR VALUE ASSETS ACQUIRED AND LIABILITIES Consideration paid $ 6,919,597 Tangible assets acquired: Cash 48,858 Accounts receivable 66,972 Prepaid expenses and other current assets 154,300 Property and equipment 1,071,401 Total tangible assets 1,341,531 Assumed liabilities: Accounts payable and accrued expenses 791,228 Loans payable 1,778,591 Total assumed liabilities 2,569,819 Net liabilities assumed 1,228,288 Goodwill (a) $ 8,147,885 (a) Goodwill is not deductible for tax purposes. NOTE 5 – PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consisted of: SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS December 31, 2023 December 31, 2022 Prepaid expenses $ 253,953 $ 987,651 Prepaid taxes 886,920 572,645 Prepaid insurance 59,398 164,354 Total prepaid expenses and other current assets $ 1,200,271 $ 1,724,650 NOTE 6 – PROPERTY AND EQUIPMENT Property and equipment consisted of the following: SCHEDULE OF PROPERTY AND EQUIPMENT December 31, 2023 December 31, 2022 Computer equipment $ 1,277,609 $ 1,264,713 Building 1,715,929 1,776,040 Leasehold improvements 527,705 541,647 Vehicle - 28,229 Furniture and fixtures 128,904 151,142 Software 1,728,126 1,667,283 Property and equipment gross 5,378,273 5,429,054 Less: accumulated depreciation ( 1,700,799 ) ( 748,559 ) Property and equipment, net $ 3,677,474 $ 4,680,495 Total depreciation expense was $ 1,099,048 and $ 736,181 for the years ended December 31, 2023 and 2022, respectively. F- 19 NOTE 7 – INTANGIBLE ASSETS AND GOODWILL Goodwill During the year ended December 31, 2023, our share price reduction was determined to be an indicator of impairment under ASC 350 of our two reporting units, United States and Latin America. We performed ongoing assessments to consider whether events or circumstances had occurred that could more likely than not reduce the fair value of a reporting unit below its carrying value. The valuation limitation from our recent share price decline caused us to perform a goodwill impairment test as of December 31, 2023. Based on the results of this testing, for the year ended December 31, 2023, we recorded a pre-tax, non-cash impairment charge related to the United States reporting unit and Latin America reporting unit of $ 35,933,364 and $ 9,261,353 , respectively. This charge is recorded as Impairment of goodwill on the Consolidated Statements of Operations and Comprehensive Loss. The reduction in fair value for the reporting units, and corresponding impairment charge, was primarily driven by the decline in our share price and uncertainty surrounding our company and a decrease in forecasted near-term cashflows of our reporting units. As part of our quantitative testing process for goodwill of the reporting units, we estimated fair values using a market approach. The following table summarizes the changes in goodwill during the years ended December 31, 2023 and 2022, respectively: SCHEDULE OF CHANGES IN GOODWILL Balance as of December 31, 2021 Goodwill $ 38,870,599 Accumulated impairment losses ( 22,078,064 ) 16,792,535 Goodwill acquired during year 58,190,213 Foreign currency translation adjustment 1,237,153 Other 444,116 Balance as of December 31, 2022 Goodwill $ 98,742,081 Accumulated impairment losses ( 22,078,064 ) 76,664,017 Foreign currency translation adjustment 50,544 Impairment losses ( 45,194,717 ) Balance as of December 31, 2023 Goodwill 98,792,625 Accumulated impairment losses ( 67,272,781 ) $ 31,519,844 Intangible Assets We performed an impairment test of our intangible assets based upon the conditions that precipitated the goodwill impairment test described above. Based on the results of this testing, we recorded a pre-tax, non-cash impairment charge totaling $ 3,116,039 for the year ended December 31, 2023, related to our customer base, intellectual property, tradenames-trademarks and non-compete, which is included in the net carry amount of intangibles in the table below. These charges were recorded in Selling, general and administrative expenses on the Consolidated Statement of Operations and Comprehensive Loss. Fair values used in testing for potential impairment of our intangible assets are calculated using a discounted cash flows method by applying estimated cash flows from our forecasted revenue and expenses of the business that utilize those assets. The assumed cash flows from this calculation are discounted at a rate based on a market participant discount rate. F- 20 There is uncertainty surrounding the revenue and cost growth factors for these assets and a change in the long-term revenue and cost growth rate or increase in the discount rate assumption could increase the likelihood of a future impairment. Following the recognition of the impairment losses, the affected assets had an aggregate carrying value of $ 455,809 as of December 31, 2023. Intangible assets, net are summarized as follows: SUMMARY OF IDENTIFIABLE INTANGIBLE ASSETS Gross Carrying Amount Accumulated Amortization Net Carrying Amount December 31, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Tradenames – trademarks $ 4,037,142 $ ( 2,329,498 ) $ 1,707,644 Customer base 1,145,378 ( 639,937 ) 505,441 Non-compete agreements 685,651 ( 630,595 ) 55,056 Intellectual property/technology 2,588,560 ( 1,078,457 ) 1,510,103 Intangible Asset $ 8,456,731 $ ( 4,678,487 ) $ 3,778,244 Gross Carrying Amount Accumulated Amortization Net Carrying Amount December 31, 2022 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Tradenames – trademarks $ 4,744,409 $ ( 1,167,476 ) $ 3,576,933 Customer base 2,949,143 ( 449,565 ) 2,499,578 Non-compete agreements 796,583 ( 436,611 ) 359,972 Intellectual property/technology 2,659,391 ( 620,645 ) 2,038,746 Intangible Asset $ 11,149,526 $ ( 2,674,297 ) $ 8,475,229 Amortization expense of identifiable intangible assets was $ 2,044,999 and $ 2,338,273 , for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the weighted-average remaining amortization period for intangible assets was 2.70 years. Based on the balance of intangibles assets at December 31, 2023, expected future amortization expense is as follows: SCHEDULE OF FUTURE AMORTIZATION EXPENSE 2024 $ 1,808,849 2025 983,019 2026 772,645 2027 115,331 2028 49,200 Thereafter 49,200 Future Amortization Expense $ 3,778,244 NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following amounts: SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES December 31, 2023 December 31, 2022 Accounts payable $ 11,045,657 $ 5,267,492 Accrued payroll and bonuses 1,873,848 1,274,919 Accrued expenses 1,650,624 740,231 Accrued commissions 100,000 305,768 Indirect taxes payable 793,347 556,151 Accrued interest 487,851 165,776 Total accounts payable and accrued expenses $ 15,951,327 $ 8,310,337 F- 21 Note 9 - RELATED PARTY TRANSACTIONS Independent Consulting Agreement with Stephen Scott In August 2020, we entered into an Independent Consulting Agreement with Stephen Scott, a then director of our company, with respect to advisory and consulting services relating to our strategic and business development, and sales and marketing. Mr. Scott receives a consulting fee of $ 11,500 per month for such services. In July 2023, we entered into an Independent Consulting Agreement with Mr. Scott, 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 years ended December 31, 2023 and 2022, we paid consulting fees to Mr. Scott in the amounts of $ 159,000 and $ 138,000 , respectively. Convertible Note Payable – Related Party 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 and unpaid interest thereon into shares of our common stock at a conversion price of $ 18.00 per share ($ 1.20 on a pre-reverse split basis). During the year ended December 31, 2023, we recorded interest expense of $ 388,888 and as of December 31, 2023, we had accrued interest of $ 388,888 . Andy McCain, a director of our company, is President and Chief Executive officer of Hensley & Company. 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, an entity affiliated with Mr. McCain, a director of our 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 years ended December 31, 2023 and 2022, we received $ 1,417,398 and $ 850,445 , respectively from Hensley Beverage Company for contracted services and had an outstanding receivable balance of $ 152,213 and $ 15,737 as of December 31, 2023 and 2022, respectively. Note 10 - STOCKHOLDERS’ EQUITY Our amended and restated certificate of incorporation authorized the issuance of up to 300,000,000 shares of common stock and 50,000,000 shares of undesignated preferred stock, each having a par value of $ 0.00001 per share. Shares of common stock have both economic and voting rights. Equity Transactions During the years ended December 31, 2023 and 2022, we issued an aggregate of 1,782,658 and 160,833 shares of common stock ( 26,739,853 and 2,412,474 on a pre-reverse split basis) to investors for cash proceeds of $ 6,682,198 and $ 10,689,087 , respectively. During the years ended December 31, 2023 and 2022, we issued an aggregate of 366,667 and 60,655 shares of common stock ( 5,500,000 and 909,819 on a pre-reverse split basis), respectively, to consultants, lenders, and vendors for services rendered. In January 18, 2022, we issued a warrant to the underwriter of our Form S-1 to purchase an aggregate 9,614 shares of our common stock ( 144,200 on a pre-reverse split basis). The warrant is exercisable for a period of 5 years from the date of issuance at an exercise price of $ 75.00 per share ($ 5.00 on a pre-reverse split basis). On May 19, 2023, we completed a $ 4,000,000 registered direct offering of our common stock, pursuant to which 1,333,334 shares of our common stock ( 20,000,000 on a pre-reverse split basis) were issued. In addition, we granted the placement agent warrants to purchase 40,000 shares ( 600,000 on a pre-reverse split basis) of our common stock at a price of $ 3.75 per share ($ 0.25 on a pre-reverse split basis). We have used the net proceeds from the offering to repay $ 2,000,000 in outstanding principal of short-term indebtedness and for general corporate purposes. The warrant is exercisable at any time on or after November 12, 2023, and expires on May 16, 2028 . F- 22 The follow table summarizes warrant activity: SCHEDULE OF STOCK WARRANT ACTIVITY Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Outstanding at January 1, 2022 - $ - - $ - Granted 9,614 75.00 - - Exercised - - - - Expired or cancelled - - - - Outstanding at December 31, 2022 9,614 $ 75.00 4.01 $ - Exercisable at December 31, 2022 9,614 $ 75.00 4.01 $ - Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Outstanding at January 1, 2023 9,614 $ 75.00 4.01 $ - Granted 40,000 3.75 5.00 - Exercised - - - - Expired or cancelled - - - - Outstanding at December 31, 2023 49,614 $ 17.56 4.12 $ - Exercisable at December 31, 2023 49,614 $ 17.56 4.12 $ - Note 11 – STOCK-BASED COMPENSATION 2023 Equity Incentive Plan Our 2023 Equity Incentive Plan (the “2023 Plan”), which replaces our 2019 Equity Incentive Plan (the “2019 Plan”), became effective on September 13, 2023. The total number of shares of our common stock reserved and available for delivery under the 2023 Plan at any time during the term of the 2023 Plan will be 2,666,667 shares ( 40,000,000 on a pre-reverse split basis) plus any remaining available for delivery under the 2019 Plan on the effective date of the 2023 Plan. As of the effective date of the 2023 Plan, there were 1,455,983 shares ( 21,839,752 on a pre-reverse split basis) remaining available for delivery under the 2019 Plan. Therefore, as of September 13, 2023, there were an aggregate of 4,122,650 shares ( 61,839,752 on a pre-reverse split basis) reserved and available for delivery under the 2023 Plan. In addition, to the extent that any stock options pursuant to the 2019 Plan expire, terminate or are canceled or forfeited under the terms of the 2019 Plan, the shares of common stock reserved for issuance pursuant to such stock options will become available for issuance under the 2023 Plan. Options We granted options for the purchase of 326,512 and 1,049,489 shares of common stock ( 4,900,833 and 17,457,613 on a pre-reverse split basis) during the year ended December 31, 2023 and 2022, respectively. In applying the Black-Scholes option pricing model to stock options granted, we used the following assumptions: SCHEDULE OF BLACK-SCHOLES STOCK OPTIONS GRANTED For the Year Ended For the Year Ended December 31, 2023 December 31, 2022 Risk free interest rate 3.46 % - 4.79 % 1.43 % - 4.22 % Contractual term (years) 5.00 – 10.00 5.00 – 10.00 Expected volatility 94.58 % - 136.47 % 87.11 % - 90.90 % Expected dividend yield - % - % F- 23 The follow table summarizes stock option activity: SCHEDULE OF STOCK OPTION ACTIVITY Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Outstanding at January 1, 2022 2,205,824 $ 27.60 - $ - Granted 1,049,489 52.65 - - Exercised ( 179,268 ) 8.25 - - Expired or cancelled ( 649,617 ) 45.45 - - Outstanding at December 31, 2022 2,426,428 36.73 - - Granted 326,512 6.15 - - Exercised ( 69,378 ) 7.18 - - Expired or cancelled ( 578,394 ) 41.56 - - Outstanding at December 31, 2023 2,105,168 $ 31.63 4.40 $ 1,542 Exercisable at December 31, 2023 1,514,541 $ 28.53 3.18 $ - The aggregate intrinsic value for stock options outstanding and exercisable is defined as the positive difference between the fair market value of our common stock and the exercise price of the stock options. Total compensation expense related to the options was $ 11,469,667 and $ 15,464,587 for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, there was future compensation expense of $ 16,337,762 with a weighted average recognition period of 1.85 years related to the options. The weighted-average grant-date fair value of options granted during the years 2023 and 2022 was $ 2.57 and $ 38.82 , respectively. The total intrinsic value of options exercised during the years ended December 31, 2023 and 2022, was $ 887,595 and $ 7,164,856 , respectively. During the year-ended December 31, 2023, 317,929 options vested, net of forfeitures. NOTE 12 – COMMITMENTS AND CONTINGENCIES Legal Claims From time-to-time, we are a party to litigation and subject to claims, suits, regulatory and government investigation, other proceedings and consent decrees in the ordinary course of business. We investigate claims as they arise and accrue estimates for resolutions of legal and other contingencies when losses are probable and reasonably estimable. There are no material pending legal proceedings in which we or any of our subsidiaries is 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 . While the results of such normal course claims and legal proceedings, regardless of the underlying nature of the claims, cannot be predicted with certainty, management believes, based on current knowledge and the likely timing of resolution of various matters, any additional reasonably possible potential losses above the amounts accrued for such matters would not be material. However, the outcome of claims, legals proceedings or investigations are inherently unpredictable and subject to uncertainty, and may have an adverse effect on us because of defense costs, diversion of management resources and other factors that are not known to us or cannot be quantified at this time. We may also receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained. The final outcome of any current or future claims or lawsuits could adversely affect our business, financial condition or results of operations. We periodically evaluate developments in our legal matters that could affect the amount of liability that has been previously accrued or the reasonably possible losses that we have disclosed, and make adjustments as appropriate. 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 United States 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 December 31, 2023 and 2022, our accrual for estimated indirect tax liabilities was $ 793,347 and $ 409,187 , 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. F- 24 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 consolidated financial statements as of December 31, 2023 and 2022. 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 13 – LOANS PAYABLE, CONVERTIBLE NOTE PAYABLE AND LINES OF CREDIT Loans Payable Loans payable was as follows: SCHEDULE OF LOAN PAYABLE Effective Interest Rate Maturities December 31, 2023 December 31, 2022 Term loans (US dollar denominated) 4.00 % – 71.55 % 2023 - 2027 $ 1,899,035 $ 5,461,520 Term loans (Chilean peso denominated) 3.48 % - 19.20 % 2023 - 2031 4,541,217 6,541,113 6,440,252 12,002,633 Less current portion ( 3,691,464 ) ( 7,758,831 ) Long term loans payable $ 2,748,788 $ 4,243,802 Bridge Loan We entered into a bridge loan with Bell Bank (the “Bell Bank Note”), secured by substantially all of our assets, in the principal amount of $ 5,000,000 bearing an interest rate of 4.00 % per annum payable monthly with a maturity date of December 14, 2022 , which was extended to March 14, 2023. We did not repay this bridge loan on the maturity date, which resulted in an event of default under the terms thereof. As a result, the interest rate applicable to amounts due under this bridge loan increased from 4.00 % to 7.50 %. This bridge loan was repaid in full on March 20, 2023. We recorded interest expense of $ 116,667 and $ 114,167 for the years ended December 31, 2023 and 2022, respectively, and had accrued interest of zero and $ 4,167 as of December 31, 2023 and 2022, respectively. Term Loans Various subsidiaries in the United States are borrowers under certain term loans. These term loans require monthly principal and interest payments. The term loans are secured by various assets owned by our subsidiaries. We recorded aggregate interest expense of these term loans of $ 20,605 and $ 50,754 for the years ended December 31, 2023 and 2022, respectively. Accrued interest for the loans was zero and $ 13,435 as of December 31, 2023 and 2022, respectively. The aggregate effective interest rate of the terms loans was 8.61 %. Our Latin America subsidiaries are the borrowers under certain term loans denominated in Chilean Pesos. These term loans require monthly principal and interest payments. The loans are secured by various assets owned by our subsidiaries. We recorded aggregate interest expense on these term loans of $ 617,804 and $ 318,055 for the years ended December 31, 2023 and 2022, respectively. The aggregate effective interest rate of these term loans was 11.15 %. In March 2023, we entered into a cash advance agreement, pursuant to which we received gross proceeds of $ 2,000,000 and paid $ 87,500 in upfront fees. The terms of the cash advance agreement called for us to remit aggregate weekly payments of $ 99,398 until such time as we had repaid $ 2,870,000 . This cash advance agreement was secured by the accounts receivable of CISO Global Inc. and our wholly owned subsidiaries, Talatek, LLC and True Digital Security, Inc. We recorded interest expense of $ 978,833 for the year ended December 31, 2023. F- 25 In August 2023, we entered into a second cash advance agreement, pursuant to which we received gross proceeds of $ 2,000,000 and paid $ 50,000 in upfront fees. The terms of the second cash advance agreement called for us to remit weekly payments of $ 80,588 until such time as we had repaid $ 2,740,000 . This cash advance agreement was secured by the accounts receivable of CISO Global Inc. and our wholly owned subsidiaries, Talatek, LLC and True Digital Security, Inc. We recorded interest expense of $ 468,707 for the year ended December 31, 2023. In November 2023, we entered into a business loan and security agreement, 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 year ended December 31, 2023, we recorded interest expense of $ 200,881 . 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. Convertible Notes Payable In October 2021, we issued to Neil Stinchcombe, a convertible note in the principal amount of $ 1,500,000 bearing an interest rate of 5.00 % per annum payable at maturity with a maturity date of January 27, 2022 , with a conversion price of $ 75.00 per share ($ 5.00 on a pre-reverse split basis). On March 10, 2022, we entered into Amendment #1 to the note pursuant to which the maturity date was extended to October 27, 2022 . On March 27, 2023, we entered into a letter agreement with Neil Stinchcombe to resolve certain payment terms of his convertible note. We agreed to repay the principal amount of the note in three equal installment payments of $ 500,000 on each of March 31, April 28 and May 31, 2023, with accrued interest to be paid on May 31, 2023 at the note’s reflected interest rate of 5.00 % per annum. The principal amount of this note, plus all accrued interest was repaid in full under the terms of the letter agreement. For the years ended December 31, 2023 and 2022, we recorded interest expense (recovery) of ($ 16,970 ) and $ 106,507 . In June 2022, we issued an unsecured convertible note payable in the principal amount of $ 1,000,000 bearing an interest rate of 5.00 % per annum payable monthly with a maturity date of June 2023, with a conversion price of $ 117.45 ($ 7.83 on a pre-reverse split basis). The outstanding principal of this note can be redeemed at any time by us or at maturity at 105% . At maturity in June 2023, we repaid the unpaid accrued interest on this convertible note and rolled the principal amount of $ 1,050,000 into a new convertible note with the lender. We recorded interest expense of $ 22,101 and $ 79,167 for the years ended December 31, 2023 and 2022, respectively. 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 wholly owned subsidiary vCISO, LLC. We recorded interest expense of $ 61,954 for the year ended December 31, 2023. Accrued interest as of December 31, 2023 was $ 61,954 . 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 ($ 1.20 on a pre-reverse split basis). During the year ended December 31, 2023, we recorded interest expense of $ 388,888 . Accrued interest as of December 31, 2023 was $ 388,888 . Mr. McCain, a director of our company, is President and Chief Executive Officer of Hensley & Company. 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 $ 26,983 for the year ended December 31, 2023. Accrued interest as of December 31, 2023 was $ 26,983 . F- 26 Future minimum payments under the above debt instruments following the year ended December 31, 2023, are as follows: SCHEDULE OF FUTURE MINIMUM PAYMENTS FOR LONG TERM DEBT 2024 $ 5,867,234 2025 6,522,165 2026 535,515 2027 293,634 2028 246,145 Thereafter 344,110 Total future minimum payments 13,808,803 Less: discount ( 318,551 ) Total 13,490,252 Less: current ( 5,741,464 ) Long term debt, net $ 7,748,788 NOTE 14 – LEASES During the years ended December 31, 2023 and 2022, we recognized additional ROU assets and lease liabilities of $ 733,782 and $ 476,986 , respectively. We elected to not recognize ROU assets and lease liabilities arising from short-term office leases, leases with initial terms of twelve months or less (deemed immaterial) on the consolidated balance sheets. When measuring lease liabilities for leases that were classified as operating leases, we discounted lease payments using its estimated incremental borrowing rate. The weighted average incremental borrowing rate applied was 9.99 %. As of December 31, 2023, our leases had a remaining weighted average term of 3.76 years. The following table presents net lease cost and other supplemental lease information: SCHEDULE OF LEASE COST AND OTHER SUPPLEMENT LEASE INFORMATION Year Ended December 31, 2023 Year Ended December 31, 2022 Lease cost Operating lease cost (cost resulting from lease payments) $ 270,638 $ 259,033 Short term lease cost 156,828 66,658 Net lease cost $ 427,466 $ 325,691 Operating lease – operating cash flows (fixed payments) $ 270,638 $ 259,003 Operating lease – operating cash flows (liability reduction) $ 199,069 $ 233,425 Non-current leases – right of use assets $ 762,228 $ 255,687 Current liabilities – operating lease liabilities $ 219,342 $ 121,731 Non-current liabilities – operating lease liabilities $ 596,307 $ 159,205 Future minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases following the year ended December 31, 2023, are as follows: SCHEDULE OF FUTURE MINIMUM UNDER NON-CANCELLABLE LEASES FOR OPERATING LEASES Fiscal Year Operating Leases 2024 $ 293,689 2025 252,040 2026 198,690 2027 204,644 2028 53,816 Total future minimum lease payments 1,002,879 Amount representing interest ( 187,230 ) Present value of net future minimum lease payments $ 815,649 F- 27 NOTE 15 – INCOME TAXES For the years ended December 31, 2023, and 2022, the income tax benefit consisted of the following: SCHEDULE OF INCOME TAX BENEFIT 2023 2022 Year Ended December 31, 2023 2022 Current: Federal $ - $ - Foreign - 1,432 State - 6,869 Total current income taxes $ - $ 8,301 Deferred Federal $ - $ ( 95,018 ) Foreign ( 435,678 ) 100,466 State - ( 14,298 ) Total deferred income taxes $ ( 435,678 ) $ ( 8,850 ) Total $ ( 435,678 ) $ ( 549 ) A reconciliation of the statutory federal income tax benefit to actual tax benefit for the years ended December 31, 2023 and 2022 is as follows: SCHEDULE OF STATUTORY FEDERAL INCOME TAX BENEFIT TO ACTUAL TAX BENEFIT Year Ended December 31, 2023 2022 Computed tax benefit at statutory rate 21.00 % 21.00 % Stock-based compensation ( 3.28 )% ( 5.10 )% Change in valuation allowance ( 10.77 )% ( 9.12 )% Return to provision adjustments ( 6.81 )% ( 6.39 )% Other, net ( 0.14 )% ( 0.39 )% Effective tax rate 0.00 % 0.00 % The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows as of December 31, 2023 and 2022: SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 2023 2022 Year Ended December 31, 2023 2022 Deferred tax assets: Property and equipment $ 213,643 $ 69,252 Allowance for doubtful accounts 53,700 143,804 Net operating loss carryforwards 9,696,873 1,452,734 Stock-based compensation 9,841,300 4,303,860 Accounts payable and accrued liabilities 307,842 3,191 Goodwill impairment 12,298,349 - Other 19,770 208,043 Total deferred tax assets $ 32,431,477 $ 6,180,884 Valuation allowance ( 31,988,729 ) ( 4,381,644 ) Net deferred income taxes $ 442,748 $ 1,799,240 Deferred tax liabilities Intangible assets $ ( 326,448 ) $ ( 2,041,418 ) Prepaid expenses ( 116,300 ) ( 193,500 ) Total deferred tax liabilities ( 442,748 ) ( 2,234,918 ) Net deferred tax liabilities $ - $ ( 435,678 ) Net deferred tax liability by jurisdiction Domestic $ - $ - Chile - ( 435,678 ) Peru - - Colombia - - Total $ - $ ( 435,678 ) F- 28 We account for deferred taxes under ASC 740, Income Taxes, which requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the ASC 740 more-likely-than-not realization threshold criterion. This assessment considers matters such as future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, legislative developments, and results of recent operations. The evaluation of the recoverability of the deferred tax assets requires that we weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. We have provided a valuation allowance for our net deferred tax assets at December 31, 2023 and 2022, due to the uncertainty surrounding the future realization of such assets and the cumulative losses we have generated. Therefore, no benefit has been recognized in the financial statements for the net operating loss carryforwards and other deferred tax assets. During the years ended December 31, 2023 and 2022, respectively, the valuation allowance increased by $ 27,607,085 and decreased by $ 4,555,842 , respectively. As of December 31, 2023, we had approximately $ 34,870,734 of consolidated federal net operating loss carryforwards and $ 39,385,617 of apportioned state net operating loss carryforwards available to offset future taxable income, respectively. If unused, the federal and state net operating loss carryforwards will begin to expire in 2032. Additionally, we had $ 3,579,475 of net operating loss carryforwards from our subsidiaries located in Latin America, primarily within Chile. An indefinite carryforward of losses is allowed in Chile. The net operating loss carryforward in Peru will begin to expire in 2026. Utilization of net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended (IRC), and similar state provisions. We have not performed a detailed analysis to determine whether an ownership change under Section 382 of the IRC has occurred or will occur. We will perform an analysis as soon as is practicable to determine the extent of limitations, especially in regard to our subsidiaries. It is possible that additional limitations may arise in future years, even after an analysis is completed, due to future changes in the ownership of our Company. We file federal and state income tax returns in jurisdictions with varying statutes of limitations. With few exceptions, we are no longer subject to federal or state income tax examinations by tax authorities for tax years prior to 2022 and 2021, respectively. We believe our income tax filing positions and deductions are more likely than not to be sustained on audit. Therefore, no liabilities for uncertain tax positions have been recorded. As of the date of this filing, we have not filed our 2023 federal and state income tax returns. We expect to file these documents as soon as practicable. NOTE 16 – DEFINED CONTRIBUTION PLAN On January 1, 2023, we began sponsoring a defined contribution 401(k) plans covering eligible U.S. employees, who may contribute up to 80 % of their compensation, subject to limitations established by the Internal Revenue Code. We match employee contributions on a discretionary basis. Expense for our matching contributions was $ 637,365 during 2023. NOTE 17 – CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS Cash Deposits 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. Revenue No single customer represented over 10 % of our total revenue for the years ended December 31, 2023 and 2022. F- 29 NOTE 18 – GEOGRAPHIC INFORMATION Revenue by geography is based on the customer’s billing address and was as follows: SCHEDULE OF REVENUE BY GEOGRAPHY IS BASED ON CUSTOMERS BILLING ADDRESS 2023 2022 U.S. $ 33,953,744 $ 36,559,841 Chile 22,570,883 9,634,082 All other countries 534,130 355,694 Revenue $ 57,058,757 $ 46,549,617 No other international country represented more than 10% of revenue in any period presented. Property and equipment, net by geography was as follows: SCHEDULE OF PROPERTY AND EQUIPMENT, NET BY GEOGRAPHIC AREAS 2023 2022 U.S. $ 1,052,637 $ 1,198,057 Chile 2,623,881 3,480,911 All other countries 956 1,527 Property and equipment net $ 3,677,474 $ 4,680,495 No other international country represented more than 10% of property and equipment, net in any period presented. NOTE 19 – ACCUMULATED OTHER COMPREHENSIVE LOSS The following table presents AOCI activity in equity: SCHEDULE OF ACCUMULATED OTHER COMPREHENSIVE INCOME Foreign Currency Translation Adjustments Total AOCI Balance as of December 31, 2021 $ - $ - Other comprehensive income 1,062,247 1,062,247 Amounts reclassified from AOCI - - Balance as of December 31, 2022 1,062,247 1,062,247 Other comprehensive income 257,930 257,930 Amounts reclassified from AOCI - - Balance as of December 31, 2023 $ 1,320,177 $ 1,320,177 NOTE 20 – SUBSEQUENT EVENTS 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 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. In connection with the Loan and Security Agreement, Aion opened a bank account in our name to be used for general business purposes including receipt of customer payments, disbursements paying normal business expenses, and receipt of any advances from Aion under this agreement. We will use proceeds from the Loan and Security Agreement to repay our business loan entered into November 2023 and for general corporate purposes, which may include working capital, capital expenditures, and repayment of debt. 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. On March 22, 2024, we received notification from the Nasdaq Stock Market that we had sufficiently demonstrated compliance with the bid price requirement in Nasdaq Listing Rule 5550(a)(2) by maintaining a share price in excess of $ 1.00 per share for 10 consecutive trading days. On March 28, 2024, we and our US subsidiaries entered into a Business Loan and Security Agreement (the “Loan Agreement” with LendSpark Corporation (the “Lender”), pursuant to which we obtained a loan with a principal amount of $ 2,200,000 (the “Loan”) from the Lender. Pursuant to the Loan Agreement, we paid the Lender a $ 44,000 origination fee. The 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, or $ 572,000 . If the Loan is prepaid in full prior to the 60-day anniversary of the date of the Loan Agreement, the total interest is reduced as follows: (i) if the Loan is repaid within 30 days, the total amount of interest due will be $242,000, and (ii) if the Loan is repaid within 60 days, the total amount of interest due will be $286,000. Pursuant to the Loan Agreement, we granted the Lender a security interest in all if our assets and the assets of our US 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 immediate due and payable or take possession of the Collateral. In connection with 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. Pursuant to the Fee Agreement, if we repay the Loan in full by (i) May 1, 2024, the Lender will return 75% of the Shares to us, and (ii) June 1, 2024, the Lender will return 50% of the Shares to us. The Fee Agreement contains customary representations, warranties, agreements and obligations of the parties. F- 30