CISO GLOBAL INC. The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our condensed financial statements and related notes.
Unless otherwise indicated or the context requires otherwise, the terms "we,"
"us," "our," and "our company" refer to
Our 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. Cybersecurity, also known as computer security or information technology security, is the protection of computer systems and networks from information disclosure, theft of or damage to their hardware, software, or electronic data, as well as from the disruption or misdirection of the services they provide. The cybersecurity industry has a supply and demand issue wherein there is more demand for cybersecurity services than there are expert and seasoned compliance and cybersecurity professionals available in the market. We seek to identify, attract, and retain highly skilled cyber and compliance teams and bring them together to provide holistic cyber services. We accomplish this through acquisitions, direct hiring, and incentivizing employees with stock options to help retain them. On an ongoing basis, we seek to identify cyber talent that is culturally aligned and that offers operating leverage through both existing customer revenue and relationships. We have invested in enterprise solutions and executive talent to integrate our different organizations into an ecosystem that works together to provide complete and holistic cybersecurity through cross pollination of solutions. The ecosystem is intended to provide additional revenue opportunities and drive overall recurring revenue.
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 the only 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. Our brand rallies around the battle cry: "Cybersecurity is a Culture, not a Product."
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First Quarter Fiscal 2022 Highlights
Our operating results for the three months ended
? Total revenue increased by$6.8 million to$8.1 million for the three months endedMarch 31, 2022 , as compared to the three months endedMarch 31, 2021 . ? Total gross profit decreased by$670,000 to$49,000 for the three months endedMarch 31, 2022 , as compared to the three months endedMarch 31, 2021 . ? We acquired TrueDigital, which is now wholly owned subsidiaries of our company.
Significant Developments During First Quarter Fiscal 2022
Nasdaq Listing and Public Offering
On
On
Acquisition of True Digital
On
True Digital is a managed cybersecurity and compliance provider dedicated to the
advancement of security in an increasingly connected world. Through integrated
services and deep visibility, True Digital helps organizations manage risk and
compliance. From its own
29 Results of Operations
Comparison of the Three Months Ended
Our financial results for the three months ended
Three Months Ended March 31,
2022 2021 Variance
Revenue:
Security managed services $ 8,052,225 $ 1,871,817 $ 6,180,408
Professional services 1,227,185 687,961 589,224
Total revenue 9,329,410 2,559,778 6,769,632
Cost of revenue:
Security managed services 2,602,924 193,667 2,409,257
Professional services 110,337 117,794 (7,457 )
Cost of payroll 4,445,850 1,427,702 3,018,148
Stock based compensation 2,121,583 100,925 2,020,658
Total cost of revenue 9,280,693 1,840,088 7,440,605
Total gross profit 48,717 719,690 (670,973 )
Operating expenses:
Professional fees 623,061 157,354 465,707
Advertising and marketing 155,341 45,227 110,114
Selling, general, and administrative 4,616,374 1,487,641 3,128,733
Stock-based compensation 2,565,510 737,837 1,827,673
Total operating expenses 7,960,286 2,428,059 5,532,227
Loss from operations (7,911,569 ) (1,708,369 ) (6,203,200 )
Other income (expense):
Other income 12,543 205 12,338
Interest expense, net (43,585 ) (68,695 ) 25,110
Total other income (expense) (31,042 ) (68,490 ) 37,448
Net loss (7,942,611 ) (1,776,859 ) (6,165,752 )
Foreign currency translation adjustment 902,441 - 902,441
Comprehensive net loss $ (7,040,170 ) $ (1,776,859 ) $ (5,263,311 )
Revenue
Security managed services revenue increased by
Professional services revenue increased by
Expenses Cost of Revenue
Security managed services cost of revenue increased by
Professional services cost of revenue decreased by
30
Cost of payroll cost of revenue increased by
Stock-based compensation expenses increased by
Operating Expenses
Professional fees increased by
Advertising and marketing expenses increased by
Selling, general, and administrative expenses increased by
Stock based compensation expenses increased by
Liquidity and Capital Resources
The accompanying unaudited condensed consolidated financial statements have been
prepared on the basis that we will continue as a going concern, which
contemplates realization of assets and satisfying liabilities in the normal
course of business. At
To date we have funded operations primarily through the sale of equity in
private placements and revenue generated by our services. During the three
months ended
We believe that our existing cash and cash equivalents and cash generated by operating activities will be sufficient to meet our operating and capital requirements for at least the next 12 months as well as our longer-term expected future cash requirements and obligations.
Our future capital requirements, both near-term and long-term, will depend on many factors, in addition to our recurring operating expenses, include our growth rate, the continued expansion of sales and marketing activities, the introduction of new and enhanced products and service offerings, and the costs of any future acquisitions in complementary businesses and technologies. To the extent existing cash and cash equivalents are not sufficient to fund future activities, we may seek to raise additional funds through equity, equity-linked or debt financings. Any additional equity financing may be dilutive to our existing stockholders. We may enter into agreements or letters of intent with respect to potential investments in, or acquisitions of, complementary businesses, services or technologies, which could also require us to seek additional equity financing, incur indebtedness or use cash resources. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results and financial condition would be adversely affected.
Working Capital Surplus
Our working capital surplus as of
As of
March 31, December 31,
2022 2021
Current assets $ 14,089,899 $ 10,345,679
Current liabilities 10,887,409 5,141,561
Working capital surplus $ 3,202,490 $ 5,204,118 The increase in current assets is primarily due to an increase in cash and cash
equivalents, accounts receivable, and prepaid expenses and other current assets
of
Cash Flows Our cash flows for the three months endedMarch 31, 2022 , in comparison to our cash flows for the three months endedMarch 31, 2021 , can be summarized as follows: Three months ended March 31, 2022 2021 Net cash used in operating activities$ (3,015,795 ) $ (1,130,173 ) Net cash used in investing activities (5,021,626 ) - Net cash provided by financing activities 9,011,005 3,259,579 Effect of exchange rates on cash and cash equivalents 164,288 - Increase in cash$ 1,137,872 $ 2,129,579 31 Operating Activities
Net cash used in operating activities was
Investing Activities
Net cash used in investing activities of
Financing Activities
Net cash provided by financing activities for the three months ended
Effects of Inflation
We do not believe that inflation has had a material impact on our business, revenue or operating results during the periods presented.
Critical Accounting Policies and Estimates
Our critical accounting policies are more fully described in the notes to our
condensed consolidated financial statements included herein for the quarter and
three months ended
32
New and Recently Adopted Accounting Pronouncements
Any new and recently adopted accounting pronouncements are more fully described
in Note 2 to our unaudited condensed consolidated financial statements herein
for the quarter ended
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.
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