CISO Global, Inc. Debt Disclosure

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, 2024				December 31, 2023
Term loans		3.62% –100.00%+			2024 - 2027			$	2,711,362			$	1,930,787
Less current portion									(2,674,090	)			(1,856,245	)
Long term loans payable								$	37,272			$	74,542

 

Term Loans

 

Our subsidiaries 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 $4,547 and $20,605 for the years ended December 31, 2024 and 2023, respectively. Accrued interest for the loans was zero as of December 31, 2024 and 2023. The aggregate effective interest rate of the terms loans was 3.62% for the year ended December 31, 2024.

 

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 us and our wholly owned subsidiaries, Talatek, LLC and True Digital Security, Inc. This loan was repaid in full in 2023. We recorded interest expense of $978,833 for the year ended December 31, 2023.

 

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 us and our wholly owned subsidiaries, Talatek, LLC and True Digital Security, Inc. This loan was repaid in full in 2023. 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. 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 years ended December 31, 2024 and 2023, we recorded interest expense of $564,529 and $200,881, respectively.

 

 

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

 

On March 28, 2024, under a troubled debt restructuring, we entered into a Business Loan and Security Agreement (the “Loan Agreement” with LendSpark Corporation (the “Lender”), pursuant to which we obtained a restructured loan with a principal amount of $2,200,000 (the “Restructured Loan”) from the Lender. Pursuant to the Loan Agreement, we paid the Lender a $44,000 origination fee. The Restructured Loan bears interest at a rate of 51.73% per annum and is payable in 52 weekly installments of $53,308, commencing on April 5, 2024.

 

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

 

In connection with the Restructured Loan, we entered into a Fee Agreement (the “Fee Agreement”) with the Lender pursuant to which we issued 100,000 shares of our common stock, as partial consideration for the Lender’s agreement to enter into the Loan Agreement and extend credit to us. The Fee Agreement contains customary representations, warranties, agreements and obligations of the parties. For the year ended December 31, 2024, we recorded interest expense of $683,480. This loan was repaid in full on March 26, 2025.

 

In June 2024, we entered into a Subordinated Business Loan and Security Agreement with Agile Capital Funding, LLC (“Agile”), pursuant to which we obtained a loan with a principal amount of $2,000,000 plus an administrative agent fee paid of $100,000. The Subordinated Business Loan was in excess of 100% per annum and is payable in 30 weekly installments. The first four installments due were $75,000 followed by 26 installments of $103,154. For the year ended December 31, 2024, we recorded interest expense of $1,026,058.

 

Pursuant to the Subordinated Business Loan Agreement, we granted Agile a security interest in the Collateral that is tertiary to the security interest held by Aion and LendSpark. Upon the occurrence of an event of default, Agile may, among other things, accelerate the Subordinated Business Loan and declare all obligations immediately due and payable or take possession of the Collateral. We may use proceeds from the Subordinated Business Loan for general corporate purposes, which includes working capital, capital expenditures, and repayment of debt. This loan was repaid in full in February 2025.

 

In November 2024, we entered into a Note Purchase Agreement, pursuant to which we obtained a loan with a principal amount of $540,000 and paid an original issue discount of $140,000. The effective interest rate on Note Purchase Agreement exceeded 100% per annum. This loan matured on January 1, 2025 and was repaid in full..

 

Line of Credit

 

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

 

We used proceeds from the Loan and Security Agreement to repay our business loan entered into November 2023 and may use for general corporate purposes, which includes working capital, capital expenditures, and repayment of debt. For the year ended December 31, 2024, we recorded interest expense of $374,521. Accrued interest as of December 31, 2024 was zero.

 

Convertible Notes Payable

 

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

 

In December 2024, we entered into Amendment #2 to extend the maturity date of the $1,050,000 unsecured convertible note to December 15, 2025. In exchange for the extension of the maturity date, interest beginning from the date of Amendment #2 increased to 12.00% per annum and $25,000 of accrued interest to be repaid on or before December 31, 2024, with remaining accrued interest due on or before March 31, 2025.

 

In March 2023, we issued an unsecured convertible note to Hensley & Company in the principal amount of $5,000,000 bearing an interest rate of 10.00% per annum. The principal amount, together with accrued and unpaid interest is due on March 20, 2025. At any time prior to or on the maturity date, Hensley & Company is permitted to convert all or any portion of the outstanding principal amount and all accrued but unpaid interest thereon into shares of our common stock at a conversion price of $18.00 per share. During the years ended December 31, 2024 and 2023, we recorded interest expense of $500,000 and $388,888, respectively. Accrued interest as of December 31, 2024 and 2023 was $888,888 and $388,888, respectively. 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. We recorded interest expense of $26,983 for the year ended December 31, 2023. Accrued interest as of December 31, 2023 was $26,983.

 

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

 

In December 2024, we entered into Amendment #2 to extend the maturity date of the $1,000,000 unsecured convertible note to December 15, 2025. In exchange for the extension of the maturity date, interest beginning from the date of Amendment #2 increased to 12.00% per annum and $25,000 of accrued interest to be repaid on or before December 31, 2024, with remaining accrued interest due on or before March 31, 2025.

 

In November 2024, we entered into an Intellectual Property Buy-Back Purchase Agreement (the “Buy-Back Agreement”), pursuant to which we reacquired vCISO, LLC in exchange for a Promissory Note with a face value $1,020,000 and bears interest of 8.00% per annum. The Promissory Note matures in November 2025. We may not prepay any principal amount due under this Promissory Note without the consent of the holder. For the year-ended December 31, 2024, we recorded interest expense of $11,136, and accrued interest as of December 31, 2024 was $11,136.

 

In December 2024, we entered into a Securities Purchase Agreement (the “Agreement”) with several purchasers (the “Purchasers”). Pursuant to the Agreement, the Purchasers agreed to purchase an aggregate of up to $8,125,000, including convertible notes and warrants to purchase our common stock. The convertible notes have a face value of up to $8,125,000 and was subject to an original issue discount of 20%. The convertible notes do not bear a stated rate of interest and mature one year from the date of issuance. The effective interest rate of these convertible notes exceeds 100% per annum. At any time prior to or on the maturity date, the Purchasers, may in part or in whole convert the outstanding principal amount into shares of our common stock at a Conversion Price equal to 90% of the lowest volume weighed average price of our common stock during the ten Trading Day period immediately preceding the Conversion Date. At no time shall the Conversion Price be below $0.394 per share.

 

The Agreement initially funded us with gross proceeds of $3,125,000. Funding of the remaining $5,000,000 was contingent upon the effectiveness of a change in majority of directors of CISO Global, which occurred on January 7, 2025, at which time we received the remaining unfunded amount.

 

We issued 6,500,000 warrants pursuant to the Agreement to purchase shares of our common stock with an exercise price of $1.00 per share.

 

We initially recorded these convertible notes at a fair value of zero, recognized the fair value of a derivative liability of $1,509,844, and recorded a loss of $1,022,650 upon issuance of the Agreement, as our issuances costs exceeded the fair value of the convertible notes. The allocation of fair value to the convertible notes was made on a relative fair value basis as the free-standing warrants issued in connection with the Agreement are equity classified. We accreted interest expense using the effective interest method over the expected term of the Agreement through December 31, 2024. For the year ended December 31, 2024, we accreted interest expense of $2.

 

 

The conversion feature of the Agreement was determined to be an embedded derivative requiring bifurcation accounting as (1) the feature is not clearly and closely related to the debt host and (2) the feature meets the definition of a derivative under ASC 815 and has been record at fair value on our balance sheet. Subsequent changes in the fair value of embedded derivative flows through the Statements of Operations.

 

The proceeds from the Agreement will be used to repay outstanding principal amounts of short-term indebtedness and for general corporate purposes, which may include working capital, capital expenditures, research and development, acquisitions of additional companies or technologies, and investments.

 

Future minimum payments under the above debt instruments following the year ended December 31, 2024, are as follows:

 SCHEDULE OF FUTURE MINIMUM PAYMENTS FOR LONG TERM DEBT

2025		$	14,839,458
2026			34,495
2027			3,615
Total future minimum payments			14,877,568
Less: discount			(3,158,266	)
Total			11,719,302
Less: current			(11,682,030	)
Long term debt, net		$	37,272