Revenue and Profitability - Total revenue decreased by $1.9 million to $11.8 million for the three months ended March 31, 2024, compared to the same period in 2023[49]. - Security managed services revenue decreased by $1,318,293, or 11%, for the three months ended March 31, 2024, primarily due to higher hardware sales in the Latin American region in the prior year[51]. - Total gross profit increased to $0.6 million for the three months ended March 31, 2024, compared to the same period in 2023[49]. - Professional services revenue decreased by $675,335, or 34%, for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to lower project volumes in Latin America[59]. - Cybersecurity software revenue increased by $100,283, or 100%, for the three months ended March 31, 2024, compared to the same period in 2023, driven by the launch of new cybersecurity software products[59]. - The net loss for the three months ended March 31, 2024, was $6,609,199, a significant improvement compared to a net loss of $34,841,689 for the same period in 2023, representing a reduction of approximately 81%[151]. Expenses and Cost Management - Total cost of revenue decreased by $2,483,687 to $10,843,910 for the three months ended March 31, 2024, compared to the same period in 2023[50]. - Loss from operations improved by $28,991,054 to $(5,739,752) for the three months ended March 31, 2024, compared to the same period in 2023[50]. - Stock-based compensation expenses decreased by $2,521,953, or 69%, for the three months ended March 31, 2024, compared to the same period in 2023, due to fully vested options and a decline in share price[64]. - Selling, general, and administrative expenses decreased by $4,511,563, or 47%, for the three months ended March 31, 2024, primarily due to headcount reductions and lower insurance costs[63]. Cash Flow and Liquidity - Cash and cash equivalents increased to $1,516,989 as of March 31, 2024, compared to $1,062,442 as of December 31, 2023[40]. - Net cash used in operating activities was $1,408,633 for the three months ended March 31, 2024, compared to $2,110,872 for the same period in 2023[76]. - The company is actively pursuing additional debt and/or equity financing to improve liquidity, although there is no assurance of success[78]. - The company plans to improve liquidity by reducing overhead costs and pursuing additional financing[56]. Assets and Liabilities - Total liabilities increased to $36,297,261 as of March 31, 2024, compared to $35,515,931 as of December 31, 2023[41]. - Total assets decreased to $47,538,869 as of March 31, 2024, from $51,655,382 as of December 31, 2023[41]. - Working capital deficit increased to $23,328,063 as of March 31, 2024, compared to $15,113,288 as of December 31, 2023, due to increased current liabilities[74]. Future Outlook and Concerns - The company expects to incur further losses through the end of 2024[56]. - There is substantial doubt about the company's ability to continue as a going concern due to incurred losses[147]. - The company is evaluating strategies to obtain additional funding, which may include equity financing and restructuring operations to grow revenues and decrease expenses[160]. Stock and Equity - As of March 31, 2024, the total stockholders' equity was $11,241,608, with a net loss of $6,609,199 for the quarter[133]. - The company has 12,279,341 shares of common stock outstanding as of May 15, 2024[135]. - Proceeds from the sale of common stock amounted to $48,087 for the three months ended March 31, 2024, compared to $3,143,147 for the same period in 2023, indicating a significant decline in equity financing[151]. Deferred Revenue and Customer Commitments - Total deferred revenue as of March 31, 2024, was $4,107,569, an increase from $4,158,969 as of December 31, 2023, reflecting ongoing customer commitments[168]. - The company’s deferred revenue from security managed services was $3,702,690 as of March 31, 2024, compared to $3,366,273 as of December 31, 2023, indicating growth in this service area[168]. Financial Reporting and Controls - There have been no changes in internal control over financial reporting that materially affected the company during the quarter ended March 31, 2024[105]. - The interim financial statements are unaudited and may not be indicative of future results[146]. - The company evaluated the effectiveness of its disclosure controls and procedures as of March 31, 2024, concluding they were effective[218]. Debt and Financing Arrangements - The company recorded interest expense of $564,529 for a business loan obtained in November 2023, with a principal amount of $2,200,000 and an interest rate of 53.44% per annum[196]. - The company issued an unsecured convertible note to Hensley & Company in March 2023 for $5,000,000, with an interest rate of 10.00% per annum, and recorded interest expense of $125,000 for the three months ended March 31, 2024[202]. - The company entered into a Loan and Security Agreement with Aion Financial Technologies, allowing borrowing up to $3,500,000, with an interest rate of 19.25% per annum[208].
CISO (CISO) - 2024 Q1 - Quarterly Report