CYCU 10-Q
Cycurion, Inc. (CYCU)
10-Q
2026-05-14
For: 2026-03-31
View Original
Added on
May 15, 2026
UNITED STATES
SECURITIES AND COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended: March 31, 2026
For the transition period from __________ to __________
Commission File Number: 001-41214
| (Exact name of registrant as specified in its charter) | ||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive office) | (Zip Code) | |||||||
| Registrant’s telephone number, including the area code) | ||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ☒ | |||||||||||||
| Smaller reporting company | Emerging growth company | ||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of May 12, 2026, there were 8,590,021 shares of common stock outstanding.
| Table of Contents to First Quarter 2026 Form 10-Q | ||||||||
2
Special Note Regarding Forward-Looking Statements
In this report, the words "Cycurion," "Company," "we," "our," and "us" refer to Cycurion, Inc., its subsidiaries and its fully consolidated variable interest entity otherwise stated or unless the context otherwise requires.
Some statements made in this Quarterly Report on Form 10-Q, and in particular in the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" section, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 pertaining to management’s current expectations as to the Company's future financial results, business prospects, and business developments. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and are typically accompanied by, and identified with, terms such as "anticipates," "believes," "expects," "estimates," "intends," "plans," "potential," "may," "should," "will," and similar phrases. The absence of these words does not necessarily mean that a statement is not forward-looking.
This Quarterly Report includes forward-looking statements addressing the Company's:
•future revenue, gross profit, operating margins, and overall financial performance;
•ability to convert contracted backlog into recognized revenue;
•plans and strategies for business growth, new contract awards, and market expansion;
•competitive position in the cybersecurity and information technology ("IT") services markets;
•development, adoption, and performance of our software platforms and service offerings;
•pursuit and execution of acquisitions, partnerships, and other strategic transactions;
•liquidity, capital resources, and ability to service existing obligations;
•compliance with the continued listing requirements of the Nasdaq Global Market;
•financial consolidation of entities in which the Company holds a controlling interest; and
•anticipated trends, growth rates, general market conditions and the regulatory environment in which we operate.
Management's expectations for the Company's future necessarily involve a number of assumptions and estimates and the evaluation of risks and uncertainties. Various factors or events, both known and unknown, could cause actual results to differ materially from the expectations expressed or implied by the forward-looking statements, including the factors discussed under "Risk Factors" in Part I, Item 1A of Cycurion's 2025 Annual Report, as well as uncertainties regarding:
•changes in demand for cybersecurity and government technology services;
•the loss or non-renewal of significant client contracts, or reductions in contract scope or funding;
•the attraction and retention of qualified employees and key personnel;
•the impact of government budget processes, spending constraints, or executive policy actions on contract activity;
•our ability to compete effectively for new contracts against larger, better-resourced competitors;
•risks inherent in completed or proposed acquisitions and strategic partnerships;
•our ability to maintain adequate liquidity and access capital on acceptable terms;
•legal proceedings, regulatory matters, or government audits affecting our business;
•our ability to prevent serious errors or defects across, and to otherwise maintain the uninterrupted operation of, our network;
•cybersecurity threats or data security incidents affecting our operations or those of our clients; and
•general economic, geopolitical, and market conditions beyond our control.
Considering these potential risks and uncertainties, no undue reliance should be placed on any forward-looking statements expressed in this report. Cycurion undertakes no obligation to release publicly the results of revisions to any forward-looking statements to reflect new information or any future events or circumstances, except as otherwise required by applicable law. The information in this report is not necessarily indicative of future results.
3
PART I - FINANCIAL STATEMENTS
Item 1. Financial Statements
CYCURION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, 2026 | December 31, 2025 | ||||||||||
| Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Software development costs, net | |||||||||||
| Goodwill | |||||||||||
| Total non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Stockholders' Equity: | |||||||||||
| Liabilities: | |||||||||||
| Bank loan-revolving credit line | $ | $ | |||||||||
| Loans payable - current portion | |||||||||||
| Factoring liability | |||||||||||
| Convertible notes | |||||||||||
| Promissory notes | |||||||||||
| Loans payable - related parties | |||||||||||
| Accounts payable | |||||||||||
| Accrued liabilities | |||||||||||
| Accrued compensation and benefits | |||||||||||
| Accrued interest payable | |||||||||||
| Excise tax payable | |||||||||||
| Total current liabilities | |||||||||||
| Loans payable - non-current portion | |||||||||||
| Total non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 19) | |||||||||||
| Stockholders' Equity: | |||||||||||
Preferred stock ($ | |||||||||||
Series A convertible preferred stock ($ | |||||||||||
Series B convertible preferred stock ($ | |||||||||||
Series C convertible preferred stock ($ | |||||||||||
Series D convertible preferred stock ($ | |||||||||||
Series E convertible preferred stock ($ | |||||||||||
Series F convertible preferred stock ($ | |||||||||||
Series G convertible preferred stock ($ | |||||||||||
Common stock ($ | |||||||||||
| Additional paid in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders' equity attributable to Cycurion | |||||||||||
| Deficit attributable to noncontrolling interests | ( | ( | |||||||||
| Total stockholders' equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
| See accompanying notes to unaudited consolidated financial statements. | |||||||||||
4
CYCURION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Revenue | $ | $ | |||||||||
| Cost of revenue | |||||||||||
| Gross profit | |||||||||||
| Operating expenses: | |||||||||||
| Selling, general and administrative expenses | |||||||||||
| Stock compensation expenses | |||||||||||
| Business combination expenses | |||||||||||
| Total operating expenses | |||||||||||
| Operating loss | ( | ( | |||||||||
| Other income/(expenses): | |||||||||||
| Interest income | |||||||||||
| Interest expense | ( | ( | |||||||||
| Gain on debt settlement, net | |||||||||||
| Other expense, net | ( | ||||||||||
| Other expenses, net | ( | ( | |||||||||
| Loss before income taxes | ( | ( | |||||||||
| Provision for income tax | |||||||||||
| Net loss | ( | ( | |||||||||
| Less: Net loss attributable to non-controlling interest | |||||||||||
| Net loss attributable to Cycurion | $ | ( | $ | ( | |||||||
| Comprehensive loss | $ | ( | $ | ( | |||||||
| Loss per share: | |||||||||||
| Basic | $ | ( | $ | ( | |||||||
| Diluted | $ | ( | $ | ( | |||||||
| Weighted average shares outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
| See accompanying notes to unaudited consolidated financial statements. | |||||||||||
5
CYCURION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Stock-based compensation | |||||||||||
| Stock-based compensation - business combination related | |||||||||||
| Amortization of debt discount | |||||||||||
| Depreciation of property and equipment | |||||||||||
| Amortization of software development costs | |||||||||||
| Gain on debt settlement, net | ( | ||||||||||
| Finance expense | |||||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable, net and other receivables | ( | ( | |||||||||
| Prepaid expenses and other current assets | ( | ( | |||||||||
| Accounts payable and accrued liabilities | ( | ( | |||||||||
| Accrued compensation and benefits | |||||||||||
| Accrued interest payable | ( | ||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows from investing activities: | |||||||||||
| Cash acquired on business combination | |||||||||||
| Capitalized software development costs | ( | ( | |||||||||
| Cash withdrawn from Trust Account in connection with redemption | |||||||||||
| Release of Trust Account to Company's bank account | |||||||||||
| Net cash (used in)/provided by investing activities | ( | ||||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from exercise of warrants | |||||||||||
| Redemption of common stock subject to redemption | ( | ||||||||||
| Repayments of revolving line of credit | ( | ( | |||||||||
| Repayment of bank borrowings | ( | ||||||||||
| Proceeds from convertible notes payable | |||||||||||
| Proceeds from notes payable | |||||||||||
| Repayments of notes payable | ( | ||||||||||
| Net cash (used in)/provided by financing activities | ( | ||||||||||
| Net (decrease)/increase in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
| See accompanying notes to unaudited consolidated financial statements. | |||||||||||
6
CYCURION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
| Common stock subject to possible redemption | Series A Convertible Preferred Stock | Series B Convertible Preferred Stock | Series C Convertible Preferred Stock | Series D Convertible Preferred Stock | Series E Convertible Preferred Stock | Series G Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total | Non- Controlling Interest | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance of December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for exercise of warrants | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series C Convertible Preferred stock for common stock | - | - | - | - | - | - | ( | - | - | - | - | - | - | - | ( | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2026 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock subject to possible redemption | Series A Convertible Preferred Stock | Series B Convertible Preferred Stock | Series C Convertible Preferred Stock | Series D Convertible Preferred Stock | Series E Convertible Preferred Stock | Series G Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total | Non- Controlling Interest | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | Shares | Amount ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance of December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock redeemed (Mezzanine Equity) | ( | ( | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Release of common stock subject to redemption | ( | ( | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series A convertible preferred stock in exchange of Series A Convertible Preferred Stock categorized as liability | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series D convertible preferred stock in exchange of convertible notes | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series B and D Convertible Preferred Stock | - | - | - | - | ( | - | - | - | ( | ( | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for exercise of warrants | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for business combination costs | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for settlement of liability | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for employment agreement | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SLG transaction | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Excise tax liability arising from redemption of Series A shares | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | ( | ( | - | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7
CYCURION, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Cycurion, Inc. (f/k/a KAE Holdings, Inc.; f/k/a Cyber Secure Solutions, Inc.)(the "Company", "Cycurion", "we", "us" or "our") was incorporated on October 12, 2017, in the state of Delaware. Through its subsidiaries, the Company provides premier information technology security solutions. The Company continually strives to deliver top-notch services in the areas of risk management, cybersecurity, information assurance, systems engineering and help desk solutions. The Company is headquartered in McLean, Virginia. On July 14, 2020, the Company changed its corporate name from KAE Holdings, Inc. to Cyber Secure Solutions, Inc., and, on February 24, 2021, to Cycurion, Inc.
The Company has two first-tier wholly-owned subsidiaries, Cycurion Sub, Inc. (formerly Cycurion, Inc., until February 14, 2025) and Cycurion Crypto Inc., a Delaware corporation formed in July 2025, and three indirectly wholly-owned second-tier subsidiaries: (i) Axxum Technologies LLC ("Axxum"), a Virginia limited liability company formed in December 2006, (ii) Cloudburst Security LLC ("Cloudburst"), a Virginia limited liability company formed in January 2007, and (iii) Cycurion Innovation, Inc., a Delaware corporation formed in September 2021 ("Cycurion Innovation"), in connection with our acquisition of assets from Sabres Security Ltd. ("Sabres"), a leading Israeli-based cybersecurity provider.
Business Combination
On February 14, 2025, the Company completed the business combination and transactions (the "Business Combination") as set forth in an Agreement and Plan of Merger, dated November 21, 2022, as amended on April 26, 2024, December 31, 2024 and February 13, 2025 (the "Merger Agreement"), by and among Western Acquisition Ventures Corp. ("Western"), Western Acquisition Merger Inc., a Delaware corporation and a wholly-owned subsidiary of Western ("Merger Sub"), and Cycurion Sub, Inc., a Delaware corporation formerly known as Cycurion, Inc. ("Cycurion Sub"). As contemplated by the Merger Agreement, Merger Sub merged with and into Cycurion Sub with Cycurion Sub as surviving the merger as a wholly-owned subsidiary of Western. In addition, in connection with the consummation of the Business Combination, Western was renamed "Cycurion, Inc."
As a result of the Business Combination, each common share of Cycurion Sub was cancelled and converted into shares of Company common stock, on the terms set forth in the Merger Agreement. Pursuant to the terms of the Merger Agreement, the aggregate number of shares of Company common stock that was delivered as consideration in the Business Combination was capped at 500,000 shares. Concurrently with the completion of the Business Combination, the Company issued an aggregate of 218,102 shares of common stock, 106,816 shares of Series A convertible preferred stock ("Series A Convertible Preferred Stock"), 3,000 shares of Series B convertible preferred stock ("Series B Convertible Preferred Stock"), 4,851 shares of Series C convertible preferred stock ("Series C Convertible Preferred Stock"), 6,666,666 shares of Series D convertible preferred stock ("Series D Convertible Preferred Stock"), 22,696 Series A warrants, 200,000 Series B warrants, 242,424 Series D warrants , 9,006 common stock warrants, 15,760 shares of common stock issued in connection with the Series D private placement, 16,667 shares of common stock issued to A.G.P./Alliance Global Partners ("A.G.P."), 8,333 shares of common stock issued to Seward & Kissel LLP and 2,627 shares of common stock issued to Baker & Hostetler LLP.
The Business Combination has been accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") because Cycurion is the operating company and has been determined to be the accounting acquirer under Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations ("ASC 805"), while Western is a blank check company.
Under the reverse recapitalization model, the Business Combination was treated as Cycurion issuing equity for the net assets of Western, with no goodwill or intangible assets recorded.
While Western was the legal acquirer in the Business Combination, because Cycurion Sub, prior to the Business Combination, was deemed the accounting acquirer, the historical financial statements of Cycurion Sub became the historical financial statements of the combined company upon the consummation of the Business Combination. As a result, the financial statements reflect (i) the historical operating results of Cycurion Sub prior to the Business Combination; (ii) the combined results of Western and Cycurion Sub following the closing of the Business Combination; (iii) the assets and liabilities of Cycurion Sub at their historical cost; and (iv) Cycurion's equity structure for all periods presented.
8
In accordance with the applicable guidance, the equity structure has been retroactively restated in all comparative periods up to the closing date, of the Business Combination to reflect the number of shares of the Company's common stock issued to Cycurion Sub common stockholders in connection with the Business Combination. As such, the shares and corresponding capital amounts and earnings per share related to Cycurion Sub prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination.
Going Concern
The accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company on a going concern basis. The going concern basis assumes that assets are realized, and liabilities are settled in the ordinary course of business at amounts disclosed in the financial statements. As of March 31, 2026, there was substantial doubt regarding the Company's ability to continue as a going concern, as the Company had a net working capital deficit and an accumulated deficit resulting from substantial losses incurred during the three months ended March 31, 2026 and from prior periods. The Company's ability to continue as a going concern depends upon its ability to market and sell its products to generate positive operating cash flows. As of March 31, 2026, the Company had an accumulated deficit of $29.0 million and a working capital deficit of $12.0 million. In addition, the Company had a net cash outflow of $2.9 million from operating activities during the three months ended March 31, 2026. These circumstances continued to give rise to substantial doubt as to whether the Company will be able to continue as a going concern and did not alleviate the doubt outstanding from 2025.
Management's plan is to continue improving operations to generate positive cash flows and register shares of its common stock in order to undertake a public offering to raise additional capital. Management believes that the valuation and liquidity brought by a public offering of its securities will allow holders of convertibles notes, and convertible preferred stockholders the mechanism to convert their securities into common stock that will reduce the Company's overall leverage and debt service requirement. If the Company is not able to continue generating positive operating cash flows, and raise additional capital, there is the risk that the Company may become insolvent.
Emerging Growth Company
The Company is an emerging growth company as defined in Section 102(b)(1) of the Jumpstart Our Business Start-ups Act of 2012 (the "JOBS Act") which exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies. The Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company's financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Nasdaq Communications
On August 21, 2025, the Company announced that we received formal notification on August 19, 2025 and August 20, 2025 from the Nasdaq Stock Market ("Nasdaq") regarding its previous deficiencies. On August 19, 2025, Nasdaq determined that we comply with Nasdaq Listing Rule 5450(b)(1)(A), which requires a minimum of $10,000,000 in stockholders' equity ("Equity Rule"), based on our Form 10-Q for the period ended June 30, 2025, evidencing stockholders’ equity of $10,448,853 . Reference is made to the April 11, 2025 notification for failure to maintain a minimum market value of listed securities of $50,000,000 over the previous 30 consecutive business days as set forth in Listing Rule 5450(b)(2)(A) ("MVLS Rule"). As we are in compliance with the Equity Rule, Nasdaq notified us that the matter regarding the MVLS Rule is now closed. Additionally, on August 20, 2025, we received formal notification from Nasdaq, determining that for the last 10 consecutive business days, from August 5, 2025 to August 18, 2025, our market value of publicly held shares ("MVPHS") has been $5,000,000 or greater set forth in Nasdaq Listing Rule 5450(b)(1)(C) ("MVPHS Rule"), and that we have regained compliance with the MVPHS Rule.
9
On October 14, 2025, we received written notice from the staff of Nasdaq Listing Qualifications (the "Staff") that it has determined to commence proceedings to delist our common stock from the Nasdaq Global Market. As previously announced in a Current Report filed with the U.S. Securities and Exchange Commission (the "SEC"), on April 15, 2025, the Staff notified the Company on April 9, 2025 that, for the prior 30 consecutive business days, the closing bid price of our common stock had been below the minimum of $1.00 per share required for continued listing on The Nasdaq Global Market under Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule"). The notification letter stated that we would be afforded 180 calendar days, or until October 6, 2025, to regain compliance. The Company did not regain compliance with the Bid Price Rule by October 6, 2025, and the listed security was subject to delisting from The Nasdaq Global Market.
On October 20, 2025, the Company submitted its request to the Nasdaq Global Market to appeal the Staff's determination to a Hearings Panel (the "Panel") pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series, which stayed the suspension of the Company's securities and the filing of a Form 25-NSE with the SEC that would remove the Company’s shares of common stock from listing and registration on The Nasdaq Stock Market. The Company's hearing was scheduled for November 20, 2025.
On November 11, 2025, the Company announced that it received a letter Nasdaq stating that Nasdaq has determined that the Company has regained compliance with Nasdaq's Bid Price Rule requirement under Listing Rule 5450(a)(1). The Company is now in compliance with Nasdaq Global Market's listing requirements. Additionally, Nasdaq confirmed that the previously scheduled hearing before the Panel on November 20, 2025 has been canceled. The Company’s securities will continue to be listed and traded on The Nasdaq Stock Market without interruption and no further communication from Nasdaq has been received as of the date of this filing.
Reverse Stock Split
On October 27, 2025, the Company announced a one-for-thirty reverse stock split of the Company's shares of common stock, par value $0.0001 per share (the "Reverse Stock Split") that took effect with the commencement of business on October 27, 2025.
The Company effected the Reverse Stock Split by filing the Second Amendment to the Second Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. The Company's shares of common stock began trading on a split-adjusted basis on The Nasdaq Global Market, when the market opened on October 27, 2025, under the existing trading symbol "CYCU" and new CUSIP number 95758L305.
As a result of the Reverse Stock Split, every thirty of the Company's issued shares of common stock was combined into one issued share of common stock, without any change to the par value per share and without any change in the total number of authorized shares of common stock. The number of outstanding shares of common stock was reduced from approximately 86,533,435 shares to approximately 2,884,447 shares. All disclosures affected in this Annual Report on Form 10-K, including share counts and warrant counts have been retroactively adjusted to give effect to the Reverse Stock Split.
No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who otherwise held a fraction of a share of common stock of the Company will receive a cash payment (without interest and subject to withholding taxes, as applicable) in lieu thereof at a price equal to that fraction of a share to which the stockholder would otherwise be entitled, multiplied by the closing price of the Company's shares on The Nasdaq Global Market on the trading day immediately preceding the effective date of the Reverse Stock Split.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP, and the rules and regulations of the SEC.
These unaudited consolidated financial statements include the accounts of Cycurion, Inc. (f/k/a KAE Holdings, Inc.; f/k/a Cyber Secure Solutions, Inc.) and its wholly owned subsidiaries: Cycurion Sub, Inc., Axxum Technologies LLC ("Axxum"), Cloudburst Security LLC ("Cloudburst"), and Cycurion Innovation, Inc. The unaudited consolidated financial statements also include the accounts of SLG Innovation Inc. ("SLG") as a result of the master service agreement entered into between the Cycurion and SLG. The Company has determined that the SLG master service agreement constitutes a business combination as defined by ASC 805, Business Combinations ("ASC 805"). ASC 805 establishes principles and requirements as to how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. The assets acquired and liabilities assumed were recognized provisionally in the accompanying consolidated balance sheets at their estimated fair values as of March 31, 2025, and adjusted to final fair value amounts as of March 31, 2026.
10
On February 14, 2025, the Company completed its Business Combination with Western a special purpose acquisition company, whereby Western merged with and into the Company, with the Company surviving the merger. The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP, with Cycurion Sub, Inc. treated as the accounting acquirer. Accordingly, the consolidated financial statements for periods prior to the Business Combination reflect the historical results of Cycurion Sub, Inc., and the equity structure has been retroactively recast to reflect the number of shares of the Company's common stock issued in connection with the Business Combination.
All significant intercompany balances and transactions have been eliminated in consolidation.
Basis of Presentation for Interim Periods
Certain information and disclosures normally included for the annual financial statements to be prepared in accordance with U.S. GAAP have been condensed or omitted for the interim periods presented. We believe that the unaudited interim consolidated financial statements include all adjustments (which are normal and recurring in nature) necessary to present fairly our financial position and the results of operations and cash flows for the periods presented.
The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for the year or future periods. The financial statements should be read in conjunction with our audited consolidated financial statements and the accompanying notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. We have continued to follow the accounting policies set forth in those financial statements.
Use of Estimates
Preparing consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, and disclosure of contingent assets and liabilities. The Company regularly assesses these estimates; however, actual results could differ from those estimates. We base our estimates on historical experience, currently available information, and various other assumptions that we believe are reasonable under the circumstances.
Management evaluates these estimates and assumptions on an ongoing basis, including those relating to revenue recognition on cost estimation on certain contracts, allowance for credit losses, certain assumptions related to share-based compensation, valuation and impairment of intangible assets and goodwill, and contingencies. Actual results could differ from those estimates. The impact of changes in estimates is recorded in the period in which they become known.
Reclassifications
Certain amounts have been reclassified to improve the clarity and comparability of the financial statements. These reclassifications had no impact on previously reported total assets, liabilities, equity, net (loss)/income, or cash flows for any periods presented.
Recent Accounting Pronouncements - Adopted
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which requires public entities, including entities with a single reportable segment, to disclose on an annual and interim basis significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss. The Company adopted this standard for its fiscal year ended December 31, 2025, and has applied the required disclosures on a retrospective basis for all periods presented.
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this update provide a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current classified accounts receivable and contract assets. The Company adopted this standard for its fiscal year ended December 31, 2026, and has applied the required disclosures on a retrospective basis for all periods presented.
Recent Accounting Pronouncements - Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)," which requires public entities to disclose, on both an annual and interim basis, additional information about certain expense categories in tabular form. The standard is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its disclosures.
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In early 2025, the FASB issued ASU 2025-03, "Business Combinations (Topic 805): Determining the Accounting Acquirer When a VIE Is Acquired," which provides clarifying guidance to help entities identify the accounting acquirer in a business combination when the entity being acquired is a VIE. The Company is currently evaluating the impact of this standard on its consolidated financial statements.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU simplifies the capitalization guidance by removing all references to prescriptive and sequential software development stages (referred to as "project stages") throughout ASC 350-40. The ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those fiscal years. Adoption of this ASU can be applied prospectively for reporting periods after its effective date; or follow a modified transition approach that is based on the status of the respective projects and whether software costs were capitalized before the date of adoption; or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. The ASU establishes authoritative guidance in GAAP about accounting for government grants received by business entities, clarifies the appropriate accounting, in an effort to reduce diversity in practice, and increase consistency of application across business entities. The ASU is effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. Adoption of this ASU can be applied a modified prospective approach, a modified retrospective approach, or a retrospective approach. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The ASU clarifies interim disclosure requirements and the applicability of Topic 270. The objective of the amendments is to provide further clarity about the current interim disclosure requirements. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Adoption of this ASU can be applied either a prospective or a retrospective approach. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements. The ASU addresses thirty-three items, representing the changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. Generally, the amendments in this Update are not intended to result in significant changes for most entities. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. The adoption method of this ASU may vary, on an issue-by-issue basis. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.
The Company has reviewed all other recently issued accounting pronouncements and does not believe that any such pronouncements will have a material impact on the Company's consolidated financial statements.
3. REVENUE RECOGNITION
Advisory Consulting
The Company enters into service agreements with customers that will set forth the responsibilities of both parties, including the type of service to be delivered, the timing of the delivery of those services, and the associated price per unit for such services. The unit of measure in the agreement is typically hours. The advisory consulting services represent a single performance obligation, as they constitute a series of distinct hourly services that are substantially the same and transferred to the customer over time. The revenue from advisory service agreement will also set forth the timing of payments by the customers which is typically between 60 and 90 days from the date that an invoice is issued to the customer. As a practical matter, the Company continuously delivers service to customers, and the customer receives benefits from those services over time. The revenue advisory consulting is recognized over time as services are rendered, based on contractual hourly rates, and when the Company has received the aforementioned acknowledgement from its customers that service has been rendered related to hours accumulated over period of time, such as a week, or two weeks, or a month, which is determined on a customer-by-customer basis. The Company's contracts do not include terms for returns, or warranties, or guarantees, or rebates, or discounts on the services rendered. The Company also enters into annual contracts with customers to provide ongoing advisory and consulting services. Services are delivered continuously over the contract term and customers are billed periodically. The annual service contract represents a single performance obligation because the services are a series of distinct, substantially similar acts that are inseparable and transferred over time. Revenue is recognized over time straight-line over the contract term.
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Managed Security Service Practice (MSSP)
Management has determined that its managed security service practice is a bundle of cybersecurity software tools, and expert 24x7x365 monitoring and breach resolution service that is accounted for as a single performance obligation that is delivered over time which is typically a month. The components of the bundle have individual commercial value. However, management believes assigning stand-alone value to each component is impractical because each component would not be able to be fully implemented or utilized if not packaged with the other components. Therefore, management believes the MSSP can only be sold as a bundle package over time. At the time that the Company recognizes revenue, it is has either already received funds in advance from its customer or it is reasonably assured that it will collect funds from its customer. In the event that funds that are received in advance, they are accounted for as contract liabilities in the deferred revenue account until the Company fulfills the performance obligation. A majority of the Company's contracts call for the Company to first deliver service and collect fees thereafter. The Company typically receives payment for these contracts within to ninety days of delivery of service. The Company does not sell monitoring time, security software-tools, and breach resolution as stand-alone services, as the customer would not receive the benefits of these items if they were not sold as an integrated package. The cybersecurity needs to monitor the customer cybersecurity environment regularly, stay up to date on cyberthreats and solutions, maintain its software tools, and then address threats identified, or rectify situations when customer environments have been breached. It is not practical or viable to sell these components separately, as customers expect comprehensive solutions. While the components are separately identifiable, management does not believe they could market the components individually. The Company's management does not believe their customers can benefit from the individual components alone, and there are not readily available resources in the market that can be obtained to make those components viable. The continuous monitoring allows the Company to identify and either neutralize and or rectify breaches by having up to the minute first-hand information, and the tools allow the Company to implement solutions rapidly. The absence of the components would render the solutions and service offering significantly devalued and non-competitive in the marketplace.
The Company believes MSSP meets the criteria to combine the goods and services under a single performance obligation. The Company believes combined integrated solution is delivered continuously over a period of time. In accordance with the terms of the contract between the Company and its customers, the Company receives prepayments in advance from its customers, and recognizes those payments to revenues over a period of time, which is typically each month.
Managed Service Provider (MSP)
The Company's managed service provider (MSP) service offering is the provision of IT infrastructure support to customers, specifically in the areas of desktop support, on-site troubleshooting, and cloud-based network infrastructure troubleshooting. This service is accounted for as a single performance obligation that is delivered over time, which is typically a month; At the time that the Company recognizes revenue, it either already received funds in advance from its customer, or it is reasonably assured that it will collect funds from its customer. In the event that funds that are received in advance, they are accounted for as contract liabilities in the deferred revenue account until the Company fulfills the performance obligation. A majority of the Company's contracts call for the Company to first deliver service and collect fees thereafter. The Company typically receives payment for these contracts within to ninety days of delivery of service.
MSP requires the integration of tools and labor in order for a customer to receive any benefit from the services provided. The Company refers to the guidance in ASC 606-10-25-19 to provide an analysis regarding this accounting recognition of this integrated service. Under MSP, the customer cannot receive any benefit purely from labor or individual software tools as a stand-alone service. The tools that the Company deploys require engineers to decipher results and develop solutions to problems during the service period covered in a contract.
While components can be separately identified, they must be used in conjunction with each other to serve the Company's customers. The Company must continuously make available support engineers to customers whenever they need support and troubleshooting. The service includes remote resolution of issues or going onsite to customer locations to solve problems. The Company's contracts with customers require the Company to have these resources available during the length of the contract. Therefore, these services are continuously delivered as a service over time. Accordingly, the Company recognizes revenue for such MSP contracts on a monthly basis.
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Software as a service (SaaS)
Management has determined that its software as a service is a suite of cybersecurity tools that are delivered either remotely or on customer premises. The service is delivered on a monthly basis. The cybersecurity tools are typically sold as a package. However, the individual components of the suite of tools can either be sold individually or bundled together. Nevertheless, if they are sold individually, or as a bundle, they are all delivered over time. Accordingly, the Company recognizes revenue over time, which is typically monthly; At the time that the Company recognizes revenue it has either already received funds in advance from its customer, or it is reasonably assured that it will collect funds from its customer. In the event that funds that are received in advance, they are accounted for as contract liabilities in the deferred revenue account until the Company fulfills the performance obligation. A majority of the Company's contracts call for the Company to first deliver service and collect fees thereafter. The Company typically receives payment for these contracts within to ninety days of delivery of service.
The Company's SaaS is delivered continuously over time. It is a subscription service where the Company provisions a suite of security software tools to its customers accessed via the internet that allows the customers to protect themselves from cyber-attacks using multiple tools within the suite. This subscription service is recognized to revenue monthly.
| Table 3: Disaggregated Revenue | |||||||||||
| For the Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Advisory consulting | $ | $ | |||||||||
| Managed security service practice (MSSP) | |||||||||||
| Software as a service (Saas) | |||||||||||
| Revenue | $ | $ | |||||||||
4. ACCOUNTS RECEIVABLE, NET
| Table 4: Details of Accounts Receivable, Net | |||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||
| Billed accounts receivable | $ | $ | |||||||||
| Billed accounts receivable - factored | |||||||||||
| Unbilled accounts receivable | |||||||||||
| Allowance for credit losses | ( | ( | |||||||||
| Accounts receivable, net | $ | $ | |||||||||
During the three months ended March 31, 2026, the Company recorded $1,360 for provisions for credit losses, compared to zero U.S. dollars for the three months ended March 31, 2025. During both the three months ended March 31, 2026 and 2025, the Company has no
5. SOFTWARE DEVELOPMENT COSTS
In 2024, the Company reclassified software development costs from property and equipment to software development costs. The Company continues to incur costs to develop new modules, functionalities, and integrations on the previously purchased SaaS platform in order to develop a new product with differentiated offering. As of March 31, 2026, the SaaS platform is still in the development stage and is not ready for external sales. No
| Table 5: Capitalized Software Development Costs | |||||||||||
| For the Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Capitalized software development costs | $ | $ | |||||||||
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6. BUSINESS COMBINATION
SLG Innovation, Inc.
SLG is a technology services firm with operations and client contracts deemed to be strategically complementary to the Company's existing business and long-term growth objectives. As of December 31, 2020, the Company had initiated discussions regarding the potential acquisition of SLG and had advanced a non-refundable deposit of $1,401,923 for cash advances, loans, capitalized transaction costs and accounts receivable arising from prior business dealings with SLG. On May 13, 2021, the Company entered into an agreement to acquire substantially all of SLG's assets and certain liabilities, which included a termination right exercisable at the Company's sole discretion prior to December 31, 2021. This agreement was subsequently amended to limit the acquisition to certain specified assets, primarily identifiable sales contracts.
As of December 31, 2024, the refundable deposit had increased to $2,000,000 , comprising $561,808 in cash advances and loans, $20,000 in due diligence costs, and $1,418,192 in accounts receivable.
On April 29, 2023, the Company and SLG executed a unidirectional letter of intent ("SLG LOI"), which bound SLG to the transaction but did not obligate the Company. The SLG LOI provided that, unless terminated by the Company on or before April 30, 2024, the Company would proceed to acquire SLG or substantially all of its assets and liabilities through a structure to be finalized. The agreed-upon valuation included the $2,000,000 receivable, $2,136,445 in SLG payables to RCR Technology Corporation (excluding payables incurred within 90 days prior to closing), and 33,212 shares of the Company's capital stock.
In connection with the potential SLG transaction, the Company entered into a separate unidirectional letter of intent with RCR ("RCR LOI") on April 29, 2023, under which the Company would acquire SLG's payables owed to RCR, subject to the closing of the potential SLG transaction. Consideration for the RCR transaction was to be settled in the form of shares of common stock of the Company, as specified in the RCR LOI.
The transaction contemplated by the SLG LOI did not close and the Company does not expect that it will close. In lieu of such transaction, and consistent with the economic and business relationship between SLG and the Company for more than the past two years, on March 31, 2025, the Company and SLG entered into a Management Services Agreement (the "MSA"), pursuant to which SLG memorialized its formal engagement of the Company to provide the Management Services (as defined in the MSA) on the terms and subject to the conditions set forth therein. The parties agreed that the Company would continue to retain sole and absolute discretion to select its employees and/or independent contractors who would perform and support the Management Services; provided that the compensation paid to any such persons shall not exceed the compensation that would have been paid to a comparable, unaffiliated third party on a commercial, arms-length basis. SLG agreed to cooperate in good faith with the Company in furtherance of its continued performance of the Management Services.
In connection with the Management Services to be provided by the Company, SLG agreed to pay a fee equal to SLG's "operational cash flow" (whether or not the inbound funds included were recognized as revenue under U.S. GAAP and whether or not the outbound funds were recognized as expenses under U.S. GAAP during the relevant reporting period). For purposes of the MSA, "operational cash flow" means (i) all cash and cash-equivalencies received by, or on behalf of, SLG from any source for any reason during any reporting period minus (ii) all payments made by, or on behalf of, SLG, all in connection with SLG's business as historically operated and as managed by the Company in accordance with the provisions of the MSA. If SLG's operational cash flow during any reporting period is negative, then the Company reserves the right (in its sole and absolute discretion) to advance funds to SLG in an amount not to exceed such negative cash flow during such period with an interest rate to be determined on a case-by-case basis.
In connection with the execution and delivery of the MSA, the Company and Ed Burns entered into a Release Agreement (the "Burns Release Agreement"), pursuant to which the Company acknowledged that it has provided and will continue to provide certain services to SLG as a subcontractor and Mr. Burns agreed to release certain claims that he had, has, or may have against the Company or SLG in relation to the terms and conditions of the MSA, the transactions contemplated thereby, or the manner in which the Company and SLG became parties to the MSA, as well as the relationship between the Company and SLG prior to the date of the MSA and the Company issued to Mr. Burns 33,609 shares of common stock and 51 shares of Series E Convertible Preferred Stock with a face value of $10,000 and conversion price of $1.00 . The Company offered a substantially equivalent release agreement to the owner of 49 % of the equity of SLG with a percentage-equivalent contingent issuance of common stock and Series E Convertible Preferred Stock. As of the date of this quarterly report, such other release has not been accepted or executed and delivered.
On March 31, 2025, the company entered into a Management Services Agreement and a Release agreement (the "Agreement") to gain control of SLG as a VIE. The total purchase consideration for the VIE contractual relationship of SLG consisted primarily of:
(a)prepaid deposit of $2,000,000 ;
(b)33,609 shares of common stock having par value of $0.0001 per share;
(c)51 shares of Series E Convertible Preferred Stock with a face value of $10,000 and conversion price of $1.00 ; and
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(d)$10,814,147 of accounts receivable in Cycurion owing from SLG
The Company has determined that the SLG transaction constitutes a business combination as defined by ASC 805, Business Combinations ("ASC 805"). ASC 805 establishes principles and requirements as to how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. The assets acquired and liabilities assumed were recognized provisionally in the accompanying consolidated balance sheets at their estimated fair values as of March 31, 2025, and subsequently adjusted through March 31, 2026. Under U.S. GAAP, the measurement period shall not exceed one year from the acquisition date and the Company has finalized these amounts as of March 31, 2026. The results of operations for SLG are included in the consolidated results of Cycurion, Inc. starting April 1, 2025.
| Table 6: SLG Valuation | |||||||||||||||||
| Initial Allocation of Assets and Liabilities | Adjustments | Final Allocation of Assets and Liabilities as of March 31, 2026 | |||||||||||||||
| Cash consideration: | |||||||||||||||||
| Cash consideration | $ | $ | - | $ | |||||||||||||
| Less: cash acquired | ( | - | ( | ||||||||||||||
| Cash consideration, net of cash acquired | - | ||||||||||||||||
| Noncash consideration: | |||||||||||||||||
Common stock (1) | |||||||||||||||||
Series E Convertible Preferred Stock (2) | - | ||||||||||||||||
Accounts receivable in Cycurion owing from SLG (3) | - | ||||||||||||||||
| Noncash consideration | |||||||||||||||||
| Total consideration | $ | $ | $ | ||||||||||||||
| Assets acquired: | |||||||||||||||||
| Accounts receivable | $ | $ | - | $ | |||||||||||||
| Total identified assets acquired | - | ||||||||||||||||
| Liabilities assumed: | |||||||||||||||||
| Accounts payable | |||||||||||||||||
| Accrued liabilities | |||||||||||||||||
| Payroll liability | |||||||||||||||||
| Factoring liability | - | ||||||||||||||||
| Due to related parties | - | ||||||||||||||||
| Loans payable | - | ||||||||||||||||
| Liabilities to Cycurion | - | ||||||||||||||||
| Total identified liabilities assumed | |||||||||||||||||
| Net identifiable liabilities assumed | ( | ( | ( | ||||||||||||||
| Elimination of inter-company balances | - | ||||||||||||||||
| Non-controlling interest | ( | - | ( | ||||||||||||||
| Goodwill | |||||||||||||||||
| Net assets acquired | $ | $ | $ | ||||||||||||||
(1)Represents the fair value of 33,609 common stock issued in the SLG transaction based on the quoted stock price on the date of issuance.
(2)Represents the fair value of the Series E Convertible Preferred Stock as is converted to common stock based on the quoted price common stock on the date of issuance.
(3)Represents the fair value of the accounts receivable in Cycurion owing from SLG.
(4)Fair value of the noncontrolling interest based on NCI’s 49 % interest in the net assets acquired.
(5)Goodwill is calculated as Total Consideration paid less the net assets acquired.
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7. GOODWILL
Acquisition of Axxum Technologies, LLC.
On November 22, 2017, the Company entered into a share transfer agreement with Axxum and the two prior members of Axxum to purchase 100 % of the members' equity interest in the Company in exchange for $6,500,000 in cash and $500,000 in two subordinated convertible promissory notes for $250,000 each, payable to the two members of Axxum. Accordingly, Axxum became a wholly-owned subsidiary of the Company. The Company assessed the carrying value of Axxum’s assets and liabilities at the date of acquisition and determined that the carrying value of those accounts approximated fair value. The difference between the purchase price paid for the acquisition of Axxum and the net asset value derived from the assets and liabilities of Axxum at the date of acquisition has been recognized as goodwill. Accordingly, the purchase costs of $6,500,000 in cash, $500,000 in promissory notes, and $140,005 in capitalized transaction costs, less $573,150 in adjustment in working capital that is recoverable from sellers resulted in a total purchase cost of $6,566,855 . The net asset value of Axxum at the date of acquisition was $1,413,589 . Accordingly, the Company recognized $5,153,266 in goodwill related to the acquisition of Axxum.
Acquisition of Cloudburst Security, LLC.
On April 3, 2019, the Company entered into a membership interest purchase agreement with Cloudburst and its two equity holders to purchase 100 % of the issued and outstanding units in exchange for $500,000 in cash; $540,000 for a promissory note to one equity holder and $360,000 to the other; and 111,628 and 74,420 shares of the Company’s common stock to the two equity holders, respectively, on a post-split basis. Accordingly, Cloudburst became a wholly-owned subsidiary of the Company. The Company assessed the carrying value of Cloudburst’s assets and liabilities at the date of acquisition and determined that the carrying value of those accounts approximated fair value; the difference between the purchase price paid for the acquisition of Cloudburst and the net asset value derived from the assets and liabilities of Cloudburst at the date of acquisition has been recognized as goodwill. The purchase costs of $500,000 in cash, $900,000 in promissory notes, $300,000 in 186,048 shares of the Company’s common stock, $1,400,000 in contingent earnout, $62,305 in capitalized transaction costs, resulted in a total purchase cost of $3,162,305 . The net asset value of Cloudburst at the date of acquisition was $323,267 . Accordingly, the Company recognized $2,839,038 in goodwill related to the acquisition of Cloudburst. On April 20, 2022, the holders of the (i) $900,000 promissory notes and (ii) 186,048 shares of the Company's common stock tendered them to the Company for cancellation.
Relevant factors to the Company's assessment of the carrying value of goodwill for both business combinations in accordance to the fair value hierarchy under the category of level 3 are as follows: estimation of the growth rate of future incoming and outgoing cash flows, certain elements that comprise the appropriate weighted average cost of capital, such as the equity of potential market participants for comparability analysis, and the Company's sensitivity to outside factors that would lead to variation in the aforementioned cash flows and weighted average cost of capital.
The Company's management reviewed the performance of Cloudburst and its manager during the year ended December 31, 2020 and determined that Cloudburst had not met the performance targets set forth at the time of acquisition. As a result, the manager of Cloudburst was dismissed. Management of the Company performed a quantitative analysis of the carrying value of the subsidiary and its related goodwill by preparing a future discounted cash flow analysis, which included variables such as expectations on future cash flows, calculation of the cost of capital, and the probability of capturing certain contracts under the framework of Cloudburst being a federal government approved service provider, and determined that the fair value as of December 31, 2020 was lower than the carrying value that was previously established at the point of acquisition; accordingly, during the year ended December 31, 2020, the Company determined that the contingent earnout should be de-recognized, and written off in its entirety in the amount of $1,400,000 to the Company's result of operations, and, as a result of the above assessment, the Company recognized an impairment of goodwill in the amount of $1,400,000 that was also recognized to the Company's results of operations. The Company's ending goodwill related to the acquisition of Cloudburst after recognizing impairment was $1,439,038 .
SLG Innovation Inc. Master Service Agreement
The Company initiated discussions to acquire SLG in late 2020, advancing an initial non-refundable deposit of $1.4 million for loans, capitalized transaction costs, and accounts receivable. By December 31, 2024, this deposit had increased to $2.0 million. On May 13, 2021, the Company entered into an agreement to acquire substantially all of SLG's assets and certain liabilities, later amended to focus on specific sales contracts. A unidirectional letter of intent (LOI) was executed on April 29, 2023, binding SLG to the transaction while allowing the Company the option to proceed. The LOI contemplated a structure involving the $2.0 million receivable, $2.1 million in SLG payables to RCR Technology Corporation, and 33,212 shares of the Company’s capital stock.
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On March 31, 2025, the Company finalized the MSA and Burns Release Agreement for SLG. The total purchase consideration included the $2.0 million prepaid deposit, 33,609 shares of common stock (par value $0.0001 ), 51 shares of Series E Convertible Preferred Stock (face value $10,000 each, conversion price $1.00 ) and $10,814,147 of accounts receivable in Cycurion owing from SLG. Additionally, the Company issued 16,667 shares of common stock to assume SLG's share-based payment obligations.
The transaction was accounted for as a business combination under ASC 805. As of the transaction date, the fair value of assets acquired totaled $3.1 million, excluding cash of $34,983 that was netted against cash consideration paid. Liabilities assumed amounted to $10.6 million, including accounts payable, accrued liabilities, payroll liabilities and loans. After recognizing a non-controlling interest of $3.5 million, the net assets acquired were negative $7.6 million. The total consideration transferred exceeded the net assets acquired, resulting in the recognition of goodwill amounting to $14.6 million. This goodwill reflects the strategic value of SLG's operations, expected synergies, and future growth potential.
| Table 7: Details of Goodwill | |||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||
| Axxum | $ | $ | |||||||||
| Cloudburst | |||||||||||
| SLG | |||||||||||
| Goodwill | $ | $ | |||||||||
8. BANK LOANS
Revolving Line of Credit
On November 22, 2017, Axxum procured from Main Street Bank a revolving line of credit with a maximum of up to $1.0 million ("Revolving Line of Credit"), subject to certain restrictions based on available collateral pledged to the bank in the form of accounts and trade receivables owed by the Company’s customers. This Revolving Line of Credit is available for one year , at which point it may be renewed by Axxum. Axxum incurred origination and closing costs for this line of credit in the amount of $10,000 , which Axxum has recognized a prepaid expense that will amortize over one year as interest expense. The stated rate of interest of the Revolving Line of Credit is the prime rate plus 100 basis points, which at the time of the loan, was 4.50 %.
On April 18, 2019, Axxum, Cloudburst, and the Company collectively renewed the Revolving Line of Credit with a maximum aggregate principal sum of $2.0 million with Main Street Bank. The stated rate of interest of the Revolving Line of Credit increased to 5.75 % at the time of the renewal.
On June 29, 2020 and again on June 30, 2021, the Company amended the Revolving Line of Credit with an extension of the maturity date to March 31, 2024. The stated rate of interest of the Revolving Line of Credit decreased to 5.25 % at the time of the first amendment and an additional 5 % default interest on the second amendment.
As of March 31, 2026, the stated rate of interest of the Revolving Line of Credit was 7.75 %. The outstanding balance of the Revolving Line of Credit was $2.7 million and $2.9 million, as of March 31, 2026 and December 31, 2025, respectively.
Loan and Security Agreement
On November 22, 2017, concurrent with the above-mentioned Revolving Line of Credit, Axxum procured a bank term loan from Main Street Bank in the amount of $5,250,000 with an expiration of December 31, 2024 (the "Loan and Security Agreement"). The Loan and Security Agreement is subject to a monthly repayment of principal in the amount of $109,375 . The loan carries a stated adjustable interest rate of the prime rate plus 200 basis points, which, at the time of the loan, was 5.50 %. Axxum incurred closing and origination costs totaling $211,729 . The imputed interest rate after giving effect for the closing and origination costs was 7.82 %.
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Under the Loan and Security Agreement, Axxum is subject to the following affirmative loan covenants: (i) on or after December 31, 2017 but prior to June 30, 2018, minimum tangible net worth (net liability) of $2,250,000 ; on or after June 30, 2018 but prior to June 30, 2019, minimum tangible net worth (net liability) of $1,250,000 ; on or after June 30, 2019 but prior to December 31, 2019, minimum tangible net worth (net liability) of $950,000 ; on or after December 31, 2019 but prior to June 30, 2020, minimum tangible net worth (net asset) of $1,750,000 ; on or after June 30, 2020 but prior to December 31, 2020, minimum tangible net worth (net asset) of $2,500,000 ; on or after December 31, 2020 but prior to June 30, 2021, minimum tangible net worth (net asset) of $3,000,000 ; on or after June 30, 2021 but prior to December 31, 2021, minimum tangible net worth (net asset) of $3,500,000 ; on or after December 31, 2021, minimum tangible net worth (net asset) of $5,000,000 , (ii) interest coverage ratios must be greater than 1.25 -to-1, measured on quarterly basis, using a rolling four-quarter basis, beginning with the fiscal quarter ending December 31, 2017, (iii) the Company and Axxum must achieve minimum consolidated earnings before tax interest, tax, depreciation and amortization of ("EBITDA") greater than $300,000 per quarter, and (iv) annual capital expenditures must be less than $50,000 . Management conferred with the bank regarding the covenants and determined that the Company was in compliance after giving effect to clarification in the definitions and formulas set forth by the bank in regard to the calculation of the above covenants.
On April 18, 2019, Axxum, Cloudburst, and the Company collectively amended the Loan and Security Agreement, including the addition of Cloudburst as a borrower. The stated interest rate increased to 6.75 % and the loan covenants remained the same.
On June 29, 2020, the Company amended and restated the Loan and Security Agreement ("Amended and Restated Loan and Security Agreement") by extending the maturity date to March 22, 2024 with a monthly repayment of principal in the amount of $62,500 on or after June 22, 2020. The stated interest rate decreased to 6.25 %.
Under the Amended and Restated Loan and Security Agreement, the loan covenants were replaced as follows: (i) on or after June 30, 2020 but prior to December 31, 2020, minimum tangible net worth (net liability) of $2,750,000 ; on or after December 31, 2020 but prior to June 30, 2021, minimum tangible net worth (net liability) of $2,250,000 ; on or after June 30, 2021 but prior to December 31, 2021, minimum tangible net worth (net liability) of $1,750,000 ; on or after December 31, 2021, but prior to June 30, 2022, minimum tangible net worth (net liability) of $1,250,000 ; on or after June 30, 2022 but prior to December 31, 2022, minimum tangible net worth (net asset) of $500,000 ; on or after December 31, 2022, but prior to June 30, 2023, minimum tangible net worth (net asset) of $1,250,000 ; on or after June 30, 2023 but prior to December 31, 2023, minimum tangible net worth (net asset) of $2,000,000 ; on or after December 31, 2023, minimum tangible net worth (net asset) of $2,500,000 , (ii) interest coverage ratios must be greater than 1.20 -to-1, measured on quarterly basis, using a rolling four-quarter basis, beginning with the fiscal quarter ending June 30, 2020 (iii) the Company must achieve minimum consolidated EBITDA greater than $300,000 per quarter, and (iv) annual capital expenditures must be less than $50,000 .
On October 1, 2025, the Company fully paid off the Loan and Security Agreement. The Company has categorized balances due within one operating period as current and those payments due after one operating period as long-term.
Pledge Agreement
On November 22, 2017, concurrent with Axxum's procurement of the above-mentioned Revolving Line of Credit and Loan and Security Agreement, Axxum entered into a pledge agreement (the "Pledge Agreement"). The following pledges of collateral and credit enhancement were made by Axxum and the Company as the sole member of Axxum: (i) the Company equity ownership in Axxum and (ii) all of Axxum's assets, such as accounts, instruments, equipment, fixtures, deposit accounts, letter of credit rights, and any other assets. All future debt is subordinated to the bank term loan until the term loan is repaid in full. Personal guarantees have also been made by Emmit McHenry, Kurt McHenry, and Alvin McCoy III, as officers and stockholders of the Company in support of the term loan.
On April 18, 2019, Axxum, Cloudburst, and the Company collectively amended the Pledge Agreement, including the addition of Cloudburst as a pledgor. The following pledges of collateral and credit enhancement were made by Axxum, Cloudburst, and the Company: (i) all of the equity of Axxum, Cloudburst and each other subsidiary of the Company then owned or hereafter acquired by the Company and (ii) all rights to which the owner of the pledged equity then or may thereafter become entitled by virtue of owning such pledged equity and being a member of Axxum, Cloudburst and each other subsidiary of the Company.
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9. LOANS PAYABLE
| Table 9: Details of Loans Payable | |||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||
| Loan payable - Cycurion | $ | $ | |||||||||
| Loan payable - SLG | |||||||||||
| Economic injury disaster loan - Cycurion | |||||||||||
| Economic injury disaster loan - SLG | |||||||||||
| Total loans payable | |||||||||||
| Less: Current portion of long-term debt | |||||||||||
| Long-term debt | $ | $ | |||||||||
Loan payable - Cycurion
On March 20, 2023, the Company entered into a receivable purchase agreement (the "RPA Loan") for cash received of $0.3 million, with a specified interest rate of 8.00 %, due January 20, 2024. The RPA Loan requires weekly payments of $15,302 , until $0.5 million is repaid. As of both March 31, 2026 and December 31, 2025, the loan balance is $0.4
EIDL Loan - Cycurion
On July 16, 2020, the Company executed the standard loan documents required for securing loans (the "EIDL Loan - Cycurion") offered by the U.S. Small Business Administration (the "SBA") under its Economic Injury Disaster Loan ("EIDL") assistance program in light of the impact of the COVID-19 pandemic on the Company's business. The principal amount of the EIDL Loan - Cycurion is $150,000 , with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75 % per annum and will accrue from the date of the EIDL Loan - Cycurion. Installment payments, including principal and interest, are due monthly beginning July 16, 2021 in the amount of $731 . The balance of principal and interest is payable 30 years from the date of the EIDL Loan - Cycurion.
EIDL Loan - SLG
On September 30, 2020, the Company executed the standard loan documents required for securing loans (the "EIDL Loan - SLG") offered by the SBA under its EIDL assistance program in light of the impact of the COVID-19 pandemic on the Company's business. The principal amount of the EIDL Loan - SLG is $150,000 , with the proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75 % per annum and will accrue from the date of the EIDL Loan - SLG. Installment payments, including principal and interest, are due monthly beginning January 1, 2023 in the amount of $731 . The balance of principal and interest is payable 30 years from the date of the EIDL Loan - SLG.
Loan Payable - SLG
In 2022 and 2023, the Company entered into non-recourse agreements with a lender to sell future cash receipts. Under the agreement, the Company was required to make daily payments. The terms were renegotiated to monthly payments in 2023. As of March 31, 2026, the balance on the loan is $264,379 . The loan is in default and management is working to settle the debt.
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10. CONVERTIBLE NOTES
| Table 10: Details of Convertible Notes | |||||||||||||||||||||||||||||
| Principal Value | Unamortized Discount and Issuance Costs | Convertible Notes Carrying Balance | Weighted Average Interest Rate | Maturity (Calendar Year) | |||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | ||||||||||||||||||||||||||
| Issuance | ( | 2026 | |||||||||||||||||||||||||||
| Amortization | — | ||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | ( | 2026 | |||||||||||||||||||||||||||
| Issuance | ( | 2026 | |||||||||||||||||||||||||||
| Conversion to equity | ( | ( | 2026 | ||||||||||||||||||||||||||
| Amortization | — | ||||||||||||||||||||||||||||
| Balance as of June 30, 2025 | |||||||||||||||||||||||||||||
| Issuance | — | ||||||||||||||||||||||||||||
| Balance as of September 30, 2025 | |||||||||||||||||||||||||||||
| Issuance | 2027 | ||||||||||||||||||||||||||||
| Balance as of December 31, 2025 | 2027 | ||||||||||||||||||||||||||||
| Issuance | |||||||||||||||||||||||||||||
| Balance as of March 31, 2026 | $ | $ | $ | 2027 | |||||||||||||||||||||||||
During the first quarter of 2025, the Company issued convertible notes in the amount of $440,217 for proceeds of $386,500 to three unaffiliated investors. The notes had a one year term and carried an annual interest rate of 18.0 %.
During the second quarter of 2025, the Company issued convertible notes in the amount of $2.1 million for proceeds of $2.0 million. All convertible notes were fully converted to Series G Convertible Preferred Stock. See Note 15 – Equity.
During the fourth quarter of 2025, the Company issued convertible notes in the amount of $192,897 to one investor, Yield Point LLC. These notes were issued in connection with the repayments of two promissory notes. No cash was received or paid by the Company. This convertible note carries an annual interest rate of 12.0 % and has a one year term.
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11. PROMISSORY NOTES
| Table 11.1: Details of Promissory Notes | |||||||||||||||||||||||
| Principal Value | Unamortized Discount and Issuance Costs | Convertible Notes Carrying Balance | Weighted Average Interest Rate | ||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | ( | $ | |||||||||||||||||||
| Issuance | ( | ||||||||||||||||||||||
| Repayment | ( | ( | |||||||||||||||||||||
| Amortization | |||||||||||||||||||||||
| Balance as of March 31, 2025 | ( | ||||||||||||||||||||||
| Conversion to equity | ( | ( | |||||||||||||||||||||
| Repayment | ( | ( | |||||||||||||||||||||
| Amortization | |||||||||||||||||||||||
| Balance as of June 30, 2025 | ( | ||||||||||||||||||||||
| Repayment | ( | ( | |||||||||||||||||||||
| Amortization | |||||||||||||||||||||||
| Balance as of September 30, 2025 | ( | ||||||||||||||||||||||
| Conversion to a convertible note | ( | ( | |||||||||||||||||||||
| Amortization | |||||||||||||||||||||||
| Balance as of December 31, 2025 | ( | ||||||||||||||||||||||
| Amortization | |||||||||||||||||||||||
| Balance as of March 31, 2026 | $ | $ | $ | ||||||||||||||||||||
| Table 11.2: Details of Loans Payable | |||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | Weighted Average Interest Rate | Maturity (Calendar Year) | ||||||||||||||||||||
| Note issued in 2017 | $ | $ | 2020 | ||||||||||||||||||||
| Note issued in 2020 | 2021 | ||||||||||||||||||||||
| Note issued in 2021 | 2021 - 2022 | ||||||||||||||||||||||
| Notes issued in 2023 | 2023 | ||||||||||||||||||||||
| Notes issued in 2024 | 2025 | ||||||||||||||||||||||
| Notes issued in 2025 | 2025 -2026 | ||||||||||||||||||||||
| Funded loans payable | |||||||||||||||||||||||
| Less: Unamortized debt-issuance costs and discounts | ( | ||||||||||||||||||||||
| Total loans payable | $ | $ | |||||||||||||||||||||
12. SUBORDINATED CONVERTIBLE PROMISSORY NOTES
On March 22, 2022, the Company issued subordinated convertible promissory notes with principal value of $526,315 to six investors. While subordinate to bank lender the notes are secured by The Company's assets. The Company issued to an independent director a $236,842 subordinated convertible note. The Company issued to an otherwise unaffiliated investors of subordinated convertible notes in principal amounts of $52,631 to three investors, $105,263 to a fifth investor and $26,315 to a sixth investor. The notes carry annual interest rate of 8 % that commenced upon funding date through the date of repayment.
On November 22, 2022, the Company issued to three otherwise unaffiliated investors $2,777,778 in promissory notes, 13,134 shares of common stock and 32,819 warrants for $2,500,000 in gross proceeds.
The Company entered into the Merger Agreement with Western and Merger Sub, on November 21, 2022, as amended. As a result of the Business Combination, Cycurion raised $3,333,335 of debt capital on November 21, 2022, from nine unaffiliated investors who were issued for convertibles notes, warrants and shares of common stock. The convertible notes had a maturity date of November 21, 2023, and an interest rate of 8 %. They were also issued to convert to equity upon completion of the Business Combination between Cycurion and Western.
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During the first quarter of 2025, the Company issued shares of preferred stock and warrants in exchange of the outstanding convertible promissory notes which had an aggregate principal amount of $3,333,335 and accrued interest of $299,259 . As a part of this conversion, the Company issued 222,222 shares of Series D Convertible Preferred Stock and 242,424 Series D warrants to seven unaffiliated note holders. As a result, the Company recorded gain on settlement of debt of $299,259 , which is presented on the consolidated statements of operations and the consolidated statements of cash flows within 'Gain on debt settlement, net'.
13. FACTORING LIABILITY
On July 12, 2022, the Company entered into agreement with a lender, whereby the lender would loan proceeds against certain accounts receivable up to 90 % of the total value of the invoice, which is paid to the Company in the form of a cash advance. A factoring cost of 1.5 % is applied for days 1-30 after the loan is funded, and an additional 0.5 % fee charge is applied for each additional 10 days period thereafter. The maximum facility is $3.0 million.
14. SERIES A CONVERTIBLE PREFERRED STOCK
As of December 31, 2024, the Company has authorized 16,667 shares of Series A Convertible Preferred Stock with a par value of $0.001 per share. The Series A Convertible Preferred Stock had voting rights on an as-if-converted to common stock basis. The holders were entitled to a 12 % dividend and convert at any time into shares of common stock at a ratio of 1 to 25.6938 shares of common stock, subject to adjustment.
As a part of the Business Combination with Western, the Company issued 106,816 shares of Series A Convertible Preferred Stock, par value $0.0001 per share, in connection with the conversion and settlement of previously outstanding securities mentioned above. Refer to Note 15 for the characteristic of newly issued Series A Convertible Preferred Stock.
15. EQUITY
Preferred Stock
The Company has authorized 20,000,000 shares of preferred stock, par value of $0.0001 per share, issuable from time to time in one or more series.
The Second Amended and Restated Certificate of Incorporation authorizes the board of directors to establish one or more series of preferred stock. Unless required by law or by any stock exchange, and subject to the terms of the Second Amended and Restated Certificate of Incorporation, the authorized shares of preferred stock will be available for issuance without further action by holders of common stock. The board of directors is able to determine, with respect to any series of preferred stock, designations, powers, preferences and relative, participating, optional or other rights, if any, and the qualifications, limitations, or restrictions thereof, if any.
The Company could issue a series of preferred stock that could, depending on the terms of the series, impede or discourage an acquisition attempt or other transaction that some, or a majority, of the stockholders might believe to be in their best interests or in which the stockholders might receive a premium over the market price of the common stock. Additionally, the issuance of preferred stock may adversely affect the rights of stockholders by restricting dividends on the common stock, diluting the voting power of the common stock or subordinating the rights of stockholders to distributions upon a liquidation, dissolution or winding up, or other event. As a result of these or other factors, the issuance of preferred stock could have an adverse impact on the market price of our common stock.
Stockholders' Equity
Series A Convertible Preferred Stock
The Company has authorized 110,000 shares of Series A Convertible Preferred Stock, par value $0.0001 per share.
Voting Rights: The holders of Cycurion's Series A Convertible Preferred Stock have voting rights on an as-if-converted-to-common-stock basis and as required by law (including without limitation, the Delaware General Corporation Law (the "DGCL") and as expressly provided in the Certificate of Designation of Preferences, Rights and Limitations for our Series A Convertible Preferred Stock.
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Dividend Rights: Holders of shares of our Series A Convertible Preferred Stock shall be entitled to receive dividends at the rate of twelve percent (12 %) per annum of the per-share stated value ($1.45 per share). The dividends shall be paid payable quarterly in arrears in shares of common stock, calculated for each dividend payment on an as-if-converted-to-Common-Stock basis. No other dividends shall be paid on shares of Series A Convertible Preferred Stock.
Conversion Rights: Shares of Cycurion's Series A Convertible Preferred Stock shall be convertible, at any time and from time to time at the option of the holder thereof, into shares of common stock (subject to certain 4.99% or 9.99% blocker limitations) at the conversion ratio of one share of Series A Convertible Preferred Stock-for-one share of common stock, subject to adjustment.
Liquidation Preference: Holders of shares of Cycurion's Series A Convertible Preferred Stock, upon any liquidation, dissolution, or winding-up of Cycurion, whether voluntary or involuntary, shall be entitled to receive out of the assets, whether capital or surplus, of Cycurion an amount equal to the Stated Value, plus any accrued and unpaid dividends thereon, for each share of Series A Convertible Preferred Stock before any distribution or payment shall be made to the holders of common stock, and, if the assets of Cycurion shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of shares of Series A Convertible Preferred Stock shall be ratably distributed among them in accordance with the respective amounts that would have been payable on such shares if all amounts payable thereon had been paid in full.
Protective Provisions: As long as any shares of Series A Convertible Preferred Stock are outstanding, Cycurion shall not, without the affirmative vote of the holders of a majority of the then-outstanding shares of Series A Convertible Preferred Stock, (a) alter or change adversely the powers, preferences, or rights given to the holders of Series A Convertible Preferred Stock or alter or amend the Certificate of Designation of Preferences, Rights and Limitations for Cycurion’s Series A Convertible Preferred Stock, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of shares of Series A Convertible Preferred Stock, (c) increase the number of authorized shares of Series A Convertible Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.
As part of the Business Combination with Western during the year ended December 31, 2025, the Company issued to unaffiliated investors a total of 106,816 preferred shares, which were converted into common stock.
As of both March 31, 2026 and December 31, 2025, there were zero
Series B Convertible Preferred Stock
The Company has authorized 3,000 shares of Series B Convertible Preferred Stock, par value $0.0001 per share.
Voting Rights: Holders of shares of Cycurion's Series B Convertible Preferred Stock shall not have any voting rights except as required by law (including without limitation, the DGCL) and as expressly provided in the Certificate of Designation of Preferences, Rights and Limitations for our Series B Convertible Preferred Stock.
Dividend Rights: Holders of our Series B Convertible Preferred Stock shall be entitled to receive dividends (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of common stock when, as, and if such dividends are paid on shares of common stock.
Conversion Rights: Shares of our Series B Convertible Preferred Stock shall be convertible, at any time and from time to time at the option of the holder thereof, into common stock (subject to certain 4.99% or 9.99% blocker limitations) at the conversion ratio of one share of Series B Convertible Preferred Stock-for-one share of common stock, subject to adjustment.
Liquidation Preference: Holders of shares of our Series B Convertible Preferred Stock, upon any liquidation, dissolution, or winding-up, whether voluntary or involuntary, shall be entitled to receive out of the assets, whether capital or surplus, an amount equal to the Stated Value, plus any accrued and unpaid dividends thereon, for each share of Series B Convertible Preferred Stock before any distribution or payment shall be made to the holders of common stock, and, if our assets are insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of shares of Series B Convertible Preferred Stock shall be ratably distributed among them in accordance with the respective amounts that would have been payable on such shares if all amounts payable thereon had been paid in full.
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Protective Provisions: As long as any shares of Series B Convertible Preferred Stock are outstanding, we will not, without the affirmative vote of the holders of a majority of the then-outstanding shares of Series B Convertible Preferred Stock, (a) alter or change adversely the powers, preferences, or rights given to the holders of Series B Convertible Preferred Stock or alter or amend the Certificate of Designation of Preferences, Rights and Limitations for our Series B Convertible Preferred Stock, (b) amend our certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of shares of Series B Convertible Preferred Stock, (c) increase the number of authorized shares of Series B Convertible Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.
As part of the Business Combination with Western during the first quarter of 2025, the Company issued to unaffiliated investors a total of 3,000 preferred shares of Series B Convertible Preferred Stock in exchange of existing 3,000 Series B Convertible Preferred Stock.
During the year ended December 31, 2025, a total of 2,999 Series B Convertible Preferred Stock were converted into 199,955 shares of common stock.
As of both March 31, 2026 and December 31, 2025, there was 1
Series C Convertible Preferred Stock
The Company has authorized 5,000 shares of Series C Convertible Preferred Stock, par value $0.0001 per share.
Voting Rights: The holders of our Series C Convertible Preferred Stock have voting rights on an as-if-converted-to-Common-Stock basis, as required by law, and as expressly provided in its Certificate of Designation, as follows. As long as any shares of our Series C Convertible Preferred Stock are outstanding, we shall not, without the affirmative vote of the holders of a majority of the then-outstanding shares of our Series C Convertible Preferred Stock, (a) alter or change adversely the powers, preferences, or rights given to our Series C Convertible Preferred Stock or alter or amend its Certificate of Designation, (b) amend our Certificate of Incorporation or other charter documents in any manner that adversely affects any rights of the holders of our Series C Convertible Preferred Stock, (c) increase the number of authorized shares of our Series C Convertible Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.
Dividend Rights: We shall pay dividends on our Series C Convertible Preferred Stock at the rate of 12 % per annum of the per-share Stated Value ($82.46 per share). The dividends are payable quarterly in arrears not in cash, but in shares of our common stock, calculated for each dividend payment on an as-if-converted-to-Common-Stock basis. No other dividends are payable on shares of our Series C Convertible Preferred Stock.
Conversion Rights: The shares of our Series C Convertible Preferred Stock may be converted into shares of our common stock at a ratio of approximately 20 shares of common stock for every one share of our Series C Convertible Preferred Stock, or an aggregate of 99,077 shares of our common stock, assuming full conversion. In connection with conversions, each holder of our Series C Convertible Preferred Stock is subject to a "beneficial ownership limitation" of 4.99% of the number of shares of our common stock outstanding immediately after giving effect to that conversion, which limitation may be increased by the holder to not more than 9.99% on 61 days' advanced notice to us.
Liquidation Preference: Our Series C Convertible Preferred Stock has a liquidation preference in an amount equal to its per-share Stated Value ($82.46 per share), plus any accrued and unpaid dividends thereon, for each share of our Series C Convertible Preferred Stock before we can make any distribution or payment to the holders of our common stock. If our assets are insufficient to pay in full such liquidation preference, then our entire assets are to be distributed to the holders of our Series C Convertible Preferred Stock, ratably distributed among them in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Protective Provisions: As long as any shares of Series C Convertible Preferred Stock are outstanding, we will not, without the affirmative vote of the holders of a majority of the then-outstanding shares of Series C Convertible Preferred Stock, (a) alter or change adversely the powers, preferences, or rights given to the holders of Series C Convertible Preferred Stock or alter or amend the Certificate of Designation of Preferences, Rights and Limitations for our Series C Convertible Preferred Stock, (b) amend our certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of shares of Series C Convertible Preferred Stock, (c) increase the number of authorized shares of Series C Convertible Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.
As part of the Business Combination with Western during year ended December 31, 2025, the Company issued a total of 4,851 1,356,586 shares of Cycurion common stock and 406,969 Warrants.
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As of March 31, 2026 and December 31, 2025, there were 2,547 4,851
Series D Convertible Preferred Stock
The Company has authorized 6,666,700 shares of Series D Convertible Preferred Stock, par value $0.0001 per share.
Voting Rights: Holders of shares of Cycurion's Series D Convertible Preferred Stock shall not have any voting rights except as required by law (including without limitation, the DGCL) and as expressly provided in the Certificate of Designation of Preferences, Rights and Limitations for Cycurion’s Series D Convertible Preferred Stock.
Dividend Rights: Holders of shares of Cycurion's Series D Convertible Preferred Stock shall be entitled to receive, and Cycurion shall pay, dividends on shares of Series D Convertible Preferred Stock (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of common stock when, as, and if such dividends are paid on shares of common stock.
Conversion Rights: Shares of Cycurion's Series D Convertible Preferred Stock shall be convertible, at any time and from time to time at the option of the holder thereof, into shares of common stock (subject to certain 4.99% or 9.99% blocker limitations) at the conversion ratio of one share of Series D Convertible Preferred Stock-for-one share of common stock, subject to adjustment.
Liquidation Preference: Holders of shares of Cycurion's Series D Convertible Preferred Stock, upon any liquidation, dissolution, or winding-up of Cycurion, whether voluntary or involuntary, shall be entitled to receive out of the assets, whether capital or surplus, of Cycurion an amount equal to the Stated Value, plus any accrued and unpaid dividends thereon, for each share of Series D Convertible Preferred Stock before any distribution or payment shall be made to the holders of common stock, and, if the assets of Cycurion shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of shares of Series D Convertible Preferred Stock shall be ratably distributed among them in accordance with the respective amounts that would have been payable on such shares if all amounts payable thereon had been paid in full.
Protective Provisions: As long as any shares of Series D Convertible Preferred Stock are outstanding, Cycurion shall not, without the affirmative vote of the holders of a majority of the then-outstanding shares of Series D Convertible Preferred Stock, (a) alter or change adversely the powers, preferences, or rights given to the holders of Series D Convertible Preferred Stock or alter or amend the Certificate of Designation of Preferences, Rights and Limitations for Cycurion’s Series D Convertible Preferred Stock, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of shares of Series D Convertible Preferred Stock, (c) increase the number of authorized shares of Series D Convertible Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.
As part of the Business Combination with Western, during the first quarter of calendar year 2025, the Company issued to unaffiliated investors a total of 6,666,666 preferred shares of Series D Convertible Preferred Stock.
During the year ended December 31, 2025, a total of 6,516,666 shares of Series D Convertible Preferred Stock were converted into 217,220 shares of common stock.
As of both March 31, 2026 and December 31, 2025, there were 150,000
Series E Convertible Preferred Stock
The Company has authorized 100 shares of Series E Convertible Preferred Stock, par value $0.0001 per share.
Voting Rights: Holders of shares of Cycurion's Series E Convertible Preferred Stock shall have voting rights on an as-if-converted-to-common stock basis and as required by law (including without limitation, the DGCL) and as expressly provided in the Certificate of Designation of Preferences, Rights and Limitations for Cycurion’s Series E Convertible Preferred Stock.
Dividend Rights: Holders of shares of Cycurion's Series E Convertible Preferred Stock shall be entitled to receive, and Cycurion shall pay, dividends on shares of Series E Convertible Preferred Stock (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of common stock when, as, and if such dividends are paid on shares of common stock.
Conversion Rights: Shares of Cycurion's Series E Convertible Preferred Stock shall be convertible, at any time and from time to time at the option of the holder thereof, into shares of common stock (subject to certain 4.99% or 9.99% blocker limitations) at the conversion ratio of one share of Series E Convertible Preferred Stock-for-one share of common stock, subject to adjustment.
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Liquidation Preference: Holders of shares of Cycurion's Series E Convertible Preferred Stock, upon any liquidation, dissolution, or winding-up of Cycurion, whether voluntary or involuntary, shall be entitled to receive out of the assets, whether capital or surplus, of Cycurion an amount equal to the Stated Value, plus any accrued and unpaid dividends thereon, for each share of Series E Convertible Preferred Stock before any distribution or payment shall be made to the holders of common stock, and, if the assets of Cycurion shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of shares of Series E Convertible Preferred Stock shall be ratably distributed among them in accordance with the respective amounts that would have been payable on such shares if all amounts payable thereon had been paid in full.
Protective Provisions: As long as any shares of Series E Convertible Preferred Stock are outstanding, Cycurion shall not, without the affirmative vote of the holders of a majority of the then-outstanding shares of Series E Convertible Preferred Stock, (a) alter or change adversely the powers, preferences, or rights given to the holders of Series E Convertible Preferred Stock or alter or amend the Certificate of Designation of Preferences, Rights and Limitations for Cycurion's Series E Convertible Preferred Stock, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of shares of Series E Convertible Preferred Stock, (c) increase the number of authorized shares of Series E Convertible Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.
As part of the Management Services Agreement and a Release agreement with Ed Burns, the Company issued to the majority shareholder a total of 51 preferred shares of Series E Convertible Preferred Stock as consideration for the transaction during the year ended December 31, 2025.
As of both March 31, 2026 and December 31, 2025, there were 51
Series F Convertible Preferred Stock
The Company has authorized 10,000 shares of Series F Convertible Preferred Stock, par value $0.0001 per share.
Voting Rights: Holders of shares of our Series F Convertible Preferred Stock shall have voting rights on an as-if-converted-to-common-stock basis and as required by law (including without limitation, the DGCL) and as expressly provided in the Certificate of Designation of Preferences, Rights and Limitations for our Series F Convertible Preferred Stock.
Dividend Rights: Holders of shares of our Series F Convertible Preferred Stock shall be entitled to receive, and we shall pay, dividends on shares of our Series F Convertible Preferred Stock at the rate of twelve percent (12 %) per annum of the $0.0001 per-share Stated Value of the Series F Convertible Preferred Stock. The dividends shall be paid payable quarterly in arrears in shares of common stock, calculated for each dividend payment on an as-if-converted-to-common-stock basis.
Conversion Rights: Shares of our Series F Convertible Preferred Stock shall be convertible, at any time and from time to time at the option of the holder thereof, into shares of common stock (subject to certain 4.99% or 9.99% blocker limitations) at the conversion ratio of one share of Series F Convertible Preferred Stock-for-1,000 shares of common stock, subject to adjustment.
Liquidation Preference: Holders of shares of our Series F Convertible Preferred Stock, upon any liquidation, dissolution, or winding-up, whether voluntary or involuntary, shall be entitled to receive out of the assets, whether capital or surplus, an amount equal to the Stated Value, plus any accrued and unpaid dividends thereon, for each share Series F Convertible Preferred Stock before any distribution or payment shall be made to the holders of common stock, and, if the assets shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of shares of our Series F Convertible Preferred Stock shall be ratably distributed among them in accordance with the respective amounts that would have been payable on such shares if all amounts payable thereon had been paid in full.
Protective Provisions: As long as any shares of Series F Convertible Preferred Stock are outstanding, we shall not, without the affirmative vote of the holders of a majority of the then-outstanding shares of Series F Convertible Preferred Stock, (a) alter or change adversely the powers, preferences, or rights given to the holders of Series F Convertible Preferred Stock or alter or amend the Certificate of Designation of Preferences, Rights and Limitations for our Series F Convertible Preferred Stock, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of shares of Series F Convertible Preferred Stock, (c) increase the number of authorized shares of Series F Convertible Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.
As of both March 31, 2026 and December 31, 2025, there were zero
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Series G Convertible Preferred Stock
The Company has designated 10,000 shares of Series G Convertible Preferred Stock, par value $0.0001 per share.
Voting Rights: Holders of shares of Series G Convertible Preferred Stock shall have voting rights on an as-if-converted-to-Common-Stock basis and as required by law (including without limitation, the DGCL) and as expressly provided in the Certificate of Designation of Preferences, Rights and Limitations for our Series G Convertible Preferred Stock.
Dividend Rights: Holders of shares of our Series G Convertible Preferred Stock shall be entitled to receive, and we shall pay, dividends on shares of our Series G Convertible Preferred Stock at the rate of twelve percent (12 %) per annum of the $0.0001 per-share Stated Value of the Series G Convertible Preferred Stock. The dividends shall be paid payable quarterly in arrears in shares of common stock, calculated for each dividend payment on an as-if-converted-to-Common-Stock basis.
Conversion Rights: Shares of our Series G Convertible Preferred Stock shall be convertible, at any time and from time to time at the option of the holder thereof, into shares of common stock (subject to certain 4.99% or 9.99% blocker limitations) at the conversion ratio of one share of Series G Convertible Preferred Stock-for-1,000 shares of common stock, subject to adjustment.
Liquidation Preference: Holders of shares of our Series G Convertible Preferred Stock, upon any liquidation, dissolution, or winding-up, whether voluntary or involuntary, shall be entitled to receive out of the assets, whether capital or surplus, an amount equal to the Stated Value, plus any accrued and unpaid dividends thereon, for each share Series G Convertible Preferred Stock before any distribution or payment shall be made to the holders of common stock, and, if the assets shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of shares of our Series G Convertible Preferred Stock shall be ratably distributed among them in accordance with the respective amounts that would have been payable on such shares if all amounts payable thereon had been paid in full.
Protective Provisions: As long as any shares of Series G Convertible Preferred Stock are outstanding, we shall not, without the affirmative vote of the holders of a majority of the then-outstanding shares of Series G Convertible Preferred Stock, (a) alter or change adversely the powers, preferences, or rights given to the holders of Series G Convertible Preferred Stock or alter or amend the Certificate of Designation of Preferences, Rights and Limitations for our Series G Convertible Preferred Stock, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of shares of Series G Convertible Preferred Stock, (c) increase the number of authorized shares of Series G Convertible Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.
As of both March 31, 2026 and December 31, 2025, there were 143
Series G Convertible Preferred Stock Activity
Cycurion has engaged in a strategic recapitalization to strengthen its balance sheet and support growth initiatives. The Company entered into agreements with certain investors to exchange $3.2 million aggregate principal amount of convertible indebtedness for an aggregate of 3,133 shares of Series G Convertible Preferred Stock. These transactions convert a substantial portion of Cycurion's debt into preferred equity, which provides additional capital to support business growth. For more information, please see "Exchange Agreements and Registration Rights Agreements" below.
Exchange Agreements and Registration Rights Agreements
On August 12, 2025, the Company entered into an exchange agreement with Alpha Capital Anstalt (the "Alpha Capital Anstalt Exchange Agreement") and a registration rights agreement. Pursuant to the Alpha Capital Anstalt Exchange Agreement, the parties intended to effect a voluntary security exchange transaction whereby Alpha Capital Anstalt will exchange $366,050 in debt for an aggregate of 366 shares of Series G Convertible Preferred Stock.
On August 12, 2025, the Company entered into an exchange agreement with M2B Funding Corp. (the "M2B Funding Corp. Exchange Agreement") and a registration rights agreement. Pursuant to the M2B Funding Corp. Exchange Agreement, the parties intended to effect a voluntary security exchange transaction whereby M2B Funding Corp. will exchange $672,077 in debt for an aggregate of 672 shares of Series G Convertible Preferred Stock.
On August 12, 2025, the Company entered into an exchange agreement with ADI Funding (the "ADI Funding Exchange Agreement") and a registration rights agreement. Pursuant to the ADI Funding Exchange Agreement, the parties intended to effect a voluntary security exchange transaction whereby ADI Funding will exchange $347,730 in debt for an aggregate of 348 shares of Series G Convertible Preferred Stock.
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On August 12, 2025, the Company entered into an exchange agreement with Deltennium (the "Deltennium Exchange Agreement") and a registration rights agreement. Pursuant to the Deltennium Exchange Agreement, the parties intended to effect a voluntary security exchange transaction whereby Deltennium will exchange $617,667 in debt for an aggregate of 618 shares of Series G Convertible Preferred Stock.
On August 12, 2025, the Company entered into an exchange agreement with Osher Capital (the "Osher Capital Exchange Agreement") and a registration rights agreement. Pursuant to the Osher Capital Exchange Agreement, the parties intended to effect a voluntary security exchange transaction whereby Osher Capital will exchange $103,800 in debt for an aggregate of 104 shares of Series G Convertible Preferred Stock.
On August 12, 2025, the Company entered into an exchange agreement with Lexi London (the "Lexi London Exchange Agreement") and a registration rights agreement. Pursuant to the Lexi London Exchange Agreement, the parties intended to effect a voluntary security exchange transaction whereby Lexi London will exchange $769,000 in debt for an aggregate of 769 shares of Series G Convertible Preferred Stock.
On August 12, 2025, the Company entered into an exchange agreement with ILE Associates (the "ILE Associates Exchange Agreement") and a registration rights agreement. Pursuant to the ILE Associates Exchange Agreement, the parties intended to effect a voluntary security exchange transaction whereby ILE Associates will exchange $256,333 in debt for an aggregate of 256 shares of Series G Convertible Preferred Stock.
Common Stock
The Company has authorized 300,000,000 shares of common stock, par value of $0.0001 per share. Each share of common stock entitles the holder to one vote, in person or proxy, on any matter on which an action of the stockholders of the Company is sought.
•578,863 shares for conversion of Series A, B and D Convertible Preferred Stock
•258,464 shares for exercise of other warrants, Warrant A, B and D for $3,309,921
•25,000 shares valued at $9,000,000 for business acquisition costs
•10,894 shares valued at $1,193,634 for a settlement of debt of $2,925,803 , as a result, the Company recorded loss on settlement of debt of $2,174,075 , which is presented on the consolidated statements of operations and the consolidated statements of cash flows within 'gain on debt settlement, net'
•330,869 shares valued at $5,916,777 for an employment agreement
•33,609 shares valued at $764,020 for consideration in the Management Services Agreement and a Release agreement with Ed Burns
•2,633 shares for a release of common stock subject to redemption
As of March 31, 2026 and December 31, 2025, there were 5,510,021 and 3,642,501 shares of common stock issued and outstanding, respectively. The 5,510,021 shares of common stock include 33,609 shares of common stock to be issued to SLG and under certain equity plans.
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Warrants
| Table 15.1: Details of Warrants | |||||||||||||||||
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Life (years) | |||||||||||||||
| Outstanding warrants, December 31, 2024 | $ | ||||||||||||||||
| Granted | |||||||||||||||||
| Replacement of old warrants | ( | ||||||||||||||||
| Exercised | ( | ||||||||||||||||
| Outstanding warrants, March 31, 2025 | |||||||||||||||||
| Issued - Prefunded (equity line) | |||||||||||||||||
| Exercised - Prefunded (equity line) | ( | ||||||||||||||||
| Exercised | ( | ||||||||||||||||
| Outstanding warrants, June 30, 2025 | |||||||||||||||||
| Exercised - Prefunded (equity line) | ( | ||||||||||||||||
| Outstanding warrants, September 30, 2025 | |||||||||||||||||
| Issued - Prefunded (Armistice-Prefunded) | |||||||||||||||||
| Issued (Armistice) | |||||||||||||||||
| Outstanding warrants, December 31, 2025 | |||||||||||||||||
| Exercised - Prefunded (Armistice-Prefunded) | ( | ||||||||||||||||
| Outstanding warrants, March 31, 2026 | $ | ||||||||||||||||
| Exercisable warrants, March 31, 2026 | $ | ||||||||||||||||
The Company has accounted for the issuance of common stock and warrants issued for cash proceeds in the private placements as equity instruments. Management believes that the warrants are indexed to and are settled in the Company's own common stock; therefore, they should be accounted for as permanent equity.
Public Warrants
As of both March 31, 2026 and December 31, 2025, there were 383,333 30 days after the completion of a Business Combination or (b) 12 months from the closing of the initial public offering. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the Public Warrants is not effective within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If neither that exemption nor another exemption is available, holders will not be able to exercise their warrants on a cashless basis.
The Public Warrants will expire on February 14, 2030, five years after the completion of the Business Combination with Cycurion or earlier upon redemption or liquidation.
Once the Public Warrants become exercisable, the Company may redeem the Public Warrants:
•in whole and not in part
•at a price of $0.30 per Public Warrant;
•upon not less than 30 days’ prior written notice of redemption;
•if, and only if, the reported last sale price of the shares of common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period commencing at any time after the Public Warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders; and
•if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying the Public Warrants.
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If and when the Public Warrants become redeemable, we may not exercise our redemption right if the issuance of shares of common stock upon exercise of the Public Warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of common stock under the blue-sky laws of those states in which such Public Warrants were offered by us in the offering.
If we call the Public Warrants for redemption, as described above, we will have the option to require any holder that wishes to exercise its Public Warrant to do so on a "cashless basis." If we take advantage of this option, all holders of Public Warrants would pay the exercise price by surrendering their Public Warrants for the number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the Public Warrants, multiplied by the difference between the exercise price of the Public Warrants and the "fair market value" (defined below) by (y) the fair market value. The "fair market value" for this purpose means the average reported last sale price of the common stock for the trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Public Warrants. If our management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of common stock to be received upon exercise of the Public Warrants, including the "fair market value" in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a Public Warrant redemption. We believe this feature is an attractive option to us if we do not need the cash from the exercise of the Public Warrants.
PIPE Warrants
On January 11, 2022, concurrently with the completion of the Business Combination, pursuant to the PIPE Subscription Agreement, dated January 11, 2022 (as the same may be amended from time to time, the "PIPE Subscription Agreement") for an aggregate purchase price of $3,760,000 , Western issued an aggregate of 12,533 shares of common stock issued in a private placement (the "PIPE Financing") pursuant to that certain PIPE Subscription Agreement and 12,533 shares of common stock issuable upon the exercise of certain warrants (the "PIPE Warrants") issued in the PIPE Financing.
Each outstanding whole PIPE Warrant and public warrant ("Public Warrant") issued in connection with the initial public offering of Western represents the right to purchase one share of common stock at a price of $11.50 per share, subject to adjustment, at any time commencing 30 days after the Business Combination with Western and ending five years after the Business Combination.
The PIPE Warrants, as well as any warrants underlying additional units issued to the Western Acquisition Ventures Sponsor, LLC (the "Sponsor") or our officers, directors or their affiliates in payment of working capital loans, are identical to the Public Warrants except that the PIPE Warrants (i) will be exercisable for cash or on a cashless basis, at the holder’s option, and (ii) will not be redeemable by us, in each case so long as they are still held by the Sponsor or its permitted transferees.
As of March 31, 2026 and December 31, 2025, there were 12,533
In addition, if we, at any time while the Public Warrants or PIPE Warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to the holders of common stock on account of such shares of common stock (or other shares of our capital stock into which the Public Warrants or PIPE Warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends, (c) to satisfy the redemption rights of the holders of common stock in connection with a proposed initial business combination, (d) to satisfy the redemption rights of the holders of common stock in connection with a stockholder vote to amend our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100 % of our common stock if we do not complete our initial business combination within 12 months from the closing of this offering (or up to 18 months from the closing of the offering at the election of the Company subject to satisfaction of certain conditions or as extended by our stockholders in accordance with our amended and restated certificate of incorporation) or (ii) with respect to any other provision relating to stockholders' rights or pre-initial business combination activity, or (e) in connection with the redemption of our public shares upon our failure to complete our initial business combination, then the Public Warrants and PIPE Warrants exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of common stock in respect of such event.
If the number of outstanding shares of common stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of common stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of common stock issuable on exercise of each Public Warrant and PIPE Warrant will be decreased in proportion to such decrease in outstanding shares of common stock.
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In case of any reclassification or reorganization of the outstanding shares of common stock (other than those described above or that solely affects the par value of such shares of common stock), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our outstanding shares of common stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of ours as an entirety or substantially as an entirety in connection with which we are dissolved, the holders of the Public Warrants and PIPE Warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Public Warrants and PIPE Warrants and in lieu of the shares of common stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Public Warrants or PIPE Warrants (as applicable) would have received if such holder had exercised their Public Warrants or PIPE Warrant (as applicable) immediately prior to such event.
The Public Warrants and PIPE Warrants are issued in registered form under a warrant agreement between Equiniti Trust Company, LLC, as warrant agent, and us. The warrant agreement provides that the terms of the Public Warrants and PIPE Warrants may be amended without the consent of any holder to cure any ambiguity or correct any mistake, or defective provision, but requires the approval by the holders of at least a majority of the then outstanding Public Warrants to make any change that adversely affects the interests of the registered holders of Public Warrants.
Series A Warrants
On November 17, 2017, the Company had issued 44,445 Series A Warrants at exercise price of $13.50 with an expiration date of November 22, 2025. As part of the Business Combination with Western, during the first quarter of 2025, the Company issued to unaffiliated investors a total of 22,696 Series A Warrants in exchange of existing 44,445 Series A Warrants having expiry on February 19, 2029 and exercise price of $9.59121
Series B Warrants
On August 1, 2023, the Company issued 133,333 Series B Warrants with an exercise price of $15.00 with an expiration date of August 1, 2028.
On April 12, 2024, the Company issued 66,667 Series B Warrants with an exercise price of $15.00 with an expiration date of April 12, 2029.
As part of the Business Combination with Western, during the year ended December 31, 2025, the Company issued to unaffiliated investors a total of 200,000 Series B Warrants in exchange of existing 200,000 Series B Warrants having and expiration date of February 19, 2030 and an exercise price of $15.00 .
Series D Warrants
On March 22, 2022, the Company issued 6,564 Series D Warrants with a subordinated convertible promissory note at an exercise price of $42.30 and an expiration date of September 22, 2027.
On November 22, 2022, the Company had issued 32,819 warrants with subordinated convertible promissory note at an exercise price of $42.30 and an expiration date of April 21, 2028.
As part of the Business Combination with Western, during the year ended December 31, 2025, the Company issued to unaffiliated investors a total of 242,424 Series D Warrants in exchange of existing 39,382 Series D Warrants having an exercise price of $15.00 and an expiration date of February 19, 2029.
Armistice Pre-Funded Warrant and Armistice Warrant
On December 4, 2025, Cycurion entered into a securities purchase agreement (the "Armistice Purchase Agreement") with a single institutional accredited investor, Armistice Capital Master Fund Ltd. ("Armistice"), pursuant to which we issued and sold to Armistice in a private placement (i) pre-funded warrants (the "Armistice Pre-Funded Warrants") to purchase up to an aggregate of 1,670,720 shares of common stock (the "Pre-Funded Warrant Shares"), and (ii) warrants (the "Armistice Warrants") to purchase up to an aggregate of 3,341,439 shares of common stock (the "Warrant Shares"). The exercise of the Warrants and the issuance of the Warrant Shares upon exercise thereof is subject to stockholder approval ("Stockholder Approval"). Stockholder Approval was received at the special general meeting of stockholders on March 19, 2026.
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Each Armistice Pre-Funded Warrant was sold at an offering price of $3.62 . Each Armistice Warrant has an exercise price of $3.62 . The Private Placement closed (the "Closing") on December 5, 2025 (the "Closing Date").
On December 5, 2025, Cycurion entered into the Armistice Pre-Funded Warrant with Armistice that is exercisable for up to 1,657,460 shares of common stock. Each Armistice Pre-Funded Warrant has an exercise price equal to $0.0001 per share. The Armistice Pre-Funded Warrants were all exercised during the three months ended March 31, 2026.
On December 5, 2025, Cycurion entered into the Armistice Warrant with Armistice that has an exercise price equal to $3.62 per share. The Armistice Warrants will be exercisable immediately following receipt of Stockholder Approval for the issuance of the Armistice Warrants and the Warrant Shares and have an exercise price of $3.62 per share, subject to adjustment for customary events such as stock splits and fundamental transactions. The Armistice Warrants will expire five years from their initial exercise date. At any time following the initial exercise date of the Armistice Warrants, the Armistice Warrants can be exercised on a cashless basis if there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares. The exercise price and number of shares of common stock issuable upon exercise of the Armistice Warrant and Armistice Pre-Funded Warrant are subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events.
The Armistice Pre-Funded Warrants and the Armistice Warrants issued in the Armistice private placement provide that a holder of Armistice Pre-Funded Warrants or Armistice Warrants, as applicable, will not have the right to exercise any portion of its Armistice Pre-Funded Warrants or Armistice Warrants if such holder, together with its affiliates, and any other party whose holdings would be aggregated with those of the holder for purposes of Section 13(d) or Section 16 of the Exchange Act would beneficially own in excess of 9.99% for the Armistice Pre-Funded Warrants and 4.99% for the Armistice Warrants of the number of shares of common stock outstanding immediately after giving effect to such exercise (the "Beneficial Ownership Limitation"); provided, however, that the holder may increase or decrease the Beneficial Ownership Limitation by giving notice to the Company, with any such increase not taking effect until the sixty-first day after such notice is delivered to the Company but not to any percentage in excess of 9.99%. The Warrants may be exercised on a cashless basis if a registration statement registering Warrant Shares is not effective. The Armistice Pre-Funded Warrants may be exercised on a cashless basis.
Subject to applicable laws, an Armistice Warrant and Armistice Pre-Funded Warrant may be transferred at the option of the holder upon surrender of the applicable warrant to us together with the appropriate instruments of transfer.
There is no trading market available for the Armistice Warrants or the Armistice Pre-Funded Warrants on any securities exchange or nationally recognized trading system. We do not intend to list the Armistice Warrants or the Armistice Pre-Funded Warrants on any securities exchange or nationally recognized trading system.
In the event of a fundamental transaction, as described in the Armistice Warrants and Armistice Pre-Funded Warrants and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50 % of our outstanding common stock, or any person or group becoming the beneficial owner of 50 % of the voting power represented by our outstanding common stock, the holders of the Armistice Warrants and Armistice Pre-Funded Warrants will be entitled to receive upon exercise of the Armistice Warrants and Armistice Pre-Funded Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the Armistice Warrants and Armistice Pre-Funded Warrants immediately prior to such fundamental transaction. In addition, in certain circumstances, upon a fundamental transaction, the holder will have the right to require us to repurchase its Armistice Warrants at the Black Scholes Value; provided, however, that, if the fundamental transaction is not within our control, including not approved by our Board of Directors, then the holder shall only be entitled to receive the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of the Warrant, that is being offered and paid to the holders of common stock in connection with the fundamental transaction.
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Pursuant to the terms of the Armistice Purchase Agreement, the Company is prohibited from entering into any agreement to issue or announcing the issuance or proposed issuance of any shares of common stock or securities convertible or exercisable into common stock for a period commencing on December 4, 2025 and expiring 90 days from the Effective Date (as defined in the Armistice Purchase Agreement). Furthermore, the Company is also prohibited from entering into any agreement to issue common stock or Common Stock Equivalents (as defined in the Armistice Purchase Agreement) involving a Variable Rate Transaction (as defined in the Armistice Purchase Agreement), subject to certain exceptions, for a period commencing on December 4, 2025 and expiring 90 days from such Effective Date. The Effective Date is defined in the Armistice Purchase Agreement as the earliest of the date that (a) the initial registration statement has been declared effective by the SEC, (b) all of the Pre-Funded Warrant Shares and Warrant Shares have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 and without volume or manner-of-sale restrictions, (c) following the one year anniversary of the Closing provided that a holder of Pre-Funded Warrant Shares or Warrant Shares is not an affiliate of the Company, or (d) all of the Pre-Funded Warrant Shares and Warrant Shares may be sold pursuant to an exemption from registration under the Securities Act without volume or manner-of-sale restrictions and Company counsel has delivered to such holders a standing written opinion that resales may then be made by such holders of the Pre-Funded Warrant Shares and Warrant Shares pursuant to such exemption which opinion shall be in form and substance reasonably acceptable to such holders.
The Armistice Purchase Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company, including for liabilities arising under the Securities Act, other obligations of the parties and termination provisions. The representations, warranties and covenants contained in the Armistice Purchase Agreement were made only for the purposes of such agreements and as of the specific dates, were solely for the benefit of the parties to such agreement and may be subject to limitations agreed upon by the contracting parties.
Yield Point NY LLC Pre-Funded Warrant
On April 7, 2025, Cycurion entered into an equity purchase agreement (the "Equity Purchase Agreement") with Yield Point NY LLC (the "Yield Point") relating to up to 4,500,000 shares of common stock issuable to Yield Point upon exercise of a pre-funded warrant ("Yield Point Pre-Funded Warrant") issued as its commitment fee ("Commitment Fee") under the Equity Purchase Agreement.
The Yield Point Pre-Funded Warrant was offered for the Commitment Fee in connection with the Equity Purchase Agreement for shares of common stock, and provides that the holder may not exercise any portion of the Yield Point Pre-Funded Warrant to the extent that immediately prior to or after giving effect to such exercise the holder would own more than 4.99%, which ownership cap may be increased by the holder up to 9.99% upon 61 days’ prior notice. The exercise price for each share of common stock underlying the Yield Point Pre-Funded Warrant is $0.0001 . The Yield Point Pre-Funded Warrant is immediately exercisable upon issuance and may be exercised at any time until the Yield Point Pre-Funded Warrant is exercised in full.
A holder of the Yield Point Pre-Funded Warrant may not exercise any portion of the warrants or Yield Point Pre-Funded Warrant, as applicable, to the extent that the holder would own more than 4.99% (or, at the holder’s option upon issuance, 9.99%) of our outstanding common stock immediately after exercise, as such percentage ownership is determined in accordance with the terms of the Yield Point Pre-Funded Warrant.
In lieu of making the cash payment otherwise contemplated to be made to us upon exercise of the Yield Point Pre-Funded Warrant in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of our common stock determined according to a formula set forth in the Yield Point Pre-Funded Warrant.
Seward & Kissel LLP Pre-Funded Warrant
On February 14, 2025, Cycurion entered into pre-funded warrant with Seward & Kissel LLP that is exercisable for approximately $1.3 million in shares of common stock, or up to 83,333 shares of common stock (the "Seward & Kissel Pre-Funded Warrant"); provided that once the net proceeds from the sale of the shares equals the $1.3 million in legal fees and expenses (the "Legal Fees"), the remaining shares of common stock, including such common stock exercisable under the Seward & Kissel Pre-Funded Warrant, shall be returned to Cycurion.
The Seward & Kissel Pre-Funded Warrant provides that the holder may not exercise any portion of the Seward & Kissel Pre-Funded Warrant to the extent that immediately prior to or after giving effect to such exercise the holder would own more than 4.99% upon 61 days' prior notice. The exercise price for each share of common stock underlying the Seward & Kissel Pre-Funded Warrant is $0.0001 . The Seward & Kissel Pre-Funded Warrant is immediately exercisable upon issuance and may be exercised at any time until the Seward & Kissel Pre-Funded Warrant is exercised in full.
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Seward & Kissel LLP may not exercise any portion of the warrants or Seward & Kissel Pre-Funded Warrant, as applicable, to the extent that the holder would own more than 4.99% of our outstanding common stock immediately after exercise, as such percentage ownership is determined in accordance with the terms of the Seward & Kissel Pre-Funded Warrant.
In lieu of making the cash payment otherwise contemplated to be made to us upon exercise of the Seward & Kissel Pre-Funded Warrant in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of our common stock determined according to a formula set forth in the Seward & Kissel Pre-Funded Warrant.
Other Warrants
On March 8, 2022, the Company issued 17,636 warrants to the originators of $700,000 of investor notes at exercise price of $0.92 , which all were exercised in 2026.
As part of the Business Combination with Western, during the year ended December 31, 2025, the Company issued to unaffiliated investors a total of 9,006 warrants in exchange of existing 17,636 warrants having an expiration date of February 19, 2029 and an exercise price of $9.59121 .
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC 480. Shares of common stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company's control) is classified as temporary equity. At all other times, common stock is classified as stockholders' equity. The Company's shares of common stock sold in the initial public offering of Western feature certain redemption rights that are considered to be outside of the Company's control and subject to occurrence of uncertain future events.
| Table 15.2: Details of Common Stock Subject to Possible Redemption | |||||||||||
| Number of Shares | Amount | ||||||||||
| Common stock subject to possible redemption as of December 31, 2024 | $ | ||||||||||
| Less: | |||||||||||
| Redemption | ( | ( | |||||||||
| Release of common stock subject to redemption | ( | ( | |||||||||
| Common stock subject to possible redemption as of December 31, 2025 | $ | ||||||||||
16. CONCENTRATIONS, RISKS AND UNCERTAINTIES
Credit risk
The Company's primary bank deposits are located in the United States. Those deposits are provided protection under FDIC insurance up to maximum of $250,000. Any deposits in excess of the aforementioned maximum are at risk of loss if those banks become insolvent. The Company is subject to risk borne from credit extended to customers.
Interest risk
The Company is subject to interest rate risk when its loans become due and require refinancing or if the prime rate adjusts, as the Company's loans are based on adjustable interest rates.
Inflation risk
Management monitors changes in prices levels. Historically, inflation has not materially impacted the Company's financial statements; however, significant increases in the cost of labor that cannot be passed on to the Company's customers could adversely impact the Company's results of operations.
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Concentration risks
| Table 16.1: Revenue Concentration by Customer - Based on % of Revenue | ||||||||||||||||||||||||||
| For the Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||
| Customer | Amount | % | Amount | % | ||||||||||||||||||||||
| A | $ | $ | ||||||||||||||||||||||||
| B | $ | $ | ||||||||||||||||||||||||
| C | $ | $ | ||||||||||||||||||||||||
| D | $ | $ | ||||||||||||||||||||||||
| Table 16.2: Accounts Receivable Concentration by Customer - Based on % of Accounts Receivable, Net | |||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| Customer | Amount | % | Amount | % | |||||||||||||||||||
| 1 | $ | % | $ | ||||||||||||||||||||
| 2 | $ | % | $ | ||||||||||||||||||||
| 3 | $ | % | $ | ||||||||||||||||||||
17. RELATED PARTY TRANSACTIONS
Promissory Note – Related Party
On September 20, 2024, the Company entered into a promissory note with Western Acquisition Ventures Sponsor, LLC (the "Sponsor") for $230,000 , pursuant to which the Company can borrow up to an aggregate cash amount of $230,000 . The Promissory Note, with an interest rate of 10 % per annum is payable upon the sooner of the consummation of the Business Combination with Cycurion. During the year ended December 31, 2024, the Company borrowed the full $255,556 , with a discount of $25,556 , resulting in net proceeds of $230,000 . The Company amortized the discount of 25,556 fully in 2025. As of both March 31, 2026 and December 31, 2025 the balance of these loans was $133,334 20,482 and $17,148 , respectively. These notes are presented with other promissory notes on the balance sheet.
Personal guarantees were entered by Emmit McHenry, Kurt McHenry and Alvin McCoy III, as officers and stockholders of the Company in support of the Main Street Bank Loan and Security Agreement.
Axxum purchased an AT&T contract relationship from Archura, LLC, a company owned by Emmit McHenry and Kurt McHenry at the end of 2018. The contract relationship includes five purchase orders to deliver networking services to AT&T and its clients. The total sales of these five purchase orders were $2,149 and $20,615 for the three months ended March 31, 2026 and 2025, respectively.
Loans Payable - Related Parties
| Table 17: Details of Loans Payable - Related Party | |||||||||||||||||||||||
| March 31, 2026 | December 31, 2025 | Weighted Average Interest Rate | Maturity (Calendar Year) | ||||||||||||||||||||
| Loans issued to a director in 2023 | $ | $ | |||||||||||||||||||||
| Loan issued to a director in 2024 | |||||||||||||||||||||||
| Funded loans payable - related party principal | |||||||||||||||||||||||
| Less: Unamortized debt-issuance costs and discounts | |||||||||||||||||||||||
| Loans payable - related party - current | $ | $ | |||||||||||||||||||||
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18. EARNINGS PER SHARE
| Table 18.1: Details of Basic and Dilutive Loss Per Share | |||||||||||
| For the Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Basic net loss per share: | |||||||||||
| Numerator | |||||||||||
| Net loss including non-controlling interests | $ | ( | $ | ( | |||||||
| Less: Net loss attributable to non-controlling interest | ( | ||||||||||
| Net loss attributable to common stockholders - basic | $ | ( | $ | ( | |||||||
| Denominator | |||||||||||
| Weighted average shares outstanding - basic | |||||||||||
| Basic net loss per share attributable to common stockholders | $ | ( | $ | ( | |||||||
| Diluted net loss per share: | |||||||||||
| Numerator | |||||||||||
| Net loss attributable to common stockholders - basic | $ | ( | $ | ( | |||||||
| Add back interest for subordinated convertible promissory note | |||||||||||
| Net loss attributable to common stockholders - diluted | $ | ( | $ | ( | |||||||
| Denominator | |||||||||||
| Weighted average shares outstanding - basic | |||||||||||
| Weighted-average effect of potentially dilutive securities: | |||||||||||
| Conversion of subordinated convertible promissory note | |||||||||||
| Conversion of Series A Convertible Preferred Stock | |||||||||||
| Conversion of Series B Convertible Preferred Stock | |||||||||||
| Conversion of Series C Convertible Preferred Stock | |||||||||||
| Exercise of investor and placement agent warrants | |||||||||||
| Weighted average shares outstanding - diluted | |||||||||||
| Dilutive net loss per share attributable to common stockholders | $ | ( | $ | ( | |||||||
| Table 18.2: Details of Potentially Dilutive Effect of Securities Excluded from Dilutive EPS due to Anti-Dilutive Effect | |||||||||||
| For the Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Conversion of Series B Convertible Preferred Stock | |||||||||||
| Conversion of Series C Convertible Preferred Stock | |||||||||||
| Conversion of Series D Convertible Preferred Stock | |||||||||||
| Conversion of Series E Convertible Preferred Stock | |||||||||||
19. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, the Company may be a party to litigation or claims arising in the ordinary course of business, including those relating to employment matters, relationships with clients and contractors, intellectual property disputes, and other business matters. These legal proceedings seek various remedies, including claims for monetary damages in varying amounts, none of which are considered material, or are unspecified as to amount. Although the outcome of any such matter is inherently uncertain and may be materially adverse, based on current information, management believes that the outcome of such known matters will not have a material adverse effect on the Company's financial condition and results of operations.
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Management does not believe that there are any litigation or claims that would have a material adverse effect on the business, or the consolidated financial statements of the Company as of March 31, 2026.
Registration Rights
The holders of Founder Shares, Private Placement Units, and units that may be issued upon conversion of working capital loans, if any, are entitled to registration rights pursuant to a registration rights agreement that was signed on the date of the IPO. These holders will be entitled to certain demand and "piggyback" registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Business Combination Marketing Agreement
The Company entered into a business combination marketing agreement on January 11, 2022 (the "Business Combination Marketing Agreement") with A.G.P. whereby A.G.P. is to act as an advisor in connection with a Business Combination to assist the Company in holding meetings with its stockholders to discuss the potential Business Combination and the target business' attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with a Business Combination, assist the Company in obtaining stockholders' approval for a Business Combination, and assist the Company with its press releases and public filings in connection with a Business Combination. The Company was to pay A.G.P. a fee for such marketing services upon the consummation of a Business Combination in an amount equal to 4.5 % of the gross proceeds of the IPO, or $5,175,000 in the aggregate (exclusive of any applicable finders’ fees that might become payable). The Business Combination Marketing Agreement will be terminated upon entry into the Advisory Agreement (defined below).
Advisory Agreement with A.G.P.
A.G.P. was a financial advisor to both Western in connection with the Business Combination transaction. Upon the completion of the Business Combination, A.G.P.: (i) received a cash fee of $500,000 shares of common stock and warrants to purchase 16,667 shares of common stock at an exercise price of $150.00 per share. Pursuant to the advisory agreement (the "Advisory Agreement"), Western shall pay A.G.P. a total transaction fee equal to $2,500,000 (the "Transaction Fee") upon the closing of the Business Combination. The Transaction Fee will be payable in the form of preferred shares of Cycurion that are convertible into 16,667 shares of common stock (such preferred shares or the common stock into which they convert, the "Transaction Fee Shares"), for a price per share of common stock equal to $5.00 . A portion of the Transaction Fee Shares shall be subject to forfeiture and return to the Company for cancellation once A.G.P. converts and sells Transaction Fee Shares generating sales proceeds (excluding commissions) of $2,500,000 .
The Transaction Fee Shares shall be subject to a lock-up ending on the earlier of (i) the date on which 75 % of the outstanding Series B Convertible Preferred Stock is converted into shares of the combined Company’s common stock and (ii) three months from February 14, 2025, which was the closing date of the de-SPAC (the "Lock-Up Termination Date"). After the Lock-Up Termination Date, A.G.P. may convert the Transaction Fee Shares and sell them subject to a leak-out provision that limits A.G.P.'s sales of Transaction Fee Shares on any given date to 10 % of the cumulative trading volume of the common stock for such date (including pre-market, market and post-market trading) as reported by Bloomberg, LP. This restriction shall remain in effect beginning on the Lock-Up Termination Date and ending on the date on which 100 % of the Series B Convertible Preferred Stock outstanding as of the closing is converted into shares of our common stock.
The parties amended the Advisory Agreement (the "Amended Advisory Agreement"), pursuant to which Western shall pay A.G.P. the Transaction Fee in the form of preferred shares of Cycurion that are convertible into 166,667 shares of common stock (such preferred shares or the common stock into which they convert, the "Amended Transaction Fee Shares"), for a price per share of common stock of $0.50 . A portion of the Amended Transaction Fee Shares shall be subject to forfeiture and return to the Company for cancellation once A.G.P. converts and sells Transaction Fee Shares generating sales proceeds (excluding commissions) of $2,500,000 .
The Amended Transaction Fee Shares shall be subject to a lock-up ending on the earlier of (i) the date on which 75 % of the outstanding Series B Convertible Preferred Stock is converted into shares of the Combined Company's common stock and (ii) six months from the Lock-Up Termination Date. After the Lock-Up Termination Date, A.G.P. may convert the Amended Transaction Fee Shares and sell them subject to a leak-out provision that limits A.G.P.'s sales of Amended Transaction Fee Shares on any given date to 10 % of the cumulative trading volume of the common stock for such date (including pre-market, market and post-market trading) as reported by Bloomberg, LP. This restriction shall remain in effect beginning on the Lock-Up Termination Date and ending on the date on which 100 % of the Series B Convertible Preferred Stock outstanding as of the closing is converted into shares of our common stock.
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Upon the execution of the Advisory Agreement, the Business Combination Marketing Agreement, dated January 11, 2022, between Western and A.G.P. in which Western and Cycurion Sub caused the combined company to issue to A.G.P. 8,333 shares of common stock of the combined company in full satisfaction of the fees, was terminated, and such shares of common stock extinguished in their entirety.
Agreements with Seward & Kissel LLP
On November 27, 2024, we entered into a revised engagement letter (the "Revised Engagement Letter") with Seward & Kissel LLP ("Seward & Kissel"), pursuant to which Western and Cycurion agreed to pay approximately $1.3 million of its outstanding legal fees and expenses ("Legal Fees") in shares of common stock in connection with the Business Combination. Following the closing of the Business Combination on February 14, 2025 and in connection with the Revised Engagement Letter, we issued to Seward & Kissel 8,333 shares of common stock and a pre-funded warrant that is exercisable for approximately $1.3 million in shares of common stock (the "Seward & Kissel Pre-Funded Warrant"); provided that once the net proceeds from the sale of the shares equals the Legal Fees, the remaining shares of common stock, including such common stock exercisable under the Seward & Kissel Pre-Funded Warrant, shall be returned to the Cycurion. We plan to enter into an exchange agreement with Seward & Kissel to exchange the Seward & Kissel Pre-Funded Warrant for a convertible promissory note that is convertible into such number of shares equal to the Legal Fees.
On February 14, 2025, Cycurion entered into pre-funded warrant with Seward & Kissel Pre-Funded Warrant that is exercisable for approximately $1.3 million in shares of common stock, or up to 83,333 shares of common stock; provided that once the net proceeds from the sale of the shares equals the $1.3 million in Legal, the remaining shares of common stock, including such common stock exercisable under the Seward & Kissel Pre-Funded Warrant, shall be returned to Cycurion.
The Seward & Kissel Pre-Funded Warrant provides that the holder may not exercise any portion of the Seward & Kissel Pre-Funded Warrant to the extent that immediately prior to or after giving effect to such exercise the holder would own more than 4.99% upon 61 days' prior notice. The exercise price for each share of common stock underlying the Seward & Kissel Pre-Funded Warrant is $0.0030 . The Seward & Kissel Pre-Funded Warrant is immediately exercisable upon issuance and may be exercised at any time until the Seward & Kissel Pre-Funded Warrant is exercised in full.
Seward & Kissel LLP may not exercise any portion of the warrants or Seward & Kissel Pre-Funded Warrant, as applicable, to the extent that the holder would own more than 4.99% of our outstanding common stock immediately after exercise, as such percentage ownership is determined in accordance with the terms of the Seward & Kissel Pre-Funded Warrant.
In lieu of making the cash payment otherwise contemplated to be made to us upon exercise of the Seward & Kissel Pre-Funded Warrant in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of our common stock determined according to a formula set forth in the Seward & Kissel Pre-Funded Warrant.
Agreement with Baker & Hostetler LLP
In 2023, Western agreed to pay approximately $788,030 of its obligations to its counsel, Baker Hostetler LLP, in shares of common stock following the Business Combination, which will be issued at a price per share equal to $10.00 , or 2,627 shares.
Equity Line of Credit
Equity Purchase Agreement
On April 7, 2025 (the "Execution Date"), we entered into the Equity Purchase Agreement with Yield Point NYC LLC ("Yield Point"). Under the Equity Purchase Agreement, we have the right, but not the obligation, to direct Yield Point to purchase up to $60.0 million (the "Maximum Commitment Amount") in shares of our common stock upon satisfaction of certain terms and conditions contained in the Equity Purchase Agreement, including, without limitation, an effective registration statement filed with the SEC registering the resale of the shares of Put Stock (defined below) and the shares of Commitment Stock (defined below) and additional shares to be sold to Yield Point from time to time under the Equity Purchase Agreement. The term of the Equity Purchase Agreement began on the Execution Date and ends on the earlier of (i) the date on which Yield Point shall have purchased shares of common stock issued, or that we shall be entitled to issue, per any applicable Put Notice (defined below) in accordance with the terms and conditions of the Equity Purchase Agreement (the "Put Stock") equal to the Maximum Commitment Amount, (ii) the date that is twelve (12 ) months from the date the registration statement is declared effective, (iii) written notice of termination by us to Yield Point (which shall not occur at any time that Yield Point holds any of the shares of Put Stock), or (iv) written notice of termination by Yield Point to us pursuant to (the "Commitment Period").
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During the Commitment Period, we may direct Yield Point to purchase shares of Put Stock by delivering a notice (a "Put Notice") to Yield Point. We shall, in our sole discretion, select the number of shares of Put Stock requested in each Put Notice. However, such amount may not exceed the Maximum Put Amount (as defined in the Equity Purchase Agreement). The purchase price to be paid by Yield Point for the shares of Put Stock will be ninety percent (90 %) of the lowest trade of the common stock on the Principal Market during the Valuation Period (as defined in the Equity Purchase Agreement).
In consideration for Yield Point's execution and delivery of, and performance under the Equity Purchase Agreement, on the Execution Date, we, in our discretion, either were to (i) pay to Yield Point in cash $1.8 million ("Commitment Cash") or (ii) issue the Yield Point Pre-Funded Warrant (as defined below) to Yield Point in a form acceptable to Yield Point in its sole discretion and having an exercise price per share of $0.0030 , for Yield Point's purchase of shares of common stock (the "Commitment Stock") having a value of $1.8 million based on closing price of the common stock on April 6, 2025. We chose to issue the Pre-Funded Warrant. All of the shares of Commitment Stock were fully earned as of the Execution Date, and the issuance of the shares of Commitment Stock is not contingent upon any other event or condition, including, without limitation, the effectiveness of the Initial Registration Statement (defined below) or our submission of a Put Notice to Yield Point and irrespective of any termination of the Equity Purchase Agreement.
In accordance with the Equity Purchase Agreement, a registration statement on Form S-1 (the "Initial Registration Statement") covering only the resale of the shares of Put Stock and Commitment Stock was filed with the SEC on May 7, 2025.
Pre-Funded Warrant
The pre-funded warrant with Yield Point (the "Yield Point Pre-Funded Warrant") certifies that, for value received, Yield Point is entitled to be issued up to 150,000 shares of common stock as its commitment fee ("Commitment Fee") and has an initial exercise price of $0.003 per share. The Yield Point Pre-Funded Warrant was offered for the Commitment Fee in connection with the Equity Purchase Agreement for shares of common stock, and provides that the holder may not exercise any portion of the Yield Point Pre-Funded Warrant to the extent that immediately prior to or after giving effect to such exercise the holder would own more than 4.99%, which ownership cap may be increased by the holder up to 9.99% upon 61 days’ prior notice. The exercise price for each share of common stock underlying the Yield Point Pre-Funded Warrant is $0.003 . The Yield Point Pre-Funded Warrant is immediately exercisable upon issuance and may be exercised at any time until the Yield Point Pre-Funded Warrant is exercised in full.
A holder of the Yield Point Pre-Funded Warrant may not exercise any portion of the warrants or Yield Point Pre-Funded Warrant, as applicable, to the extent that the holder would own more than 4.99% (or, at the holder’s option upon issuance, 9.99%) of our outstanding common stock immediately after exercise, as such percentage ownership is determined in accordance with the terms of the Yield Point Pre-Funded Warrant.
In lieu of making the cash payment otherwise contemplated to be made to us upon exercise of the Yield Point Pre-Funded Warrant in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of our common stock determined according to a formula set forth in the Yield Point Pre-Funded Warrant.
During the year ended December 31, 2025, 150,000 of these shares have been exercised, therefore as of December 31, 2025, all Yield Point Pre-Funded Warrants have been exercised.
Registration Rights Agreement
On April 7, 2025 (the "RRA Execution Date"), in connection with the Equity Purchase Agreement, we entered into a registration rights agreement with Yield Point (the "Registration Rights Agreement"), pursuant to which we shall, by May 7, 2025, file with the SEC the Initial Registration Statement covering the maximum number of (i) shares of Commitment Stock, (ii) shares of Put Stock, which have been, or which may, from time to time be issued, including without limitation all of the shares of common stock which have been issued or will be issued to Yield Point under the Equity Purchase Agreement (without regard to any limitation or restriction on purchases), and (iii) any and all shares of capital stock issued or issuable with respect to the Put Stock, Commitment Stock, and the Equity Purchase Agreement as a result of any stock split, combination, stock dividend, recapitalization, exchange, or similar event, or otherwise, without regard to any limitation on purchases under the Equity Purchase Agreement (the "Registrable Securities"), as shall be permitted to be included thereon in accordance with applicable SEC rules, regulations, and interpretations so as to permit the resale of the Registrable Securities by Yield Point, including, but not limited to, under Rule 415 at then-prevailing market prices (and not fixed prices). The Initial Registration Statement shall register only Registrable Securities. The Initial Registration Statement and any amendment thereto was declared effective by the SEC in May 2025.
Non-Redemption Agreement
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On August 6, 2024, the Company, Western Acquisition Ventures Sponsor, LLC (the "Sponsor") and RiverNorth SPAC Arbitrage Fund, LP (the "RiverNorth") entered into a non-redemption agreement (the "Non-Redemption Agreement") whereby the Sponsor plans to transfer to RiverNorth 167 shares each month over the next three months for agreeing not to redeem the 3,327 that it currently holds prior to the business combination.
On October 9, 2024, the Company, the Sponsor and RiverNorth entered into extended non-redemption agreement whereby the Sponsor plans to transfer to RiverNorth 167 shares each month over the next three months for agreeing not to redeem the 3,327 that it currently holds prior to the business combination.
Employment Agreements
On December 27, 2023, we entered into an employment agreement with James P. McCormick whereby the Company agreed to pay a total of $125,000 of total compensation annually, including $40,000 in cash and $85,000 in stock payment. On October 30, 2024, we entered into an amendment to the employment agreement with James P. McCormick whereby the Company agreed to pay total compensation of $200,000 , including $40,000 in cash at the closing of the Business Combination and the remaining $160,000 in cash from the proceeds that the Company receives from any capital raising transaction following the closing of the Business Combination, including the proceeds from an equity line of credit to be entered into by and among the Company, Cycurion and the investors named therein; provided that the Company shall only be obligated to apply up to 15 % of the proceeds from each capital raise until Mr. McCormick’s compensation of $200,000 has been paid in full.
On December 1, 2024, Cycurion and L. Kevin Kelly, Chief Executive Officer, entered into an employment agreement on a two-year term, commencing on December 1, 2024 and ending on December 1, 2026. During the employment period, Mr. Kelly will receive an annual base salary of $325,000 , and equity compensation of $500,000 of Company common stock in the first year of the employment agreement, payable quarterly. Mr. Kelly is eligible for a performance bonus based on the Company’s results. The targeted performance bonus is $325,000 for year-one, and the performance bonus will increase for subsequent years based on future financial and non-financial results
On January 1, 2025, Cycurion and Alvin McCoy, III, Chief Financial Officer, entered into an employment agreement on a two-year term, commencing on January 1, 2025 and ending on December 31, 2026. During the employment period, Mr. McCoy, III will receive an annual base salary of $325,000 and equity compensation of $500,000 of Company stock in the first year of the employment agreement, payable quarterly. Mr. McCoy, III is eligible for a performance bonus based on the Company’s performance. The targeted performance bonus is $325,000 for year-one, and the performance bonus will increase for subsequent years based on future financial and non-financial results.
Retention Packages
On June 16, 2025, the Board of Directors approved a retention package for L. Kevin Kelly, Chief Executive Officer, and Alvin McCoy III, Chief Financial Officer, and issued each officer 100,000
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act of 2022 (the "IR Act") was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the "Treasury") has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
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Any redemption or other repurchase that occurs after December 31, 2022, in connection with a business combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a business combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the business combination, extension or otherwise, (ii) the structure of a business combination, (iii) the nature and amount of any "PIPE" or other equity issuances in connection with a business combination (or otherwise issued not in connection with a business combination but issued within the same taxable year of a business combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a business combination and in the Company's ability to complete a business combination.
As of both March 31, 2026 and December 31, 2025 the Company's stockholders have redeemed a total of 380,701 1.2
20. SUBSEQUENT EVENTS
The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued which is up to and through May 14, 2026. There are two types of subsequent events: (i) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing consolidated financial statements, and (ii) nonrecognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date.
During the period April 1, 2026 through May 12, 2026, the Company raised approximately $2.3 million through sales of its common stock under the Equity Purchase Agreement with Yield Point, pursuant to which the Company issued and aggregate 3,080,000 shares of common stock.
On April 21, 2026, the Company provided an update on the revised non-binding memorandum of understanding with Kustom Entertainment, Inc. ("Kustom") for the acquisition of Kustom's legacy video solutions segment. The transaction is expected to contribute approximately $5.1 million in annual revenue and an estimated $8.0 million backlog comprised of established contracts and recurring subscription revenue.
On May 7, 2026, the Company announced it has executed a binding agreement to acquire Halo Privacy, an industry-leading secure communications company, and fully integrate its elite digital investigations and attribution arm, HavenX. The Company expects to close the transaction within 45 days. This acquisition builds on Cycurion's disciplined growth strategy by delivering innovative new products and capabilities that directly address its clients' evolving needs for security, privacy, proactive threat defense and operational efficiency.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read together with our audited consolidated financial statements and the related notes thereto for the fiscal years ended December 31, 2025 and 2024, included in Item 8. Financial Statements and Supplementary Data.
The discussion below contains management's comments on our business strategy and outlook, and such discussions contain forward-looking statements. These forward-looking statements reflect the expectations, beliefs, plans, and objectives of management about future financial performance and assumptions underlying management's judgment concerning the matters discussed, and accordingly involve estimates, assumptions, judgments, and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements, and the discussion below is not necessarily indicative of future results. Factors that could cause or contribute to any differences include, but are not limited to, those discussed below and elsewhere in our Annual Report on Form 10-K filed with the SEC on March 31, 2026, particularly in "Item 1A. Risk Factors" and in "Special Note Regarding Forward-Looking Statements" at the beginning of this Form 10-K.
General and Business Overview
We were originally incorporated as KAE Holdings, Inc., under the laws of the State of Delaware in 2017, with the purpose of acquiring and holding operating entities in the cybersecurity industry. On July 14, 2020, we changed our corporate name from KAE Holdings, Inc. to Cyber Secure Solutions, Inc., and, on February 24, 2021, to Cycurion, Inc.
We have two first-tier wholly-owned subsidiaries, Cycurion Sub, Inc. (formerly Cycurion, Inc., until February 14, 2025) and Cycurion Crypto, a Delaware corporation formed in July 2025, and three indirectly wholly-owned second-tier subsidiaries: (i) Axxum, a Virginia limited liability company formed in December 2006, (ii) Cloudburst, a Virginia limited liability company formed in January 2007, and (iii) Cycurion Innovation, Inc., a Delaware corporation formed in September 2021, in connection with our acquisition of assets from Sabres, a leading Israeli-based cybersecurity provider.
We deliver high-quality, cybersecurity solutions to federal government civilian, defense, and judiciary agencies in addition to commercial clients across a variety of industries. We, through our operating subsidiaries and strategic partnerships, have numerous prime and subcontracts with key government agencies. Our growth engine is driven by organic business solutions and strategic acquisitions of cyber/ infrastructure service providers.
Our Subsidiaries
Cycurion Sub, Inc.
We own our operating subsidiaries through Cycurion Sub., Inc., a Delaware corporation that, until the closing date of the de-SPAC, was known as "Cycurion, Inc." We continue to conduct our business through the three below-described entities, which are now indirectly wholly-owned second-tier subsidiaries by virtue of the recent closing of the de-SPAC transaction.
Cycurion Crypto Inc.
Our direct wholly-owned subsidiary, Cycurion Crypto, a Delaware corporation, was formed in July 2025 as part of our strategic initiative to position the Company within the expanding digital asset ecosystem and will manage a crypto treasury.
Axxum Technologies LLC
Organized in the Commonwealth of Virginia on December 29, 2006, Axxum is a cybersecurity provider with successful assignments within the multiple sub-agencies of the Department of Homeland Security. We acquired Axxum in November 2017. Following the acquisition, we continued Axxum's core operations of providing contractor services to its existing federal government customer base while leveraging our existing processes and tools to expand its commercial footprint.
Cloudburst Security LLC
Cloudburst is a cybersecurity provider with successful assignments within highly sensitive government agencies and other commercial organizations. We acquired Cloudburst in April 2019. Following the acquisition, we continued Cloudburst’s core operations of providing mission-critical and highly sensitive government agencies and other commercial organizations with high-quality, innovative cybersecurity services. Cloudburst focuses on providing tailored solutions that leverage the industry's best minds and technologies to predict, protect, detect, respond, and sustain our clients from the latest evolving cyber threats.
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Cycurion Innovation, Inc.
Cycurion Innovation, Inc. was formed in connection with our acquisition of assets from Sabres, a leading Israeli-based cybersecurity provider. It operates our Cycurion Security Platform’s line of products allows our customers to improve their cyber posture with its MDP SaaS platform. This platform efficiently bundles and easily implements the external protection of a WAF and the internal protection of Bot Mitigation. Bot Mitigation is the reduction of risk to applications, Application Program Interfaces ("APIs"), and backend services from malicious bot traffic that fuels common automated attacks, such as DoS campaigns and vulnerability probing. The costs of single-layer security can be measured in terms of money, time, and risk, as well as the damage wrought by a data breach, which millions of businesses experience each year. Through this interaction of the WAF and Bot Mitigation, the MDP is able to reinforce these layers of security and generate new security layers in real time in response to emerging threats. This process is directed by our Cycurion Security Platform's proprietary, cloud-based AI algorithm. Crucially, the AI underpinning the MDP platform is constantly evolving to counter new threats. Through a crowdsourcing process, the cloud-based MDP learns from every threat to any protected application and uses that newly acquired knowledge to protect all MDP clients better.
Master Service Agreement with SLG Innovation, Inc.
The SLG team has an average of over 25 years of experience in the development, planning, implementation, and management of information systems. SLG's leadership team offers years of combined success in answering the needs of government agencies and healthcare organizations across the country.
The SLG team has worked nationally, as it has served over 25 Department of Health and Human Services agencies, all 50 state governments, and over 250 local governments. Since SLG's inception, it has primarily focused on customers in the middle of the country. The team of professionals has successfully delivered information technology, project management, and subject matter services to key health and human service projects, including, but not limited to, state Medicaid programs in Illinois, Indiana, Nebraska, and Tennessee, the Indiana Division of Aging, Illinois Early Intervention, the University of Illinois Division of Specialized Care for Children, the Multiple Myeloma Research Foundation, and many more.
We established a subcontractor — prime contractor relationship with SLG in the fall of 2019, where we serviced several government agencies and commercial customers, State of New Mexico, Cognizant, KPMG, and the University of Illinois in support of SLG. Axxum Technologies and SLG Innovation that relationship in 2020. A subcontractor offers its specialized services to a prime contractor. Unlike prime contractors, who focus on the managerial side of the government contract, subcontractors tend to dedicate their efforts to lending subject matter expertise and delivery of service to the project. Technically strong subcontractors, along with a strong subcontractor plan are essential to boost the success of a project.
As a result of the strong technical skills and experience of the cyber teams at Cycurion and its subsidiaries, SLG Innovation entered into a Master Services Agreement ("MSA") with Axxum Technologies to provide services to SLG customers. The MSA is task order driven and the number of task orders is modified periodically depending on actual customer requirements for IT and cybersecurity services. Over the last three years, Axxum Technologies has assisted SLG Innovation in growing its revenue and customer base. As a result, SLG Innovation now represents a majority of Cycurion revenues.
RCR Acquisition Agreement
RCR Technology Corporation ("RCR") performs certain services for SLG in its role as an SLG subcontractor and, in that context, became a creditor of SLG. In connection with the transactions contemplated by the term sheet with SLG (the "SLG Term Sheet"), on April 25, 2023, Cycurion Sub and RCR also entered into a term sheet (the "RCR Term Sheet") for a distinct, but related transaction. The RCR Term Sheet contemplates a transaction, pursuant to which RCR will sell to Cycurion all of the accounts receivable of SLG in favor of RCR (but for those accounts that are less than 90 days old as of the date of consummation of the contemplated transaction). The consummation of the transactions contemplated by the RCR Term Sheet is contingent upon the consummation of the transactions contemplated by the SLG Term Sheet. We consummated the transactions contemplated by the RCR Term Sheet on September 25, 2025. Cycurion issued 248,006 shares of common stock to RCR as a result of the consummation of the transaction contemplated by the RCR Term Sheet pursuant to the Securities Purchase Agreement, dated September 25, 2025.
The foregoing brief summary description of certain terms and provisions of the RCR Term Sheet does not purport to be complete and is qualified in its entirety by reference to the full text of the RCR Term Sheet, a copy of which is filed as an exhibit to this Annual Report on Form 10-K as Exhibit 10.13 and the full text of the RCR Term Sheet amendments, a copy of each of which are filed as an exhibit to this Annual Report on Form 10-K as Exhibit 10.13a, 10.13b, 10.13c and 10.13d. Readers are encouraged to read those Exhibits in full for a more comprehensive understanding of the transaction contemplated by the RCR Term Sheet.
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Acquisition of Technology
On September 30, 2021, we acquired certain technology assets of Sabres, a leading Israeli-based cybersecurity provider. As part of the asset purchase agreement, we acquired Multi-Dimensional Protection ("MDP"), WAF and Bot Mitigation SaaS platforms, and their associated intellectual property.
Our Cycurion Security Platform's (formerly Sabres') line of products allows our customers to improve their cyber posture with its MDP SaaS platform. This platform efficiently bundles and easily implements the external protection of a WAF and the internal protection of Bot Mitigation. Bot Mitigation is the reduction of risk to applications, APIs, and backend services from malicious bot traffic that fuels common automated attacks, such as DoS campaigns and vulnerability probing. The costs of single-layer security can be measured in terms of money, time, and risk, as well as the damage wrought by a data breach, which millions of businesses experience each year. Through this interaction of the WAF and Bot Mitigation, the MDP is able to reinforce these layers of security and generate new security layers in real time in response to emerging threats. This process is directed by our Cycurion Security Platform's (formerly Sabres') proprietary, cloud-based AI algorithm. We do not have AI processing in the production version of the software. That version is in the testing and evaluation phase. Crucially, the AI underpinning the MDP platform is constantly evolving to counter new threats. Through a crowdsourcing process, the cloud-based MDP learns from every threat to any protected application and uses that newly acquired knowledge to protect all MDP clients better.
Our Cycurion Security Platform's (formerly Sabres') line of products provides solutions for substantially all web application security needs. These products provide solutions, whether a client is in need of a web application firewall to comply with regulations and ensure it has a first line of defense against the hazards that the internet can present or is in need of enterprise-level products that empower SOC teams and security management. Our Cycurion Security Platform's constantly survey a client's data to detect security issues in need of attention, send automatic updates, and provide the client with a complete database of rules and threats.
We have integrated the technology assets that we acquired from Sabres (which now constitutes our Cycurion Security Platform) into our Managed Security Services Practice. We believe that the platform will enhance our service offerings and assist with the expansion of our commercial business. Our dedicated support team will manage the Sabres platform, provide real time reporting, response to security incidents, and will manage all data privacy needs from a single security information and event management SaaS platform dashboard.
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Financial Overview
A number of factors have contributed to first quarter 2026 results of operations, the most significant of which are described below. More details on these changes are presented below within our "Results of Operations" section.
•The execution of cost saving efforts have improved our gross margin.
•The completion of the business combination with Western Acquisition Ventures Corp. resulted in first quarter 2025 losses.
Results of Operations
| Table MD&A 1: Consolidated Results of Operations | |||||||||||
| For the Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Revenue | $ | 3,268,620 | $ | 3,870,050 | |||||||
| Cost of revenue | 2,580,262 | 3,192,287 | |||||||||
| Gross profit | 688,358 | 677,763 | |||||||||
| Gross margin | 21.1 | % | 17.5 | % | |||||||
| Operating expenses: | |||||||||||
| Selling, general and administrative expenses | 2,743,695 | 337,374 | |||||||||
| Stock compensation expenses | 315,833 | — | |||||||||
| Business combination expenses | — | 10,437,894 | |||||||||
| Total operating expenses | 3,059,528 | 10,775,268 | |||||||||
| Operating loss | (2,371,170) | (10,097,505) | |||||||||
| Interest income | 14,236 | — | |||||||||
| Interest expense | (204,852) | (178,890) | |||||||||
| Gain on debt settlement, net | — | 141,653 | |||||||||
| Other expense | — | (113,744) | |||||||||
| Other expense, net | (190,616) | (150,981) | |||||||||
| Loss before income taxes | (2,561,786) | (10,248,486) | |||||||||
| Provision for income tax | — | — | |||||||||
| Net loss | (2,561,786) | (10,248,486) | |||||||||
| Less: Net loss attributable to non-controlling interest | 433,324 | — | |||||||||
| Net loss attributable to Cycurion | $ | (2,128,462) | $ | (10,248,486) | |||||||
Revenue
Revenues for the three months March 31, 2026 decreased $0.6 million or 15.5% compared to the three months ended March 31, 2025. We attribute this decrease in the revenues for the three months ended March 31, 2026 compared to the same period in 2025 to planned wind-down of certain legacy contracts ahead of the ramp of higher-margin replacement work and the delayed start dates of new federal, state and local contracts.
Cost of revenues
The cost of revenue for the three months ended March 31, 2026, was approximately $2.6 million, compared to $3.2 million for comparable period in 2025. The gross margin improved from 17.5 % to 21.1 % as management focuses on cost cutting efforts and works to improve the overall portfolio of contracts.
Selling, general and administrative expenses
Our selling, general and administrative expenses increased significantly for the three months ended March 31, 2026 compared to the same period in 2025 due to the additional expenses associated with being a publicly traded company, full consolidation of SLG selling, general and administrative expenses and the addition of key individuals for the company's growth strategy.
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Stock compensation expenses
Stock compensation expenses were $315,833 for the three months ended March 31, 2026, compared to zero amounts being recognized in the same period 2025.
Business combination expenses
Business combination expenses in the three months ended March 31, 2025 are a result of the business combination with Western.
Interest income
Interest income was $14,236 for the three months ended March 31, 2026 as the company was able to invest cash in money market accounts. No interest earning assets existed in the three months ended March 31, 2025.
Interest expense
Interest expense for both the three months ended March 31, 2026 and 2025, was $0.2 million. Although approximately the same interest expense was incurred, the underlying interest-bearing liabilities varied were different during the two periods. For further information refer to debt footnotes.
Gain on debt settlement, net
The $0.1 million gain on debt settlement, net for the three months ended March 31, 2025 is the result of the conversion of debt to various equity instruments at a lower fair market value than the exchanged debt on the books. No conversions occurred in the three months ended March 31, 2026.
Liquidity and Capital Resources
Our primary sources of liquidity are cash on hand, cash from operations, borrowings under our debt financing arrangements and equity raises through our equity line. As of March 31, 2026, we had $2.0 million in cash and cash equivalents. As of March 31, 2026, there was substantial doubt regarding the Company's ability to continue as a going concern, as the Company had a net working capital deficit and an accumulated deficit resulting from substantial losses incurred during the three months ended March 31, 2026 and from prior periods. The Company's ability to continue as a going concern depends upon its ability to market and sell its products to generate positive operating cash flows. As of March 31, 2026, the Company had an accumulated deficit of $29.0 million and a working capital deficit of $12.0 million. In addition, the Company had a net cash outflow of $2.9 million from operating activities during the three months ended March 31, 2026. These circumstances continued to give rise to substantial doubt as to whether the Company will be able to continue as a going concern and did not alleviate the doubt outstanding from 2025.
Management's plan is to continue improving operations to generate positive cash flows and register shares of its common stock in order to undertake a public offering to raise additional capital. Management believes that the valuation and liquidity brought by a public offering of its securities will allow holders of convertibles notes, and convertible preferred stockholders the mechanism to convert their securities into common stock that will reduce the Company's overall leverage and debt service requirement. If the Company is not able to continue generating positive operating cash flows, and raise additional capital, there is the risk that the Company may become insolvent.
Cash Flow
| Table MD&A 2: Net Changes in Cash and Cash Equivalents | |||||||||||
| For the Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash used in operating activities | $ | (2,889,834) | $ | (2,745,109) | |||||||
| Net cash (used in)/provided by investing activities | (129,000) | 1,799,523 | |||||||||
| Net cash (used in)/provided by financing activities | (207,683) | 3,173,991 | |||||||||
| Net (decrease)/increase in cash and cash equivalents | $ | (3,226,517) | $ | 2,228,405 | |||||||
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Net Cash Used In Operating Activities
For the three months ended March 31, 2026, net cash used by operating activities was $2.9 million, compared to $2.7 million for the three months ended March 31, 2025. The slight increase in cash used in operating activities is the result numerous factors since the first quarter of 2025 had many business combinations expenses. The company has expanded the corporate level team compared to first quarter 2025, but has been able to partially offset some of those cash outflows by focusing on cost saving initiatives through the organization.
Net Cash (Used in)/Provided By Investing Activities
For the three months ended March 31, 2026, net cash used in by investing activities was approximately $0.1 million, compared to $1.8 million net cash provided by investing activities for the three months ended March 31, 2025. The cash inflow in 2025 was a result of the Trust Account in connection with redemption and cash released from the Trust Account to the Company.
Net Cash (Used in)/Provided by Financing Activities
For the three months ended March 31, 2026, net cash used by financing activities was $0.2 million, which was repayments on the revolving line of credit. For the three months ended March 31, 2025, net cash provided by financing activities was $3.2 million, driven by $3.3 million in proceeds from exercise of warrants, partially offset by cash outflow of $1.0 million related to the redemption of common stock subject to redemption. Other inflows and outflows are the result of various proceeds and repayments on notes and bank borrowings.
Going Concern
We have incurred operating losses since inception through the period ended March 31, 2026, having had negative cash flow from operations. As of March 31, 2026, we had an accumulated deficit of approximately $29.0 million, as compared to our accumulated deficit of approximately $26.9 million as of December 31, 2025. The increase of our accumulated deficit was a result of our net losses for the three months ended March 31, 2026.
Furthermore, we expect continued, significant operating losses for the next few years. We also utilized cash in operations of approximately $2.9 million for the three months ended March 31, 2026. As of March 31, 2026, we had unrestricted cash of approximately $2.0 million, a decrease of $3.2 million from approximately $5.3 million as of December 31, 2025. As of March 31, 2026, our total assets decreased to approximately $31.4 million from approximately $33.5 million as of December 31, 2025, primarily due to decreases in cash. Based on our current capital resources as of March 31, 2026, including our unrestricted cash and accounts receivable, net of $5.4 million, we expect to be able to continue our operations for a minimum of 12 months as of the date of this report. Nevertheless, our continuation as a going concern is dependent on our ability to obtain additional financing until we can generate sufficient, consistent cash flow from operations to meet the expected growth in our obligations. We intend to continue to seek additional debt or equity financing to continue our operations.
Our unaudited consolidated financial statements have been prepared on a going concern basis, which implies we may not continue to meet our obligations and continue our operations for the next fiscal year. The continuation of our Company as a going concern is dependent upon our ability to obtain necessary debt or equity financing to continue operations until we begin generating positive cash flow.
There is no assurance that we will ever be consistently profitable or, notwithstanding our recent financing activities, that debt or equity financing will be available to us in the amounts, on terms, and at times deemed acceptable to us, if at all. The issuance of additional equity securities by us would result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, would increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business, as planned, and as a result may be required to scale back or cease operations for our business, the result of which would be that our stockholders would lose some or all of their investment. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.
Off-balance sheet arrangements
We did not have any off-balance sheet arrangements during the periods presented, and we do not currently have any off-balance sheet arrangements, as defined in the SEC rules and regulations.
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Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates, judgments, and assumptions that affect the amounts reported. Actual results could differ from those estimates. The 2025 Form 10-K, as filed with the SEC on March 31, 2026, includes a summary of critical accounting policies we believe are the most important to aid in understanding our financial results. There have been no changes to those critical accounting policies that have had a material impact on our reported amounts of assets, liabilities, revenues, or expenses during the three months ended March 31, 2026.
Item 3 Quantitative and Qualitative Disclosures about Market Risk
As a "smaller reporting company," as that term is defined in Rule 229.10(f)(1), we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer (our Chairman and Chief Executive Officer) and principal financial officer (our Executive Vice President and Chief Financial Officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a15(e) or 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report on form 10-Q. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control that occurred during the quarter ended March 31, 2026, that have materially affected, or are reasonably likely to materially effect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Information required for Item 1. is incorporated by reference to the discussion under the heading "Legal Proceedings" in Note 19 "Commitments and Contingencies" to the unaudited consolidated financial statements included in Item 1. of this Form 10-Q.
Item 1A. Risk Factors
There were no material changes during the three months ended March 31, 2026 to the risk factors previously disclosed in our Annual Report on Form 10-K, filed with the SEC on March 31, 2026.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a)There were no unregistered sales of equity securities for the three months ended March 31, 2026.
(b)None.
(c)None.
Item 3. Defaults Upon Senior Securities
(a)None.
(b)None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(a)None
(b)None.
(c)None.
Item 6. Exhibits and Financial Statement Schedules
| Exhibit No. | Description of Exhibit | |||||||
| 31.1 | Ω | |||||||
| 31.2 | Ω | |||||||
| 32.1 | † | |||||||
| 32.2 | † | |||||||
| 101.INS | Ω | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||||
| 101.SCH | Ω | XBRL Taxonomy Extension Schema. | ||||||
| 101.CAL | Ω | XBRL Taxonomy Extension Calculation Linkbase. | ||||||
| 101.DEF | Ω | XBRL Taxonomy Extension Definition Linkbase. | ||||||
| 101.LAB | Ω | XBRL Taxonomy Extension Label Linkbase. | ||||||
| 101.PRE | Ω | XBRL Taxonomy Extension Presentation Linkbase. | ||||||
| 104 | Ω | Cover Page Interactive Data File - the cover page iXBRL tags are embedded within the inline XBRL document contained in Exhibit 101. | ||||||
| Ω | Filed herewith | |||||||
| † | Furnished herewith | |||||||
50
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Cycurion Inc. | |||||||||||
| By: | /s/ L. Kevin Kelly | May 14, 2026 | |||||||||
| L. Kevin Kelly | |||||||||||
| Chief Executive Officer | |||||||||||
| (Principal Executive Officer) | |||||||||||
| /s/ Alvin McCoy III | May 14, 2026 | ||||||||||
| By: | Alvin McCoy III | ||||||||||
| Chief Financial Officer | |||||||||||
| (Principal Financial Officer and Principal Accounting Officer) | |||||||||||
51