Cycurion, Inc S-1/A, filed May 13, 2025
Cycurion, Inc. (CYCU)
As filed with the Securities and Exchange Commission on May 13, 2025
File No. 333-287052
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
TO THE
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
| 7371 | ||||
(State or Other Jurisdiction of Incorporation or Organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Chief Executive Officer
Cycurion, Inc.
(Name, Address Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
With a copy to:
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Keith Billotti Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 (212) 574-1200 |
Randolf Katz Clark Hill LLP 555 South Flower Street, 24th Floor Los Angeles, CA 90071 (213) 891-9100 |
Approximate Date of Commencement of Proposed Sale to the Public: From time to time after the effective date of this registration statement, as determined by market conditions.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
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 7(a)(2)(B) of the Securities Act.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a) of the Securities Act, may determine.
| The information in this prospectus is not complete and may be changed. The selling stockholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state where such offer or sale is not permitted. |
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION, DATED MAY 13, 2025 |
CYCURION, INC.
Up to $15,000,000 in Shares of Common Stock
Up to 4,500,000 Shares of Common Stock Underlying a Pre-Funded Warrant
This prospectus relates to the offer and sale from time to time by the Yield Point NY LLC (the “Investor” or the “Selling Stockholder”) or its permitted assigns of (i) up to an aggregate of up to $15 million in shares of our common stock, with a par value of $0.0001 per share (“Common Stock”), relating to shares that may be issued to the Selling Stockholder pursuant to an equity purchase agreement with the Investor dated as of April 7, 2025 (the “Equity Purchase Agreement”); and (ii) up to 4,500,000 shares of Common Stock issuable to the Investor upon exercise of a pre-funded warrant (“Pre-Funded Warrant”) issued as its commitment fee (“Commitment Fee”) under the Equity Purchase Agreement (“Commitment Stock”). Under the Equity Purchase Agreement, we have the right to present the Investor with a put notice (each, a “Put Notice”) directing the Investor to purchase shares of our Common Stock in an amount per Put Notice (“Put Stock”) determined pursuant to the limitations in the Equity Purchase Agreement, at a per-share price equal to 90% of the lowest daily volume-weighted average price (“VWAP”) during the three consecutive trading days following the Put Notice date. We currently have reserved 40,000,000 shares of our authorized and unissued shares of Common Stock solely for the purpose of effecting purchases of the shares under the Equity Purchase Agreement (“Reserve Shares”).
In connection with the Equity Purchase Agreement, we have the right, but not the obligation, to direct the Investor to purchase up to $60 million 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 U.S. Securities and Exchange Commission (the “SEC”) registering the resale of Put Stock and Commitment Stock (as defined below). This prospectus relates to the resale of an aggregate of 37,833,333 shares of Common Stock, consisting of (i) 33,333,333 shares, or $15 million in shares of Common Stock, pursuant to the Equity Purchase Agreement, which number of shares has been calculated based on the closing price of our shares of Common Stock on May 6, 2025 of $0.45 per share; and (ii) 4,500,000 shares of Commitment Stock. The remaining balance of the $45 million in shares of Common Stock issued pursuant to the Equity Purchase Agreement may be registered under a separate registration statement to be filed in the future. See the sections of this prospectus entitled “Prospectus Summary-The Offering” and “The ELOC Transaction” for more detail regarding the sale of shares under the Equity Purchase Agreement.
We are registering the offer and sale of these securities to satisfy certain registration rights we have granted. The Selling Stockholder may offer, sell, or distribute all or a portion of the securities hereby registered publicly or through private transactions at prevailing market prices or at negotiated prices. We will not receive any of the proceeds from such sales of the shares of our Common Stock, except with respect to amounts received by us upon the exercise of the Pre-Funded Warrant. We will bear all costs, expenses, and fees in connection with the registration of these securities, including with regard to compliance with state securities or “blue sky” laws. The Selling Stockholder will bear all commissions and discounts, if any, attributable to their sale of shares of our Common Stock or the shares of our Common Stock underlying the Pre-Funded Warrant. See the section entitled “Plan of Distribution” of this prospectus for additional information.
Our shares of Common Stock are listed on The Nasdaq Global Market, and our warrants are listed on The Nasdaq Capital Market under the symbols “CYCU” and “CYCUW”, respectively. On May 6, 2025, the closing sale price of our Common Stock was $0.45.
The Selling Stockholder is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended (the “Securities Act”) with respect to the resale of the shares of Common Stock hereunder.
We are an “emerging growth company,” as defined under the federal securities laws, and, as such, may elect to comply with certain reduced public company reporting requirements for future SEC filings.
Investing in our securities involves a high degree of risk. You should review carefully the risks and uncertainties described under the heading “Risk Factors” beginning on page 10 of this prospectus before investing in our securities.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is May 13, 2025
TABLE OF CONTENTS
The registration statement containing this prospectus, including the exhibits to the registration statement, provides additional information about us and the Common Stock offered under this prospectus. The registration statement, including the exhibits, can be read on our website and the website of the U.S. Securities and Exchange Commission. See “Where You Can Find More Information.”
Information contained in, and that can be accessed through our web site, www.cycurion.com, shall not be deemed to be part of this prospectus or incorporated herein by reference and should not be relied upon by any prospective investors for the purposes of determining whether to purchase the Common Stock offered hereunder.
Unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company,” “Cycurion” and “our business” refer to Cycurion, Inc. and “this offering” refers to the offering contemplated in this prospectus.
Neither we nor the Selling Stockholder authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under the circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our Common Stock. Our business, financial condition, results of operations and prospects may have changed since that date. We are not, and the Selling Stockholder are not, making an offer of these securities in any jurisdiction where such offer is not permitted.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-1 that we filed with the SEC, under which the Selling Stockholder may, from time to time, sell the securities offered by them described in this prospectus. We will not receive any proceeds from the sale by such stockholders of the securities offered by them described in this prospectus. This prospectus describes the general manner in which the Selling Stockholder identified in this prospectus may offer, from time to time, up to an aggregate of $15 million in shares of our Common Stock, which may be issued pursuant to the Equity Purchase Agreement. We are not selling any securities under this prospectus and will not receive any proceeds from the sale of shares of securities by the Selling Stockholder.
Neither we nor the Selling Stockholder have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus, any applicable prospectus supplement, or any free writing prospectuses prepared by or on behalf of us or to which we have referred you. Neither we nor the Selling Stockholder take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither we nor the Selling Stockholder will make an offer to sell these securities in any jurisdiction where such offer or sale is not permitted. No dealer, salesperson, or other person is authorized to give any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. You should assume that the information appearing in this prospectus or any prospectus supplement is accurate as of the date on the front of those documents only, regardless of the time of delivery of this prospectus or any applicable prospectus supplement, or any sale of a security. Our business, financial condition, results of operations, and prospects may have changed since those dates.
The Selling Stockholder and its permitted transferees may use this registration statement to sell securities from time to time through any means described in the section entitled “Plan of Distribution.” More specific terms of any securities that the Selling Stockholder and its permitted transferees offer and sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the securities being offered and the terms of the offering.
We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in such prospectus supplement or post-effective amendment modifies or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer you in the section of this prospectus entitled “Where You Can Find More Information.”
This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed, or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “Where You Can Find More Information.”
References to “Selling Stockholder” refers to Yield Point NY LLC and is further identified herein in the section titled “Selling Stockholder” beginning on page 50 of this prospectus, who may sell securities from time to time as described in this prospectus.
Unless expressly indicated or the context otherwise requires, references in this prospectus to the “Company,” the “Registrant,” “we,” “us,” and “our” refer to the Company (and the business of Cycurion which became the business of the Company after giving effect to the Business Combination (defined below)).
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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere or incorporated by reference in this prospectus. This summary may not contain all the information that you should consider before determining whether to invest in our securities. You should read the entire prospectus carefully, including the information included in the “Risk Factors” section, as well as our consolidated financial statements, notes to the consolidated financial statements and the other information included in this prospectus, before making an investment decision.
Company 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 one first-tier wholly-owned subsidiary, Cycurion Sub, Inc. (formerly Cycurion, Inc., until February 14, 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, in connection with our acquisition of assets from Sabres Security Ltd. (“Sabres”), a leading Israeli-based cyber security provider.
Business
We provide innovative custom solutions for our clients by adapting our knowledge base and government-level experience to create dynamic solutions to best serve our client’s information technology (“IT”) and cybersecurity needs. We assess, secure and advise your organization by leveraging our government proven, cutting edge techniques, custom tools and extensively knowledgeable personnel to revolutionize the client’s cybersecurity posture.
We are committed to surpassing expectations and delivering incomparable value to our clients and partners. We achieve this goal by providing Network Communications and Information Technology Security services and solutions that are custom-tailored to your environment, as well as your level of need. We are built on a foundation of experts in Network Communications and Information Technology who possess unrivaled security expertise and experience. We are committed to hiring the most knowledgeable professionals in order to expand and reinforce our team of experts, leveraging world-class talent to improve and expand upon our already vast understanding of this environment. We pride ourselves on having the capability and resources to successfully implement a management strategy that delivers the solutions you need to stay within budget and on schedule.
We deliver high-quality, cybersecurity solutions to federal government civilian, defense and judicial agencies in addition to commercial clients across a variety of industries. Through our operating subsidiaries and strategic partnerships, we have numerous prime and subcontracts with key government agencies. Our growth engine is driven by organic business solutions and strategic acquisitions of cybersecurity services and technology providers. We leverage our highly skilled workforce to access, secure and advise our clients to improve their cyber security posture. Our ability to identify and implement customized solutions is core to driving continued growth.
Our Subcontractor Relationship
SLG Innovation, Inc.
We are currently a subcontractor for several keystone contracts held by SLG Innovation, Inc. (“SLG”). 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.
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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, 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 fall 2019, where we serviced several government agencies and commercial customers, State of New Mexico, Cognizant, KPMG, and University of Illinois in support of SLG.
Services
Consulting and Advisory Services
Our consulting services perform a detailed review of our customers’ IT security to identify and address vulnerabilities. Using advanced tools and research techniques, we enhance our customers’ cybersecurity program to meet regulatory compliance, data confidentiality and privacy standards, and train our customers’ personnel accordingly.
Our advisory services supplement our consulting services with a cost-effective alternative to a full-time chief information officer. Our customers gain access to our pool of experienced chief information officers, who are backed by our resources. They deliver tailored advice and training to keep our customers’ organization ahead in the ever-changing cybersecurity landscape.
Our consulting and advisory services include: (i) security control assessments; (ii) security architecture and engineering; (iii) risk management and compliance audits; (iv) staff augmentation; (v) cybersecurity awareness and training; (vi) cloud security; (vii) virtual CISO support; and (viii) digital modernization.
Managed IT Services
Our managed IT services can optimize an organization’s IT infrastructure, reduce costs and improve operational efficiency, and it offers comprehensive IT management and support for organizations of all sizes.
Managed IT services is a services model in which a managed service provider (“MSP”) remotely manages the day-to-day IT offerings for a client under a service level agreement (“SLA”). This includes remote monitoring and management of servers, disaster recovery, infrastructure as a service (“IaaS”), platform as a service (“PaaS”), and software as a service (“SaaS”). In short, managed IT services provides businesses with IT support and maintenance on an ongoing basis.
IT services are typically provided on a break-fix basis, meaning that the client only calls the provider when there is a problem with its IT infrastructure. Managed IT services, on the other hand, are provided on an ongoing basis under an SLA. This means that the MSP is responsible for the day-to-day maintenance of the client’s IT infrastructure and is always monitoring and managing the system to ensure it is running smoothly.
For example, a company that provides cloud services to businesses would offer managed platform services, remote monitoring and management of servers and security services. The MSP would handle the day-to-day maintenance of the client’s IT infrastructure and offers disaster recovery services in the event of a data breach or other catastrophe.
Our managed IT services include: (i) project and license management; (ii) network infrastructure; (iii) systems engineering and administration; (iv) voice and data infrastructure engineering and management; (iv) application development; (v) IT help desk support; and (vi) staff augmentation.
Managed Security Services
We are a professional and trusted provider of managed security services. We have designed comprehensive security management solution to help organizations protect their digital assets against various cyber threats. Our managed security services (“MSS”) include 24/7 monitoring, threat detection, incident response and remediation. Our Security Operations Center (SOC) as a service offers organizations with a team of security professionals dedicated to monitoring and managing their security infrastructure.
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MSS are a crucial component of a robust security program. Managed security service providers (“MSSPs”) specialize in protecting businesses from cyber threats and deliver a range of security services including, but not limited to, intrusion detection, vulnerability assessments and network security services.
MSSPs offer organizations access to a dedicated team of security professionals who use the latest security architectures and technologies to monitor their clients’ networks and systems, identify potential threats and respond promptly to security incidents. This is especially important for small to mid-sized businesses that may not have the in-house resources to maintain a robust security posture on their own.
MSS plays a critical role in safeguarding businesses from cyber threats in today’s digital landscape, making them an essential partner for organizations across industries. MSSPs work with clients ranging from small businesses to large enterprises and are often partnered with internet service providers to provide comprehensive security solutions.
MSS can also help organizations meet compliance requirements and reduce the risk of data breaches, which can be costly in terms of lost data, damaged reputation, and regulatory penalties. Additionally, MSSPs can provide SaaS solutions, allowing businesses to access security tools and services on-demand without having to invest in expensive hardware and software.
Our MSS include: (i) managed detection and response; (ii) external attack surface management; (iii) threat hunting and threat intelligence; (iv) end point detection and response; (v) firewall management; (vi) threat and vulnerability management; (vii) vulnerability and penetration testing; (viii) 24/7/365 security monitoring; and (ix) digital forensic and incident response.
Our Background
On February 14, 2025, we completed the business combination and transactions (the “Business Combination”) as set forth in an Agreement and Plan of Merger, dated November 11, 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.”
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Summary of Risk Factors
Investing in our securities involves a high degree of risk. You should review carefully all of the information contained in this prospectus before making an investment in our securities. The following list summarizes some, but not all, of these risks. Please read the information in the section titled “Risk Factors” for a more thorough description of these and other risks.
Risks Related to this Offering
| ● | Issuances of our Common Stock to the Investor has caused and will continue to cause substantial dilution to our existing stockholders and will cause the price of our Common Stock to decline. | |
| ● | The sale of a substantial number of Put Stock and Commitment Stock in the public market could adversely affect the prevailing market price of our shares. | |
| ● | We may not have access to the full amount available under the Equity Purchase Agreement. | |
| ● | The Investor will pay less than the then-prevailing market price for our Common Stock, which could cause the price of our Common Stock to decline. |
Risks Related to Our Business Generally
| ● | We have a limited operating history upon which you can evaluate our future business and prospects. | |
| ● | We have incurred net losses and cannot assure you that we will achieve or maintain profitable operations. | |
| ● | Our level of indebtedness and debt service obligations could adversely affect our financial condition and make it more difficult for management to fund our operations. | |
| ● | Our recurring losses, net working capital, and accumulated deficit resulting from substantial operating losses have raised substantial doubt regarding our ability to continue as a going concern. | |
| ● | We will require substantial additional funding in the future, which may not be available to us on acceptable terms, or at all, and, if not so available, may require us to delay, limit, reduce, or cease our operations. | |
| ● | Our ability to grow and compete in the future will be adversely affected if adequate capital is not available to us or not available on favorable terms. | |
| ● | If we do not continue to innovate and offer solutions and professional services that address the dynamic threat landscape, we may not remain competitive, and our revenue and operating results could suffer. | |
| ● | We must continually enhance our training, existing solutions and technology tools and develop or acquire new solutions and tools, or we will lose clients and our competitive position will suffer. | |
| ● | As a cybersecurity provider, we are a target of cyber-attacks and other cyber risks that could adversely impact our reputation and operating results. | |
| ● | Future acquisitions could disrupt our business and harm our financial condition and operating results. |
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Risks Related to Securities Markets and Investments in Our Common Stock
| ● | We have no current plans to pay dividends on our shares of Common Stock. | |
| ● | Our Common Stock price may be volatile, and as a result you could lose all or part of your investment. | |
| ● | Potential future sales pursuant to registration rights that we have granted may depress the market price for our shares of Common Stock. | |
| ● | We face risks related to compliance with corporate governance laws and financial reporting standards. | |
| ● | There can be no assurance that our Common Stock will continue to trade on The Nasdaq Global Market or another national securities exchange. | |
| ● | The market price of our shares of Common Stock is likely to be highly volatile, and you may lose some or all of your investment. | |
| ● | A “short squeeze” due to a sudden increase in demand for shares of our common stock that largely exceeds supply and/or focused investor trading in anticipation of a potential short squeeze have led to, and may lead to, extreme price volatility in the price of our Common Stock. |
Risks Related to Operating as a Public Company
| ● | Our management team has limited experience managing a public company. | |
| ● | We may incur significantly increased costs and devote substantial management time as a result of operating as a public company. | |
| ● | Certain recent public offerings of companies with public floats comparable to ours have experienced extreme volatility that was seemingly unrelated to their performance. We may experience similar volatility, which may make it difficult for prospective investors to assess the value of our shares of Common Stock. |
Recent and Other Developments
On January 15, 2025, we issued a $50,000 promissory note to an unaffiliated investor for $50,000 in proceeds.
On January 21, 2025, we issued a $75,000 promissory note to an unaffiliated investor for $75,000 in proceeds.
On January 25, 2025, we issued a $50,000 promissory note to an unaffiliated investor for $50,000 in proceeds.
On January 31, 2025, we issued a $125,000 promissory note to a related party for 125,000 in proceeds.
On January 24, 2025, Western held a shareholders’ meeting, at which the Western stockholders considered and adopted, among other matters, a proposal to approve the Business Combination pursuant to the Merger Agreement, by and among Western, Merger Sub and Cycurion Sub.
On February 14, 2025, the Business Combination closed, and, as contemplated by the Merger Agreement, Merger Sub merged with and into Cycurion Sub with Cycurion Sub 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.”
On February 18, 2025, our shares of Common Stock began trading on The Nasdaq Global Market, and warrants began trading on The Nasdaq Capital Market, under the symbols “CYCU” and “CYCUW”, respectively.
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On February 19, 2025, we announced an agreement with iQSTEL, a multinational innovator in telecommunications, FinTech, electric vehicles and AI-driven solutions.
On February 24, 2025, we announced an expansion of our partnership with a major health association, bringing our MSSP to several thousand member organizations across the country.
On March 3, 2025, we announced the availability of our ARx Platform targeted for the corporate sector.
On March 5, 2025, we announced the award of three new multi-year contracts focused on program management, cybersecurity and disaster and business continuity. These engagements are secured with two government clients and one commercial client.
On March 6, 2025, we announced a nationwide expansion of our strategic partnership with CentralSquare Technologies, LLC to deliver its IT services across the country.
On April 7, 2025, we entered into an equity purchase agreement with Yield Point NY LLC whereby we have the right, but not the obligation, to direct the investor to purchase up to $60,000,000 in shares of our Common Stock.
On April 8, 2025, we announced an expanded partnership with Journal Technologies. Together, the companies have been awarded a $22 million multi-year contract to deliver a criminal justice case management system to a state police agency.
On April 9, 2025, we increased the size of our board of directors through the appointment of Irving Minnaker.
On April 9, 2025, we received written notice received from the Listing Qualifications Department of Nasdaq stating 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 Capital Market under Nasdaq Listing Rule 5550(a)(2). The notification letter stated that we would be afforded 180 calendar days (until October 6, 2025) to regain compliance. In order to regain compliance, the closing bid price of our Common Stock must be at least $1.00 for a minimum of ten consecutive business days. The notification letter also stated that, in the event that we do not regain compliance within the initial 180-day period, we may be eligible for an additional 180-day period. If we are not eligible for the additional 180-day period, or if it appears to the Nasdaq staff that we will not be able to cure the deficiency, the Nasdaq Listing Qualifications Department will provide notice after the end of the initial 180-day period that our securities will be subject to delisting. Failure to regain compliance within that 180-day period would result in the delisting of our securities from Nasdaq, although we would have the right to appeal such a delisting to a Nasdaq hearings panel. The Nasdaq notification has no effect at this time on the listing of our Common Stock.
On April 11, 2025, we received two letters from the Nasdaq Listing Qualifications Department, each addressing a separate compliance deficiency of ours under the Nasdaq Listing Rules. The first letter notified us of a deficiency under Nasdaq Listing Rule 5450(b)(2)(A), which requires a company such as ours, whose securities are listed on The Nasdaq Global Market under the “Market Value Standard”, to maintain a minimum Market Value of Listed Securities (an “MVLS”) of $50 million. The deficiency was caused by our MVLS having been below the minimum level for the prior 30 consecutive business days. Under Nasdaq Listing Rule 5810(c)(3)(C), we are entitled to a 180-day period, ending on October 8, 2025, to rectify the deficiency. In order to do so, we must achieve and maintain an MVLS of at least $50 million or more for a minimum of ten consecutive business days. Failure to regain compliance within that 180-day period would result in the delisting of our securities from Nasdaq, although we would have the right to appeal such a delisting to a Nasdaq hearings panel. The Nasdaq notification has no effect at this time on the listing of our Common Stock.
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The second letter notified us of a deficiency under Nasdaq Listing Rule 5450(b)(2)(C), which requires a minimum Market Value of Publicly Held Shares (an “MVPHS”) of $15 million for continued listing on the Nasdaq Global Market under the “Market Value Standard”. This deficiency was caused by our MVPHS having been below the minimum level for the prior 30 consecutive business days. Under Nasdaq Listing Rule 5810(c)(3)(D), we have 180 calendar days, or until October 8, 2025, to regain compliance, which we can achieve if our MVPHS is at least $15 million for a minimum of ten consecutive business days. Failure to regain compliance within that 180-day period would result in the delisting of our securities from Nasdaq, although we would have the right to appeal such a delisting to a Nasdaq hearings panel. The Nasdaq notification has no effect at this time on the listing of our Common Stock.
On April 29, 2025, we announced that we have been awarded a $6 million contract by a major municipal agency.
For more information, please see “Note 19. Subsequent Events” to our annual report on Form 10-K for the year ended December 31, 2024, filed with the SEC on April 17, 2025.
We also plan to register on a separate registration statement the resale of shares of Common Stock by certain selling securityholders that have been issued or may be issued upon the exercise or conversion of our outstanding warrants and convertible notes.
The Offering
Pursuant to the Equity Purchase Agreement, we are issuing (i) Put Stock, in the form of $15 million in shares of Common Stock; and (ii) Commitment Stock, in the form of 4,500,000 shares of Common Stock issuable upon exercise of the Pre-Funded Warrant. We currently have 40,000,000 Reserve Shares of our authorized and unissued shares of Common Stock solely for the purpose of effecting purchases of the shares under the Equity Purchase Agreement. Under the Equity Purchase Agreement, we have the right to present the Investor with a Put Notice directing the Investor to purchase shares of Common Stock in an amount per Put Notice determined pursuant to the limitations in the Equity Purchase Agreement, at a per-share price equal to 90% of the lowest VWAP during the three consecutive trading days following the Put Notice date.
For more information, please see the section entitled “The ELOC Transaction.”
Emerging Growth Company
We are an “emerging growth company,” as defined in the Securities Act as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, an exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “SOX Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result of these exemptions, there may be a less active trading market for our securities, and the prices of our securities may be more volatile.
We will remain an emerging growth company until the earliest of: (1) December 31, 2026 (the last day of the fiscal year following the fifth anniversary of the consummation of our initial public offering), (2) the last day of the fiscal year in which we have total annual gross revenues of at least $1.235 billion, (3) the last day of the fiscal year in which we are deemed to be a large accelerated filer, as defined in the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), or (4) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
Smaller Reporting Company
Additionally, we are a “smaller reporting company” as defined under the Securities Act. Smaller reporting companies may take advantage of certain reduced SEC disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our Common Stock held by non-affiliates was not less than $250 million as of the prior June 30, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our Common Stock held by non-affiliates exceeded $700 million as of the prior June 30.
Corporate Information
Our principal executive office is located at 1640 Boro Place, Fourth Floor, McLean, Virginia 22102, and our telephone number is (703) 854-1652. Our website address is www.cycurion.com. Axxum’s website address is www.axxumtech.com. Cloudburst’s website address is www.cloudburstsecurity.com. Information on or accessed through any of these websites is not incorporated into and not part of this prospectus.
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OFFERING SUMMARY
| Issuance of Common Stock | Cycurion, Inc. | |
| Shares of Common Stock to be Issued by Us | Up to (i) $15 million in shares of Common Stock, which may be issued pursuant to the Equity Purchase Agreement; and (ii) 4,500,000 shares of Common Stock underlying the Pre-Funded Warrant. | |
| Shares of common stock outstanding as of the date of this prospectus | 31,443,906 shares | |
| Resale of Common Stock | ||
| Shares of Common Stock Offered by the Selling Stockholder | Up to (i) $15 million in shares of Common Stock, which may be issued pursuant to the Equity Purchase Agreement and (ii) 4,500,000 shares of Common Stock underlying the Pre-Funded Warrant. | |
| Terms of the Offering | The Selling Stockholder will determine when and how it will dispose of the shares of Common Stock registered under this prospectus for resale. | |
| Purchase Price of Securities | The shares of Common Stock underlying the Pre-Funded Warrant will be purchased at a price equal to the price at which the share of Common Stock and accompanying Pre-Funded Warrant are being sold to the public, minus $0.0001, and the exercise price of each Pre-Funded Warrant will be $0.0001 per share. | |
| Use of Proceeds | All of the securities offered under this prospectus are being registered for the account of the Selling Stockholder. We will not receive any of the proceeds from the sale of these securities. We have agreed to pay all costs, expenses and fees relating to the registration of the securities covered by this prospectus. The Selling Stockholder will bear all commissions and discounts, if any, attributable to the sale of the securities. The prices at which the shares of Common Stock covered by this prospectus may actually be sold will be determined by the prevailing public market price for shares of our Common Stock, by negotiations between the Selling Stockholder and buyers of our Common Stock in private transactions or as otherwise described in “Plan of Distribution.” | |
| Risk Factors | Investing in our securities involves a high degree of risk. You should review carefully the risks and uncertainties described under the heading “Risk Factors” beginning on page 10 of this prospectus. | |
| Nasdaq Symbols | Our Common Stock is listed on The Nasdaq Global Market, and our warrants are listed on The Nasdaq Capital Market under the symbols “CYCU” and “CYCUW”, respectively. |
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. This includes, without limitation, statements regarding the financial position and the plans and objectives of management for our future operations. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this prospectus, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this prospectus and in any document incorporated by reference in this prospectus may include, for example, statements about:
| ● | the occurrence of any event, change or other circumstances, including the outcome of any legal proceedings that may be instituted against us; | |
| ● | the ability to maintain the listing of our securities on The Nasdaq Stock Market, and the potential liquidity and trading of our securities; | |
| ● | the risk of disruption to our current plans and operations; | |
| ● | the ability to recognize the anticipated benefits of our business and the recently closed de-SPAC transaction, which may be affected by, among other things, competition and the ability to grow, manage growth profitably, and retain key employees; | |
| ● | costs related to our business; | |
| ● | changes in applicable laws or regulations; | |
| ● | our ability to meet our future capital requirements to fund our operations, which may involve debt and/or equity financing, and to obtain such debt and/or equity financing on favorable terms, and our sources and uses of cash; | |
| ● | our ability to achieve and sustain profitability of our existing lines of business and through our wholly owned subsidiaries; | |
| ● | our ability to raise sufficient capital to continue to acquire cybersecurity companies; | |
| ● | our ability to attract and retain qualified cybersecurity talent; | |
| ● | our ability to successfully execute acquisitions, integrate the acquired businesses, and create synergies as a global cybersecurity consolidator; | |
| ● | our ability to efficiently acquire customers and maintain high client retention rates; | |
| ● | our ability to attract and retain qualified key technology or management personnel and to expand our management team; | |
| ● | our ability to stay in compliance with laws and regulations currently applicable to, or which may become applicable to our business both in the United States and internationally; | |
| ● | our ability to maintain existing license agreements; | |
| ● | our estimates regarding expenses, future revenue, capital requirements, and need for additional financing; | |
| ● | our ability to achieve and maintain profitability in the future; | |
| ● | our financial performance; and | |
| ● | other factors disclosed under the section entitled “Risk Factors” in this prospectus. |
These forward-looking statements are based on information available as of the date of this prospectus and current expectations, forecasts, and assumptions, and involve a number of judgments, risks, and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.
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RISK FACTORS
An investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment. Certain statements in “Risk Factors” are forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements.”
Risks Related to this Offering
Issuances of our Common Stock to the Investor has caused and will continue to cause substantial dilution to our existing stockholders and will cause the price of our Common Stock to decline.
We are registering for resale up to an aggregate of (i) up to $15 million in shares of Common Stock that may be issued to the Investor from time to time under the Equity Purchase Agreement; and (ii) 4,500,000 shares of Common Stock issuable upon exercise of the Pre-Funded Warrant.
The number of shares that we ultimately sell to the Investor under this prospectus depends on the number of shares we elect to sell to the Investor under the Equity Purchase Agreement. Depending on a variety of factors, including market liquidity of our Common Stock, the issuance and sale of shares under the Equity Purchase Agreement may cause the trading price of our Common Stock to decline.
We may ultimately issue and sell to the Investor all, some or none of the shares of Common Stock available under the Equity Purchase Agreement that we are registering. the Investor may sell all, some or none of our shares that it holds or comes to hold pursuant to sales under the Equity Purchase Agreement. The issuance and sale of shares by us to the Investor pursuant to the Equity Purchase Agreement will result in dilution to the interests of other holders of our Common Stock. The sale of a substantial number of shares of our Common Stock by the Investor in this offering, or anticipation of such sales, could cause the trading price of our Common Stock to decline or make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise desire.
The sale of a substantial number of Put Stock and Commitment Stock in the public market could adversely affect the prevailing market price of our shares.
We are registering for resale an aggregate of up to $15 million in Put Stock, together with 4,500,000 shares of Commitment Stock. Sales of a substantial number of our shares in the public market, or the perception that such sales might occur, could adversely affect the market price of our shares. We cannot predict if and when the selling stockholder may sell such shares in the public markets. Furthermore, in the future, we may issue additional shares or other equity or debt securities convertible into shares. Any such issuance could result in substantial dilution to our existing stockholders and could cause our share price to decline.
We may not have access to the full amount available under the Equity Purchase Agreement.
Under the Equity Purchase Agreement, we will have the right to direct the Investor to purchase shares of our Common Stock from time to time by presenting the Investor with put notices directing the Investor to purchase amounts of our Common Stock per Put Notice (defined below), as limited pursuant to the terms of the Equity Purchase Agreement, at a per share price equal to 90% of the lowest VWAPs during the three consecutive trade days following the Put Notice date. See the section entitled “The ELOC Transaction” below.
Although the Equity Purchase Agreement provides that we may sell up to $60 million of our Common Stock to the Investor, depending on the market prices of our Common Stock, we may not be able to nor desire to sell all of the shares contemplated by the Equity Purchase Agreement. In addition, if the number of shares registered hereby is insufficient to cover all of the shares we elect to sell to the Investor under the Equity Purchase Agreement, we will be required to file one or more additional registration statements to register such additional shares. This prospectus relates only to the resale of $15 million in shares of Common Stock.
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The extent to which we rely on the Investor as a source of funding will depend on a number of factors, including the prevailing market price of our Common Stock and the extent to which we are able to secure working capital from other sources. Even if we sell a significant amount of shares under the Equity Purchase Agreement to the Investor, we may still need additional capital to fully implement our business, operating and development plans. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences could be a material adverse effect on our business, operating results, financial condition and prospects.
The Investor will pay less than the then-prevailing market price for our Common Stock, which could cause the price of our common stock to decline.
The purchase price of Common Stock sold to the Investor under the Equity Purchase Agreement is derived from the market price of our Common Stock. The shares to be sold to the Investor pursuant to the Equity Purchase Agreement will be purchased at a discounted price as described above. As a result of this pricing structure, the Investor may sell the shares it receives immediately after receipt of the shares, which could cause the price of our Common Stock to decrease further.
It is not possible to predict the actual number of shares we will sell to the Selling Stockholder under the Equity Purchase Agreement, or the actual gross proceeds resulting from those sales.
Subject to certain limitations in the Equity Purchase Agreement and compliance with applicable law, we have the discretion to deliver notices to the Selling Stockholder at any time throughout the term of the Equity Purchase Agreement. The actual number of shares of Common Stock that we sell to the Selling Stockholder may depend upon a number of factors, including the market price of the Common Stock during the sales period. Because the price per share of each share sold to Selling Stockholder will fluctuate during the sales period, it is not currently possible to predict the number of shares that we will sell or the actual gross proceeds to be raised in connection with those sales.
Investors who buy shares of our Common Stock at different times will likely pay different prices.
Investors who purchase shares of Common Stock in this offering at different times will likely pay different prices, and so may experience different levels of dilution and different outcomes in their investment results. Investors also may experience a decline in the value of the shares they purchase from the Selling Stockholder in this offering as a result of sales in future transactions at lower prices.
There is no public market for the Pre-Funded Warrant.
There is no established public trading market for the Pre-Funded Warrant, and we do not expect a market to develop. In addition, we do not intend to apply to list the Pre-Funded Warrant on any national securities exchange or other nationally recognized trading system. Without an active market, the liquidity of the Pre-Funded Warrant will be limited.
Risks Related to Our Business Generally
We have a limited operating history upon which you can evaluate our future business and prospects.
We have a limited operating history. Since our incorporation in 2017, we have acquired two operating subsidiaries: Axxum in 2017 and Cloudburst in 2019. We have also acquired certain technology assets of Sabres in September 2021. Accordingly, along with our subsidiaries, we have varying operating histories and, together as a consolidated company, has a limited operating history, which can make it difficult for investors to evaluate our operations and prospects and may increase the risks associated with an investment. There can be no assurance that our business plan can be realized in the manner contemplated, that we will ever realize any significant operating revenues, or that our operations will ever be profitable, and, therefore, our stockholders may lose all or a substantial part of their investment.
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We have incurred net losses and cannot assure you that we will achieve or maintain profitable operations.
Our net income was $1,229,601 for the year ended December 31, 2024, and, we had a net loss of $(2,097,013) December 31, 2023. We may continue to incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications, and delays and other unknown events.
We intend to increase our brand awareness, expand the customer base, and expect to continue to invest heavily in our businesses in the foreseeable future as management continues to attempt to expand and grow the core businesses. In addition, our net revenues could be impacted by various factors, including the competitive landscape, customer preferences, and the success of our service offerings.
Accordingly, we cannot assure you that we will achieve sustainable operating profits as we continue to attempt to expand our product and professional service offerings and otherwise implement our growth initiatives. Any failure to achieve and maintain profitability would have a materially adverse effect on our ability to implement our business plan, our results and operations, and our financial condition, and could cause the value of our Common Stock to decline, resulting in a significant or complete loss of your investment.
Our level of indebtedness and debt service obligations could adversely affect our financial condition and make it more difficult for management to fund our operations.
As of December 31, 2024, we had approximately $20.2 million of indebtedness and other liabilities outstanding. Consequently:
| ● | we will need to use a substantial portion of available cash flow to pay interest and principal on existing debt, which will reduce the amount of money available to finance our operations and other business activities; | |
| ● | our debt level increases our vulnerability to general economic downturns and adverse industry conditions; | |
| ● | our debt level could limit our flexibility in planning for, or reacting to, changes in our business and in our industry in general; | |
| ● | our leverage could place us at a competitive disadvantage compared to our competitors that have less debt; and | |
| ● | our failure to comply with the financial and other restrictive covenants in our debt instruments which, among other things, may require us to maintain specified financial ratios and will limit our ability to incur debt and sell assets, could result in an event of default that, if not cured or waived, could have a material adverse effect on our business or prospects. |
Despite our existing level of indebtedness, we may incur additional indebtedness, which could further exacerbate the risks described above.
Our recurring losses, net working capital, and accumulated deficit resulting from substantial operating losses have raised substantial doubt regarding our ability to continue as a going concern.
We had a net working capital deficit of $7.8 million and an accumulated deficit of $3.2 million resulting from net income incurred during the year ended December 31, 2024 and from substantial losses during prior periods. In addition, we had a net cash outflow of $2 million from operating activities during the year ended December 31, 2023 and $1.4 million during the year ended December 31, 2024, all of which raise substantial doubt about our ability to continue as a going concern. Although we were nominally profitable during 2024, there is no assurance that we will not continue to generate operating losses and consume significant cash resources for the foreseeable future. Without additional financing, these conditions raise substantial doubt about our ability to continue as a going concern, meaning that we may be unable to continue operations for the foreseeable future or realize assets and discharge liabilities in the ordinary course of operations. If we seek additional financing to fund our business and potential acquisition activities in the future and there remains doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding on commercially reasonable terms or at all. If we are unable to obtain sufficient funding, our business, prospects, financial condition, and results of operations will be materially and adversely affected, and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and we may receive less than the value at which those assets are carried on our financial statements; accordingly, it is likely that stockholders will lose all or a part of their investment.
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We will require substantial additional funding in the future, which may not be available to us on acceptable terms, or at all, and, if not so available, may require us to delay, limit, reduce, or cease our operations.
Our operations have consumed substantial amounts of cash since our inception. As of December 31, 2024, we had an accumulated deficit of $3.2 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. Our business will require substantial additional capital for implementation of our long-term business plan and development of cybersecurity technology. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the U.S. As we require additional funds, we may seek to fund our operations through the sale of additional equity securities, debt financing, and/or strategic collaboration agreements. We cannot be sure that additional financing from any of these sources will be available when needed or that, if available, the additional financing will be obtained on favorable terms.
If we raise additional funds by selling shares of our Common Stock or other equity-linked securities, the ownership interest of our current stockholders will be diluted. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. If we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, or assets or to grant licenses on terms that may not be acceptable to us. If we raise additional funds through debt financing, we may have to grant a security interest on our assets to the future lenders, our debt service costs may be substantial, and the lenders may have a preferential position in connection with any future bankruptcy or liquidation involving us.
We may issue additional shares of Common Stock or preferred stock under an employee incentive plan, which would dilute the interest of our stockholders.
We may issue a substantial number of additional shares of common or preferred stock under an employee incentive plan. The issuance of additional shares of common or preferred stock:
| ● | may significantly dilute the equity interest of investors; | |
| ● | may subordinate the rights of holders of Common Stock if preferred stock is issued with rights senior to those afforded our Common Stock; | |
| ● | could cause a change of control if a substantial number of shares of our Common Stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and | |
| ● | may adversely affect prevailing market prices for the Common Stock. |
Our ability to grow and compete in the future will be adversely affected if adequate capital is not available to us or not available on favorable terms.
We have limited capital resources. To date, we have financed our operations through a mix of equity investments by unaffiliated third parties and bank debt financing and, except in connection with this Offering, we expect to continue to do so in the foreseeable future. Our ability to continue our normal and planned operations, to grow our business, and to compete in the cybersecurity industry will depend on the availability of adequate capital.
We cannot assure you that we will be able to obtain additional financing from those or other sources when or in the amounts needed, on acceptable terms, or at all. If we raise capital through the sale of equity, or securities convertible into equity, that would result in dilution to our then-existing stockholders, which could be significant depending on the price at which we may be able to sell our securities. If we raise additional capital through the incurrence of additional indebtedness, we would likely become subject to further covenants restricting our business activities, and holders of debt instruments would have rights and privileges senior to those of our then-existing stockholders. In addition, servicing the interest and principal repayment obligations under debt facilities could divert funds that would otherwise be available to support development of new programs and marketing to current and potential new clients. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce, or eliminate certain products or professional service offerings or future marketing efforts, or reduce or discontinue our operations. Any of these events could significantly harm our business, financial condition, and prospects and could cause the value of our Common Stock to decline, resulting in a significant or complete loss of your investment.
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If we do not continue to innovate and offer solutions and professional services that address the dynamic threat landscape, we may not remain competitive, and our revenue and operating results could suffer.
Our success will depend, in part, on our ability to develop and implement innovative customer solutions and professional services that anticipate and keep pace with rapid and continuing changes in technology, industry standards, and client preferences, as well as continue to attract top talent and expertise in order to develop innovative solution offerings and professional services that are required to keep up with dynamic industry landscapes. We may not be successful in anticipating or responding to these developments in a timely basis, and our offerings may not be successful in the marketplace. In addition, services, solutions, and technologies developed by our competitors may make our service or solution offerings uncompetitive or obsolete. Any of these circumstances could have a material adverse effect on our ability to obtain and successfully complete important client engagements, which in return would negatively affect revenue and operating results.
We rely on personnel with extensive information-security expertise and the loss of, or our inability to attract and retain, qualified personnel in the highly competitive labor market for such expertise could harm our business.
Our future performance depends upon our ability to attract and retain qualified cybersecurity personnel. The information technology consulting and cybersecurity industries have highly competitive labor markets, which depend on technical expertise and experience. In the future, we may be unable to continue to recruit and retain talent. If we cannot, we may not be able to expand. Finally, our competitors may offer more competitive compensation packages than we could afford to offer.
We regularly attempt to benchmark our employee and contractor compensation against compensation paid within our industry and, if possible, make annual adjustments to the compensation we pay in order to remain competitive in the market.
In order to attract and retain the number of employees we need to grow our business, we may need to increase our compensation levels in the future. This could adversely affect our operating margins, which, in turn, could negatively affect our financial condition and operating results.
If we are unable to hire, retain, train, and motivate qualified personnel and senior management, our business could suffer.
Our future success largely depends upon the continued contribution, attraction, and retention of our senior management and other qualified personnel. If one or more of our executive officers are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. Additionally, we may incur additional expenses to recruit and retain new executive officers. If any of our executive officers joins a competitor or forms a competing company, we may lose some or all of our customers. Finally, we do not maintain “key person” life insurance on any of our executive officers. Because of these factors, the loss of the services of any of these key persons could adversely affect our business, financial condition, and results of operations, and thereby an investment in our Common Stock.
We must continually enhance our training, existing solutions and technology tools and develop or acquire new solutions and tools, or we will lose clients and our competitive position will suffer.
The cybersecurity landscape is constantly changing with increasing scale, frequency, and organization of attacks. Thus, there is a high need for constant improvement and updates in our existing solutions and technologies. We face the risks of our services offerings not being adequately competitive, including not being able to: (i) accurately target our clients’ and prospective clients’ most-needed solutions (ii) be cost-effective for our clients and prospective clients, and (iii) be easy to use.
If we do not meet our clients’ and prospective clients’ expectations, or adequately mitigate these risks, we risk losing our competitive position and clients, which, in turn, will decrease our operating profits, revenue, and net income.
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We face intense competition in the cybersecurity industry, especially from larger, well-established companies.
We face significant competition from other cybersecurity companies, especially those companies who are considered the larger and more established entities. Relative to us, many of these companies have significantly greater financial, technical, marketing, and other resources, longer operating histories, more well-established brand names and business user recognition, larger customer bases, larger and more mature intellectual property portfolios, and more diverse strategic plans and service offerings. Intense competition from these traditional and new cybersecurity companies has led to declining prices and margins for many cybersecurity services, and we expect this trend to continue as competition intensifies in the future. Any decrease in our pricing or margins, could significantly harm our business, financial condition, and results of operations, resulting in a significant or complete loss of your investment.
Further, decreasing prices for such professional services due to high number of entrants has somewhat diminished the competitive advantage that we have enjoyed as a result of our service pricing. If our competitors implement a similar business model, then our competitive position in the market might be diluted. Should this happen, our ability to acquire and keep customers would be impaired. Our competitors may also introduce new technologies or services that could make our product offerings and professional services less attractive to our customers or potential customers. The inability to maintain or improve our competitive standing within the cybersecurity industry could materially adversely affect our business, prospects, financial condition, and results of operations.
For all of these reasons, we may not be able to compete successfully against our current or future competitors, or may be required to expend significant resources in order to remain competitive. If our competitors are more successful than us in developing new product and service offerings or in attracting and retaining customers, our business, financial condition, and results of operations could be adversely affected.
If our products or professional services fail to detect vulnerabilities or identify and respond to cybersecurity incidents, or if our products contain undetected errors or defects, our brand and reputation could be harmed, which could have an adverse effect on our business and results of operations.
If our products or professional services fail to detect vulnerabilities in our customers’ cybersecurity infrastructure, or if our products or professional services fail to identify and respond to new and increasingly complex methods of cyber-attacks, our business and reputation may suffer. There is no guarantee that our products or professional services will detect all vulnerabilities, especially in light of the rapidly changing security landscape to which we must respond. Additionally, our products may falsely detect vulnerabilities or threats that do not actually exist.
Our products may also contain undetected errors or defects. Any errors, defects, disruptions in service, or other performance problems with our products may damage our customers’ businesses and could hurt our reputation. If our products or professional services fail to detect vulnerabilities for any reason, we may incur significant costs, the attention of our key personnel could be diverted, our customers may delay or withhold payment to us or elect not to renew or other significant customer relations problems may arise. We may also be subject to liability claims for damages related to errors or defects in our products. A material liability claim or other occurrence that harms our reputation or decreases market acceptance of our products may harm our business and operating results.
Many federal, state, and foreign governments have enacted laws requiring companies to notify individuals of data security breaches involving their personal data. These mandatory disclosures regarding a security breach often lead to widespread negative publicity, and any association of us with such publicity may cause our customers to lose confidence in the effectiveness of our security solutions. An actual or perceived security breach or theft of the sensitive data of one of our customers, regardless of whether the breach is attributable to the failure of our products or professional services, could adversely affect the market’s perception of our offerings and subject us to legal claims.
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We have recently acquired multiple businesses. Successful acquisitions and integration of additional businesses that provide comparable or complementary services drives our growth strategy. Our ability to grow is limited if we fail to identify and consummate acquisitions.
We have completed the acquisition of certain complementary businesses, and we intend to consider additional potential strategic transactions, which could involve acquisitions of businesses or assets, joint ventures, or investments in businesses or technologies that expand, complement, or otherwise relate to our business. We may also consider, from time to time, opportunities to engage in joint ventures or other business collaborations with third parties. Should our relationships fail to materialize into significant agreements, or should we fail to work efficiently with these companies, we may lose sales and marketing opportunities and our business, results of operations, and financial condition could be adversely affected.
Any business acquisition creates risks such as, among others: (i) the need to integrate and manage the businesses acquired with our own business; (ii) additional demands on our resources, systems, procedures, and controls; (iii) disruption of our ongoing business; and (iv) diversion of management’s attention from other business concerns. Moreover, these transactions could involve: (i) substantial investment of funds or financings by issuance of debt or equity securities; (ii) substantial investment with respect to technology transfers and operational integration; and (iii) the acquisition or disposition of lines of businesses. Also, such activities could result in one-time charges and expenses and have the potential to either dilute the interests of our existing stockholders or result in the issuance of, or assumption of debt. Such acquisitions, investments, joint ventures, or other business collaborations may involve significant commitments of financial and other resources. Any such activities may not be successful in generating revenue, income, or other returns, and any resources we committed to such activities will not be available to us for other purposes. Moreover, if we are unable to access the capital markets on acceptable terms or at all, we may not be able to consummate acquisitions, or may have to do so on the basis of a less than optimal capital structure. Our inability to take advantage of growth opportunities or address risks associated with acquisitions or investments in businesses may negatively affect our operating results.
Additionally, any impairment of goodwill or other intangible assets acquired in an acquisition or in an investment, or charges to earnings associated with any acquisition or investment activity, may materially reduce our earnings. Future acquisitions or joint ventures may not result in their anticipated benefits and we may not be able to properly integrate acquired technologies or businesses with our existing operations or successfully combine personnel and cultures. Failure to do so could deprive us of the intended benefits of those acquisitions.
We intend to grow our client base significantly through acquisitions of other service providers. If we fail to retain existing clients and attract new clients through acquisitions, we may never achieve profitability.
Through acquisition of other service providers, we will inherit an increasingly larger client base, which creates cross-selling and up-selling opportunities. We need high-quality service and exemplary client management to retain and grow our client base. We also plan to launch sales and marketing efforts, and if our marketing efforts do not materialize, we may lose existing clients or fail to obtain new clients. Our inability to grow sales as we expand in operations may result in continuing losses, and we may not be profitable for an extended period of time. In addition, even if we are able to make future acquisitions, we will incur additional costs to consummate them, which may result in a shortage in our capital resources. We may also incur difficulties in integrating new businesses with our current operations.
Our business strategy may impose limitations in our ability to accurately forecast future revenue and operating results.
Our operating results are dependent on a variety of factors, including purchasing patterns of our clients, competitive pricing, debt servicing, and general economic trends. Our revenue and operating results may fluctuate if our sales targets are not met, new service offerings receive poor client response, or client acquisition costs increase due to competition. In addition to these factors, our acquisition strategy may impose additional risks to the predictability of our operating results. Revenue streams may be volatile due to the uncertainty in identifying attractive acquisition candidates and our ability to consummate new acquisitions. Unexpected expenses may be incurred during due diligence and post-acquisition. We intend to manage risk carefully with the acquisitions; however, there can be no assurance that we will be able to identity and consummate acquisitions that improve our results of operations.
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As a cybersecurity provider, we are a target of cyber-attacks and other cyber risks that could adversely impact our reputation and operating results.
As a cybersecurity provider, we have been and will likely be a target of cyber-attacks designed to impede the performance of our products, penetrate our network security, or that of our customers, misappropriate proprietary information and/or cause interruptions to our services. If our systems are breached as a result of third-party action, employee error or misconduct, attackers could learn critical information about how our products operate to help protect our customers’ infrastructures from cyber risk, thereby making our customers more vulnerable to cyber-attacks. In addition, if actual or perceived breaches of our network security occur, they could adversely affect the market perception of our products, negatively affecting our reputation, and may expose us to the loss of our proprietary information or information belonging to our customers, investigations or litigation and possible liability, including injunctive relief and monetary damages. Such security breaches could also divert the efforts of our key personnel. In addition, such security breaches could impair our ability to operate our business and provide products and services to our customers. If this happens, our reputation could be harmed, our revenue could decline and our business could suffer.
Additionally, we cannot be certain that our insurance coverage will be adequate for data security liabilities actually incurred, will cover any indemnification claims against us relating to any incident, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.
The loss of, or a significant reduction, in purchases by any of our larger clients could adversely affect our business and financial results.
Currently, we are dependent on a few clients for a large portion of our revenue. If we fail to provide professional services to these clients on a timely basis or fail to meet their performance expectations, including the failure to enhance, maintain, upgrade, or improve our products and professional services, we may lose some of our clients that generate a significant amount of our revenue. If this were to happen, we would need to acquire several smaller clients or another large client to replace the lost revenue, as to which acquisitions there can be no assurance.
Any loss of a significant customer could increase our per-client costs, decrease our operating efficiencies, and have a material adverse effect on our business, results of operations, and financial condition. There can be no assurance that we can easily mitigate the potential loss of any of our larger clients, if at all.
The failure of Congress to approve appropriations bills in a timely manner for the Federal government agencies and departments we support, or the failure of the Administration and Congress to reach an agreement on fiscal issues, could delay and reduce spending, cause us to lose revenue and profit, and affect our cash flow.
On an annual basis, Congress is required to approve appropriations bills that govern spending by each of the Federal government agencies and departments we support. When Congress is, or Congress and the Administration are, unable to agree on budget priorities and, thus, unable to pass annual appropriations bills on a timely basis, Congress typically enacts a continuing resolution. Continuing resolutions generally allow Federal government agencies and departments to operate at spending levels based on the previous fiscal year. When agencies and departments operate on the basis of a continuing resolution, funding we expect to receive from clients for work we are already performing and for new initiatives may be delayed or cancelled. Congress and the Administration have from time to time failed to agree on a continuing resolution, resulting in temporary shutdowns of non-essential Federal government functions and our work on such functions. Such shutdowns may result in delayed payments to us and/or the delay of certain programs and projects for which we were engaged. Thus, the failure by Congress and the Administration to enact appropriations bills in a timely manner can result in the loss of revenue and profit when Federal government agencies and departments are required to cancel or change existing or new initiatives or the deferral of revenue and profit to later periods due to shutdowns or delays in implementing existing or new initiatives. There is also the possibility that Congress will fail to raise the U.S. debt ceiling, when necessary. This can also result in Federal government shutdowns. The delayed funding or shutdown of many parts of the Federal government, including agencies, departments, programs, and projects we support, could have a substantial negative affect on our revenue, profits, and cash flow.
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Substantially all of our revenue is generated from contracts with Federal governmental clients.
We derived substantially all of our revenue in each of 2024 and 2023 from contracts with Federal government clients. Selling to government entities can be highly competitive, expensive and time consuming, and often requires significant upfront time and expense without any assurance that we will win a sale. Further expenditures by our Federal government clients may be restricted or reduced by Administration or congressional actions, by action of the Office of Management and Budget, by action of individual agencies or departments, or by other actions. Accordingly, we expect that, due to changing government budgeting and spending priorities and related disputes among Congress and the Administration, some of our government clients in the future may delay payments due to us, may eventually fail to pay what they owe us, and/or may delay certain programs and projects. For some government clients, we may face a difficult choice: turn down (or stop) work due to budget uncertainty with the risk of damaging a valuable client relationship or perform work with the risk of not being paid in a timely fashion or perhaps at all. Congressional elections could also affect spending priorities and budgets at all levels of government. In addition, increased deficits and debt at all levels of government, may lead to reduced spending by agencies and departments on projects or programs we support.
Government entities also have heightened sensitivity surrounding the purchase of cybersecurity solutions due to the critical importance of their IT infrastructures, the nature of the information contained within those infrastructures and the fact that they are highly visible targets for cyber-attacks. Accordingly, increasing sales of our products and professional services to government entities may be challenging.
Further, in the course of providing our products and professional services to government entities, our employees and those of our channel partners may be exposed to sensitive government information. Any failure by us or our channel partners to safeguard and maintain the confidentiality of such information could subject us to liability and reputational harm, which could materially and adversely affect our results of operations and financial performance.
Our reliance on U.S. General Services Administration Multiple Award Schedule (“GSA Schedule”) contracts and other Indefinite Delivery/Indefinite Quantity (“IDIQ”) contracts creates the risk of volatility in our revenue and profit levels.
We believe that one of the elements of our success is our position as a prime contractor under GSA Schedule contracts and other IDIQ contracts, and we believe this position is important to our ability to sell our services to Federal government clients. However, these contract vehicles require us to compete for each delivery order and task order, rather than having a more predictable stream of activity during the term of a multi-year contract. In addition, we may spend considerable cost and management time and effort to prepare bids and proposals for contracts, delivery orders, or task orders that we may not win. There can be no assurance that we will continue to obtain revenue from such contracts at current levels, or in any amount, in the future. To the extent that Federal government agencies and departments choose to employ GSA Schedule contracts and other IDIQ contracts encompassing activities for which we are not able to compete or provide services, we could lose business, which would negatively affect our revenue and profitability.
Future acquisitions could disrupt our business and harm our financial condition and operating results.
To remain competitive, we have in the past and may in the future seek to acquire additional businesses, products, or technologies. The environment for acquisitions in our industry is very competitive and acquisition candidate purchase prices will likely exceed what we would prefer to pay. We also may not find suitable acquisition candidates, and acquisitions we complete may be unsuccessful.
Achieving the anticipated benefits of future acquisitions will depend in part upon whether we can integrate acquired operations, products and technology in a timely and cost-effective manner and successfully market and sell these as new product offerings, or as new features within our existing offerings. The acquisition and integration processes are complex, expensive, and time consuming, and may cause an interruption of, or loss of momentum in, product development, sales activities, and operations. If we are unable to effectively execute or integrate acquisitions, our business, financial condition, and operating results could be adversely affected.
In addition, we may only be able to conduct limited due diligence on an acquired company’s operations or may discover that the products or technology acquired were not as capable as we thought based upon the initial or limited due diligence. Following an acquisition, we may be subject to unforeseen liabilities arising from an acquired company’s past or present operations and these liabilities may be greater than the warranty and indemnity limitations that we negotiate. Any unforeseen liability that is greater than these warranty and indemnity limitations could have a negative impact on our financial condition.
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Our strategic partnerships expose us to a range of business risks and uncertainties that could have a material adverse impact on our business and financial results.
We and our subsidiaries have entered, and intend to continue to enter, into strategic partnerships with third parties to support our future growth plans. We cannot provide any assurance that we will be able to continue to enter into additional strategic partnerships. Strategic partnerships require significant coordination between the parties involved, particularly if a partner requires that we integrate its products with our products. Further, we have invested and will continue to invest significant time, money, and resources to establish and maintain relationships with our strategic partners, but we have no assurance that any particular relationship will continue for any specific period of time, result in new offerings that we can effectively commercialize, or result in enhancements to our existing offerings.
We depend on the continued services and performance of our senior management and other key employees, the loss of any of whom could adversely affect our business, operating results, and financial condition.
Our future performance depends on the continued services and contributions of our senior management, particularly Emmit McHenry, and other key employees to execute on our business plan and to identify and pursue new opportunities and product innovations. From time to time, there may be changes in our senior management team resulting from the termination or departure of our executive officers and key employees. The loss of the services of our senior management, particularly Emmit McHenry, or other key employees for any reason could significantly delay or prevent the achievement of our development and strategic objectives and harm our business, financial condition, and results of operations.
Accusations against us by third parties of infringement or other violations of their intellectual property rights, regardless of the accuracy of these assertions, could result in significant costs and harm our business and operating results.
We cannot ensure that our professional services and solutions, or the third-party solutions that we offer to our clients, do not infringe on the intellectual property rights of third parties and, in the future, we may have infringement claims asserted against us or against our clients. These claims could harm our reputation, require us to incur significant expenses and monetary liability, and prevent us from offering some of our current professional services or solutions. Legal challenges to our intellectual property rights and claims of intellectual property infringement by third parties could require that we enter into royalty or licensing agreements on less-than-favorable terms. Even if we believe any such challenges or claims are without merit, they can be time-consuming and costly to defend, injure our reputation, and divert management’s attention and resources away from our business. We may need to change our business practices if any of these events were to occur, which may limit our ability to compete effectively and could have an adverse effect on our results of operations.
We depend on unaffiliated third-party software in order to provide our solutions and professional services and support our operations.
Significant portions of our services and operations rely on software that is licensed from third-party vendors. The fees associated with these license agreements could increase in future periods, resulting in increased operating expenses. If there are significant changes to the terms and conditions of our license agreements, or if we are unable to renew these license agreements, we may be required to make changes to our vendors or information technology systems. These changes could impact the solutions and services we provide to our clients or the processes we have in place to support our operations, which could have an adverse effect on our business.
Any material weakness in our internal controls could adversely affect our business and could impair our ability to produce accurate and timely financial statements.
In the future, under Section 404 of the SOX Act, we will be required to furnish a report by our management on internal control over financial reporting. This report must contain, among other matters, an assessment of the effectiveness of our internal control over financial reporting, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by our management.
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We identify material weakness in our internal controls, which could affect our ability to provide reliable financial statements and our business decision-making process, could harm our business and operating results, cause investors to lose confidence in our reported financial information, cause the market price of our securities to decrease and harm our ability to obtain additional financing, especially additional financing on favorable terms, could be adversely affected. In addition, failure to maintain effective internal control over financial reporting could result in investigations or sanctions by regulatory authorities. For a description of our material weaknesses, please see “Item 9A. Controls and Procedures” of our annual report on Form 10-K for the year ended December 31, 2024, filed with the SEC on April 17, 2025.
When and if we are a “large accelerated filer” or an “accelerated filer” and are no longer an “emerging growth company” or “smaller reporting company,” each as defined in the Exchange Act, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting. However, for so long as we remain an emerging growth company or smaller reporting company, we intend to take advantage of an exemption available to emerging growth companies and smaller reporting companies from these auditor attestation requirements.
The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation. To comply with the requirements of being a reporting company under the Exchange Act, we will need to upgrade our systems including information technology; implement additional financial and management controls, reporting systems, and procedures; and hire additional accounting and finance staff. If we or, if required, our auditors are unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in our financial reporting, and the trading price of our Common Stock may decline.
We may not be able to manage our growth effectively or improve our operational, financial, and management information systems, which would impair our results of operations.
In the near term, we intend to expand the scope of our operational activities significantly. If we are successful in executing our business plan, we will experience growth in our business that could place a significant strain on our business operations, finances, management, and other resources. The factors that may place strain on our resources include, but are not limited to, the following:
| ● | the need for continued development of our financial and information management systems; | |
| ● | the need to manage strategic relationships and agreements with manufacturers, customers, and partners; and | |
| ● | difficulties in hiring and retaining skilled management, technical, and other personnel necessary to support and manage our business. |
Additionally, our strategy envisions a period of rapid growth that may impose a significant burden on our administrative and operational resources. Our ability to manage growth effectively will require us to expand the capabilities of our administrative and operational resources substantially and to attract, train, manage, and retain qualified management and other personnel. There can be no assurance that we will be successful in recruiting and retaining new employees or retaining existing employees.
We cannot provide assurances that our management will be able to manage this growth effectively. Our failure to manage growth successfully could result in our sales not increasing commensurately with capital investments, if at all, or otherwise materially adversely affecting our business, financial condition, or results of operations.
We may issue additional shares of our Common Stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.
We may issue additional shares of our Common Stock or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions, repayment of outstanding indebtedness or under the Equity Incentive Plan, without stockholder approval, in a number of circumstances.
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Our issuance of additional shares of our Common Stock or other equity securities of equal or senior rank could have the following effects:
| ● | your proportionate ownership interest in our Company may decrease; | |
| ● | the relative voting strength of each previously outstanding share of Common Stock may be diminished; or | |
| ● | the market price of our shares of Common Stock may decline. |
You will experience immediate and substantial dilution as a result of this offering and any future offering and may experience additional dilution in the future.
In the future, your percentage ownership in our company may be diluted because of equity issuances for warrant exercises, conversion of promissory notes, acquisitions, strategic investments, capital market transactions, or otherwise, including equity compensation awards that we grant to our directors, officers and employees. The issuance and resale of additional shares of Common Stock or other securities in any future registration statement may cause substantial dilution of your ownership interest in our securities.
The future issuance of any such additional shares of Common Stock may create downward pressure on the trading price of our Common Stock. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with any capital raising efforts, including at a price (or exercise prices) below the price at which shares of our Common Stock are currently traded at such time.
If we are unable continually to add new customer offerings, innovate, and increase efficiencies, our ability to attract new customers may be adversely affected.
In the area of innovation, we must be able to add new solutions and professional service offerings and adopt sales incentives and policies that appeal to our customers and prospective customers. This depends, in part, on the creative and marketing skills of our personnel and on our ability to appeal to both customers and manufacturers. We may not be successful in the development, introduction, marketing and sourcing of new products or sales policies that satisfy customer needs, achieve market acceptance, or generate satisfactory financial returns, any of which could adversely affect our business, financial condition, or results of operations.
Risks Related to Securities Markets and Investments in Our Common Stock
We have no current plans to pay dividends on our shares of Common Stock.
We do not anticipate paying any cash dividends in the foreseeable future. If we incur indebtedness in the future to fund our future growth, our ability to pay dividends may be further restricted by the terms of such indebtedness.
We will qualify as an “emerging growth company” within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, it could make our securities less attractive to investors and may make it more difficult to compare our performance to the performance of other public companies.
We will qualify as an “emerging growth company” as defined under the Securities Act. As such, we will be eligible for and intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (a) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the SOX Act, (b) the exemptions from say-on-pay, say-on-frequency, and say-on-golden parachute voting requirements, and (c) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period, or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our predecessor’s IPO. In addition, the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to opt out of such extended transition period and, therefore, we may not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Investors may find our Common Stock less attractive because we will rely on these exemptions, which may result in a less active trading market for our Common Stock and the price may be more volatile.
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Our Common Stock price may be volatile, and as a result you could lose all or part of your investment.
In addition to volatility associated with equity securities in general, the value of your investment could decline due to the impact of any of the following factors upon the market price of our shares of Common Stock:
| ● | disappointing results from our development efforts; | |
| ● | decline in demand for our shares of Common Stock; | |
| ● | downward revisions in securities analysts’ estimates or changes in general market conditions; | |
| ● | technological innovations by competitors or in competing products; | |
| ● | investor perception of our industry or our prospects; and | |
| ● | general economic trends. |
Stock markets in general have experienced extreme price and volume fluctuations, and the market prices of securities have been highly volatile. These fluctuations are often unrelated to operating performance and may adversely affect the market price of our shares of Common Stock.
Potential future sales pursuant to registration rights that we have granted may depress the market price for our shares of Common Stock.
We have granted a number of our stockholders’ registration rights with respect to their shares of Common Stock. See the section titled “Registration Rights.” Such future sales of our shares of Common Stock by our existing stockholders, pursuant to and in accordance with the provisions of any registration statement, may have a depressive effect on the market price of our shares of Common Stock. Further, in general, under the Securities Act, a person who has satisfied a minimum holding period of between six months and one-year and any other applicable requirements, may thereafter resell such shares publicly. A significant number of our currently issued and outstanding shares of Common Stock held by existing stockholders, including officers and directors and other principal stockholders are currently eligible for resale pursuant to and in accordance with SEC rules. The possible future sale of our shares by our existing stockholders, pursuant to and in accordance with the provisions of SEC rules, may have a depressive effect on the price of our Shares of Common Stock in the applicable trading marketplace.
The Financial Industry Regulatory Authority, Inc. (“FINRA”) has adopted sales practice requirements that may also limit a stockholder’s ability to buy and sell our Common Stock.
FINRA has adopted rules that require that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative, low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our shares of Common Stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares of Common Stock.
We face risks related to compliance with corporate governance laws and financial reporting standards.
The SOX Act, as well as related rules and regulations implemented by the SEC and the Public Company Accounting Oversight Board (“PCAOB”), require changes in the corporate governance practices and financial reporting standards for public companies. These laws, rules and regulations, including compliance with Section 404 of the SOX Act relating to internal control over financial reporting materially increased our legal and financial compliance costs and made some activities more time-consuming and more burdensome.
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There can be no assurance that our Common Stock will continue to trade on The Nasdaq Global Market or another national securities exchange.
There can be no assurance that we will be able to continue to meet The Nasdaq Global Market listing standards. If we are unable to maintain compliance with all applicable listing standards, our Common Stock may no longer be listed on The Nasdaq Global Market or another national securities exchange and the liquidity and market price of our Common Stock may be adversely affected.
We currently are (and from time to time in the recent past, have been) out of compliance with the standards and requirements for continued listing on Nasdaq.
On April 9, 2025, we received written notice received from the Listing Qualifications Department of Nasdaq stating 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 Capital Market under Nasdaq Listing Rule 5550(a)(2). The notification letter stated that we would be afforded 180 calendar days (until October 6, 2025) to regain compliance. In order to regain compliance, the closing bid price of our Common Stock must be at least $1.00 for a minimum of ten consecutive business days. The notification letter also stated that, in the event that we do not regain compliance within the initial 180-day period, we may be eligible for an additional 180-day period. If we are not eligible for the additional 180-day period, or if it appears to the Nasdaq staff that we will not be able to cure the deficiency, the Nasdaq Listing Qualifications Department will provide notice after the end of the initial 180-day period that our securities will be subject to delisting. Failure to regain compliance within that 180-day period would result in the delisting of our securities from Nasdaq, although we would have the right to appeal such a delisting to a Nasdaq hearings panel. The Nasdaq notification has no effect at this time on the listing of our Common Stock.
On April 11, 2025, we received two letters from the Nasdaq Listing Qualifications Department, each addressing a separate compliance deficiency of ours under the Nasdaq Listing Rules. The first letter notified us of our deficiency with regard to Nasdaq Listing Rule 5450(b)(2)(A), which requires a company such as ours, whose securities are listed on The Nasdaq Global Market under the “Market Value Standard”, to maintain a minimum Market Value of Listed Securities (an “MVLS”) of $50,000,000. The deficiency was caused by our MVLS having been below the minimum level for the prior 30 consecutive business days. Under Nasdaq Listing Rule 5810(c)(3)(C), we are entitled to a 180-day period, ending on October 8, 2025, to rectify the deficiency. In order to do so, we must achieve and maintain an MVLS of at least $50,000,000 or more for a minimum of 10 consecutive business days. Failure to regain compliance within that 180-day period would result in the delisting of our securities from Nasdaq, although we would have the right to appeal such a delisting to a Nasdaq hearings panel. The Nasdaq notification has no effect at this time on the listing of our Common Stock.
The second letter notified us of our deficiency with regard to Nasdaq Listing Rule 5450(b)(2)(C), which requires a minimum Market Value of Publicly Held Shares (an “MVPHS”) of $15 million for continued listing on the Nasdaq Global Market under the “Market Value Standard”. This deficiency was caused by our MVPHS having been below the minimum level for the prior 30 consecutive business days. Under Nasdaq Listing Rule 5810(c)(3)(D), we have 180 calendar days, or until October 8, 2025, to regain compliance, which we can achieve if our MVPHS is at least $15 million for a minimum of 10 consecutive business days. Failure to regain compliance within that 180-day period would result in the delisting of our securities from Nasdaq, although we would have the right to appeal such a delisting to a Nasdaq hearings panel. The Nasdaq notification has no effect at this time on the listing of our Common Stock.
To remedy any deficit in funds or stockholder equity in order to satisfy Nasdaq’s continuing listing standards or other minimum bid price requirements, if any, we may have to raise additional funding through dilutive equity investments or other external sources; but, there is no certainty such external funding will be available or on acceptable terms, or we may have to conduct reverse stock splits to consolidate our shares of Common Stock. If we fail to meet Nasdaq’s continued listing requirements, and Nasdaq delists our Common Stock from trading on its exchange, and we are not able to list our securities on another national securities exchange, we could face significant material adverse consequences, including without limitation a substantial reduction in the liquidity of our Common Stock, which could further limit our access to capital markets for fundraising.
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The market price of our shares of Common Stock is likely to be highly volatile, and you may lose some or all of your investment.
The market price of our shares of Common Stock is likely to be highly volatile and may be subject to wide fluctuations in response to a variety of factors, including the following:
| ● | the inability to obtain or maintain the listing of our shares of Common Stock on Nasdaq; | |
| ● | the inability to recognize the anticipated benefits of the recently closed de-SPAC transaction, which may be affected by, among other things, competition, our ability to grow and manage growth profitably, and retain our key employees; | |
| ● | changes in applicable laws or regulations; and | |
| ● | risks relating to the uncertainty of our projected financial information. |
In addition, the equity markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, as well as general economic, political, regulatory and market conditions, may negatively affect the market price of our shares of Common Stock, regardless of our actual operating performance.
A “short squeeze” due to a sudden increase in demand for shares of our common stock that largely exceeds supply and/or focused investor trading in anticipation of a potential short squeeze have led to, and may lead to, extreme price volatility in the price of our Common Stock.
Investors may purchase shares of our Common Stock to hedge existing exposure or to speculate on the price of our Common Stock. Speculation on the price of our Common Stock may involve long and short exposures. To the extent aggregate short exposure exceeds the number of shares of our Common Stock available for purchase on the open market, investors with short exposure may have to pay a premium to repurchase shares of our Common Stock for delivery to lenders of our Common Stock. Those repurchases may, in turn, dramatically increase the price of shares of our Common Stock until additional shares of our Common Stock are available for trading or borrowing. This is often referred to as a “short squeeze.” With the recent substantial increase in volume of our shares being traded and trading price, the proportion of our Common Stock that may be traded in the future by short sellers may increase the likelihood that our Common Stock will be the target of a short squeeze. A short squeeze and/or focused investor trading in anticipation of a short squeeze have led to, may be currently leading to, and could again lead to volatile price movements in shares of our Common Stock that may be unrelated or disproportionate to our financial performance or prospects and, once investors purchase the shares of our Common Stock necessary to cover their short positions, or if investors no longer believe a short squeeze is viable, the price of our Common Stock may rapidly decline. Investors that purchase shares of our Common Stock during a short squeeze may lose a significant portion of their investment. Under the circumstances, we caution you against investing in our Common Stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.
Increases in market interest rates may cause potential investors to seek higher returns and therefore reduce demand for our Common Stock, which could result in a decline in our stock price.
One of the factors that may influence the price of our Common Stock is the return on our Common Stock (i.e., the amount of distributions as a percentage of the price of our Common Stock) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of our Common Stock to expect a return, which we may be unable or choose not to provide as we have never paid a dividend and have no current intention to pay any dividends. Further, higher interest rates would likely increase our borrowing costs and potentially decrease the cash available. Thus, higher market interest rates could cause the market price of our Common Stock to decline.
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If securities or industry analysts do not publish research or reports about us, or publish negative reports, our share price and trading volume could decline.
The trading market for our shares of Common Stock will depend, in part, on the research and reports that securities or industry analysts publish about us. We do not have any control over these analysts. If our financial performance fails to meet analyst estimates or one or more of the analysts who cover us downgrade our shares of Common Stock or change their opinion, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
Volatility in the price of our Common Stock may subject us to litigation.
The market for our Common Stock has been characterized recently by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of our securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.
Because we do not anticipate paying any cash dividends in the foreseeable future, capital appreciation, if any, would be your sole source of gain.
We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of our shares of Common Stock would be your sole source of gain on an investment in such shares for the foreseeable future.
Our share price may fluctuate.
Our share price can be volatile. Among the factors that may affect the volatility of our stock price are the following:
| ● | speculation in the investment community or the press about, or actual changes in, our competitive position, organizational structure, executive team, operations, financial condition, financial reporting and results, expense discipline, strategic transactions, or progress on achieving expected benefits; | |
| ● | the announcement of new products, services, acquisitions, or dispositions by us or our competitors; | |
| ● | increases or decreases in revenue or earnings, changes in earnings estimates by the investment community, and variations between estimated financial results and actual financial results; and | |
| ● | sales of a substantial number of shares of our shares of Common Stock by large shareholders. |
Future offerings of debt, which would be senior to our Common Stock upon liquidation, and/or preferred equity securities, which may be senior to our Common Stock for purposes of distributions or upon liquidation, could adversely affect the market price of our Common Stock.
In the future, we may attempt to increase our capital resources by making additional offerings of debt or preferred equity securities, including convertible or non-convertible senior or subordinated notes, convertible or non-convertible preferred stock, medium-term notes and trust preferred securities. Upon liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive distributions of our available assets prior to the holders of our Common Stock. In addition, any preferred stock we may issue could have a preference on liquidating distributions or a preference on distribution payments that could limit our ability to make a distribution to the holders of our Common Stock. Since our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of our Common Stock.
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Anti-takeover provisions contained in our charter and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Our charter contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions will include:
| ● | no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; | |
| ● | the right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death, or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our board of directors; and | |
| ● | a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders. |
Our charter provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our charter provides that, subject to limited exceptions, any (i) derivative action or proceeding brought on our behalf of under Delaware law, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee, (iii) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the DGCL, our charter or our bylaws (in each case, as may be amended from time to time), (iv) any action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine of the State of Delaware or (v) any other action asserting an “internal corporate claim,” as defined in Section 115 of the DGCL, in all cases subject to the court’s having personal jurisdiction over all indispensable parties named as defendants shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, another state or federal court located within the State of Delaware. The charter also provides that unless a majority of our board of directors consents to the selection of an alternative forum (which consent may be given at any time, including during the pendency of litigation), the federal district courts will be the sole and exclusive forum for the resolution of any action asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in our shares of capital stock shall be deemed to have notice of and to have consented to the provisions of our certificate of incorporation described above.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which, along with potential increased costs of litigating the courts provided by the choice of forum provision, may discourage such lawsuits against us and our directors, officers, and employees. Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
Risks Related to Operating as a Public Company
Our management team has limited experience managing a public company.
Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws, rules and regulations that govern public companies. As a public company, we are subject to significant obligations relating to reporting, procedures and internal controls, and our management team may not successfully or efficiently manage such obligations. These obligations and scrutiny will require significant attention from our management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition, and results of operations.
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We may incur significantly increased costs and devote substantial management time as a result of operating as a public company.
As a public company, we will incur significant costs related to legal, accounting, listing, hiring of external consultants and advisors, and other expenses. For example, we will be subject to the reporting requirements of the Exchange Act and will be required to comply with the applicable requirements of the SOX Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC and Nasdaq, including the establishment and maintenance of effective disclosure and financial controls, changes in corporate governance practices and required filing of annual, quarterly and current reports with respect to our business and results of operations. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. In addition, we expect that management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the SOX Act, which will increase when we are no longer an emerging growth company. We may also need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and establish an internal audit function.
We also expect that operating as a public company will make it more expensive to obtain director and officer liability insurance and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. This could also make it more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers.
As we continue to expand via opportunities for acquisitions, investments or strategic alliances as a public company, we expect that management and other personnel will need to divert attention from operational and other business matters to ensure the success of these opportunities.
Certain recent public offerings of companies with public floats comparable to ours have experienced extreme volatility that was seemingly unrelated to their performance. We may experience similar volatility, which may make it difficult for prospective investors to assess the value of our shares of Common Stock.
Our shares of Common Stock may be subject to extreme volatility that is seemingly unrelated to the underlying performance of our business. Recently, companies with comparable public floats and public offering sizes have experienced instances of extreme stock price run-ups followed by rapid price declines, and such stock price volatility was seemingly unrelated to the respective company’s underlying performance. Although the specific cause of such volatility is unclear, our public float may amplify the impact of the actions taken by a few shareholders on the price of our shares of Common Stock, which may cause our share price to deviate, potentially significantly, from a price that better reflects the underlying performance of our business. Should our shares of Common Stock experience run-ups and declines that are seemingly unrelated to our actual or expected operating performance and financial condition or prospects, prospective investors may have difficulty assessing the rapidly changing value of our shares of Common Stock. In addition, investors in our shares of Common Stock may experience losses, which may be material, if the price of our shares of Common Stock declines after this offering or if such investors purchase shares of Common Stock prior to any price decline.
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USE OF PROCEEDS
All of the securities offered under this prospectus are being registered for the account of the Selling Stockholder. We will not receive any of the proceeds from the sale of these securities.
We have agreed to pay all costs, expenses and fees relating to the registration of the securities covered by this prospectus. The Selling Stockholder will bear all commissions and discounts, if any, attributable to the sale of the securities. The prices at which the shares of Common Stock covered by this prospectus may actually be sold will be determined by the prevailing public market price for shares of our Common Stock, by negotiations between the Selling Stockholder and buyers of our Common Stock in private transactions or as otherwise described in “Plan of Distribution.”
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THE ELOC TRANSACTION
Equity Line of Credit
Equity Purchase Agreement
On April 7, 2025 (the “Execution Date”), we entered into the Equity Purchase Agreement with the Investor. Under the Equity Purchase Agreement, we have the right, but not the obligation, to direct the Investor to purchase up to $60 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 the Investor 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 the Investor shall have purchased shares of Common Stock issued, or that we shall be entitled to issue, per any applicable Put Notice 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 the Investor (which shall not occur at any time that the Investor holds any of the shares of Put Stock), or (iv) written notice of termination by the Investor to us pursuant to (the “Commitment Period”).
During the Commitment Period, we may direct the Investor to purchase shares of Put Stock by delivering a notice (a “Put Notice”) to the Investor. 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 the Investor 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 the Investor’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 the Investor in cash $1,800,000 (“Commitment Cash”) or (ii) issue the Pre-Funded Warrant to the Investor in a form acceptable to the Investor in its sole discretion and having an exercise price per share of $0.0001, for the Investor’s purchase of shares of Common Stock (the “Commitment Stock”) having a value of $1,800,000 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 the Investor and irrespective of any termination of the Equity Purchase Agreement.
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Under the Equity Purchase Agreement, we are obligated to file with the SEC, on or before May 7, 2025, a registration statement on Form S-1 (the “Initial Registration Statement”) covering only the resale of the shares of Put Stock and Commitment Stock and is to use our best efforts to have the Initial Registration declared no later than July 7, 2025.
Pre-Funded Warrant
The Pre-Funded Warrant certifies that, for value received, the Investor is entitled to be issued up to 4,500,000 shares of Common Stock as its Commitment Fee and has an initial exercise price of $0.0001 per share. The Pre-Funded Warrant may not be exercised if the aggregate number of shares of the Common Stock beneficially owned by the holder would exceed 4.99% immediately after exercise thereof, which ownership cap may be increased by the holder up to 9.99% upon 61 days’ prior notice (the “Beneficial Ownership Limitation”).
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 the Investor (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 the Investor 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 the Investor, 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. We shall use our commercial best efforts to have the Initial Registration Statement and any amendment thereto declared effective by the SEC at the earliest possible date, but in no event later than July 7, 2025.
The foregoing summary of the terms and conditions of each of the Equity Purchase Agreement, Pre-Funded Warrant, and Registration Rights Agreement is subject to, and qualified in its entirety by reference to the full text of such agreement, copies of which are filed as Exhibits 10.23, 10.24, and 10.25, respectively, to this Registration Statement on Form S-1 (of which this prospectus forms a part) and are incorporated herein by reference.
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MARKET PRICE OF OUR COMMON STOCK AND DIVIDEND INFORMATION
Market Price of Our Common Stock
Our Common Stock is listed on The Nasdaq Global Market and our warrants are listed on The Nasdaq Capital Market under the symbols “CYCU” and “CYCUW”, respectively.
On May 6, 2025, the closing sale price of our Common Stock was $0.45 per share.
As of May 13, 2025, there were 46 holders of record of our Common Stock.
Dividend Policy
We do not anticipate paying any cash dividends in the foreseeable future. If we incur indebtedness in the future to fund our future growth, the terms of such indebtedness may further constrict our ability to pay dividends.
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BUSINESS
Company 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 name from KAE Holdings, Inc. to Cyber Secure Solutions, Inc., and, on February 24, 2021, to Cycurion, Inc.
We have one first-tier wholly-owned subsidiary, Cycurion Sub, Inc. (formerly Cycurion, Inc., until February 14, 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, in connection with our acquisition of assets from Sabres Security Ltd. (“Sabres”), a leading Israeli-based cyber security provider.
Our Business
We provide innovative custom solutions for our clients by adapting our knowledge base and government-level experience to create dynamic solutions to best serve our client’s IT and cybersecurity needs. We assess, secure and advise your organization by leveraging our government proven, cutting edge techniques, custom tools and extensively knowledgeable personnel to revolutionize the client’s cybersecurity posture.
We are committed to surpassing expectations and delivering incomparable value to our clients and partners. We achieve this goal by providing Network Communications and Information Technology Security services and solutions that are custom-tailored to your environment, as well as your level of need. We are built on a foundation of experts in Network Communications and Information Technology who possess unrivaled security expertise and experience. We are committed to hiring the most knowledgeable professionals in order to expand and reinforce our team of experts, leveraging world-class talent to improve and expand upon our already vast understanding of this environment. We pride ourselves on having the capability and resources to successfully implement a management strategy that delivers the solutions you need to stay within budget and on schedule.
We deliver high-quality, cybersecurity solutions to federal government civilian, defense and judicial agencies in addition to commercial clients across a variety of industries. Through our operating subsidiaries and strategic partnerships, we have numerous prime and subcontracts with key government agencies. Our growth engine is driven by organic business solutions and strategic acquisitions of cybersecurity services and technology providers. We leverage our highly skilled workforce to access, secure and advise our clients to improve their cyber security posture. Our ability to identify and implement customized solutions is core to driving continued growth.
Our Services
Consulting and Advisory Services
Our consulting services perform a detailed review of our customers’ IT security to identify and address vulnerabilities. Using advanced tools and research techniques, we enhance our customers’ cybersecurity program to meet regulatory compliance, data confidentiality and privacy standards, and train our customers’ personnel accordingly.
Our advisory services supplement our consulting services with a cost-effective alternative to a full-time chief information officer. Our customers gain access to our pool of experienced chief information officers, who are backed by our resources. They deliver tailored advice and training to keep our customers’ organization ahead in the ever-changing cybersecurity landscape.
Our consulting and advisory services include: (i) security control assessments; (ii) security architecture and engineering; (iii) risk management and compliance audits; (iv) staff augmentation; (v) cybersecurity awareness and training; (vi) cloud security; (vii) virtual CISO support; and (viii) digital modernization.
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Managed IT Services
Our managed IT services can optimize an organization’s IT infrastructure, reduce costs and improve operational efficiency, and it offers comprehensive IT management and support for organizations of all sizes.
Managed IT services is a services model in which a MSP remotely manages the day-to-day IT offerings for a client under a SLA. This includes remote monitoring and management of servers, disaster recovery, IaaS, PaaS, and SaaS. In short, managed IT services provides businesses with IT support and maintenance on an ongoing basis.
IT services are typically provided on a break-fix basis, meaning that the client only calls the provider when there is a problem with IT infrastructure. Managed IT services, on the other hand, are provided on an ongoing basis under an SLA. This means that the MSP is responsible for the day-to-day maintenance of the client’s IT infrastructure and is always monitoring and managing the system to ensure it is running smoothly.
For example, a company that provides cloud services to businesses would offer managed platform services, remote monitoring and management of servers and security services. The MSP would handle the day-to-day maintenance of the client’s IT infrastructure and offers disaster recovery services in the event of a data breach or other catastrophe.
Our managed IT services include: (i) project and license management; (ii) network infrastructure; (iii) systems engineering and administration; (iv) voice and data infrastructure engineering and management; (iv) application development; (v) IT help desk support; and (vi) staff augmentation.
Managed Security Services
We are a professional and trusted provider of managed security services. We have designed comprehensive security management solution to help organizations protect their digital assets against various cyber threats. Our MSS include 24/7 monitoring, threat detection, incident response and remediation. Our Security Operations Center (SOC) as a service offers organizations with a team of security professionals dedicated to monitoring and managing their security infrastructure.
MSS are a crucial component of a robust security program. Managed security service providers (“MSSPs”) specialize in protecting businesses from cyber threats and deliver a range of security services including, but not limited to, intrusion detection, vulnerability assessments and network security services.
MSSPs offer organizations access to a dedicated team of security professionals who use the latest security architectures and technologies to monitor their clients’ networks and systems, identify potential threats and respond promptly to security incidents. This is especially important for small to mid-sized businesses that may not have the in-house resources to maintain a robust security posture on their own.
MSS plays a critical role in safeguarding businesses from cyber threats in today’s digital landscape, making them an essential partner for organizations across industries. MSSPs work with clients ranging from small businesses to large enterprises and are often partnered with internet service providers to provide comprehensive security solutions.
MSS can also help organizations meet compliance requirements and reduce the risk of data breaches, which can be costly in terms of lost data, damaged reputation, and regulatory penalties. Additionally, MSSPs can provide SaaS solutions, allowing businesses to access security tools and services on-demand without having to invest in expensive hardware and software.
Our MSS include: (i) managed detection and response; (ii) external attack surface management; (iii) threat hunting and threat intelligence; (iv) end point detection and response; (v) firewall management; (vi) threat and vulnerability management; (vii) vulnerability and penetration testing; (viii) 24/7/365 security monitoring; and (ix) digital forensic and incident response.
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Our Industries
Enterprise Business
Enterprise level organizations face a litany of challenges when curating and implementing a successful IT environment. Challenges generally evolve from multiple points, such as finding experienced and deeply knowledgeable IT staff that is prepared for all security eventualities, to creating a comprehensive, functional, and compliant interface tends to create a high cost, knowledge deficient, and overwhelmed staff that often lacks in providing a positive ROI, and at times a cost-prohibitive scenario.
As digitization of operations becomes a necessity in the current environment, we plan to help our customers hire the right personnel and implement proper protocols in a time- and cost-efficient manner. We will take the responsibility from initial analysis to full spectrum implementation of our services, duly optimizing our customers’ organization and digital environment for the future.
We offer an evolutionary solution for this knowledge gap by providing deeply knowledgeable experts and highly trained analysts directly to our customers’ organization as a service. Our contract analysts provide more than just their individual expertise to solve specific challenges, but also will leverage Cycurion’s entire repository of collective knowledge, techniques and methodologies to our customers’ organization, at a cost below that of hiring an IT department, while providing highly efficient, multi-disciplined and deeply knowledgeable expert solutions to our customers.
Government
Government entities face a number of compliance and certification challenges. With constantly changing legislation, meeting government mandate and expectations in the IT environment is often a challenge. We leverage our historical knowledge and extensive experience on the federal level to continue to fulfill all of IT needs across the government organization.
Bad actors attack government agencies by targeted cyber threats, personnel exploitation and creative manipulation to gain access to critical systems and infrastructure through unperceived vulnerabilities. Public platforms, such as social media, surface, deep and dark web, present substantial risks through knowledge gaps in personnel training, presenting high risk and substantial possibility of security failure. We have been defending and optimizing these environments at the federal level for over a decade and, as a result, have created a robust and predictive methodology to defend and optimize government organizational and security gaps in order to mitigate these threats and vulnerabilities before they are compromised. We provide the knowledge, experience and analytical understanding of this environment to evolve our services to meet current and future needs across the IT spectrum.
Our extensive knowledge and real-world experience with government agencies allow us to understand the operational, security and overall IT needs and challenges that such agencies must overcome to achieve their mandate. We leverage our experience in this space allowing us to provide best-practice solutions throughout the IT environment.
Small and Medium Businesses
We offer IT solutions for small and medium businesses through different management plans by offering IT services and solutions with the same resources, concentrations and knowledge-based analytical methodology that are used for our enterprise and government clients. We provide roadmaps to successful integration, streamlining the businesses’ operation for maximum effectiveness by developing comprehensive IT solutions to navigate the modern cyber environment. We leverage our expertise and experience from our work in the federal environment, custom tailoring these solutions to your business, no matter the size, while focusing on our customers’ business needs and budget.
Healthcare
We understand that healthcare organizations must manage a vast array of rapidly evolving complexities. Our company will lead healthcare organizations through the demands of HIPAA / HITECH security and privacy compliance requirements. We offer healthcare IT services to augment and refine an organization through auditing and assessment of the organization, staff, applications, compliance, risk, vulnerability and infrastructure in order to improve the entity’s ability to better serve the healthcare needs of the organization’s clients.
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We understand the key drivers of the healthcare market, and continually create focused, innovative and repeatable solutions. We provide technology services to improve service delivery with a focus on system integration, process reengineering, cloud/web / mobile development, solutions for coordinated community care and case management applications. We have extensive experience providing management consulting from strategic planning, IT assessment, project management, application rationalization, enterprise architecture, organizational change management and training.
Higher Education
We offer cybersecurity services and solutions for universities and high education and protect our customers’ systems, information and students from cyber threats and attacks. Our end-to-end managed cybersecurity solutions include: (i) IT and cybersecurity audit, consulting and advisory services; (ii) Security Operation Center (SOC) Network services; (iii) virtual chief information security officers; and (iv) cyber awareness and threat intelligence training services. We have over 150 years of experience on our management team and have served over 275,000 students.
Cycurion ARx Platform
The Cycurion ARx platform is a turnkey web application protection and managed security solution that combines the essential cybersecurity layers in a comprehensive, customizable platform. This platform offers: (i) Geo Gate Protection; (ii) DDoS Protection; (iii) WAF and API Protection; (iv) Endpoint Protection; and (v) Bot Hunter Protection.
| ● | Geo Gate Protection. This reverse proxy server makes geographic restrictions easy, thus reducing unwanted traffic. | |
| ● | DDoS Protection. This distributed denial-of-service (“DDoS”) protection mitigates the threat from malicious actors attempting to flood the entry point of an application. | |
| ● | WAF and API Protection. Web Application Firewall (“WAF”) protection inspects requests in real-time and filters out harmful traffic, while application programing interfaces (“API”) protection is a defense mechanism involving a two-step process of authenticating the data sender and inspecting the data to ensure no malicious data injections have occurred. | |
| ● | Endpoint Protection. This countermeasure ensures that devices follow compliance and security policies, preventing intrusion from particular vectors. | |
| ● | Bot Hunter. Our proprietary algorithm provides detection and protection against non-human activity. This can prevent low-level threats like unwanted scraping, and high-level threats like attempted system breaches. |
Key Performance Indicators
| 2024 | Margin | 2023 | Margin | |||||||||||||
| Gross Profit ($) | 3,634,743 | 20.5 | % | 2,643,060 | 13.7 | % | ||||||||||
| Operating Income ($) | 2,416,113 | 13.6 | % | 326,411 | 1.7 | % | ||||||||||
| Net Income/(Loss) ($) | 1,229,601 | 6.9 | % | (2,097,013 | ) | (10.8 | )% | |||||||||
| Total | Total | |||||||||||||||
| Number of Customers | 41 | 38 | ||||||||||||||
Our Subsidiaries
Cycurion Sub, Inc.
Our direct subsidiary, Cycurion Sub., Inc., a Delaware corporation that, until the closing date of the de-SPAC, was known as “Cycurion, Inc”, owns 100% of our operating subsidiaries. Consequently, we conduct our business through the three indirectly wholly-owned second-tier subsidiaries described below.
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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 our 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.
Axxum has the specialized skills and experience to provide a strategy and tactics to help organizations defend against cyber-attacks and implement a secure network infrastructure. Our team has extensive experience implementing cybersecurity solutions against internal and external threats to the health of our clients’ networks. Axxum’s information security focus produces several key benefits:
| ● | Agile Client Focus: Axxum’s projects are overseen directly by its program managers, all of whom have information security backgrounds and are fully authorized to promptly implement client requirements throughout the performance life cycle. | |
| ● | Streamlined and Process Focused: Axxum’s streamlined infrastructure leverages ISO quality standards integrated with emerging and established technologies, allowing it to engineer innovative solutions without building in excessive overhead. | |
| ● | Outstanding Personnel: Axxum has a reputation of employing cybersecurity experts. |
Cloudburst Security LLC
Organized in the Commonwealth of Virginia on January 12, 2007, Cloudburst specializes in providing a full spectrum of high-quality, innovative cybersecurity services to both government and commercial organizations, such as banking and financial; education and schools; energy; critical infrastructure and supervisory control and data acquisition; healthcare; and manufacturing. We acquired Cloudburst in April 2019. Cloudburst’s mission is to help our clients — of all sizes and mission types — protect their integral data and information assets, so that they can focus on their core competencies.
Through Cloudburst we focus 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.
Cycurion Innovation, Inc.
Our Cycurion Security Platform’s line of products allows our customers to improve their cyber posture with its Multi-Dimensional Protection (“MDP”) SaaS platform. This platform efficiently bundles and easily implements the external protection of a Web Application Firewall (“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 DDoS 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. Our Cycurion Security Platform’s proprietary, cloud-based artificial intelligence (“AI”) algorithm directs this process. 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 Subcontractor Relationship
SLG Innovation, Inc.
We are currently a subcontractor for several keystone contracts held by SLG Innovation, Inc., an Illinois corporation formed in 2010 (“SLG”). 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, University of Illinois Division of Specialized Care for Children, the Multiple Myeloma Research Foundation, and many more.
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We established a subcontractor — prime contractor relationship with SLG in fall 2019, where we serviced several government agencies and commercial customers, State of New Mexico, Cognizant, KPMG, and University of Illinois in support of SLG.
Our Acquisitions
SLG Acquisition Agreement
On April 25, 2023, Cycurion Sub executed a Term Sheet with SLG (the “SLG Term Sheet”), pursuant to which SLG, agreed to be acquired by Cycurion Sub. The Term Sheet contained all of the material terms and conditions of two proposed interrelated transactions to be memorialized by an acquisition agreement (the “SLG Acquisition Agreement”). To effectuate the two transactions contemplated by the SLG Term Sheet, Cycurion Sub will form two subsidiaries, which, upon formation, will initially be wholly owned by Cycurion Sub. If, when, and as the transactions contemplated by the SLG Term Sheet are consummated, SLG would merge with and into one of the subsidiaries and survive, thereby becoming a wholly-owned subsidiary of Cycurion Sub. Because certain of the agreements to which SLG is the prime contractor require that the majority owner of the prime contractor be a resident of the City of Chicago or of Cook County (depending on the contract), contemporaneously with the consummation of the first of the two transactions, (i) SLG will divest itself of those agreements with the residency requirements, (ii) the second newly formed subsidiary will assume those agreements, (iii) Mr. Ed Burns will become the owner of a 51% interest in that newly formed subsidiary, and (iv) we will enter into a Management Agreement with that subsidiary (see below for a discussion of the SLG Management Agreement), the economic terms and management / control terms of which are intended to be the equivalent of complete ownership of the 49% owned subsidiary. Mr. Ed Burns is currently the 51% owner of SLG and a resident of the City of Chicago. The SLG Term Sheet provides that, if, when, and as the transactions contemplated thereby are consummated, the two current owners of SLG will be issued shares of our Common Stock. SLG is fully bound by the terms and provisions of the SLG Term Sheet and the related Management Agreement structure, although Cycurion Sub is permitted to terminate the SLG Term Sheet and to abandon the transactions contemplated thereby any time for any reason or for no reason prior to April 11, 2025, with no further obligations on Cycurion Sub’s part. As of the date of this prospectus, although we reserve the right to modify the terms and provisions of the SLG Acquisition Agreement, we do not currently expect to terminate it and currently expect to close the transactions contemplated during our current fiscal quarter. Substantially all of the agreements to which SLG is a party have a provision that provides the counterparty to such agreement with a right to approve an assignment or change in control of SLG prior to its effectiveness. If an approval is not forthcoming, then the provisions of the SLG Acquisition Agreement permit us to excise that specific agreement. Upon such occurrence, we reserve that right to reduce the consideration that we would otherwise tender to the equity owners of SLG.
As amended by the parties, initially effective as of November 29, 2023, and subsequently effective as of April 29, 2024, August 16, 2024, and December 31, 2024, the SLG Term Sheet expires on the soonest of (i) closing of the transactions contemplated thereby, (ii) April 11, 2025, if the transactions contemplated thereby have not closed by then, (iii) Cycurion Sub’s termination thereof, and (iv) the mutual termination by all of the parties thereto. Notwithstanding anything to the contrary contained therein, Cycurion Sub may terminate its obligations under the SLG Term Sheet and the transactions contemplated hereby for any reason or for no reason without any further obligations and without any liability at any time through and including April 11, 2025. The SLG Term Sheet, as amended, consensually superseded, as noted therein, Cycurion Sub’s previous “unidirectional” agreement with SLG.
As of March 31, 2025 we entered into a Management Services Agreement (the “SLG Management Agreement”) with SLG to ensure SLG’s continuing commercial viability, which, indirectly, assists the commercial viability of Cycurion Sub and us. To validate and enhance the business relationship with SLG, the parties agreed that Cycurion Sub and we shall, even more formally than historically, manage and control all of SLG’s operations from and after such date. Accordingly, Cycurion and we shall provide management, financing, administrative, and other services to SLG (as described in more detail on Schedule A of the SLG Management Agreement) in exchange for the fees and/or other consideration set forth on Schedule B of the SLG Management Agreement. The relationship, as so memorialized, results in the relationship between the parties from and after such date (if not prior thereto) results in SLG being deemed to be a “Variable Interest Entity” of Cycurion (as such relationship is defined by the Financial Accounting Standards Board), which will result in SLG’s financial statements being consolidated with and into our financial statements.
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Our entry into the SLG Management Agreement may accomplish substantially all of SLG’s and our business objectives. Accordingly, one or more of the parties to the SLG Term Sheet may postpone the execution or delivery of the SLG Acquisition Agreement and the consummation of certain of the transactions specifically contemplated thereby (as also set forth in the SLG Term Sheet), contingent, in part, on the potential agreements of the equity owners of SLG. Nevertheless, we currently believe that the current draft of the SLG Acquisition Agreement may be executed and delivered by the parties thereto in the first half of our current fiscal year.
The foregoing brief summary description of certain terms and provisions of (i) the SLG Term Sheet does not purport to be complete and is qualified in its entirety by reference to the full text of the SLG Term Sheet, a copy of which is filed as an exhibit to this Registration Statement as Exhibit 10.12, (ii) the SLG Term Sheet Amendments, a copy of each of which is filed as an exhibit to this Registration Statement as Exhibit 10.12a, Exhibit 10.12b, Exhibit 10.12c, and Exhibit 10.12d, and (iii) the SLG Management Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the SLG Term Sheet, a copy of which is filed as an exhibit to this Registration Statement as Exhibit 10.12e. Readers are encouraged to read those Exhibits in full for a more comprehensive understanding of the transaction contemplated by the SLG Term Sheet.
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 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. Nevertheless, as a result of our entry into the SLG Management Agreement with SLG, we still currently intend to consummate the transactions contemplated by the RCR Term Sheet in the first half of our current fiscal year. The RCR Term Sheet provides that, if, when, and as the transactions contemplated thereby are consummated, RCR will be issued shares of our Common Stock.
Further, as amended by the parties, initially effective as of November 29, 2023, and subsequently effective as of April 29, 2024, August 16, 2024, and December 31, 2024, the RCR Term Sheet expires on the soonest of (i) closing of the transactions contemplated thereby, (ii) April 11, 2025, if the transactions contemplated thereby have not closed by then, (iii) Cycurion’s termination thereof, and (iv) the mutual termination by all of the parties thereto. Notwithstanding anything to the contrary contained therein, Cycurion may terminate its obligations under the RCR Term Sheet and the transactions contemplated hereby for any reason or for no reason without any further obligations and without any liability at any time through and including September 30, 2025. As of the date of this prospectus, we do not currently expect to terminate the transactions contemplated by the RCR Term Sheet, as amended, and currently expect to close the transactions in the first half of our current fiscal year.
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 Registration Statement 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 Registration Statement 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 cyber security provider. As part of the asset purchase agreement, we acquired Multi-Dimensional Protection, Web Application Firewall 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 DDoS 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. We expect to move the production in quarter three of 2024. 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 Security Operations Center (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 SIEM SaaS platform dashboard.
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Our Growth Strategy
Our objectives are to expand our market leadership and management and to capture large market opportunities in cloud, AI and IT. We intend to accomplish these objectives as follows:
| ● | Continuing to acquire to platforms. We believe there is substantial opportunity to increase our platforms and have experienced growth due to expanded product capabilities and investments. We intend to continue to pursue new customers by adding capacity and leveraging our partnerships in the domestic and international markets. | |
| ● | Expanding platform coverage with our customers. We believe there is opportunity to develop and expand our relationships with existing customers by targeting additional platforms and geographies, pursuing platform expansions and expanding our coverage. | |
| ● | Investing in new technology platforms. We plan to continue to develop and broaden our exposure and security solutions, including expanding our coverage, by entering into new contracts focused on program management, cybersecurity, disaster recovery and business continuity. | |
| ● | Exploring acquisition opportunities. We intend to acquire other businesses, technology, AI platforms and/or development personnel to enhance the functionality of our platforms. |
Competitors
The IT and cybersecurity solutions market is fragmented, competitive and always evolving. We compete with a range of established and emerging cybersecurity software and services vendors, as well as organizations that choose to build their own solutions in-house. With new technologies and market entrants, we expect the competitive environment to remain intense going forward.
Our competitors include:
| ● | vulnerability management and assessment vendors; | |
| ● | diversified security software and services vendors; | |
| ● | endpoint security vendors with vulnerability assessment capabilities; | |
| ● | public cloud vendors and other companies that offer solutions for cloud security; and | |
| ● | providers of point solutions that compete with some of the features present in our solutions. |
The key competitive factors in our markets include:
| ● | ability to prepare for, detect and mitigate cybersecurity threats; | |
| ● | ability to respond to customer needs quickly; | |
| ● | ability for products to facilitate customer needs; | |
| ● | total cost and ease-of-use of our products; | |
| ● | brand awareness and reputation; and | |
| ● | ability to attract and retain employees. |
We believe that the principal competitive factors affecting the market for cybersecurity solutions include product functionality, depth of platform offerings, flexibility of delivery models, ease of deployment and use, integration capabilities such as open APIs and scalability, uptime and performance. Some of our competitors are more established and have greater name recognition, longer operating histories, more established customer relationships, larger marketing budgets and significantly greater resources than we do.
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Properties
We do not own any properties. Our principal executive office, which we rent, is located at 1640 Boro Place, Fourth Floor, McLean, Virginia 22102. We share our executive office with our subsidiaries, and it houses our management team, cybersecurity engineers, support staff, and sales and customer service teams.
Due to the nature of our business and the professional services we offer, a majority of our employees work on client sites or remotely. Our offices do not require any state or regulatory permits. We currently believe that our existing facilities are suitable, but we may need additional space in the future to accommodate our anticipated growth. We believe that such space will be available to us when required and on commercially reasonable terms.
Customers
We have over 40 customers across a variety of industries, including enterprise businesses, small and medium businesses, government agencies, healthcare and higher education. Our customers include, but are not limited to, AT&T, Smithsonian Museum, Federal Emergency Management Agency and Peraton Inc. During the years ended December 31, 2024 and 2023, purchases from our ten largest end-customers accounted for approximately 93% and 88% of our total revenue, respectively.
Backlog
We define backlog as contractually committed orders to be invoiced under our existing agreements that are not included in deferred revenue on our consolidated balance sheets. We expect the amount of backlog to change from period to period due to the timing of billings for our solutions and professional services. At December 31, 2024 and 2023, we had committed backlog of $16 million and $15 million, respectively. We expect the majority of the backlog at December 31, 2024 to be invoiced within the following 12 months.
Government Regulation
Our business and operations are subject to extensive federal and state governmental regulation and supervision. The following is a brief summary of certain statutes and rules and regulations that affect or may affect us. This summary is not intended to be an exhaustive description of the statutes or regulations applicable to our business.
In the ordinary course of our business, we process personal information. Accordingly, we are, or may become, subject to numerous data privacy and security obligations, including federal, state, local, and foreign laws, regulations, guidance, and industry standards related to data privacy and security. Such obligations may include, without limitation, the Federal Trade Commission Act, the California Consumer Privacy Act of 2018 as amended by the California Privacy Rights Act of 2020, or, collectively, the CCPA, the Colorado Privacy Act, Virginia’s Consumer Data Protection Act, the Connecticut Privacy Act, the Utah Consumer Privacy Act and similar U.S. state comprehensive privacy laws, the European Union’s General Data Protection Regulation 2016/679, or EU GDPR, the EU GDPR as it forms part of the United Kingdom law by virtue of section 3 of the European Union (Withdrawal) Act of 2018, or UK GDPR, and the ePrivacy Directive.
Human Capital
As of the date of this prospectus, we have 46 full-time employees and no part-time employees. None of our U.S. employees are represented by a labor union or covered by a collective bargaining agreement. Our senior leadership team has extensive experience with business process management, and while we have grown through a number of acquisitions, we have retained an experienced and cohesive leadership team.
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Our key human capital objectives are to attract, retain, engage, reward and develop our highly talented existing and future employees, while cultivating an inclusive workforce and culture to achieve exceptional business results. We are committed to fostering a community of talented individuals from all backgrounds and perspectives by implementing the following.
| ● | Compensation and benefits. We continually work to provide a competitive compensation and benefits program as this plays a key role in our ability to attract and retain a highly skilled workforce. In addition to salaries, these programs, which vary by country/region, include long-term equity incentive awards with certain vesting requirements, deferred compensation plans (which are offered to certain members of executive management), a 401(k) plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, paid volunteer time off, employee assistance program and tuition assistance. | |
| ● | Health, safety and wellness. The well-being of our employees is paramount to the continued success of our business. To this end, we are committed to each of our employees’ health, safety and wellness. We provide our employees with access to various health and wellness benefits designed to enable them and their family members to have affordable access to health, dental and vision insurance. | |
| ● | Talent development. We invest significant resources to develop the talent needed to remain a market-leading global supplier of broadband infrastructure. We offer numerous training opportunities on both technical and professional development topics. | |
| ● | Diversity and inclusion. We believe that maintaining a diverse and inclusive workforce is important to the success of our business. We encourage an environment where individuality is embraced regardless of age, gender, identity, race, sexual orientation, physical or mental ability, ethnicity and perspective and where each employee is accepted. |
Research and Development
Rapidly changing technologies, evolving industry standards, changing customer requirements, supply constraints and continuing developments in communications service offerings characterize the markets for our products. Our on-going ability to adapt to these changes and to develop new and enhanced products that meet or anticipate market demand is the main factor influencing our competitive position and our ability to grow.
We continue to invest substantial resources in research and development to enhance our platform offerings by developing new features, functionality, and applications. Our engineering expertise combines extensive security product development experience with individuals who possess deep cloud and user interface design backgrounds.
Our team is staffed by cybersecurity, cloud and data science experts who deliver exposure management intelligence, data science insights, alerts and security advisories. Our team has developed research tools to help improve efficiency and effectiveness in processes such as reverse engineering, code debugging, web app security and visibility into cloud-based tools.
Legal Proceedings
On July 29, 2024, Object3, LLC initiated an arbitration proceeding with the American Arbitration Association, styled Object3, LLC, Claimant, v. Cloudburst Security, LLC, Respondent, Case No. 01-24-0006-9906. The claimant made claims against Cloudburst for unpaid consulting services and associated costs, fees, and interest for the prior 12-month period in the aggregate amount of approximately $228,000. Defendant Cloudburst (a wholly-owned subsidiary) denies that it owes such amount to Claimant. The arbitration is in the early stages, and, as of the date of this prospectus, we are in negotiations to settle this case.
We know of no other material pending legal proceedings to which we or any of our subsidiaries are a party or to which any of our assets or properties, or the assets or properties of any of our subsidiaries, are subject and, to the best of our knowledge, no adverse legal activity is anticipated or threatened. In addition, we do not know of any such proceedings contemplated by any governmental authorities.
We know of no material proceedings in which any of our directors, officers, or affiliates, or any registered or beneficial stockholder is a party adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries.
Corporate Information
Our principal executive office is located at 1640 Boro Place, Fourth Floor, McLean, Virginia 22102, and our telephone number is (703) 854-1652. Our website address is www.cycurion.com. Axxum’s website address is www.axxumtech.com. Cloudburst’s website address is www.cloudburstsecurity.com. The SEC maintains an internet site that contains reports, proxy and information statements and other information that we file electronically with the SEC at www.sec.gov. The information contained on the websites referenced in this prospectus is not incorporated by reference into this prospectus.
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MANAGEMENT
Executive Officers and Directors
Each of our directors holds office until the next annual meeting of our stockholders or until his successor has been elected and qualified, or until his death, resignation, or removal. Our executive officers are appointed by, and serve at the pleasure of, our board of directors and hold office until death, resignation, or removal from office. The executive officers have been appointed based on their qualifications, including their prior leadership history with other companies, strategic vision, and potential contributions to our growth and profitability.
The following table sets forth certain information concerning our executive officers and directors as of the date of this prospectus.
| Name | Age | Position | ||
| Emmit McHenry | 81 | Chairman of the board of directors | ||
| Alvin McCoy, III | 56 | Chief Financial Officer | ||
| L. Kevin Kelly | 58 | Chief Executive Officer and Director | ||
| Peter R. Ginsberg (1)(2)(3) | 70 | Director | ||
| Reginald S. Bailey, Sr. (1)(2)(3) | 50 | Director | ||
| Kevin E. O’Brien (1)(2)(3) | 57 | Director | ||
| Irving Minnaker | 66 | Director |
| (1) | Member of the Audit Committee | |
| (2) | Member of the Compensation Committee | |
| (3) | Member of the Nominating and Governance Committee |
Emmit McHenry, Chairman of the Board of Directors
Emmit McHenry has served as our Chairman of the board of directors since October 4, 2017, and he also served as our Chief Executive Officer until January 25, 2023. Prior to joining the Company, Mr. McHenry was a founding Principal of Archura, LLC, in 2006, and held the positions of Chairman and Chief Executive Officer. Earlier in his career, Mr. McHenry founded and developed several other companies us, including NetCom Solutions International, Inc. and Network Solutions, Inc, the internet domain service provider. In addition, he has held management positions with International Business Machines, Connecticut General Life Insurance Company (now, CIGNA), Union Mutual, and Allstate Insurance Company, where he served in several positions, including Regional Vice President for the five northwestern states (Idaho, Oregon, Washington, Alaska, and Hawaii).
Mr. McHenry has held positions on the executive Committee for the Council on Competitiveness and the board of directors for James Martin Government Intelligence and Global Technology. Mr. McHenry obtained a Bachelor of Arts in Communications from the University of Denver and a Master of Arts in Communications from Northwestern University. Mr. McHenry also received an Honorary Doctor of Philosophy from Shaw University. Mr. McHenry is a Service-Disabled Veteran, having served in the United States Marine Corps. We believe that Mr. McHenry is qualified to serve on our board of directors because of his significant experience in corporate leadership and extensive knowledge Information Security.
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Alvin McCoy, III, Chief Financial Officer
Alvin McCoy, III has served as our Chief Financial Officer since October 4, 2017 and as a director through April 24, 2024. Prior to joining the Company, Mr. McCoy served as a Managing Partner at Quantum Capital Partners, LLC (“Quantum Capital Partners”), a merchant banking firm that specialized in corporate financial advisory, real estate advisory, and niche structured finance transactions from 2004. He specialized in advising middle market companies with strategic financial management and M&A activity. Prior to his role at Quantum Capital Partners, Mr. McCoy was the President and Chief Executive Officer of The McCoy Group, LLC, providing interim CFO services, capital raising and strategic advice to middle market and early-stage companies. Prior to this, Mr. McCoy served in several management positions at Merrill Lynch, Pierce, Fenner & Smith Incorporated’s Sales and Trading and Structured Finance groups from 1994 to 1999.
Mr. McCoy earned a Bachelor of Arts in Economics and History from Bucknell University and a Master of Business Administration from Duke University — The Fuqua School of Business. He was the Chairman of the board of directors for Lafayette Federal Credit Union, a $560 million financial institution that serves the Washington DC market, and also served on the board of directors of Potomac Business Services, LLC, a commercial real estate underwriting, lending, and servicing organization with over $5 billion in assets that represents financial institutions. Mr. McCoy served on the board of directors of the Bucknell Alumni Association and has been active in the Junior Achievement Mentoring Program.
L. Kevin Kelly, Chief Executive Officer
L. Kevin Kelly has served as our Chief Executive Officer and one if our directors since January 25, 2023. Mr. Kelly will continue to serve as our Chief Executive Officer. From March 2015, he was the Chief Executive of Halo Privacy, a Chicago, Illinois-based cyber security organization that focuses on digital security solutions for high-profile individuals and Fortune 500 companies. In 2014 and 2015, he was the Chief Executive Officer and President for the North American operations of Asia Pulp & Paper, an Asian-based pulp and paper entity that ranks as one of the largest in the world. Mr. Kelly’s career also included 16 years with Heidrick & Struggles International Incorporated, a world-wide premier executive search firm; during the last six years of his tenure ending in 2013, he served as its Chief Executive Officer. From January 2016 to April 2017, Mr. Kelly was based in the Greater Chicago Area, as an executive advisor to the BTS Group AB, a Swedish-headquartered global professional services firm. Mr. Kelly earned his Bachelor of Science from George Mason University and his Master of Business Administration from Duke University — The Fuqua School of Business.
Peter R. Ginsberg, Director
Peter R. Ginsberg has served as one of our independent directors since November 30, 2023. He is a practicing attorney with a wide range of experience and successfully represented Cycurion in one of its matters in 2020. In February of 2023, he co-founded Moskowitz Colson Ginsberg & Schulman, LLP, of which he is a partner in the firm. Previously, he was a partner with Moskowitz & Book, LLP from July of 2021 until the co-founding of his current firm. He was a partner of Michelman & Robinson, LLP from December 2020 through July 2021. Prior to that, from September 2018 through December 2020, he was a partner at Robinson Brog Leinwand Greene Genovese & Gluck, P.C. and then moved with a number of its attorneys to Sullivan & Worcester LLP (US). Earlier in his career, Mr. Ginsberg was an Assistant U.S. Attorney in the Eastern District of New York,
Mr. Ginsberg received his B.A. in history from the University of Pennsylvania in 1976, his MS in international relations from the London School of Economics in 1977; and his J.D. from Columbia Law School of Law in 1980. We believe that Mr. Ginsberg is qualified to serve on our board of directors because of his long history with Cycurion and the ability to provide broad-based legal advice to the board of directors.
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Reginald S. Bailey, Sr.
Reginald S. Bailey has served as one of our independent directors since February 14, 2025. He is a co-founder of, and from 2019 to present, is the Chief Operating Officer of Cysurance LLC, a Washington DC and New York-based provider of a fully integrated cyber incident program. In 2017, Mr. Bailey co-founded, and thereafter has been, and remains, the managing principal of BoxTop Growth Partners LLC, a Washington DC and New York-based boutique advisory firm. From 2012 to 2013, he served as Chief Operating Officer of Hofmann Brands and then from 2014 to 2017, he served as the Chief Executive Officer and a Board Member of Hofmann Brands, a Syracuse New York-based portfolio investment company to Hofmann Sausage Company LLC, Hofmann Hots, LLC, and The Handwich®. From 2008 to 2012, Mr. Bailey served as the Managing Partner of Phoenix International Management Group, LLC, a Washington DC-based privately owned consulting practice that specialized in global network infrastructure and business operations solutions. From 2000 to 2008 he served as the Managing Partner, President, and Chief Operating Officer of Worldwide Network Services, LLC, a Washington DC-based SBA-certified defense contractor that he co-founded and which specialized in the engineering, design, installation, and maintenance of private networks within hazardous, remote, or geographically challenged environments worldwide.
Mr. Bailey earned a Bachelor of Science in Business Management from North Carolina Agricultural & Technical State University in 1995. We believe that Mr. Bailey is qualified to serve on our board of directors because of his broad experience in the cyber industry and his investment company advisory services.
Kevin E. O’Brien
Kevin E. O’Brien has served as one of our independent directors since February 14, 2025. In 2000, he founded and, through its acquisition by Revere Data, LLC in 2002, served as the Chief Executive Officer of Gradience, Inc., a San Francisco, California-based provider of cloud-based services and software for on-demand marketing and financial services applications. From that acquisition in 2002 through 2013, Mr. O’Brien served as the President and Chief Executive Officer of and a Director of Revere Data, LLC, a San Francisco, California-based provider of specialty data, analytics, and index services to Fortune 500 and defense customers. Revere Data was acquired by FactSet Research Systems, Inc. in 2013, where, for the succeeding three years, he served as its Regional Director for the Americas. FactSet is a San Francisco, New York, and London-based provider of enterprise class software, analytics, and services to 126,000 in 24 countries. From 2016 to the 2024, he has been employed by Orbital Insight, Inc., a Palo Alto, California- based Geospacial Software and Analytics Company that merges artificial intelligence and innovations to solve the world’s biggest business, national security, and societal problems as scale. During the first four years of his employment, he served as Orbital Insight’s Chief Operating Officer and, thereafter, from 2020 to 2024 as its Chief Executive Officer. From February 2024 to present, he serves as President at Chainalysis Government Solutions.
Mr. O’Brien received his B.B.A. in Management Information Systems from James Madison University in 1987 and his MBA from EDHEC Business School (Paris, France) in innovation, strategy, and information technology in 1994. We believe that Mr. O’Brien is qualified to serve on our board of directors because of his broad experience in the technology industry.
Irving Minnaker
Irving Minnaker has served as one of our independent directors since April 9, 2025. Mr. Minnaker has served as one of Cycurion Sub’s independent directors from April 24, 2024 until the closing of the de-SPAC transaction on February 14, 2025. Mr. Minnaker served as a Senior Vice President of Retail Sales and Trading at Lehman Brothers from January 1986 to December 1993. Additionally, he served as Senior Vice President of Retail Sales at Prudential Financial from January 1993 to December 1996, and Head of International Sales for Eco Building Products, Inc. from October 2010 to November 2014. Since December 2014, he has served as an Executive Vice President at Apollo Capital Group, Inc. Mr. Minnaker is also an independent director of Endexx Corporation since September 2021; Chemical Technologies Holding Corporation; and Comprehensive Business Developers Inc. Mr. Minnaker earned a Bachelor of Arts in Finance from the University of Miami in 1980. We believe that Mr. Minnaker is qualified to recommence service on our board of directors because of his finance and sales background.
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Board Composition
Our business and affairs are organized under the direction of our board of directors. The board of directors will meet on a regular basis and additionally as required. In accordance with the terms of the amended and restated certificate of incorporation, the board of directors may establish the authorized number of directors from time to time by resolution. Our board of directors currently consists of six directors.
Director Independence
Nasdaq requires that a majority of our board of directors must be composed of “independent directors,” which is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which in the opinion of the company’s board of directors would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Messrs. Ginsberg, Bailey, Sr., O’Brien, and Minnaker are our independent directors.
Our independent directors will have regularly scheduled meetings at which only independent directors are present. Any affiliated transactions will be on terms that our board of directors believes are no less favorable to us than could be obtained from independent parties. Our board of directors will review and approve all affiliated transactions with any interested director abstaining from such review and approval.
Board of Directors Oversight of Risk
One of the key functions of our board of directors is to conduct informed oversight of our risk management process. The board of directors does not anticipate having a standing risk management committee, but rather administers this oversight function directly through the board of directors as a whole, as well as through various standing committees of the board of directors that address risks inherent in their respective areas of oversight. In particular, the board of directors will be responsible for monitoring and assessing strategic risk exposure and the Audit Committee will have the responsibility to consider and discuss the Company’s major financial risk exposures and the steps our management will take to monitor and control such exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee also monitors compliance with legal and regulatory requirements. The Compensation Committee assesses and monitors whether our compensation plans, policies, and programs comply with applicable legal and regulatory requirements.
Committees of the Board of Directors
The board of directors has formed the committees described below. Each of the committees operates pursuant to a written charter adopted by the committee or our board of directors. Each charter sets forth the committee’s specific functions and responsibilities. The board of directors may from time to time establish other committees.
Audit Committee
The audit committee of the board of directors (the “Audit Committee”) assists the board of directors with its oversight of the integrity of the financial statements; the compliance with legal and regulatory requirements; the qualifications, independence and performance of the independent registered public accounting firm; the design and implementation of the financial risk assessment and risk management. Among other things, the Audit Committee is responsible for reviewing and discussing with management the adequacy and effectiveness of disclosure controls and procedures. The Audit Committee also discusses with management and independent registered public accounting firm the annual audit plan and scope of audit activities, scope, and timing of the annual audit of the financial statements, and the results of the audit, quarterly reviews of the financial statements and, as appropriate, initiates inquiries into certain aspects of the financial affairs.
The Audit Committee is responsible for establishing and overseeing procedures for the receipt, retention, and treatment of any complaints regarding accounting, internal accounting controls or auditing matters, as well as for the confidential and anonymous submissions by employees of concerns regarding questionable accounting or auditing matters. In addition, the Audit Committee has direct responsibility for the appointment, compensation, retention, and oversight of the work of the independent registered public accounting firm. The Audit Committee has sole authority to approve the hiring and discharging of the independent registered public accounting firm, all audit engagement terms and fees and all permissible non-audit engagements with the independent auditor. The Audit Committee reviews and oversees all related party transactions in accordance with policies and procedures.
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The Audit Committee is comprised of three members: Messrs. Ginsberg, Bailey, Sr., and O’Brien. Each member of the Audit Committee meets the requirements for independence under the current Nasdaq and SEC rules and regulations, and each member is financially literate. In addition, the board of directors has determined that Mr. O’Brien, who is the chairman of the Audit Committee, is an “audit committee financial expert” as defined under the Securities Act. Please see a description of Mr. O’Brien’s biography in this section “Management – Executive Officers and Directors” above.
Compensation Committee
The compensation committee of board of directors (the “Compensation Committee”) assists the board of directors with its oversight of the forms and amount of compensation for executive officers, the administration of equity and non-equity incentive plans for employees and other service providers and certain other matters related to compensation programs. The Compensation Committee, among other responsibilities, evaluates the performance of our Chief Executive Officer and, in consultation with the Chief Executive Officer, evaluates the performance of other executive officers.
The Compensation Committee is comprised of three members: Messrs. Ginsberg, Bailey, Sr., and O’Brien. Mr. Ginsberg is the chairman of the Compensation Committee. The composition of the Compensation Committee meets the requirements for independence under the current Nasdaq and SEC rules and regulations. Each member of the Compensation Committee is a “non-employee” director within the meaning of the Exchange Act.
Nominating and Governance Committee
The nominating and corporate governance committee of the board of directors (the “Nominating and Corporate Governance Committee”) assists the board of directors with its oversight of and identification of individuals qualified to become members of the board of directors, consistent with criteria approved by the board of directors, and selects, or recommends that the board of directors selects, director nominees; develops and recommends to the board of directors a set of corporate governance guidelines; oversees the evaluation of the board of directors; and reviews the environmental, safety, sustainability, and corporate social responsibility policies, objectives, and practices on a periodic basis.
The Nominating and Corporate Governance Committee is comprised of three members: Messrs. Ginsberg, Bailey, Sr., and O’Brien. Mr. O’Brien is the chairman of the Nominating and Corporate Governance Committee. The composition of the Nominating and Corporate Governance Committee meets the requirements for independence under the current Nasdaq and SEC rules and regulations.
Significant Employees
We do not employ any non-officers who are expected to make a significant contribution to our business.
Family Relationships
There are no family relationships among our directors and executive officers.
Code of Ethics
We have adopted a code of ethics, and we rely on our board of directors to review related party transactions on an ongoing basis to prevent conflicts of interest. The board of directors reviews a transaction in light of the affiliations of the director, officer or employee and the affiliations of such person’s immediate family. Transactions are presented to the board of directors for approval before they are entered into or, if this is not possible, for ratification after the transaction has occurred. If the board of directors finds that a conflict of interest exists, then it will determine the appropriate remedial action, if any. The board of directors approves or ratifies a transaction if it determines that the transaction is consistent with our best interests.
A copy of our Code of Ethics is filed as Exhibit 14.1 to the Registration Statement of which this Prospectus is a part.
Insider Trading Policy
We have adopted an Insider Trading Policy governing the purchase, sale and other dispositions of our securities by directors, officers and employees, that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations.
A copy of our Insider Trading Policy is filed as Exhibit 19.1 to the Registration Statement of which this Prospectus is a part.
Director and Officer Liability and Indemnification
We have purchased directors’ and officers’ liability insurance and have entered into indemnification agreements with each of directors and executive officers. The indemnification agreements and our amended and restated certificate of incorporation and amended and restated bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.
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EXECUTIVE AND DIRECTOR COMPENSATION
The following table sets forth certain compensation awarded to, earned by, or paid to the following “named executive officers,” which term is defined as follows:
| (a) | all individuals serving as one of our principal executive officers during our fiscal year ended December 31, 2024; and | |
| (b) | each of our two other most highly compensated executive officers who were serving at the end of 2024. |
| Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||
| L. Kevin Kelly* | 2024 | $ | 24,681 | — | — | — | $ | 24,681 | ||||||||||||||||
| Chief Executive Officer | 2023 | $ | 113,120 | — | — | — | $ | 113,120 | ||||||||||||||||
| Alvin McCoy, III | 2024 | $ | 114,900 | — | — | — | $ | 114,900 | ||||||||||||||||
| Chief Financial Officer | 2023 | $ | 114,900 | — | — | — | $ | 114,900 | ||||||||||||||||
| William Singleton, | 2024 | $ | 179,262 | — | — | — | $ | 179,262 | ||||||||||||||||
| Cyber Security Lead | 2023 | $ | 177,293 | — | — | — | $ | 177,293 | ||||||||||||||||
| Kathy Mostafa, | 2024 | $ | 151,618 | — | — | — | $ | 151,618 | ||||||||||||||||
| Cyber Security Engineer | 2023 | $ | 151,618 | — | — | — | $ | 151,618 | ||||||||||||||||
*Mr. Emmit McHenry resigned as our Chief Executive Officer on January 25, 2023, the date on which Mr. Kelly became our Chief Executive Officer.
Outstanding Equity Awards at Fiscal Year-End
We did not have any option awards or unvested stock awards outstanding as of December 31, 2024.
Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide retirement or similar benefits for our directors or executive officers.
Resignation, Retirement, Other Termination, or Change in Control Arrangements
Other than as disclosed below, we have no contract, agreement, plan, or arrangement, whether written or unwritten, that provides for payments to our directors or executive officers at, following, or in connection with the resignation, retirement, or other termination of our directors or executive officers, or a change in control of our Company or a change in our directors’ or executive officers’ responsibilities following a change in control.
Executive Officer Compensation
Employment Agreement with L. Kevin Kelly
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.
Employment Agreement with Alvin McCoy, III
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.
The resignation, termination and change of control arrangements are filed as Exhibits 10.15 and 10.16 to this Registration Statement of which this Prospectus forms a part.
Director Compensation
We have four non-employee, independent directors. For the fiscal year ended December 31, 2024, we did not pay or accrue any fees to our non-employee directors, nor did we grant them any stock awards, option awards, non-equity incentive plan compensation, nonqualified deferred compensation, or any other compensation. No director has received compensation for their services as directors.
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BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth beneficial ownership of the Company’s Common Stock by:
| ● | each person known to be the beneficial owner of more than 5% of our outstanding Common Stock; | |
| ● | each of our executive officers and directors; and | |
| ● | all of our current executive officers and directors as a group. |
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she, or it possesses sole or shared voting or investment power over that security. Under those rules, beneficial ownership includes securities that the individual or entity has the right to acquire, such as through the exercise of warrants or stock options or the vesting of restricted stock units, within 60 days. Shares subject to warrants or options that are currently exercisable or exercisable within 60 days or subject to restricted stock units that vest within 60 days are considered outstanding and beneficially owned by the person holding such warrants, options, or restricted stock units for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
Except as noted by footnote, and subject to community property laws where applicable, based on the information provided to the Company, the persons and entities named in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them. Unless otherwise indicated, the business address of each beneficial owner listed in the table below is c/o Cycurion, Inc., 1640 Boro Place, Fourth Floor, McLean, Virginia 22102.
The beneficial ownership of our Common Stock is based on 31,443,906 shares of Common Stock issued and outstanding.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all of the shares shown to be beneficially owned by them.
| Name and Address of Beneficial Owner | Number of Shares of Common Stock(1) | Percentage of Common Stock(2) | ||||||
| Directors and Executive Officers | ||||||||
| Emmit McHenry | 1,634,097 | 5.20 | % | |||||
| Alvin McCoy, III | 1,225,572 | 3.90 | % | |||||
| L. Kevin Kelly | 0 | 0.00 | % | |||||
| Peter R. Ginsberg | 0 | 0.00 | % | |||||
| Kevin E. O’Brien | 0 | 0.00 | % | |||||
| Reginald S. Bailey, Sr. | 0 | 0.00 | % | |||||
| Irving Minnaker | 0 | 0.00 | % | |||||
| All directors and executive officers as a group (6 individuals) | 2,859,669 | 9.10 | % | |||||
| Other 5% beneficial owners | ||||||||
| N/A | - | - | % | |||||
| (1) | Unless otherwise noted, each person or group identified possesses sole voting and investment power with respect to such shares. | |
| (2) | Applicable percentage of ownership is based upon 31,443,906 shares of Common Stock issued and outstanding as of May 13, 2025. |
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SELLING STOCKHOLDER
The securities offered under this prospectus may be offered from time to time by the Selling Stockholder named below or by any of its respective pledgees, donees, transferees or other successors-in-interest. As used in this prospectus, the term “Selling Stockholder” includes the Selling Stockholder identified below and any donees, pledgees, transferees or other successors-in-interest selling shares received after the date of this prospectus from the Selling Stockholder as a gift, pledge or other non-sale related transfer. The Selling Stockholder such acquired the shares of our Common Stock being offered under this prospectus directly from us. We issued the securities to the Selling Stockholder in reliance on an exemption from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act and Rule 506 promulgated thereunder.
The following table sets forth the names of the Selling Stockholder, the aggregate number of Common Stock and/or warrants beneficially owned prior to the sale of the securities offered hereby by the Selling Stockholder, the aggregate number of Common Stock and/or warrants that the Selling Stockholder may offer pursuant to this prospectus, and the number of Common Stock and/or warrants beneficially owned by the Selling Stockholder after the sale of the securities offered hereby.
The following table is prepared based on information provided to us by the Selling Stockholder. The beneficial ownership of our Common Stock is based on 31,443,906 shares of Common Stock issued and outstanding.
| Name of Selling | Shares of Common Stock Beneficially Owned Prior to the Offering | Number of Shares to be Offered Pursuant to this | Shares of Common Stock Beneficially Owned After Completion of the Offering(1) | ||||||||||||||||
| Stockholder(2) | Number | Percentage(3) | Prospectus(4) | Number | Percentage | ||||||||||||||
| Yield Point NY LLC (5) (6) | 4,500,000 | 14.31 | % | 37,833,333 | 0 | 0 | % | ||||||||||||
| (1) | Assumes all securities being offered under this prospectus are sold, although the Selling Stockholder is under no obligation to sell any shares at this time. | |
| (2) | Unless otherwise noted, each person or group identified possesses sole voting and investment power with respect to such shares. | |
| (3) | Applicable percentage of ownership is based upon 31,443,906 shares of Common Stock issued and outstanding as of May 13, 2025. | |
| (4) | This registration statement of which this prospectus forms a part relates to the resale of an aggregate of 37,833,333 shares of Common Stock, consisting of (i) 33,333,333 shares, or $15 million in shares of Common Stock, pursuant to the Equity Purchase Agreement, which number of shares has been calculated based on the closing price of our shares of Common Stock on May 6, 2025 of $0.45 per share; and (ii) 4,500,000 shares of Commitment Stock. | |
| (5) | In accordance with Rule 13d-3(d) under the Exchange Act, we have excluded from the number of shares beneficially owned prior to the offering all of the shares that the Selling Stockholder may be required to purchase under the Equity Purchase Agreement, because the issuance of such shares is subject to conditions contained in the Equity Purchase Agreement, the satisfaction of which are entirely outside of the Selling Stockholder’s control, including the registration statement that includes this prospectus becoming and remaining effective. Furthermore, the purchase of shares of Common Stock are subject to certain agreed upon maximum amount limitations set forth in the Equity Purchase Agreement. Also, the Equity Purchase Agreement prohibits us from issuing and selling any shares of Common Stock to the Selling Stockholder to the extent such shares, when aggregated with all other shares of Common Stock then beneficially owned by the Selling Stockholder, would cause the Selling Stockholder’s beneficial ownership of our Common Stock to exceed the Beneficial Ownership Limitation. | |
| (6) | The address for this person is 23 Tamy Road, Spring Valley, NY 10977. The individual who has voting and disposition control over these shares is Ari Kluger. |
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the compensation arrangements with directors and executive officers described under the sections titled “Executive Compensation” and “Management,” the following is a description of each transaction as of May 13, 2025, and each currently proposed transaction, in which:
| ● | we have been or are to be a participant; | |
| ● | the amount involved exceeds or will exceed $120,000; and | |
| ● | any of our directors, executive officers, or beneficial holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals (other than tenants or employees), had or will have a direct or indirect material interest. |
Code of Ethics; Audit Committee Charter
We have adopted a Code of Ethics, and we rely on our board of directors to review related party transactions on an ongoing basis to prevent conflicts of interest. Our board of directors reviews a transaction in light of the affiliations of the director, officer or employee and the affiliations of such person’s immediate family. Transactions are presented to the board of directors for approval before they are entered into or, if this is not possible, for ratification after the transaction has occurred. If the board of directors finds that a conflict of interest exists, then it will determine the appropriate remedial action, if any. The board of directors approves or ratifies a transaction if it determines that the transaction is consistent with our best interests.
Related Party Transactions
On September 20, 2024, we entered into a promissory note with Western Acquisition Ventures Sponsor LLC (the “Sponsor”) for $230,000 (the “Promissory Note”), pursuant to which we can borrow up to an aggregate principal amount of $230,000. That promissory note, with an interest rate of 10% per annum, is payable upon the sooner of the consummation of the Business Combination with us. As of December 31, 2024, we had borrowed the full $230,000 and nothing was available for withdrawal. We deemed the interest on the loan to be immaterial and as such did not record any interest relating to the promissory note as of December 31, 2024.
Personal guarantees were entered by Emmit McHenry, Kurt McHenry, and Alvin McCoy, III, as officers and stockholders of Cycurion Sub in support of a loan from Main Street Bank, of which approximately $4 million is owed as of May 13, 2025.
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 $119,279 and $144,820 as of December 31, 2024 and 2023, respectively.
Notes payable
On April 26, 2023, we issued to a director a $55,000 promissory note for $50,000 in gross proceeds.
On April 26, 2023, we issued to a director a $27,500 promissory note for $25,000 in gross proceeds.
On April 26, 2023, we issued to a director a $20,900 promissory note for $19,000 in gross proceeds.
On June 22, 2023, we issued to a director a $82,500 promissory note for $75,000 in gross proceeds.
On June 22, 2023, we issued to a director a $165,000 promissory note for $150,000 in gross proceeds.
On July 6, 2023, we issued to a director a $55,000 promissory note for $50,000 in gross proceeds.
On July 21, 2023, we issued to a director a $181,500 promissory note for $165,000 in gross proceeds.
On August 24, 2024, we issued a promissory note in the amount of $20,250 for $15,000 in proceeds to an officer of the company.
During the year ended December 31, 2024 and 2023, we record amortization of debt discount of $2,188 and $53,400, respectively.
As of December 31, 2024 and 2023, we had “due to related party” balances of $148,088 and $587,400, respectively.
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Promissory Notes with Western
On July 27, 2023, Western entered into a promissory note with Cycurion Sub for $200,000, pursuant to which Western can borrow up to an aggregate principal amount of $200,000. The Promissory Note, with an interest rate of 5% per annum is payable upon the sooner of the consummation of the Business Combination with Cycurion Sub, or January 11, 2024. If Western defaulted on the loan, or the business combination did not occur, Western will owe all principal and accrued interest thereto to Cycurion Sub. Cycurion Sub may not seek recourse against any money held in the Trust Account established pursuant the Borrower’s investment management trust agreement, dated as of January 11, 2022, as amended, by and between Western and Equiniti Trust Company, nor any of Western’s directors, officers, and any affiliate. As of September 30, 2024, Western has borrowed $554,269 and accrued approximately $21,906 in interest. As of December 31, 2023, Western has borrowed $200,000 and accrued approximately $4,222 in interest. On January 26, 2024, Western and Cycurion Sub amended the Promissory Note to increase its amount to $300,000 and extend the maturity date to the earlier of the consummation of the Business Combination or April 11, 2024. On April 4, 2024, Western and Cycurion Sub amended the Promissory Note to extend the maturity date to the earlier of the consummation of the Business Combination or July 11, 2024. On May 3, 2024, Western and Cycurion Sub amended the Promissory Note to increase its principal amount to $554,269. On July 2, 2024, Western and Cycurion Sub amended the Promissory Note to extend the maturity date of this note to the earlier of the consummation of the Business Combination or January 11, 2025. On October 9, 2024, Western and Cycurion Sub amended the Promissory Note to extend the maturity date of this note to the earlier of the consummation of the Business Combination or January 11, 2025. On January 8, 2025, Western and Cycurion Sub amended the Promissory Note to extend the maturity date of this note to the earlier of the consummation of the Business Combination or April 11, 2025. On October 9, 2024, Western and Cycurion Sub amended the Promissory Note to extend the maturity date of this note to the earlier of the consummation of the Business Combination or January 11, 2025. On January 8, 2025, Western and Cycurion Sub amended the Promissory Note to extend the maturity date of this note to the earlier of the consummation of the Business Combination or April 11, 2025.
On September 24, 2024, Cycurion Sub entered into a promissory note with Western for a principal amount of $210,555.56, pursuant to which Cycurion Sub can borrow up to an aggregate principal amount of $185,000.00. 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 Sub, or six months following the date of the promissory note. If Western defaults on the loan, or the business combination does not occur, Western will owe all principal and accrued interest thereto to Western.
On January 6, 2025, Cycurion Sub entered into a promissory note with Western for a principal amount of $55,555.56, pursuant to which Cycurion Sub can borrow up to an aggregate principal amount of $50,000.00. 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 Sub, or six months following the date of the promissory note. If Western defaults on the loan, or the business combination does not occur, Western will owe all principal and accrued interest thereto to Western.
On January 24, 2025, Cycurion Sub entered into a promissory note with Western for a principal amount of $327,777.78, pursuant to which Cycurion Sub can borrow up to an aggregate principal amount of $295,000.00. 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 Sub, or six months following the date of the promissory note. If Western defaults on the loan, or the business combination does not occur, Western will owe all principal and accrued interest thereto to Western.
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Founder Shares
On June 9, 2021, the Sponsor acquired 4,312,500 shares of common stock of Western (the “Founder Shares”) for an aggregate purchase price of $25,000. On June 16, 2021, the Sponsor transferred 1,207,500 of the Founder Shares to A.G.P./Alliance Global Partners (“A.G.P.”) for $7,000. On November 22, 2021, Western effected a 2-for-3 reverse stock split of its common stock, and A.G.P. sold back to the Sponsor 55,000 Founder Shares for $478, such that the Sponsor owns an aggregate of 2,125,000 Founder Shares, and A.G.P. owns 750,000 Founder Shares. Up to 375,000 Founder Shares (including the Founder Shares transferred to A.G.P.) were subject to forfeiture by the subscribers in case the underwriters did not fully exercise their over-allotment option. Since the underwriters exercised the overallotment option in full on January 14, 2022, none of the Founder Shares are subject to forfeiture any longer.
The Sponsor, officers and directors have agreed, subject to limited exceptions, not to transfer, assign, or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the Business Combination or (B) subsequent to the Business Combination, (x) if the last sale price of the common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination, or (y) the date on which Western completes a liquidation, merger, capital stock exchange, or other similar transaction that results in all of Western’s stockholders having the right to exchange their shares of common stock for cash, securities, or other property.
PIPE Subscription Agreement
On January 11, 2022, concurrently with the completion of the Business Combination, pursuant to the PIPE Subscription Agreement for an aggregate purchase price of $3,760,000, Western issued an aggregate of 376,000 shares of our Common Stock and PIPE Warrants to purchase 376,000 shares of the Company’s Common Stock.
The PIPE Subscription Agreement contains registration rights, pursuant to which we must use reasonable best efforts to file with the SEC a registration statement registering the resale of shares of our Common Stock. We are filing the registration statement of which this prospectus is a part, in part, to satisfy that contractual requirement.
The PIPE Warrants are exercisable until February 14, 2030 (five years after the completion of the Business Combination) at an exercise price of $11.50 per share, subject to adjustment as set forth in the PIPE Warrants for stock splits, stock dividends, recapitalizations and similar customary adjustments. A.G.P. may exercise each PIPE Warrant on a cashless basis if the shares underlying the PIPE Warrants are not then registered for resale pursuant to an effective registration statement.
Our Common Stock and PIPE Warrants to purchase our Common Stock issued pursuant to the PIPE Subscription Agreement were not registered under the Securities Act, and were issued in reliance upon the exemption provided under Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.
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 500,000 shares of Common Stock at an exercise price of $5.00 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 500,000 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.
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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 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 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 5,000,000 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 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 Preferred Stock outstanding as of the closing is converted into shares of our Common Stock.
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. 250,000 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 250,000 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 (the “Seward & Kissel Convertible Note”) that is convertible into such number of shares equal to the Legal Fees.
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 78,803 shares.
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Lock-up Agreements and Leak-out Agreements
Series A Convertible Preferred Stock
The holders of our Series A Convertible Preferred Stock (and the underlying securities for which the holders have conversion rights) are subject to a one-year lock-up of their securities that commenced on the closing of the Business Combination, subject to release from the lock-up after six months from the closing if, thereafter, the daily trading value of shares of our Common Stock is greater than $150,000 for 30 consecutive trading days and the 30-day VWAP for shares of our Common Stock is greater than $5.00.
Series B Convertible Preferred Stock
The holders of our Series B Convertible Preferred Stock (and the underlying securities for which the holders have conversion rights) are subject to different terms depending on the relevant agreements. 355 shares of Cycurion Series B Convertible Preferred Stock following the Business Combination were converted at the closing of the Business Combination for 710,000 shares of our Common Stock following the Business Combination). Holders are subject to a nine-month leak-out that commenced on the closing of the Business Combination, such that aggregate sales cannot exceed 40% of the daily trading volume of shares of our Common Stock following the Business Combination.
Series C Convertible Preferred Stock
The holders of our Series C Convertible Preferred Stock (and the underlying securities for which the holders have conversion rights) are subject to a one-year lock-up of their securities that commenced on the closing of the Business Combination, subject to release from the lock-up after six months from the closing if, thereafter, the daily trading value of shares of our Common Stock is greater than $150,000 for 30 consecutive trading days and the 30-day VWAP for shares of our Common Stock is greater than $5.00.
Series D Convertible Preferred Stock
The holders of our Series D Convertible Preferred Stock (and the underlying securities for which the holders have conversion rights) are subject to a nine-month leak-out that commenced on the closing of the Business Combination, such that aggregate sales cannot exceed 10% of the daily trading volume of shares of our Common Stock following the Business Combination. However, the leak-out provisions shall terminate prior to the expiry of the nine-month period in the event that the holders of the Series D Convertible Preferred Stock have converted all of such preferred stock and have sold all of the converted shares into the public markets.
A.G.P.
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 Preferred Stock is converted into shares of the our Common Stock and (ii) three months from 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 Preferred Stock outstanding as of the closing is converted into shares of our Common Stock.
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 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 Preferred Stock outstanding as of the closing is converted into shares of our Common Stock.
Seward & Kissel LLP
The holder of the 250,000 shares of Common Stock issued in upon the closing of the Business Combination was subject to a 20-day lock-up that commenced on February 14, 2025, which was the closing of the Business Combination. The shares of Common Stock underlying the Seward & Kissel Convertible Note are not subject to a lock-up period.
Baker & Hostetler LLP
The holder of 78,803 shares of Common Stock is subject to a one-year lock-up of its securities that commenced on February 14, 2025, which was the closing of the Business Combination.
Founder Shares
The holder of these securities is subject to a one-year lock-up of its securities that commenced on February 14, 2025, which was the closing of the Business Combination.
PIPE Shares
The holder of these securities is subject to a 30-day lock-up of its securities that commenced on February 14, 2025, which was the closing of the Business Combination.
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DESCRIPTION OF OUR SECURITIES
The following is a description of our securities of as set forth in certain provisions of our Second Amended and Restated Certificate of Incorporation (the “Charter”) and our Amended and Restated Bylaws (the “Bylaws”), and applicable forms of warrant, each previously filed with the SEC and incorporated by reference as an exhibit to this registration statement to which this prospectus forms a part. This summary does not purport to be complete and is qualified in its entirety by the full text of the Charter, Bylaws, applicable forms of warrant, and the applicable provisions of the Delaware General Corporation Law (the “DGCL”). We encourage you to read our Charter, Bylaws, applicable forms of warrant, and the applicable portions of the DGCL carefully.
Authorized and Outstanding Stock
The Charter authorizes the issuance of an aggregate of 100 million shares of Common Stock and 20 million shares of preferred stock, $0.0001 par value per share. The shares of Common Stock to be issued in the Business Combination will be duly authorized, validly issued, fully paid and non-assessable. Our purpose is to engage in any lawful act or activity for which corporations may be organized under the DGCL. Unless our board of directors determines otherwise, we will issue all shares of our capital stock in uncertificated form.
We have 31,443,906 shares of Common Stock issued and outstanding.
Common Stock
Voting Rights
Each holder of our Common Stock is entitled to one vote for each share held of record by such holder on all matters on which stockholders generally are entitled to vote, as provide by the Charter. The holders of Common Stock do not have cumulative voting rights in the election of directors. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast present in person or represented by proxy, unless otherwise specified by law, the Charter.
Dividend Right
Subject to preferences that may be applicable to any outstanding preferred stock, the holders of shares of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board out of funds legally available therefor.
Rights upon Liquidation, Dissolution and Winding-Up
In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the stockholders are entitled to share ratably in all assets remaining after payment of our debts and other liabilities, subject to prior distribution rights of preferred stock or any class or series of stock having a preference over the Common Stock, then outstanding, if any.
Preemptive or Other Rights
The stockholders have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock. The rights, preferences, and privileges of stockholders will be subject to those of the holders of any shares of the preferred stock that we may issue in the future.
Preferred Stock
The Charter 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 Charter, 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.
We 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.
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Series A Convertible Preferred Stock
The material attributes of the shares of our Series A Convertible Preferred Stock to be issued at the closing of the Business Combination are:
Voting Rights: Holders of shares of our Series A 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 A Convertible Preferred Stock.
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 $12.12 per-share Stated Value of the Series A 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 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-25.6938 shares of Common Stock, subject to adjustment.
Liquidation Preference: Holders of shares of our Series A 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, 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 our assets are insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of Cycurion’s 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, we 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.
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Series B Convertible Preferred Stock
The material attributes of the shares of our Series B Convertible Preferred Stock to be issued at the closing of the Business Combination are:
Voting Rights: Holders of our 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 Cycurion’s Series B Convertible Preferred Stock.
Dividend Rights: Holders of shares 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.
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 Cycurion’s 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.
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Series C Convertible Preferred Stock
We have authorized 5,000 shares of our Series C Convertible Preferred Stock, par value $0.0001 per share (our “Series C Stock”).
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 613 shares of Common Stock for every one share of our Series C Convertible Preferred Stock, or an aggregate of 2,972,320 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 Cycurion’s 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.
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Series D Convertible Preferred Stock
The material attributes of the shares of our Series D Convertible Preferred Stock to be issued at the closing of the Business Combination are:
Voting Rights: Holders of 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 our Series D 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 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 our Series D Convertible Preferred Stock, upon any liquidation, dissolution, or winding-up, whether voluntary or involuntary, shall be entitled to receive out of our assets, whether capital or surplus, 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 our assets 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, we will 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 Series D 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 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.
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Warrants
We have warrants outstanding to purchase an aggregate of 11,876,000 shares of Common Stock, which amount consists of the PIPE Warrants and Public Warrants.
If the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise of each whole warrant will be increased in proportion to such increase in the outstanding shares of Common Stock.
The warrant holders, solely by virtue of holding warrants, do not have the rights or privileges of holders of Common Stock or any voting rights until they exercise their warrants and receive shares of Common Stock.
PIPE Warrants and Public Warrants
Each outstanding whole PIPE Warrant and Public Warrant represents the right to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustment as discussed in this prospectus, at any time commencing 30 days after the Business Combination and ending five years after the Business Combination.
The PIPE Warrants, as well as any warrants underlying additional units issued to 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.
We may call the Public Warrants for redemption (excluding any warrants underlying additional units issued to the Sponsor, our officers, directors or their affiliates in payment of working capital loans made to us), in whole and not in part, at a price of $0.01 per Public Warrant,
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; and | |
| ● | if, and only if, the reported last sale price of the Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the applicable warrants become exercisable and ending three business days before we send the notice of redemption to the warrant holders. |
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 in 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 that 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 ten 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.
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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.
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.
Pre-Funded Warrant
The 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 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 Pre-Funded Warrant is $0.0001. The Pre-Funded Warrant is immediately exercisable upon issuance and may be exercised at any time until the Pre-Funded Warrant is exercised in full.
A holder of the Pre-Funded Warrant may not exercise any portion of the warrants or 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 Pre-Funded Warrant.
In lieu of making the cash payment otherwise contemplated to be made to us upon exercise of the 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 Pre-Funded Warrant.
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Our Transfer Agent and Warrant Agent
Our transfer agent and warrant agent is Equiniti Trust Company, LLC.
Anti-Takeover Effects of the Charter and Bylaws and Certain Provisions of Delaware Law
The Charter and the DGCL contain provisions summarized below that are intended to enhance the likelihood of continuity and stability in the composition of our board of directors. These provisions are intended to avoid costly takeover battles, reduce our vulnerability to a hostile or abusive change of control and enhance the ability of our board of directors to maximize stockholder value in connection with any unsolicited offer to acquire us. However, these provisions may have an anti-takeover effect and may delay, deter or prevent a merger or acquisition of us by means of a tender offer, a proxy contest or other takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over the prevailing market price for shares of Common Stock held by stockholders.
Authorized but Unissued Capital Stock
Delaware law does not require stockholder approval for any issuance of shares that are authorized and available for issuance. However, the listing requirements of Nasdaq, which would apply so long as the shares of our Common Stock remain listed on Nasdaq, require stockholder approval of certain issuances equal to or exceeding 20% of the then-outstanding voting power or the then-outstanding number of shares of Common Stock. These additional shares may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions. Additionally, the number of authorized shares of any series of common stock or preferred stock may be increased or decreased (but not below the number of shares thereof outstanding) by the affirmative vote of the holders of a majority of shares in voting power, irrespective of the provisions of Delaware law.
Our board of directors may generally issue shares of one or more series of preferred stock on terms designed to discourage, delay or prevent a change of control or the removal of our management. Moreover, our authorized but unissued shares of preferred stock will be available for future issuances in one or more series without stockholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, to facilitate acquisitions and employee benefit plans.
One of the effects of the existence of authorized and unissued and unreserved shares of Common Stock or preferred stock may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive our stockholders of opportunities to sell their shares of Common Stock at prices higher than prevailing market prices.
Vacancies and Newly Created Directorships
The Charter provides that, subject to the rights granted to one or more series of preferred stock then outstanding, any newly-created directorship on the board of directors that results from an increase in the number of directors and any vacancies on our board of directors will be filled solely only by the affirmative vote of a majority of the remaining directors, even if less than a quorum, by a sole remaining director or by our stockholders.
Special Stockholder Meetings
The Charter provides that special meetings of our stockholders may be called at any time only by the board of directors acting pursuant to a resolution approved by the affirmative vote of a majority of the directors then in office, subject to the rights of holders of any series of preferred stock then outstanding.
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Stockholder Action by Written Consent
Pursuant to Delaware law, any action required to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice, and without a vote if a consent or consents in writing, setting forth the action so taken, is or are signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of our stock entitled to vote thereon were present and voted, unless our amended and restated certificate of incorporation provides otherwise. Subject to applicable law and the rights, if any, of the holders of any outstanding series of preferred stock or any other outstanding class or series of stock of Cycurion, the Charter does not permit our holders of common stock to act by consent in writing.
Section 203 of the DGCL
Cycurion will be subject to the provisions of Section 203 of the DGCL (“Section 203”) regulating corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:
| ● | prior to the date of the transaction, our board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; | |
| ● | upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, but not the outstanding voting stock owned by the interested stockholder, (1) shares owned by persons who are directors and also officers and (2) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or | |
| ● | at or subsequent to the date of the transaction, the business combination is approved by Cycurion’s board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder. |
Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting stock.
The provisions of Delaware law and the provisions of our Charter and Bylaws could have the effect of discouraging others from attempting hostile takeovers and as a consequence, they might also inhibit temporary fluctuations in the market price of common stock that often result from actual or rumored hostile takeover attempts. These provisions might also have the effect of preventing changes in management. It is also possible that these provisions could make it more difficult to accomplish transactions that stockholders might otherwise deem to be in their best interests.
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Dissenters’ Rights of Appraisal and Payment
Under Delaware law, with certain exceptions, our stockholders will have appraisal rights in connection with a merger or consolidation in which we are a constituent entity. Pursuant to Delaware law, stockholders who properly demand and perfect appraisal rights in connection with such merger or consolidation will have the right to receive payment of the fair value of their shares as determined by the Court of Chancery of the State of Delaware, plus interest, if any, on the amount determined to be the fair value, from the effective time of the merger or consolidation through the date of payment of the judgment.
Stockholders’ Derivative Actions
Under Delaware law, any of our stockholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the stockholder bringing the action is a holder of our shares at the time of the transaction to which the action relates or such stockholder’s stock thereafter devolved by operation of law. To bring such an action, the stockholder must otherwise comply with Delaware law regarding derivative actions.
Exclusive forum for certain lawsuits
Our Charter requires, unless we consent in writing to the selection of an alternative forum, that (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders, (iii) any action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL or our Charter or bylaws, or (iv) any action asserting a claim against us, our directors, officers or employees governed by the internal affairs doctrine may be brought only in the Court of Chancery in the State of Delaware, except any claim (A) as to which the Court of Chancery of the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or (C) for which the Court of Chancery does not have subject matter jurisdiction, as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction. If an action is brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, a court may determine that this provision is unenforceable, and to the extent it is enforceable, the provision may have the effect of discouraging lawsuits against Cycurion’s directors and officers, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder.
Notwithstanding the foregoing, our Charter provides that the exclusive forum provision will not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. The Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Additionally, unless we consent in writing to the selection of an alternative forum, the federal courts shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act against us or any of our directors, officers, other employees, or agents. Any person or entity purchasing or otherwise acquiring any interest in our securities shall be deemed to have notice of and consented to these provisions. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. The Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Limitations on Liability and Indemnification of Officers and Directors
Delaware law authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties, subject to certain exceptions. The Charter includes a provision that eliminates the personal liability of directors for monetary damages to the corporation or its stockholders for any breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under Delaware law. The effect of these provisions is to eliminate the rights of us and our stockholders, through stockholders’ derivative suits on our behalf, to recover monetary damages from a director for breach of fiduciary duty as a director, including breaches resulting from grossly negligent behavior. However, exculpation does not apply to any director if the director has breached such director’s duty of loyalty, acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends, redemptions or repurchases or derived an improper benefit from his or her actions as a director.
The limitation of liability provision in the Charter may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. In addition, your investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
Listing
Our Common Stock is listed on The Nasdaq Global Market, and our warrants are listed on The Nasdaq Capital Market under the symbols “CYCU” and “CYCUW”, respectively.
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SECURITIES ACT RESTRICTIONS ON RESALE OF COMMON STOCK
Rule 144
Pursuant to Rule 144 under the Securities Act (“Rule 144”), a person who has beneficially owned our restricted Common Stock or our warrants for at least six months generally would be entitled to sell their securities provided that (i) such person is not deemed to have been our affiliate at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as the Company was required to file reports) preceding the sale.
Persons who have beneficially owned restricted Common Stock shares or our warrants for at least six months but who are our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:
| ● | 1% of the total number of our Common Stock then outstanding; or |
| ● | the average weekly reported trading volume of our Common Stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. |
Sales by our affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about us.
Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies
Rule 144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important exception to this prohibition if the following conditions are met:
| ● | the issuer of the securities that was formerly a shell company has ceased to be a shell company; |
| ● | the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; |
| ● | the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and |
| ● | at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company. |
As a result, the Sponsor will be able to sell their founder shares and private placement warrants, as applicable, pursuant to Rule 144 without registration one year after the Business Combination.
Following the recent completion of the Business Combination, the Company is no longer a shell company, and, once the conditions set forth in the exceptions listed above are satisfied, Rule 144 will become available for the resale of the above noted restricted securities.
Lock-up Agreements
For a more detailed description of our lock-up agreements, please see “Certain Relationships and Related Party Transactions – Lock-up Agreements and Leak-out Agreements”.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CYCURION
Throughout this section, unless otherwise noted, “we,” “our,” “us,” “Cycurion” and the “Company” refer to Cycurion, Inc. You should read the following discussion of our financial condition and results of operations in conjunction with our financial statements and the notes included elsewhere in this prospectus.
Our Business
We deliver high-quality, cybersecurity solutions to federal government civilian, defense, and judiciary agencies in addition to commercial clients across a variety of industries. Through our operating subsidiaries and strategic partnerships, we 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 described in the section “Our Background”.
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.
Cycurion Innovation, Inc.
Cycurion Innovation, Inc. was formed in connection with our acquisition of assets from Sabres, a leading Israeli-based cyber security 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 Web Application Firewall (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 Distributed Denial of Service (DDoS) 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 artificial intelligence (“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.
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Results of Operations for the years ended December 31, 2024 and 2023
| Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | 17,771,485 | $ | 19,350,208 | ||||
| Cost of revenue | 14,136,742 | 16,707,148 | ||||||
| Gross profit | 3,634,743 | 2,643,060 | ||||||
| Selling, general and administrative | (1,218,630 | ) | (2,316,649 | ) | ||||
| Interest and other expenses | (1,186,512 | ) | (2,419,637 | ) | ||||
| Net income/loss | $ | 1,229,601 | $ | (2,097,013 | ) | |||
Revenue
Revenues decreased $1,578,723 (8.16%) to $17,771,485 for the year ended December 31, 2024, as compared to $19,350,208 for the year ended December 31, 2023.
We attribute this decrease in the revenues for the year ended December 31, 2024 to the conclusion of key contracts with the federal government and state and local agencies, partially offset by new business segments and contracts.
Cost of Revenue
The cost of revenue for the year ended December 31, 2024, was approximately $14,136,742, nearly all of which is related to costs incurred while delivering services to our customers and expansion of our employee base to address our business growth. Conversely, the cost of revenue for the year ended December 31, 2023, was approximately $16,707,148, nearly all of which is related to costs incurred while servicing our contracts, including contractual and servicing obligations with our employees and contractors. This $2,570,406 (15.39%) decrease in the cost of revenues is directly attributable to lower contractor-related expenses.
Research and Development
We did not have any Research and Development expenses for the years ended December 31, 2024 and December 31, 2023.
Selling, General and Administrative
Our selling, general and administrative expenses decreased by $1,098,019 (47.40%) to $1,218,630 for the year ended December 31, 2024, compared to $2,316,649 for the year ended December 31, 2023, respectively. We attribute this improvement to reduced legal, administrative, and consulting fees in 2024.
Interest and Other Expense
Interest and other expense was approximately $(1,186,512) and $(2,419,637) for the years ended December 31, 2024 and 2023, respectively. These expenses for the year ended December 31, 2024 include $1,209,502 in interest-related expenses and losses, related to the payment of our bank instrument, and other loan obligations. We attribute this $1,233,125 (50.96%) decrease of interest and other expenses to reduced or renegotiated interest expenses in 2024.
Cash Flows
| Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash and cash equivalents at the beginning of the period | $ | 607,869 | $ | 96,185 | ||||
| Net cash used in operating activities | (1,371,281 | ) | (1,987,771 | ) | ||||
| Net cash used in investing activities | (885,066 | ) | (706,707 | ) | ||||
| Net cash provided by financing activities | 1,689,268 | 3,206,162 | ||||||
| Cash and cash equivalents at the end of the period | $ | 40,790 | $ | 607,869 | ||||
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Operating Activities
For the year ended December 31, 2024, net cash used by operating activities was $1,371,281, which included $1,229,601 in net profits, $3,238,749 increase in accounts receivable, $253,902 decrease in deferred revenue, and $908,854 increase in accounts and other payables. We also incurred a marginal $6,566 non-cash adjustment to the amortization of debt discount.
For the year ended December 31, 2023, net cash used in operating activities was $1,987,771, which included $2,097,013 in net losses, $4,636,805 increase in accounts receivable, $242,099 increase in deferred revenue, and $3,105,223 increase in accounts and other payables. We also incurred a $1,094,131 non-cash adjustment to the amortization of debt discount.
Investing Activities
For the year ended December 31, 2024, net cash used in investing activities was approximately $885,066. This was primarily used in the purchase of equipment, and servicing notes issued by Western.
For the year ended December 31, 2023, net cash used in investing activities was approximately $706,707. This was used in the purchase of equipment.
Financing Activities
For the year ended December 31, 2024, net cash provided by financing activities was $1,689,268. The net cash provided includes $1,000,000 in proceeds from a private placement, $405,000 in proceeds from notes payables and $252,314 in proceeds from our line of credit.
For the year ended December 31, 2023, net cash provided by financing activities was $3,206,162. The net cash provided includes $2,000,000 in proceeds from a private placement and $1,084,000 in proceeds from notes payables, offset by $193,305 used in the repayment of bank borrowings.
From the date of the closing of our de-SPAC transaction (February 14, 2025) to April 17, 2025, otherwise unaffiliated persons converted 2,999.3 shares of the Company’s Series B Preferred Stock into 5,998,653 shares of our Common Stock and 6,666,667 shares of our Series D Preferred Stock into 6,666,667 shares of our Common Stock.
From the date of the closing of our de-SPAC transaction (February 14, 2025) to April 17, 2025, otherwise unaffiliated persons exercised 694,530 Series A warrants for the purchase of 694,530 shares of our Common Stock; 2,400,000 Series B warrants for the purchase of 4,800,000 shares of our Common Stock; 4,382,033 Series D warrants for the purchase of 8,764,066 shares of our Common Stock; and 270,137 common stock warrants for the purchase of 270,137 shares of our Common Stock for gross proceeds of approximately $3.5 million.
Liquidity and Capital Resources
Going Concern
We have incurred operating losses since inception through the end of our 2023 fiscal year, having had negative cash flow from operations. As of December 31, 2024, we had an accumulated deficit of approximately $3,203,361, an improvement compared to our accumulated deficit of approximately $4,432,962 at December 31, 2023. The decline in our deficit was the result of net profits of $1,229,601 incurred during our fiscal year 2024. Furthermore, we expect possible, significant operating losses for the next few years. We also utilized cash in operations of approximately $1,371,281 in the twelve months ended December 31, 2024. As of December 31, 2024, we had unrestricted cash of approximately $40,700, a decrease of $567,000 from approximately $607,000 at December 31, 2023. As of December 31, 2024, our total assets increased to approximately $25.7 million from approximately $20.8 million at December 31, 2023, primarily due to a $3.2 million increase in our accounts receivable and $1.8 million increase in investments held in trust.
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Based on our current capital resources as of December 31, 2024, including our unrestricted cash and accounts receivable (net) of $10.3 million, we expect to be able to continue our operations for a minimum of 12 months as of the date of these financial statements. The following table provides aging analysis of our accounts receivable for 2023 and 2024. As we have broadened our business customer base, the nature of our payment and cash receipt cycle has changed. Many of our corporate customers have longer payment terms. We expect that this trend to continue as we acquire additional commercial customers.
Accounts Receivable Aging Analysis without SLG ($)
| Current | 30 days | 60 days | 90 days | 90+ days | ||||||||||||||||
| 2024 | 3,332,464 | 1,121,062 | 1,482,192 | 1,130,038 | 1,904,536 | |||||||||||||||
| 2023 | 2,395,952 | 3,806,985 | 970,411 | 1,101,005 | 2,571,450 | |||||||||||||||
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.
We prepare our consolidated financial statements on a going concern basis, which implies that we may not continue to meet our obligations and continue our operations for the next fiscal year. Our continuation as a going concern depends on 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.
Revenue Recognition
We adopted the new revenue standard, ASC 606, on January 1, 2018, using the full retrospective approach. The adoption did not have an effect on 2024 or 2023 revenue recognition or a cumulative effect on opening equity, as the timing and measurement of revenue recognition is materially the same as the old standard under ASC 605. The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
| ● | Step 1: Identify the contract with the customer | |
| ● | Step 2: Identify the performance obligations in the contract | |
| ● | Step 3: Determine the transaction price | |
| ● | Step 4: Allocate the transaction price to the performance obligations in the contract | |
| ● | Step 5: Recognize revenue when the company satisfies a performance obligation |
For contracts where the period between when we transfer a promised good or service to the customer and when the customer pays is one year or less, we have elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component.
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Stock-based compensation
We measure and recognize compensation expense for all options based on the estimated fair value of the award on the grant date. We use the Black-Scholes option-pricing model to estimate the fair value of option awards. The fair value is recognized as expense on a straight-line basis over the requisite service period. We account for forfeitures as they occur. We recognize expense for awards where vesting is subject to a market or performance condition based on the derived service period. Expense for awards with performance conditions would be estimated and adjusted on a quarterly basis based upon our assessment of the probability that the performance condition will be met.
The determination of the grant date fair value of options using an option pricing model is affected principally by our estimated fair value of shares of our Common Stock and requires management to make a number of other assumptions, including the expected life of the option, the volatility of the underlying shares, the risk-free interest rate and expected dividends. The assumptions used in our Black-Scholes option-pricing model represent management’s best estimates at the time of measurement. These estimates are complex, involve a number of variables, uncertainties and assumptions and the application of management’s judgment, as they are inherently subjective. If any assumptions change, our stock-based compensation expense could be materially different in the future.
These assumptions are estimated as follows:
| ● | Fair Value of Common Stock. As our Common Stock has not historically been publicly traded, we estimated the fair value of our Common Stock. See “Fair Value of Common Stock” and “Common Stock Valuation Methodology” sections. | |
| ● | Expected Term. The expected term represents the period that our options are expected to be outstanding. We calculated the expected term using the simplified method for options based on the average of each option’s vesting term and the contractual period during which the option can be exercised, which is typically 10 years following the date of grant. | |
| ● | Expected Volatility. The expected volatility was based on the historical share volatility of several of our comparable publicly traded companies over a period of time equal to the expected term of the options, as we do not have any trading history to use the volatility of our Common Stock. | |
| ● | Risk-Free Interest Rate. The risk-free interest rate was based on the yields of U.S. Treasury securities with maturities appropriate for the term of the award. | |
| ● | Expected Dividend Yield. We have not paid dividends on our Common Stock nor do we expect to pay dividends in the foreseeable future. |
Fair Value of Common Stock
Historically, for all periods prior to this offering, our board of directors estimated the fair values of the shares of Common Stock underlying our options on each grant date. In order to determine the fair value, our board of directors considered, among other things, contemporaneous valuations of our Common Stock and preferred stock prepared by unrelated third-party valuation firms in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or the Practice Aid. Given the absence of a public trading market of our capital stock, our board of directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair value of our Common Stock, including:
| ● | contemporaneous third-party valuations of our Common Stock; | |
| ● | the prices, rights, preferences, and privileges of our preferred stock relative to our Common Stock; | |
| ● | our business, financial condition, and results of operations, including related industry trends affecting our operations; | |
| ● | the likelihood of achieving a liquidity event, such as an initial public offering or sale of our company, given prevailing market conditions; | |
| ● | the lack of marketability of our Common Stock; | |
| ● | the market performance of comparable publicly traded companies; and | |
| ● | U.S. and global economic and capital market conditions and outlook. |
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Critical accounting policies and significant judgments and estimates
We prepare our financial statements in accordance with GAAP. The preparation of our financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, costs, and expenses. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates. Our most critical accounting policies are summarized below. See Note 2 to our consolidated financial statements for the years ended December 31, 2024 and 2023 for a description of our other significant accounting policies.
We review goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter of each fiscal year or more frequently if impairment indicators arise. The review of impairment consists of using a qualitative approach to determine whether it is more than likely that the fair value of the assets is less than their respective carrying values or a one-step qualitative impairment test.
In performing the qualitative assessment, we consider many factors in evaluating whether the carrying value of goodwill may not be recoverable, including an analysis of the firm’s contract backlog and sales pipeline. While the contract backlog is confirmed contractual wins, the sales pipeline is evaluated by management to determine the uncertainty of the pipeline. Each potential contractual win is assigned a probability of win score to address the potential uncertainty. Thus, it provides a conservative estimate of any future contractual wins. If, based on the qualitative assessment results, it is concluded that the fair value of a reporting unit may not exceed its carrying value, additional quantitative impairment testing is performed.
The quantitative test requires that the carrying value of each reporting unit be compared with its estimated fair value. If the carrying value of a reporting unit is greater than its fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill).
We use a discounted cash flow approach to determine the fair value of a reporting unit. The determination of discounted cash flows of the reporting units and assets and liabilities within the reporting units requires significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to, the discount rate being the weighted average cost of capital for the firm, terminal growth rates, earnings before depreciation and amortization, and capital expenditures forecasts.
Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates. We evaluate the merits of each significant assumption, both individually and in the aggregate, used to determine the fair value of the reporting units, as well as the fair values of the corresponding assets and liabilities within the reporting units.
Given that we operated at a net profit in 2024, we performed quantitative impairment testing as second step to validate our qualitative testing. Based on our quantitative impairment testing, the fair value of goodwill substantially exceeds the carrying value.
Goodwill
| 2024 | 2023 | |||||||
| Axxum Technologies | $ | 5,153,266 | $ | 5,153,266 | ||||
| Cloudburst Security | 1,439,038 | 1,439,038 | ||||||
| Total Cycurion Goodwill | $ | 6,592,304 | $ | 6,592,304 | ||||
Recent accounting pronouncements
See Note 2 to our consolidated financial statements for the years ended December 31, 2024 and 2023 for a description of recent accounting pronouncements applicable to our financial statements.
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PLAN OF DISTRIBUTION
We refer to the Common Stock being issued pursuant to this prospectus, including the shares of Common Stock underlying the Pre-Funded Warrant, as the “securities” in this Plan of Distribution section. The Selling Stockholder may, from time to time, sell, transfer, distribute, or otherwise dispose of certain of its securities or interests in the securities on any stock exchange, market, or trading facility on which the securities are traded, or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. The Selling Stockholder will sell all of the securities that it offers pursuant to this prospectus for its accounts. We will not receive any of the proceeds from the sale of the securities hereunder.
The Selling Stockholder may use any one or more of the following methods when disposing of the securities or its interests therein:
| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; | |
| ● | one or more underwritten offerings on a firm commitment or best efforts basis; | |
| ● | block trades in which the broker-dealer will attempt to sell the securities as agent, but may position and resell a portion of the block as principal to facilitate the transaction; | |
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its accounts; | |
| ● | an exchange distribution in accordance with the rules of the applicable exchange; | |
| ● | privately negotiated transactions; | |
| ● | distributions or transfers to its members, partners, or stockholders; | |
| ● | short sales; | |
| ● | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; | |
| ● | in market transactions, including transactions on a national securities exchange or quotations service or over-the-counter market; | |
| ● | through trading plans entered into by a Selling Stockholder pursuant to Rule 10b5-1 under the Exchange Act that are in place at the time of an offering pursuant to this prospectus and any applicable prospectus supplement hereto that provide for periodic sales of its securities on the basis of parameters described in such trading plans; | |
| ● | directly to one or more purchasers, including through a specific bidding, auction, or other process or in privately negotiated transactions; | |
| ● | in “at the market” offerings, as defined in Rule 415 under the Securities Act, at negotiated prices, at prices prevailing at the time of sale or at prices related to such prevailing market prices, including sales made directly on a national securities exchange or sales made through a market maker other than on an exchange or other similar offerings through sales agents; | |
| ● | through agents; | |
| ● | through broker-dealers who may agree with the Selling Stockholder to sell a specified number of such securities at a stipulated price per share or warrant; | |
| ● | by entering into transactions with third parties who may (or may cause others to) issue securities convertible or exchangeable into, or the return of which is derived in whole or in part from the value of, our Common Stock; and | |
| ● | a combination of any such methods of sale or any other method permitted pursuant to applicable law. |
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We will pay the reasonable expenses incident to the registration and offering of the securities offered hereby. We have agreed to indemnify the Investor and certain other persons against certain liabilities in connection with the offering of shares offered hereby, including liabilities arising under the Securities Act or if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities. the Investor has agreed to indemnify us against liabilities under the Securities Act that may arise from certain written information furnished to us by the Investor specifically for use in this prospectus or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities.
The Selling Stockholder and any broker-dealers or agents that are involved in selling the securities registered hereunder may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The Selling Stockholder has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.
The Investor has represented to us that at no time prior to the Equity Purchase Agreement has the Investor or its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any short sale (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of our Common Stock nor any hedging transaction, which establishes a net short position with respect to our Common Stock.
We have advised the Investor that it is required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M precludes a selling stockholder, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase, any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability of the shares offered hereby this prospectus.
| 74 |
TAXATION
United States Federal Income Tax Considerations
The following discussion is a summary of the U.S. federal income tax considerations generally applicable to the ownership and disposition of our Common Stock, including the Common Stock underlying the Pre-Funded Warrants, which we refer to collectively as our securities. This summary is based upon U.S. federal income tax law as of the date of this prospectus, which is subject to change or differing interpretations, possibly with retroactive effect. This summary does not discuss all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances, including investors subject to special tax rules (e.g., financial institutions, insurance companies, broker-dealers, tax-exempt organizations (including private foundations), taxpayers that have elected mark-to-market accounting, S corporations, regulated investment companies, real estate investment trusts, passive foreign investment companies, controlled foreign corporations, investors that will hold our securities as part of a straddle, hedge, conversion, or other integrated transaction for U.S. federal income tax purposes, investors holding Common Stock through an “applicable partnership interest,” investors required to recognize income for U.S. federal income tax purposes no later than when such income is reported on an “applicable financial statement” or investors that have a functional currency other than the U.S. dollar), all of whom may be subject to tax rules that differ materially from those summarized below. In addition, this summary does not discuss other U.S. federal tax consequences (e.g., estate or gift tax), any state, local, or non-U.S. tax considerations, the Medicare tax or any alternative minimum tax consideration. In addition, this summary is limited to investors that will hold our securities as a “capital asset,” as defined under the Internal Revenue Code of 1986, as amended (“U.S. Tax Code”) (generally, property held for investment). No ruling from the Internal Revenue Service, (the “IRS”) has been or will be sought regarding any matter discussed herein. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax aspects set forth below.
A “non-U.S. Holder” is a beneficial holder of securities who or that is neither a U.S. Holder nor a partnership for U.S. federal income tax purposes.
If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our securities, the tax treatment of a partner, member or other beneficial owner of such partnership will generally depend upon the status of the partner, member or other beneficial owner, the activities of the partnership, and certain determinations made at the partner, member or other beneficial owner level. If you are a partner, member, or other beneficial owner of a partnership holding our securities, you are urged to consult your tax advisor regarding the tax consequences of the ownership and disposition of our securities.
THIS DISCUSSION OF U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. PROSPECTIVE HOLDERS SHOULD CONSULT THEIR TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES TO THEM OF OWNING AND DISPOSING OF OUR SECURITIES, AS WELL AS THE APPLICATION OF ANY, STATE, LOCAL, AND NON-U.S. INCOME, ESTATE AND OTHER TAX CONSIDERATIONS.
U.S. Holders
Taxation of Distributions
We do not intend to pay cash dividends for the foreseeable future. If we pay distributions to U.S. Holders of shares of our Common Stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in our Common Stock. Any remaining excess will be treated as gain realized on the sale or other disposition of the Common Stock and will be treated as described under “U.S. Holders-Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock” below.
Dividends we pay to a U.S. Holder that is a taxable corporation generally will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions (including dividends treated as investment income for purposes of investment interest deduction limitations), and provided certain holding period requirements are met, dividends we pay to a non-corporate U.S. Holder will generally constitute “qualified dividends” that will be subject to tax at the maximum tax rate accorded to long-term capital gains.
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Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock
A U.S. Holder will recognize gain or loss on the sale, taxable exchange or other taxable disposition of our Common Stock. Any such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder’s holding period for such Common Stock exceeds one year. The amount of gain or loss recognized will generally be equal to the difference between (1) the sum of the amount of cash and the fair market value of any property received in such disposition and (2) the U.S. Holder’s adjusted tax basis in such Common Stock. A U.S. Holder’s adjusted tax basis in its Common Stock will generally equal the U.S. Holder’s acquisition cost (i.e., the amount paid for the Common Stock) less any prior distributions treated as a return of capital. The deductibility of capital losses is subject to limitations.
Non-U.S. Holders
Taxation of Distributions
As discussed above, we do not intend to pay cash dividends for the foreseeable future. In general, any distributions we make to a non-U.S. Holder of shares of our Common Stock, to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles), will constitute dividends for U.S. federal income tax purposes and, provided such dividends are not effectively connected with the non-U.S. Holder’s conduct of a trade or business within the United States, we will be required to withhold tax from the gross amount of the dividend at a rate of 30%, unless such non-U.S. Holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate (generally on an IRS Form W-8BEN or W-8BEN-E, as applicable). Any distribution not constituting a dividend will be treated first as reducing (but not below zero) the non-U.S. Holder’s adjusted tax basis in its shares of our Common Stock and, to the extent such distribution exceeds the non-U.S. Holder’s adjusted tax basis, as gain realized from the sale or other disposition of the Common Stock, which will be treated as described under “Non-U.S. Holders-Gain on Sale, Exchange, Redemption or Other Taxable Disposition of Common Stock” below. In addition, if we determine that we are classified as a “United States real property holding corporation” (see “Non-U.S. Holders-Gain on Sale, Exchange, Redemption or Other Taxable Disposition of Common Stock” below), we will withhold 15% of the fair market value of any property distributed that exceeds our current and accumulated earnings and profits.
Dividends we pay to a non-U.S. Holder that are effectively connected with such non-U.S. Holder’s conduct of a trade or business within the United States (or, if an applicable tax treaty so requires, are attributable to a U.S. permanent establishment or fixed base maintained by the non-U.S. Holder) will generally not be subject to U.S. withholding tax, provided such non-U.S. Holder complies with certain certification and disclosure requirements (generally by providing an IRS Form W-8ECI). Instead, such dividends will generally be subject to U.S. federal income tax, net of certain deductions, at the same graduated individual rates or corporate rates applicable to U.S. Holders. If the non-U.S. Holder is a corporation, dividends that are effectively connected income may also be subject to a “branch profits tax” at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty).
Gain on Sale, Exchange, Redemption or Other Taxable Disposition of Common Stock or Warrants
A non-U.S. Holder will generally not be subject to U.S. federal income or withholding tax in respect of gain recognized on a sale, taxable exchange or other taxable disposition of our Common Stock unless:
| ● | the gain is effectively connected with the conduct of a trade or business by the non-U.S. Holder within the United States (or, if an applicable tax treaty so requires, is attributable to a U.S. permanent establishment or fixed base maintained by the non-U.S. Holder); | |
| ● | the non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met; or | |
| ● | (i) we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the non-U.S. Holder held our Common Stock or warrants, and (ii) shares of our Common Stock (A) are not regularly traded on an established securities market or (B) are regularly traded on an established securities market, but the non-U.S. Holder has owned, directly or constructively (including through ownership of warrants), more than 5% of our Common Stock at any time within the shorter of the five-year period preceding the disposition or such non-U.S. Holder’s holding period for the shares of our Common Stock. There can be no assurance that our Common Stock will be treated as regularly traded on an established securities market for this purpose. |
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Gain described in the first bullet point above will be subject to tax at generally applicable U.S. federal income tax rates. Any gains described in the first bullet point above of a non-U.S. Holder that is a foreign corporation may also be subject to an additional “branch profits tax” at a 30% rate (or lower applicable treaty rate). Gain described in the second bullet point above will generally be subject to a 30% U.S. federal income tax. Non-U.S. Holders are urged to consult their tax advisors regarding possible eligibility for benefits under income tax treaties.
If the third bullet point above applies to a non-U.S. Holder, gain recognized by such non-U.S. holder on the sale, exchange or other disposition of our Common Stock will be subject to tax at generally applicable U.S. federal income tax rates. In addition, if our stock is not regularly traded on an established securities market for this purpose, a buyer of our Common Stock from such non-U.S. Holder may be required to withhold U.S. income tax at a rate of 15% of the amount realized upon such disposition. We will be classified as a United States real property holding corporation if the fair market value of our “United States real property interests” equals or exceeds 50% of the sum of the fair market value of our worldwide real property interests plus our other assets used or held for use in a trade or business, as determined for U.S. federal income tax purposes. We believe that we currently are, and expect to remain for the foreseeable future, a United States real property holding corporation. Non-U.S. Holders are urged to consult their tax advisors regarding the application of these rules.
Additional U.S. Federal Tax Considerations
Additional Tax on Net Investment Income
In addition to regular U.S. federal income tax, certain U.S. Holders that are individuals, estates or trusts are subject to a 3.8% tax on all or a portion of their “net investment income,” which may include all or a portion of their net gain from the sale, exchange or other disposition of Common Stock or warrants, or dividends with respect to Common Stock. Each U.S. Holder is urged to consult its own tax advisor regarding the application of this tax.
Excise Tax on Certain Stock Buybacks
The Inflation Reduction Act of 2022 (the “IR Act”) provides for, among other things, a U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by a “covered corporation” (which includes publicly traded corporations) occurring on or after January 1, 2023 (the “Excise Tax”). 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.
Any redemptions of our Common Stock may be subject to the Excise Tax.
Backup Withholding and Additional Information Reporting
In general, information returns may be filed with the IRS in connection with actual or constructive dividends paid to a U.S. Holder in respect of our securities, and the proceeds received by a U.S. Holder from the sale, exchange or other disposition of our securities within the United States or through certain U.S.-related financial intermediaries will be subject to U.S. information reporting rules, unless a U.S. Holder is a corporation or other exempt recipient and properly establishes its rights to an exemption. Backup withholding at a rate of 24% may apply to such payments if a U.S. Holder does not establish an exemption from backup withholding or fails to provide a correct taxpayer identification number and make any other required certifications.
In general, information returns may be filed with the IRS in connection with dividends paid to non-U.S. Holders, and the proceeds received by a non-U.S. Holder from the sale, exchange or other disposition of our securities within the United States or through certain U.S.-related financial intermediaries. Copies of the information returns reporting dividends and any withholding may also be made available to the tax authorities in the country in which the non-U.S. Holder resides under the provisions of a treaty or agreement. A non-U.S. Holder may be subject to backup withholding (currently at a rate of 24%) in connection with actual or constructive dividends with respect to our securities and the proceeds from the sales, exchange or other disposition of our securities unless the non-U.S. Holder provides to the applicable withholding agent a properly executed IRS Form W-8BEN or W-8BEN-E (or other applicable form) certifying under penalties of perjury that the non-U.S. Holder is not a United States person, or otherwise qualifies for an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against U.S. federal income tax liability, provided that the required information is timely furnished to the IRS. Holders are urged to consult their own tax advisor regarding the information reporting and backup withholding rules.
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Foreign Account Tax Compliance Act
Sections 1471 through 1474 of the U.S. Tax Code and the Treasury Regulations and administrative guidance promulgated thereunder (commonly referred as the “Foreign Account Tax Compliance Act” or “FATCA”) generally impose withholding at a rate of 30% in certain circumstances on actual or constructive dividends in respect of our securities which are held by or through certain foreign financial institutions (including investment funds), unless any such institution (1) enters into, and complies with, an agreement with the IRS to report, on an annual basis, information with respect to interests in, and accounts maintained by, the institution that are owned by certain U.S. persons and by certain non-U.S. entities that are wholly or partially owned by U.S. persons and to withhold on certain payments, or (2) if required under an intergovernmental agreement between the United States and an applicable foreign country, reports such information to its local tax authority, which will exchange such information with the U.S. Department of Treasury. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Accordingly, the entity through which our securities are held will affect the determination of whether such withholding is required. Similarly, dividends in respect of our securities held by an investor that is a non-financial non-U.S. entity that does not qualify under certain exceptions will generally be subject to withholding at a rate of 30%, unless such entity either (1) certifies to us or the applicable withholding agent that such entity does not have any “substantial United States owners” or (2) provides certain information regarding the entity’s “substantial United States owners,” which will in turn be provided to the U.S. Department of Treasury. Prospective investors should consult their tax advisors regarding the possible implications of FATCA on their investment in our securities.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon by Seward & Kissel LLP, New York, New York.
EXPERTS
The financial statements of Cycurion as of December 31, 2024 and 2023 included in this prospectus have been so included in reliance on the report of WWC, P.C., an independent registered public accounting firm.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act. In accordance with the Exchange Act, we file periodic reports, proxy and information statements and other information with the SEC. Our filings with the SEC are available to the public over the Internet at the SEC’s website at www.sec.gov. You may also find documents we filed on our website at www.cycurion.com. Information contained in or accessible through our website does not constitute a part of this prospectus.
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CYCURION, INC. AND ITS SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Report of Independent Registered Public Accounting Firm (PCAOB ID: 1171) | F-2 |
| Financial Statements: | |
| Consolidated Balance Sheets | F-3 |
| Consolidated Statements of Operations and Comprehensive Income (Loss) | F-4 |
| Consolidated Statements of Mezzanine Equity and Stockholders’ Equity | F-5 |
| Consolidated Statements of Cash Flows | F-6 |
| Notes to Consolidated Financial Statements | F-7 to F-35 |
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To:
The Board of Directors and Stockholders of
Cycurion Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Cycurion Inc. and its subsidiaries (collectively, the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive income/(loss), mezzanine equity and stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has a significant working capital deficit that raises substantial doubt about its ability to continue as a going concern. Management’s plans with regards to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, audits of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal controls over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ WWC, P.C.
Certified Public Accountants
PCAOB ID: 1171
We have served as the Company’s auditor since 2018.
San Mateo, California
April 17, 2025
| F-2 |
CYCURION, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and Cash Equivalent | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Other receivables | ||||||||
| Note receivable - WAVS | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | $ | $ | ||||||
| Non-current assets | ||||||||
| Deposit for acquisition target | ||||||||
| Fixed assets, net | ||||||||
| Software development costs, net | ||||||||
| Intangible asset, net | ||||||||
| Security deposits | ||||||||
| Goodwill | ||||||||
| Investments held in Trust Account | ||||||||
| Total non-current assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities, Mezzanine and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Bank loan-revolving credit line | ||||||||
| Bank loan-current portion | ||||||||
| Loans payable – current portion | ||||||||
| Subordinated convertible promissory notes | ||||||||
| Promissory notes | ||||||||
| Loans payable - related parties | ||||||||
| Loans payable | ||||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Income Tax Payable | ||||||||
| Franchise tax payable | ||||||||
| Excise tax payable | ||||||||
| Advance from Sponsor | ||||||||
| Deferred revenue | ||||||||
| Total current liabilities | ||||||||
| Long-term loan payable | ||||||||
| Series A convertible preferred stock ($ par value, shares designated, issued and outstanding) | ||||||||
| Total non-current liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| Commitments and contingencies (Note 18) | ||||||||
| Mezzanine Equity | ||||||||
| Common stock subject to possible redemption, $ par value, shares at redemption value of approximately $ per share at December 31, 2024 | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock ($ par value, shares authorized) | ||||||||
| Series B convertible preferred stock ($ stated value, shares designated, and issued and outstanding, respectively) | ||||||||
| Series C convertible preferred stock ($ stated value, shares designated, issued and outstanding) | ||||||||
| Preferred stock value | ||||||||
| Common stock ($ par value, shares authorized, and shares issued and outstanding) | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to the consolidated financial statements.
| F-3 |
CYCURION, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
| 2024 | 2023 | |||||||
| Years ended | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Net revenues | $ | $ | ||||||
| Cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling, general and administrative expenses | ||||||||
| Operating income (loss) | ||||||||
| Other income (expenses): | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Other expense | ( | ) | ( | ) | ||||
| Other income (expenses) | ( | ) | ( | ) | ||||
| Income (loss) before income taxes | ( | ) | ||||||
| Provision before income taxes | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Comprehensive income (loss) | $ | $ | ( | ) | ||||
| Net income (loss) per common share | ||||||||
| Basic income (loss) per common share | $ | $ | ( | ) | ||||
| Diluted income (loss) per common share | $ | $ | ( | ) | ||||
| Basic weighted average common shares outstanding | ||||||||
| Diluted weighted average common shares outstanding | ||||||||
See accompanying notes to the consolidated financial statements.
| F-4 |
CYCURION, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | capital | deficit | Equity | ||||||||||||||||||||||||||||||||||
| Total Cycurion, Inc. Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||
Common stock subject to possible | Series B convertible | Series C convertible | ||||||||||||||||||||||||||||||||||||||||||
| redemption | preferred stock | preferred stock | Common stock | Total | ||||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Number of | Number of | Additional paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | capital | deficit | Equity | ||||||||||||||||||||||||||||||||||
| Retroactive Application of Recapitalization to December 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Series B preferred stock and warrant issued | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Series B preferred stock and warrant issued | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Board Compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Acquisition of WAVS | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
| F-5 |
CYCURION, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| 2024 | 2023 | |||||||
| Years ended | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Stock based compensation | ||||||||
| Amortization of debt discount | ||||||||
| Depreciation of fixed assets | ||||||||
| Amortization of software development cost | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Change of right of use asset and lease liabilities | ( | ) | ||||||
| Accounts and other receivables | ( | ) | ( | ) | ||||
| Advance and prepayments to suppliers | ( | ) | ( | ) | ||||
| Accounts and other payables | ||||||||
| Accrued interest | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Acquisition of WAVS | ||||||||
| Promissory note issued by WAVS | ( | ) | ( | ) | ||||
| Purchase of plant and equipment | ( | ) | ||||||
| Software development cost | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from private placement | ||||||||
| Net proceeds from line of credit | ||||||||
| Repayment of all bank borrowings | ( | ) | ||||||
| Proceeds from loans payable | ||||||||
| Repayments of loans payable | ( | ) | ||||||
| Proceeds from notes payable by WAVS | ||||||||
| Proceeds from notes payable | ||||||||
| Proceeds from notes payable - related parties | ||||||||
| Proceeds from notes payable | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash and restricted cash | ( | ) | ||||||
| Cash –beginning of period | ||||||||
| Cash–end of period | $ | $ | ||||||
| Restricted cash - end of period | $ | $ | ||||||
| Cash - end of period | $ | $ | ||||||
| Supplementary cash flow information: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
See accompanying notes to the consolidated financial statements.
| F-6 |
CYCURION, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2024 and 2023
NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS
Description of Business
Cycurion, Inc (f/k/a KAE Holdings, Inc.; f/k/a Cyber
Secure Solutions, Inc.; the “Company” or “we”) was incorporated on
On November 22, 2017, the Company acquired Axxum Technologies, LLC (“Axxum”), a limited liability company organized on December 29, 2006, in the Commonwealth of Virginia.
On April 3, 2019, the Company acquired Cloudburst Security, LLC (“Cloudburst”), a limited liability company organized on January 12, 2007, in the Commonwealth of Virginia.
Business Combination
On November 21, 2022, the Company and Western Acquisition Ventures Corp.(“WAVS”), among other parties, entered into an Agreement and Plan of Merger, such that the Company would become a wholly-owned subsidiary of WAVS. In connection therewith, WAVS filed a Registration Statement on Form S-4 with the Securities and Exchange Commission, which, upon its review, then issued certain comments.
WAVS has advised the Company that it expects that it will file an amendment to the Registration Statement and, on April 26, 2024, the parties amended and restated the Business Combination Agreement essentially to update the representations and warranties and to provide for the Omnibus Exchange Agreement whereby the holders of the Series A, B, C, and D preferred stock of Cycurion agree to exchange those shares for equivalent Series A, B, C, and D preferred stock of WAVS.
On February 14, 2025, the parties completed the Business Combination. As a result of the Business Combination, each ordinary share of Old Cycurion 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 shares. Concurrently with the completion of the Business Combination, the Company issued an aggregate of shares of common stock, shares of Series A preferred stock (“Class A Convertible Preferred Stock”), shares of Series B preferred stock (“Class B Convertible Preferred Stock”), shares of Series C preferred stock (“Class C Convertible Preferred Stock”), shares of Series D preferred stock (“Class D Convertible Preferred Stock”), Series A warrants, Series B warrants, Series D warrants, common stock warrants, shares of common stock issued in connection with the Series D private placement, shares of common stock issued to A.G.P./Alliance Global Partners (“A.G.P.”), shares of common stock issued to Seward & Kissel LLP and shares of common stock issued to Baker & Hostetler LLP.
Notwithstanding the legal form of the Business Combination pursuant to the Business Combination, the Business Combination has been accounted for as a reverse recapitalization in accordance with 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 WAVS is a blank check company.
Under the reverse recapitalization model, the Business Combination was treated as Cycurion issuing equity for the net assets of WAVS, with no goodwill or intangible assets recorded.
While WAVS was the legal acquirer in the Business Combination, because Predecessor Cycurion was deemed the accounting acquirer, the historical financial statements of Predecessor Cycurion 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 Predecessor Cycurion prior to the Business Combination; (ii) the combined results of WAVS and Predecessor Cycurion following the closing of the Business Combination; (iii) the assets and liabilities of Predecessor Cycurion at their historical cost; and (iv) the Company’s equity structure for all periods presented. In connection with the consummation of the Business Combination, WAVS was renamed “Cycurion Inc,
In accordance with the applicable guidance, the equity structure has been retroactively restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company’s common stock issued to Predecessor Cycurion common shareholders in connection with the Business Combination. As such, the shares and corresponding capital amounts and earnings per share related to Predecessor Cycurion prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination.
| F-7 |
Going Concern
The accompanying financial
statements have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States, 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 December 31,
2024, 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 year ended December 31,
2024 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 December 31, 2024, the Company had an accumulated deficit of $
Management’s plan is to continue improve 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.
Restricted Cash
In accordance with the Trust agreement,
the Company is permitted to withdraw interest from the Trust Account to pay its tax obligations, including federal income taxes and state
franchise taxes. The balance of this withdrawal is included in restricted cash in the amount of $
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
These consolidated financial statements, accompanying notes, and related disclosures have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), which include the application of the accrual basis of accounting in accordance with GAAP. The Company’s fiscal year end is December 31. The Company’s financial statements are presented in US dollars.
| F-8 |
Principles of consolidation
These 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: Axxum Technologies, LLC, Cloudburst Security, LLC, Cycurion Innovation, Inc., and Western Acquisition Ventures Corp. All significant inter-company balances, fees, and expenses have been eliminated in consolidation.
Reclassification
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 income (loss), or cash flows for any periods presented.
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.
Use of estimates
The preparation of financial statements in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures regarding contingent liabilities at the date of the financial statements. These estimates may affect the reported amounts for certain revenues and expenses incurred during the reporting period; actual results may materially differ from these estimates.
Cash Held in Trust Account
At December 31, 2024 and 2023, substantially all of the assets held in the Trust Account were held in cash. During the period ended December 31, 2023, the assets held in the Trust Account were held in mutual funds that invest in U.S Treasury Securities. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in in the accompanying statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents include
cash on hand, deposits in banks, and any investments with maturities with less than three months from inception to maturity. The
Company’s primary bank deposits are located in the United States. Those deposits are provided protection under FDIC insurance
up to maximum of $
| F-9 |
The Company had $
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 Public Shares sold in the IPO feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events.
As of December 31, 2024 and 2023, the value of common stock subject to possible redemption reflected on the balance sheet is reconciled on the following table:
SCHEDULE OF COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION
| Common stock subject to possible redemption as of December 31, 2022 | ||||
| Less: | ||||
| Redemption | ( | ) | ||
| Add: | ||||
| Accretion of carrying value to redemption value | ||||
| Common stock subject to possible redemption as of December 31, 2023 | $ | |||
| Less: | ||||
| Redemption | ( | ) | ||
| Add: | ||||
| Increase of carrying value to redemption value due to change in tax | ||||
| Common stock subject to possible redemption as of December 31, 2024 | $ |
Accounts receivable
Accounts receivable is stated at the original amount less an allowance for credit losses.
Accounts receivable is recognized in the period when the Company has provided services to its customers and when its right to consideration is unconditional. On January 1, 2023, the Company adopted ASU 2016-13, “Financial Instruments — Credit Losses (Accounting Standards Codification (“ASC”) Topic 326): Measurement on Credit Losses on Financial Instruments”, including certain subsequent amendments, transitional guidance and other interpretive guidance within ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11, ASU 2020-02 and ASU 2020-03 (collectively, including ASU 2016-13, “ASC 326”). ASC 326 introduces an approach based on expected losses to estimate the allowance for doubtful accounts, which replaces the previous incurred loss impairment model. The Company’s estimation of allowance for credit losses considers factors such as historical credit loss experience, age of receivable balances, subsequent collection, current market conditions, reasonable and supportable forecasts of future economic conditions, as we
The Company evaluates its accounts receivable for expected credit losses on a regular basis. The Company maintains an estimated allowance for credit losses to reduce its accounts receivable to the amount that it believes will be collected. The Company considers factors in assessing the collectability of its receivables, such as the age of the amounts due, the customer’s payment history, credit-worthiness and other specific circumstances related to the accounts. If there is strong evidence indicating that the accounts receivable is likely to be unrecoverable, the Company also makes specific allowance in the period in which a loss is determined to be probable. Accounts receivable balances are written off after all collection efforts have been exhausted.
The Company also assessed the creditworthiness and solvency of its customers at December 31, 2024 and 2023 determined that those customers were unlikely not to settle their balances in full; accordingly, as of December 31, 2024 and 2023, the Company’s estimated allowance for credit losses was both zero.
Property, plant, and equipment
Equipment is carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method. Estimated useful lives of the equipment are as follows:
SCHEDULE OF ESTIMATED USEFUL LIVES OF RELATED ASSETS
| Office equipment | ||
| Furniture and fixtures | ||
| Leasehold improvement | ||
| Capital lease | ||
| Software |
The cost of maintenance and repairs to fixed assets are charged to expenses as incurred.
| F-10 |
Goodwill
Goodwill represents the excess of the purchase price
over the fair value of the net tangible and identifiable assets acquired in a business combination. Goodwill is reviewed for impairment
annually during the fourth quarter of each fiscal year, or more frequently if impairment indicators arise. The review of goodwill impairment
consists of either using a qualitative approach to determine whether it is more likely than not that the fair value of the assets
is less than their respective carrying values or a one-step quantitative impairment test. In performing the qualitative assessment,
we consider many factors in evaluating whether the carrying value of goodwill may not be recoverable. If, based on the results of the
qualitative assessment, it is concluded that it is not more likely than not that the fair value of a reporting unit exceeds
its carrying value, additional quantitative impairment testing is performed. The quantitative test requires that the carrying value of
each reporting unit be compared with its estimated fair value. If the carrying value of a reporting unit is greater than its fair value,
a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). Fair value is generally determined
using a discounted cash flow analysis. During the years ended December 31, 2024 and 2023,
Software development costs
The Company is undergoing new SaaS product development based on an acquired SaaS platform in previous years, which has not been utilized in its original form. Cost occurring for the acquired SaaS platform and following added functionalities, modules, and redesigned features of the distinct new SaaS product are accounted for under ASC 985-20 (Costs of Software to Be Sold, Leased, or Marketed). Development costs were capitalized as “Software Development in Progress” after achieving technological feasibility.
Accounting for long-lived assets
The Company annually reviews its long-lived assets for impairment or whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Impairment may be the result of becoming obsolete from a change in the industry or new technologies. Impairment is present if the carrying amount of an asset is less than its undiscounted cash flows to be generated.
If an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Bank loans
The Company accounts for borrowings from banks as either current or long-term borrowings. Origination and closing costs for long term borrowings are accounted for using the effective interest method and accreted to the Company’s outstanding balances owed over the life of the long-term loan, and the related interest expense is recognized to the results of operations.
Revenue recognition
The Company adopted ASC Topic 606, Revenue from Contracts with Customers. Revenue from contracts with customers is recognized using the following five steps:
| 1. | Identify the contract(s) with a customer; | |
| 2. | Identify the performance obligations in the contract; | |
| 3. | Determine the transaction price; | |
| 4. | Allocate the transaction price to the performance obligations in the contract; and | |
| 5. | Recognize revenue when (or as) the entity satisfies a performance obligation. |
In applying ASC 606, the Company will recognize revenue when the Company has negotiated and formalized the terms of the transaction in the form of written contracts with their customers that set forth the sales price, the scope of services to be delivered by professional technology infrastructure and cyber engineers measured in hours, accompanied by hourly billing rates, and payment terms; typically, the performance obligations in the contract are the delivery of service hours; when the Company has obtained evidence that the service has been delivered and the performance obligations have been fulfilled, it will record revenue and either recognize an asset such as accounts receivable or decrease deferred revenue from its liabilities.
Management has determined that its services business can be segregated into four lines of business. Each line of business has its own methodology for recognizing revenue.
| F-11 |
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 de 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. The Company issues invoices when management has received acknowledgment from the customer that it has rendered service as measured in hours 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.
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 thirty 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 all 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.
| F-12 |
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 thirty 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 contract on a monthly basis.
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 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 thirty 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.
| F-13 |
The Company’s disaggregated revenues for the year ended December 31, 2024 and 2023 were as follows:
SCHEDULE OF DISAGGREGATED REVENUES
| 2024 | 2023 | |||||||
| Years ended | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Advisory Consulting | $ | $ | ||||||
| Managed Security Service Practice (MSSP) | ||||||||
| Software as a Service (Saas) | ||||||||
| Revenues | $ | $ | ||||||
The following table shows the changes in the contract liabilities accounts shown as deferred revenue of the Company’s consolidated balance sheets as of December 31, 2024 and 2023.
SCHEDULE OF DEFERRED REVENUE
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Balance, beginning of year | $ | $ | ||||||
| Deferral of revenue | ||||||||
| Recognition of deferred revenue | ( | ) | ( | ) | ||||
| Balance, end of year | $ | $ | ||||||
Deferred Revenue
As of December 31, 2024 and 2023, non-cancelable contract obligations that the Company must fulfill have been recognized as deferred revenue liability on the Company’s consolidated balance sheets.
Cost of revenue
Cost of revenue primarily consists of compensation expenses for program personnel, and the fringe benefits associated with this compensation, subcontractor costs, and other direct expenses incurred to deliver services to customers.
Selling, general, and administrative expenses
Selling, general and administrative expenses are expensed as incurred.
Research and development
The Company expenses research and development as incurred.
During the years ended December 31, 2024 and 2023, the Company incurred
Income taxes
The Company accounts for income tax using an asset and liability approach and allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.
| F-14 |
The Company computes earnings per share (“EPS”) in accordance with ASC Topic 260, “Earnings per share”. Basic EPS is measured as the income or loss available to common stockholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per-share basis of potential common shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
As of December 31, 2024, common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive (see Note 16).
Commitments and contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
Lease
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our consolidated balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Leases with a lease term of
Comprehensive income
Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. The Company’s current component of other comprehensive income includes the foreign currency translation adjustment and unrealized gain or loss.
| F-15 |
Accounting for Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding. Management has concluded that the Public Warrants, Private Placement Warrants, and all other warrants issued qualify for equity accounting treatment.
Recently Issued Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03.
In March 2024, the FASB issued ASU 2024-02 “Codification Improvements – Amendments to Remove References to the Concepts Statements” (“ASU 2024-02”), which contains amendments to the Codification to remove references to various FASB Concepts Statements. In most instances, the references are extraneous and not required to understand or apply the guidance. Generally, ASU 2024-02 is not intended to result in significant accounting changes for most entities. ASU 2024-02 is effective for the Company for fiscal years beginning after December 15, 2024. The Company does not expect this update to have a material impact on its financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires, among other things, additional disclosures primarily related to the income tax rate reconciliation and income taxes paid. The expanded annual disclosures are effective for our year ending December 31, 2025. The Company is currently evaluating the impact that ASU 2023-09 will have on the consolidated financial statements and whether the Company will apply the standard prospectively or retrospectively.
The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.
Recently Adopted Accounting Pronouncement
In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires additional disclosures around significant segment expenses and disclosures to identify the title and position of the chief operating decision maker (“CODM”). ASU 2023-07 was effective for the year ended December 31, 2024 and interim periods thereafter.
NOTE 3 — ACCOUNTS RECEIVABLES
Accounts receivables consisted of the following As of December 31, 2024 and 2023:
SCHEDULE OF ACCOUNTS RECEIVABLES
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Gross accounts and other receivables | $ | $ | ||||||
| Less: Allowance for credit losses | ||||||||
| Accounts receivables, net | $ | $ | ||||||
During the years ended December 31, 2024 and 2023, the Company have not written off any outstanding receivable.
| F-16 |
NOTE 4 — DEPOSIT FOR ACQUISITION TARGET
As of December 31, 2020, the Company had contemplated
the acquisition of SLG Innovation, Inc. (“SLG”); accordingly, as of such date, the Company set aside $
For any reason or for no reason in its sole and absolute
discretion prior to December 31, 2021, with no further obligations on its part to SLG or any third party. Subsequently, the Company and
SLG modified the May 13, 2021 agreement such that the Company would purchase only certain specified assets from SLG, specifically, certain
identifiable sales contracts, but not all or substantially all of the assets of SLG. The modified agreement set forth the consideration
that the Company would have paid to SLG, which consideration would have included the refundable deposit, the outstanding balance of which,
as of December 31, 2024 and 2023, was $
| F-17 |
NOTE 5 — FIXED ASSETS, SOFTWARE DEVELOPMENT COSTS, AND INTANGIBLE ASSET
Fixed assets consisted of the following as of December 31, 2024 and 2023:
SCHEDULE OF FIXED ASSETS
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| At Cost: | ||||||||
| Equipment | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Leasehold improvements | ||||||||
| Capital lease | ||||||||
| Software | ||||||||
| Property plant and equipment, gross | ||||||||
| Less: Accumulated depreciation | ||||||||
| Equipment | ||||||||
| Furniture and fixtures | ||||||||
| Leasehold improvements | ||||||||
| Capital lease | ||||||||
| Software | ||||||||
| Less: Accumulated depreciation | ||||||||
| Property plant and equipment, net | $ | $ | ||||||
During
the years ended December 31, 2024 and 2023, the Company recorded depreciation expenses in cost of revenue of $
Software development costs consisted of the following as of December 31, 2024 and 2023:
SCHEDULE OF SOFTWARE DEVELOPMENT COSTS
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| At Cost: | ||||||||
| Software development cost | ||||||||
During
the years ended December 31, 2024 and 2023, the Company incurred software development costs of $
In 2024, the Company reclassed software development costs from fixed asset to software development costs. The Company continuing incurs costs to develop new modules, functionalities, and integrations on previous purchased SaaS platform in order to develop a new product with differentiated offering. As of December 31, 2024, the SaaS platform is still undergoing development stage and not ready for external sales. No amortization has been recorded during the years ended December 31, 2024 and 2023.
In 2024, the Company reclassed a part of software from fixed asset to software development costs.
Intangible assets consisted of the following as of December 31, 2024 and 2023:
SCHEDULE OF INTANGIBLE ASSETS
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| At Cost: | ||||||||
| Contractual relationship | $ | $ | ||||||
| Implementation | ||||||||
| Software | ||||||||
| Intangible assets, gross | ||||||||
| Less: Accumulated amortization | ||||||||
| Contractual relationship | ||||||||
| Implementation | ||||||||
| Software | ||||||||
| Accumulated amortization | ||||||||
| Intangible assets, net | $ | $ | ||||||
During
the years ended December 31, 2024 and 2023, the Company recorded amortization expenses in selling, general and administrative expenses
of $
NOTE 6 — 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 % of the members’ equity interest in the Company in exchange for $ in cash and $ in two subordinated convertible promissory notes for $ 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 $ in cash, $ in promissory notes, and $ in capitalized transaction costs, less $ in adjustment in working capital that is recoverable from sellers resulted in a total purchase cost of $; the net asset value of Axxum at the date of acquisition was $; accordingly, the Company recognized $ in goodwill related to the acquisition of Axxum.
| F-18 |
Acquisition of Cloudburst Security, LLC.
On
April 3, 2019, the Company entered into a membership interest purchase agreement with Cloudburst Security, LLC, a Virginia limited
liability company, and its two equity holders to purchase
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 $
SCHEDULE OF GOODWILL
| Goodwill | 2024 | 2023 | ||||||
| Axxum Technologies | ||||||||
| Cloudburst Security | ||||||||
| Total Goodwill | ||||||||
| F-19 |
NOTE 7 — BANK LOANS
Bank loan-revolving credit line
On
November 22, 2017, Axxum procured from Main Street Bank a revolving line of credit with a maximum of up to $
On
April 18, 2019, Axxum, Cloudburst, and the Company collectively renewed the revolving line of credit with a maximum aggregate principal
sum of $
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
As
of December 31, 2024, the stated rate of interest of the revolving line of credit was
Bank term loan Concurrent with Axxum’s
procurement of the above-mentioned revolving credit line, Axxum also procured a term loan from Main Street Bank in the amount of $
Axxum
is subject to the following affirmative loan 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
On
June 29, 2020, the Company amended and restated the Loan and Security Agreement by extending the maturity date to
| F-20 |
The
loan covenants were replaced as follows:
As
of December 31, 2024, the stated rate of interest of the loan was
The
Company has categorized balances due within one operating period as current and those payments due after one operating period as long-term.
As of December 31, 2024 and 2023, the Company recorded bank loan-current portion of $
Pledge agreement
Concurrent with Axxum’s procurement of the above-mentioned revolving credit line and loan, Axxum entered into a 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.
During
the year ended December 31, 2024 and 2023, the Company record amortization of discount of $
NOTE 8 — LOANS PAYABLE
EIDL Loan
On
July 16, 2020, the Company executed the standard loan documents required for securing loans (the “EIDL Loan”) 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 is $
Other loan payable
On
March 20, 2023, the Company entered into a receivable purchase agreement (the “RPA Loan”) for case received of $
| F-21 |
NOTE 9 — SUBORDINATED DEBT
Subordinated promissory notes payable
As
part of the consideration for the acquisition of Axxum by the Company, the Company issued two subordinated convertible promissory notes
for $
As
bridge capital until the Company closes the next round of equity capital, the Company issued three promissory notes in the aggregate
principal value of $
During
the year ended December 31, 2021, the Company refinanced the $
On
April 20, 2022, the Company issued to an otherwise unaffiliated investor a $
On
June 21, 2022, the Company issued to an otherwise unaffiliated investor a $
On
September 21, 2022, the Company issued to an otherwise unaffiliated investor a $
On
November 23, 2022, the Company retired two promissory notes, one note totaling $
On
February 25, 2023, the Company issued to an otherwise unaffiliated investor a $
On
February 28, 2023, the Company issued to an otherwise unaffiliated investor a $
On
September 6, 2024, the Company issued a promissory note in the amount of $
On
September 6, 2024, the Company issued a promissory note in the amount of $
| F-22 |
On
September 6, 2024, the Company issued a promissory note in the amount of $
On
November 22, 2024, the Company issued a promissory note in the amount of $
On
November 22, 2024, the Company issued a promissory note in the amount of $
On
November 22, 2024, the Company issued a promissory note in the amount of $
On
November 22, 2024, the Company issued a promissory note in the amount of $
On
December 5, 2024, the Company issued a promissory note in the amount of $
On
December 20, 2024, the Company issued a promissory note in the amount of $
On
December 20, 2024, the Company issued a promissory note in the amount of $
As
of December 31, 2024 and 2023, the Company had outstanding notes payable of $
During the years ended December 31, 2024 and 2023, the Company record
amortization of debt discount of $
Subordinated Convertible Promissory notes payable
On
March 22, 2022, the Company issued subordinated convertible promissory notes with principal value of $
On
November 22, 2022, the Company issued to three otherwise unaffiliated investors $
| F-23 |
As
of December 31, 2024 and 2023, the Company had outstanding convertible promissory notes of $
The
company entered a Business Combination Agreement (BCA) with Western Acquisition Ventures in November 2022. As a result of consummating
the BCA, Cycurion raised $
NOTE 10 — SERIES A CONVERTIBLE PREFERRED STOCK
The Company has designated shares of Series A Convertible Preferred Stock with a par value of $ per share.
The
Series A has voting rights on an as-if-converted to common stock basis. The holders are entitled to a
Private Placement
On
November 17, 2017, the Company issued to certain accredited investors and a placement agent investment unit that were comprised
of Series A Convertible Preferred Stock, warrants, and common stock. The net proceeds of the transaction after deducting
placement agent and closing fees were $
The
Company issued shares of Series A Convertible Preferred Stock to the investors and a placement agent that are convertible
into of newly issuable shares of the Company’s common stock. Management assessed the attributes of the Series A Convertible
Preferred Stock and determined that the securities for accounting purposes should be treated as debt, as they call for liquidation preference,
preferred dividends that are akin to interest payments, and certain redemption features that require settlement in cash. The convertible
stock is redeemable May 20, 2021. In the event that the convertible stock is redeemed, the Company will be required to pay a redemption
premium of $
| F-24 |
NOTE 11 — EQUITY
Preferred Stock
The Company has authorized shares of preferred stock with a par value of $ per share, issuable from time to time in one or more series.
Mezzanine Equity
As of December 31, 2024 and 2023, there are and shares of common stock subject to possible redemption, respectively.
Stockholders’ Equity
Series B Convertible Preferred Stock
The Company has designated shares of Series B Convertible Preferred Stock with a stated value of $ 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 Cycurion’s Series B Convertible Preferred Stock.
Dividend Rights: Holders of shares of Cycurion’s Series B Convertible Preferred Stock shall be entitled to receive, and Cycurion shall pay, dividends on shares of Series B 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:
Liquidation Preference: Holders of shares of Cycurion’s Series B 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 B 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 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.
Protective Provisions: As long as any shares of Series B 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 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 Cycurion’s Series B 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 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.
In
August 2023, the Company issued to unaffiliated investors a total of preferred shares and warrants for $
As of December 31, 2024 and 2023, there were and shares of Series C Convertible Preferred Stock issued and outstanding, respectively.
Series C Convertible Preferred Stock
The Company has designated shares of Series C Convertible Preferred Stock with a stated value of $ per share.
Voting Rights: The holders of our Series C 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 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 Stock, (a) alter or change adversely the powers, preferences, or rights given to our Series C 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 Stock, (c) increase the number of authorized shares of our Series C Stock, or (d) enter into any agreement with respect to any of the foregoing.
Dividend
Rights: We shall pay dividends on our Series C Stock at the rate of
Conversion
Rights:
Liquidation
Preference: Our Series C Stock has a liquidation preference in an amount equal to its per-share Stated Value ($
Protective Provisions: As long as any shares of Series C 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 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 Cycurion’s Series C 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 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, the Company issued shares of Series C Convertible Stock (see Note 1).
As of December 31, 2024 and 2023, there were shares of Series C Convertible Preferred Stock issued and outstanding.
Common Stock
The Company has authorized shares of Common Stock with a par value of $ 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.
| F-25 |
During the year ended December 31, 2023, the Company issued shares of the Company’s Common Stock for compensation valued at $.
As of December 31, 2024 and 2023, there were and shares of Common Stock issued and outstanding, respectively.
Warrants
Public Warrants
As
of December 31, 2024 and 2023, there were
The
Public Warrants will expire on February 14, 2030,
Once the Public Warrants become exercisable, the Company may redeem the Public Warrants:
| ● | in whole and not in part; | |
| ● | at
a price of $ | |
| ● | upon
not less than | |
| ● | if,
and only if, the reported last sale price of the shares of common stock equals or exceeds $ | |
| ● | if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying the Public Warrants. |
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.
The exercise price and number of shares of common stock issuable on exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger, or consolidation. However, the warrants will not be adjusted for issuances of shares of common stock at a price below their respective exercise prices. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire and become worthless.
| F-26 |
In
addition, if (a) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection
with the closing of a Business Combination at an issue price or effective issue price of less than $
Private Placement Warrants
As
of December 31, 2024 and 2023, there were
Series A Warrants
On
November 17, 2017, the Company issued
In
a series of transactions from June 22 through September 30, 2021, the Company issued
Series B Warrants
On
August 1, 2023, the Company issued
On
April 12, 2024, the Company issued
Series D Warrants
On
March 22, 2022, the Company issued
| F-27 |
On
November 22, 2022, the Company issued
Other Warrants
On
March 8, 2022, the Company issued
A summary of activity for all warrants during the year ended December 31, 2024 and 2023 follows:
SCHEDULE OF WARRANTS ACTIVITY
| Number of | Weighted Average | Weighted Average | ||||||||||
| shares | Exercise Price | Life (years) | ||||||||||
| Outstanding, December 31, 2022 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | - | |||||||||||
| Expired | - | |||||||||||
| Outstanding, December 31, 2023 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | - | |||||||||||
| Expired | - | |||||||||||
| Outstanding, December 31, 2024 | $ | |||||||||||
| Exercisable, December 31, 2024 | $ | |||||||||||
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.
NOTE 12 — LEASE COMMITMENTS
Operating lease
After
the acquisition of Cloudburst, the Company entered into a new non-cancelable operating lease agreement with Scandium, LLC, for the
lease of a new floor in the same building as it had occupied.
The
Company recognized total lease expense of $
| F-28 |
NOTE 13 — RISKS
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 $
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.
Concentration risks
The following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenues for the years ended December 31, 2024 and 2023. Accordingly, there was a concentration of risk in demand for the Company’s services.
SCHEDULE OF CONCENTRATION RISKS
| Revenue | ||||||||||||||||
| For the year ended December 31, | ||||||||||||||||
| 2024 | 2023 | |||||||||||||||
| Customer | Amount | % | Amount | % | ||||||||||||
| A | $ | % | $ | % | ||||||||||||
| B | $ | % | $ | % | ||||||||||||
| C | $ | % | $ | % | ||||||||||||
| Accounts receivable | ||||||||||||||||
| At December 31, | At December 31, | |||||||||||||||
| 2024 | 2023 | |||||||||||||||
| Customer | Amount | % | Amount | % | ||||||||||||
| 1 | $ | % | $ | % | ||||||||||||
| 2 | $ | % | $ | % | ||||||||||||
| 3 | $ | % | $ | % | ||||||||||||
| F-29 |
NOTE 14 — FINANCIAL INSTRUMENTS
The Company classified the following securities as financial instruments:
SCHEDULE OF FINANCIAL INSTRUMENTS
| Liabilities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| December 31, 2024 | ||||||||||||||||
| Liabilities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Subordinated convertible promissory notes | $ | $ | $ | $ | ||||||||||||
| Series A convertible preferred stock | $ | $ | $ | $ | ||||||||||||
| Equity: | ||||||||||||||||
| Warrants | $ | $ | $ | $ | ||||||||||||
| Liabilities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| December 31, 2023 | ||||||||||||||||
| Liabilities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Subordinated convertible promissory notes | $ | $ | $ | $ | ||||||||||||
| Series A convertible preferred stock | $ | $ | $ | $ | ||||||||||||
| Equity: | ||||||||||||||||
| Warrants | $ | $ | $ | $ | ||||||||||||
Management believes the carrying values of the above securities approximate their fair values. The subordinated convertible promissory notes carry an interest rate that is indicative of the Company’s overall borrowing cost and the length of time until maturity is not expected to significantly impact their value. The convertible preferred stock, which is akin to debt, has been discounted to its presented carrying value in accordance with the debt discounts and redemption premiums recognized.
NOTE 15 — RELATED PARTY TRANSACTIONS
Promissory Note – Related Party
On
September 20, 2024, the Company entered into a promissory note with the Sponsor for $
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.
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 $
Notes payable
On
April 26, 2023, the Company issued to a director a $
On
April 26, 2023, the Company issued to a director a $
On
April 26, 2023, the Company issued to a director a $
On
June 22, 2023, the Company issued to a director a $
On
June 22, 2023, the Company issued to a director a $
| F-30 |
On
July 6, 2023, the Company issued to a director a $
On
July 21, 2023, the Company issued to a director a $
On
August 24, 2024, the Company issued a promissory note in the amount of $
During
the year ended December 31, 2024 and 2023, the Company record amortization of debt discount of $
As of December 31, 2024 and 2023, the
Company had due to related party balances of $
SCHEDULE OF COMPONENTS OF BASIC AND DILUTED EARNINGS PER SHARE
| 2024 | 2023 | |||||||
| Years ended | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Basic Earnings (Loss) Per Share Numerator | ||||||||
| Net Income (Loss) | $ | $ | ( | ) | ||||
| Income (Loss) Available to Common Stockholders | ( | ) | ||||||
| Diluted Earnings (Loss) Per Share Numerator | ||||||||
| Add back interest for subordinated convertible promissory note | ||||||||
| Income (Loss) Available to Common Stockholders on Converted Basis | $ | $ | ( | ) | ||||
| Original Shares: | ||||||||
| Basic Weighted Average Shares Outstanding | ||||||||
| Dilutive Shares: | ||||||||
| Additions from Potential Events | ||||||||
| - 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 | ||||||||
| - Conversion of Convertible Preferred Stock | ||||||||
| - Exercise of Investor and Placement Agent Warrants | ||||||||
| Diluted Weighted Average Shares Outstanding: | ||||||||
| Earnings (loss) Per Share | ||||||||
| - Basic | $ | $ | ( | ) | ||||
| - Diluted | $ | $ | ( | ) | ||||
| F-31 |
NOTE 17 — INCOME TAX
Due to operating losses and the recognition of valuation allowances, the Company has no provision for a current and deferred federal or state income taxes in 2021. In 2020, the Company reversed valuation allowances against previously reserved deferred tax assets, accordingly, there was no provision for current and deferred federal or state income taxes.
Deferred income taxes reflect the net tax effects of temporary and permanent differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and deferred tax liabilities are as follows as of:
SCHEDULE OF SIGNIFICANT COMPONENTS OF THE COMPANY’S DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Non-operating loss carryforward | $ | $ | ||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
The
Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such
assets. The Company has net operating and economic loss carry-forwards of approximately $
A
reconciliation between expected income taxes, computed at the federal income tax rate of
SCHEDULE OF RECONCILIATION OF THE STATUTORY FEDERAL INCOME TAX RATE (BENEFIT) TO THE COMPANY’S EFFECTIVE TAX RATE
| 2024 | 2023 | |||||||
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Tax at federal statutory rate | % | % | ||||||
| Tax at state rate net of federal benefit | % | % | ||||||
| Change in valuation allowance | - | % | - | % | ||||
| Provision for taxes | % | % | ||||||
NOTE 18- COMMITMENTS AND CONTINGENCIES
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.
| F-32 |
Business Combination Marketing Agreement
The
Company entered into a business combination marketing agreement on January 11, 2022 with A.G.P. (the “Business Combination Marketing
Agreement”) 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
Service Provider Agreements
The Company plans to enter into advisory agreements with certain of its service providers to fund its obligations in shares of common stock instead of cash.
Advisory
Agreement with A.G.P. The Company plans to enter into an advisory agreement with A.G.P. (the “Advisory Agreement”), pursuant
to which the Company shall pay A.G.P. a total transaction fee equal to $
The
Transaction Fee Shares shall be subject to a lock-up ending on the earlier of (i) the date on which % of the outstanding Series B Preferred
Stock is converted into shares of the Combined Company’s common stock and (ii) from the Closing date (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 % 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
Upon the execution of the Advisory Agreement, that certain Business Combination Marketing Agreement, dated January 11, 2022, between the Company and A.G.P. in which the Company and Cycurion shall cause the Combined Company to issue to A.G.P. shares of common stock of the Combined Company in full satisfaction of the fees, shall be terminated and such shares of common stock extinguished in their entirety.
| F-33 |
Other
Service Providers. In addition, the Company entered into revised arrangements with certain of its service providers, under which
the Company agrees to pay approximately $
Non-Redemption Agreement
On August 6, 2024, the Company, Western Acquisition Ventures Sponsor, LLC (the “Sponsor”) and RiverNorth SPAC Arbitrage Fund, LP (the “Investor”) entered into a non-redemption agreement (the “Non-Redemption Agreement”) whereby the Sponsor plans to transfer to the Investor shares each month over the next three months for agreeing not to redeem the 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 shares each month over the next three months for agreeing not to redeem the 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 $
of total compensation annually, including $
Inflation Reduction Act of 2022 (the “IR Act”)
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.
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 December 31, 2024 and 2023, the Company’s stockholders have redeemed a total of and shares of Common Stock
resulting in $
| F-34 |
NOTE 19 — 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 April 17, 2024. 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) non-recognized, 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.
On
January 15, 2025, Cycurion issued a $
On
January 21, 2025, Cycurion issued a $
On
January 25, 2025, Cycurion issued a $
On
January 31, 2025, Cycurion issued a $
On January 24, 2025, Western Acquisition Ventures Corp., a Delaware Corporation (“Western”), held the Special Meeting, at which the Western stockholders considered and adopted, among other matters, a proposal to approve a business combination (“Business Combination”) pursuant to the terms of that certain Agreement and Plan of Merger, dated April 26, 2024, as amended on December 31, 2024 and February 13, 2025 (the “Merger Agreement”), by and among Western, WAV Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Western (“Merger Sub”), and Cycurion Sub, Inc., a Delaware corporation (“Cycurion Sub”).
On February 14, 2025, the Business Combination closed, and, as contemplated by the Merger Agreement, Merger Sub merged with and into Cycurion Sub with Cycurion Sub surviving the merger as a wholly-owned subsidiary of Western. In addition, in connection with the consummation of the Business Combination, Western Acquisition Ventures Corp. was renamed “Cycurion, Inc.”
On February 18, 2025, our common stock began trading on The Nasdaq Global Market and our warrants began trading on The Nasdaq Capital Market under the symbols “CYCU” and “CYCUW”, respectively.
On February 19, 2025, Cycurion announced an agreement with iQSTEL Inc., a multinational innovator in telecommunications, FinTech, electric vehicles and AI-driven solutions.
On February 24, 2025, Cycurion announced an expansion of its partnership with a major health association, bringing its MSSP to several thousand member organizations across the country.
On March 3, 2025, Cycurion announced the availability of its ARx Platform targeted for the corporate sector.
On March 5, 2025, Cycurion announced the award of three new multi-year contracts focused on program management, cybersecurity and disaster and business continuity. These engagements are secured with two government clients and one commercial client.
On March 6, 2025, Cycurion announced a nationwide expansion of its strategic partnership with CentralSquare Technologies, LLC to deliver its IT services across the country.
On April 7,
2025, Cycurion entered into an equity purchase agreement with Yield Point NY LLC whereby the Company has the right, but not the obligation,
to direct the investor to purchase up to $
On April 8,
2025, Cycurion announced an expanded partnership with Journal Technologies. Together, the companies have been awarded a $
On April 9, 2025, Cycurion increased the size of its board of directors through the appointment of Irving Minnaker.
On April 9, 2025, Cycurion received written notice received from the Listing Qualifications Department of Nasdaq stating that, for the prior 30 consecutive business days, the closing bid price of the Company’s common stock had been below the minimum of $ per share required for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). The notification letter stated that the Company would be afforded 180 calendar days (until October 6, 2025) to regain compliance. In order to regain compliance, the closing bid price of the Company’s common stock must be at least $1 for a minimum of ten consecutive business days. The notification letter also stated that, in the event the Company does not regain compliance within the initial 180-day period, the Company may be eligible for an additional 180-day period. If the Company is not eligible for the additional 180-day period, or if it appears to the Nasdaq staff that the Company will not be able to cure the deficiency, the Nasdaq Listing Qualifications Department will provide notice after the end of the initial 180-day period that the Company’s securities will be subject to delisting. The Nasdaq notification has no effect at this time on the listing of the Company’s common stock.
On April 11,
2025, we received two letters from the Nasdaq Listing Qualifications Department, each addressing a separate compliance deficiency of the
Company under the Nasdaq Listing Rules. The first letter from the Nasdaq Listing Qualifications Department notified us of our non-compliance
with Nasdaq Listing Rule 5450(b)(2)(A), which requires a company such as ours whose securities are listed on The Nasdaq Global Market
under the “Market Value Standard” to maintain a minimum Market Value of Listed Securities (an “MVLS”) of $
The
second letter informed us of our deficiency in complying with Nasdaq Listing Rule 5450(b)(2)(C), which requires a minimum Market Value
of Publicly Held Shares (an “MVPHS”) of $
From February 14 to April 17, 2025, otherwise unaffiliated persons converted shares of the Company’s Series B Preferred Stock into shares of the Company’s common stock and shares of the Company’s Series D Preferred Stock into shares of the Company’s common stock.
From February
14 to April 17, 2025, otherwise unaffiliated persons exercised Series A warrants for the purchase of
| F-35 |
CYCURION, INC.
Up to $15,000,000 in Shares of Common Stock
Up to 4,500,000 Shares of Common Stock Underlying a Pre-Funded Warrant
PROSPECTUS
May 13, 2025
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the fees and expenses payable by the registrant in connection with the issuance and distribution of the securities being registered. All of the amounts shown are estimates, except for the SEC registration fee:
| Legal fees and expenses | $ | 50,000 | |||
| Accounting fees and expenses | 20,000 | ||||
| SEC registration fee | 2,573 | ||||
| Miscellaneous fees and expenses | 12,427 | ||||
| Total | $ | 85,000 |
Item 14. Indemnification of Directors and Officers.
Section 145 of the DGCL concerning indemnification of officers, directors, employees and agents is set forth below.
Section 145. Indemnification of officers, directors, employees and agents; insurance.
| (a) | A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful. |
| (b) | A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. |
| II-1 |
| (c) | (1) | To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith. For indemnification with respect to any act or omission occurring after December 31, 2020, references to “officer” for purposes of these paragraphs (c)(1) and (2) of this section shall mean only a person who at the time of such act or omission is deemed to have consented to service by the delivery of process to the registered agent of the corporation pursuant to § 3114(b) of Title 10 (for purposes of this sentence only, treating residents of this State as if they were nonresidents to apply § 3114(b) of Title 10 to this sentence). |
| (2) | The corporation may indemnify any other person who is not a present or former director or officer of the corporation against expenses (including attorneys’ fees) actually and reasonably incurred by such person to the extent he or she has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein. |
| (d) | Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made, with respect to a person who is a director or officer of the corporation at the time of such determination, (1) By a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) By a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (3) If there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) By the stockholders. |
| (e) | Expenses (including attorneys’ fees) incurred by an officer or director of the corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents of the corporation or by persons serving at the request of the corporation as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and conditions, if any, as the corporation deems appropriate. |
| (f) | The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to or repeal or elimination of the certificate of incorporation or the bylaws after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred. |
| II-2 |
| (g) | A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under this section. For purposes of this subsection, insurance shall include any insurance provided directly or indirectly (including pursuant to any fronting or reinsurance arrangement) by or through a captive insurance company organized and licensed in compliance with the laws of any jurisdiction, including any captive insurance company licensed under Chapter 69 of Title 18, provided that the terms of any such captive insurance shall: |
|
(1) Exclude from coverage thereunder, and provide that the insurer shall not make any payment for, loss in connection with any claim made against any person arising out of, based upon or attributable to any (i) personal profit or other financial advantage to which such person was not legally entitled or (ii) deliberate criminal or deliberate fraudulent act of such person, or a knowing violation of law by such person, if (in the case of the foregoing paragraph (g)(1)(i) or (ii) of this section) established by a final, nonappealable adjudication in the underlying proceeding in respect of such claim (which shall not include an action or proceeding initiated by the insurer or the insured to determine coverage under the policy), unless and only to the extent such person is entitled to be indemnified therefor under this section;
(2) Require that any determination to make a payment under such insurance in respect of a claim against a current director or officer (as defined in paragraph (c)(1) of this section) of the corporation shall be made by an independent claims administrator or in accordance with the provisions of paragraphs (d)(1) through (4) of this section; and
(3) Require that, prior to any payment under such insurance in connection with any dismissal or compromise of any action, suit or proceeding brought by or in the right of a corporation as to which notice is required to be given to stockholders, such corporation shall include in such notice that a payment is proposed to be made under such insurance in connection with such dismissal or compromise. | |
| For purposes of paragraph (g)(1) of this section, the conduct of an insured person shall not be imputed to any other insured person. A corporation that establishes or maintains a captive insurance company that provides insurance pursuant to this section shall not, solely by virtue thereof, be subject to the provisions of Title 18. | |
| (h) | For purposes of this section, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. |
| (i) | For purposes of this section, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this section. |
| (j) | The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. |
| II-3 |
| (k) | The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine a corporation’s obligation to advance expenses (including attorneys’ fees). |
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Section 8.2 of the Company’s second amended and restated certificate of incorporation provides:
“(a) To the fullest extent permitted by applicable law, as the same exists or may hereafter be amended, the Corporation shall indemnify and hold harmless each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan (an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against all liability and loss suffered and expenses (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred by such indemnitee in connection with such proceeding. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by an indemnitee in defending or otherwise participating in any proceeding in advance of its final disposition; provided, however, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking, by or on behalf of the indemnitee, to repay all amounts so advanced if it shall ultimately be determined that the indemnitee is not entitled to be indemnified under this Section 8.2 or otherwise. The rights to indemnification and advancement of expenses conferred by this Section 8.2 shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators. Notwithstanding the foregoing provisions of this Section 8.2(a), except for proceedings to enforce rights to indemnification and advancement of expenses, the Corporation shall indemnify and advance expenses to an indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board.
(b) The rights to indemnification and advancement of expenses conferred on any indemnitee by this Section 8.2 shall not be exclusive of any other rights that any indemnitee may have or hereafter acquire under law, this Second Amended and Restated Certificate, the By-Laws, an agreement, vote of stockholders or disinterested directors, or otherwise.
(c) Any repeal or amendment of this Section 8.2 by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Second Amended and Restated Certificate inconsistent with this Section 8.2, shall, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior thereto), and shall not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any proceeding (regardless of when such proceeding is first threatened, commenced or completed) arising out of, or related to, any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.
(d) This Section 8.2 shall not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other than indemnitees.”
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is theretofore unenforceable.
| II-4 |
Item 15. Recent Sales of Unregistered Securities.
During the past three years, we sold the following securities without registration under the Securities Act:
On April 7, 2025, we entered into a pre-funded warrant (“Pre-Funded Warrant”) with Yield Point NY LLC (the “Investor”) for up to 4,500,000 shares of Common Stock issuable to the Investor upon exercise of the Pre-Funded Warrant. We chose to issue the Pre-Funded Warrant in consideration for the Investor’s execution and delivery of the Equity Purchase Agreement, dated April 7, 2025, between us and the Investor in lieu of paying the Investor $1,800,000 in cash.
Item 16. Exhibits.
The exhibits to this registration statement are listed in the Exhibit Index to this registration statement, which immediately precedes the Signature Page and which Exhibit Index is hereby incorporated by reference.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
| (1) | to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the “Securities Act”); |
| (ii) | to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
| (iii) | to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
provided, however, that paragraphs (i), (ii) and (iii) do not apply if the registration statement is on Form S-1 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement;
| (2) | that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; |
| (3) | to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; |
| (4) | that, for the purpose of determining liability under the Securities Act to any purchaser: |
| (i) | If the registrant is relying on Rule 430B: |
| (A) | Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. |
Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use; and
| (5) | that, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities: |
the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
| (i) | any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
| (ii) | any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
| (iii) | the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of an undersigned registrant; and |
| (iv) | any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
| II-5 |
EXHIBIT INDEX
| II-6 |
| II-7 |
| II-8 |
| II-9 |
* Filed herewith.
** Previously filed.
| II-10 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned, in the city of Wilmington, State of Delaware, on May 13, 2025.
| CYCURION, INC. | ||
| By: | /s/ L. Kevin Kelly | |
| Name: | L. Kevin Kelly | |
| Title: | Chief Executive Officer (Principal Executive Officer) | |
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints L. Kevin Kelly and Alvin McCoy, III, acting alone or together with another attorney-in-fact, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign any or all further amendments (including post-effective amendments) to this registration statement (and any additional registration statement related hereto permitted by Rule 462(b) promulgated under the Securities Act (and all further amendments, including post-effective amendments, thereto)), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized.
| Signature | Title | Date | ||
| * | ||||
| Emmit McHenry | Chairman of the Board of Directors | May 13, 2025 | ||
| /s/ Alvin McCoy III | ||||
| Alvin McCoy III | Chief Financial Officer (Principal Financial and Accounting Officer) | May 13, 2025 | ||
| /s/ L. Kevin Kelly | ||||
| L. Kevin Kelly | Chief Executive Officer and Director (Principal Executive Officer) | May 13, 2025 | ||
| * | ||||
| Peter R. Ginsberg | Director | May 13, 2025 | ||
| * | ||||
| Reginald S. Bailey, Sr. | Director | May 13, 2025 | ||
| * | ||||
| Kevin E. O’Brien | Director | May 13, 2025 | ||
| * | ||||
| Irving Minnaker | Director | May 13, 2025 |
*Alvin McCoy III, pursuant to the Power of Attorney, by signing his name hereto does hereby sign and execute this Amendment No. 1 to the Registration Statement on behalf of the person referenced above.
| By: | /s/ Alvin McCoy III | |
| Alvin McCoy III | ||
| Attorney-in-Fact |
| II-11 |
Exhibit 5.1
|
ONE BATTERY PARK PLAZA NEW YORK, NEW YORK 10004 TELEPHONE: (212) 574-1200 FACSIMILE: (212) 480-8421 WWW.SEWKIS.COM |
901 K STREET, NW WASHINGTON, DC 20001 TELEPHONE: (202) 737-8833 FACSIMILE: (202) 737-5184 |
May 13, 2025
Cycurion, Inc.
1640 Boro Place, Fourth Floor
McLean, VA 22102
Re: Cycurion, Inc.
Ladies and Gentlemen:
We have acted as counsel to Cycurion, Inc., a Delaware corporation (the “Company”) in connection with the Company’s registration statement on Form S-1 (File No. 333-287052), including the prospectus contained therein, as initially filed on May 6, 2025 with the U.S. Securities and Exchange Commission (the “Commission”), and as thereafter amended or supplemented (the “Registration Statement”), relating to the registration under the U.S. Securities Act of 1933, as amended (the “Securities Act”), of the resale of up to an aggregate of 37,833,333 shares of common stock, $0.0001 per share, of the Company, consisting of (i) 33,333,333 shares, or $15 million in shares of Common Stock (the “ELOC Shares”), pursuant to the equity purchase agreement, dated April 7, 2025 (the “Equity Purchase Agreement”) with Yield Point NY LLC (the “Investor”); and (ii) 4,500,000 shares of common stock issuable to the Investor upon exercise of a pre-funded warrant (the “Commitment Shares”), to be offered by the Investor named therein.
We have examined originals or copies, certified or otherwise identified to our satisfaction, of (i) the Registration Statement and the prospectus contained therein, and (ii) such corporate documents and records of the Company and such other instruments, certificates and documents as we have deemed necessary or appropriate as a basis for the opinions hereinafter expressed. In such examinations, we have assumed the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies or drafts of documents to be executed, the genuineness of all signatures and the legal competence or capacity of persons or entities to complete the execution of documents. As to various questions of fact that are material to the opinions hereinafter expressed, we have relied upon statements or certificates of public officials, directors and officers of the Company and others.
Based upon and subject to the foregoing, and having regard to such other legal considerations which we deem relevant, we are of the opinion that:
| 1. | Each of the Commitment Shares have been duly authorized and are validly issued, fully paid and non-assessable; and | |
| 2. | The ELOC Shares issuable in accordance with the Equity Purchase Agreement have been duly authorized for issuance by all necessary corporate action on the part of the Company and, when issued and delivered against payment therefor in accordance with the terms of the Equity Purchase Agreement, will be validly issued, fully paid and non-assessable. |
This opinion is limited to the laws of the United States as in effect on the date hereof.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement, and to the reference to us under the heading “Legal Matters,” without admitting we are “experts” within the meaning of the Securities Act or the rules and regulations of the Commission promulgated thereunder with respect to any part of the Registration Statement.
| Very truly yours, | |
|
/s/ Seward & Kissel LLP |
Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
We hereby consent to the inclusion in this Registration Statement of Cycurion Inc. on Form S-1/A No. 1 of our report dated April 17, 2025 with respect to our audits of the consolidated financial statements of Cycurion Inc. as of December 31, 2024 and 2023 and for the years then ended.
We also consent to the reference of WWC, P.C., as an independent registered public accounting firm, as “Experts” in matters of accounting.
 | |
| San Mateo, California | WWC, P.C. |
| May 13, 2025 | Certified Public Accountants |
| PCAOB ID: 1171 |
