Kustom Entertainment Amends Divestiture Terms with Cycurion into Upgraded $6.1M Deal Featuring Immediate Cash Injection and 12% Yielding Preferred Equity

Rhea-AI Summary

Kustom Entertainment (Nasdaq: KUST) amended its asset purchase agreement with Cycurion (Nasdaq: CYCU) for the sale of its legacy video solutions business, lifting total deal valuation to $6.1 million and adding an immediate $250,000 non-refundable cash payment received on July 23, 2026.

The upgraded structure includes $1.25 million total upfront cash (including the $250,000 extension payment) and a $4.25 million secured promissory note with a 36‑month term at 7% annual interest. Previously planned 2,000,000 Cycurion warrants are replaced by $600,000 of Series H Preferred Stock paying a 12% annual cumulative dividend, convertible at $1.45 per share with senior liquidation preference and registration rights. The outside closing date moves to September 15, 2026. According to Kustom, the divestiture supports its shift to a pure-play live entertainment and proprietary ticketing focus, including expansion of its Country Stampede festival.

Positive

• Total deal value increased to $6.1 million
• Immediate non-refundable cash of $250,000 received from Cycurion
• Upfront cash increased to $1.25 million at closing
• Secured promissory note of $4.25 million at 7% for 36 months
• $600,000 Series H Preferred with 12% annual cumulative dividend
• Warrants cancelled and replaced with dividend-paying preferred equity

Negative

• Large portion of consideration in $4.25 million, 36‑month promissory note
• Deal closing timeline extended to September 15, 2026

News Explained

The revised economics are partly current cash and partly contingent on a September 15 closing, with Cycurion securities—not Kustom shares—forming the equity component.

On July 23, 2026, Kustom Entertainment executed an amendment to sell its legacy video-solutions assets, but the divestiture is not yet closed: the release sets September 15, 2026 as the outside closing date. The revised terms give Kustom $250,000 of non-refundable cash now, while the asset transfer and remaining closing consideration still depend on completion.

The $250,000 payment is earned immediately but will credit against the final purchase price only at closing. The replacement equity is preferred stock issued by Cycurion, with a 12% cumulative dividend paid quarterly in Cycurion common stock and a $1.45 conversion price; these are Cycurion securities rather than stated new Kustom common shares.

At March 31, 2026, Kustom reported $1,224,321 of cash and equivalents and $1,171,110 of first-quarter operating cash outflow.

The September 15, 2026 closing milestone is the key resolution point: it determines whether the $250,000 is credited to the purchase price and whether the note and Cycurion preferred-stock consideration are delivered as part of the sale.

Market reaction after divestiture terms amendment: KUST -14.81% in the Jul 27 session

-14.81%

23 alerts

-14.81% Session close to close

-22.0% Trough in 27 hr 15 min

$883,055 Market Cap

0.1x Rel. Volume

In the Jul 27 session, KUST declined 14.81%, reflecting a significant negative market reaction. Argus tracked a trough of -22.0% from its starting point during tracking. Our momentum scanner triggered 23 alerts that day, indicating elevated trading interest and price volatility.

Data tracked by StockTitan Argus on the day of publication.

Market Context

The stock dropped -14.8% in the session following this news. -7.14% was KUST's 24-hour reaction to a...

Analysis

The stock dropped -14.8% in the session following this news. -7.14% was KUST's 24-hour reaction to a June 15 ticket-inventory update. The amended divestiture brings cash and revised equity terms, but the provided high short-positioning level remains a volatility risk.

Key Figures

Immediate cash injection: $250,000 Total valuation: $6.1 million Upfront cash: $1.25 million +5 more

8 metrics

Immediate cash injection $250,000 Non-refundable payment delivered immediately to Kustom

Total valuation $6.1 million Upgraded divestiture agreement

Upfront cash $1.25 million Total upfront cash, inclusive of the extension payment

Secured promissory note $4.25 million 36-month term at 7% annual interest

Annual interest 7% Secured promissory note

Series H Preferred Stock $600,000 Replacing previously planned warrants

Annual cumulative dividend 12.0% Series H Preferred Stock, paid quarterly in Cycurion common stock

Conversion price $1.45 Series H Preferred Stock conversion into common stock

Historical Context

5 past events · Latest: Jul 01 (Positive)

Pattern 5 events

Date	Event	Sentiment	24h Move	Catalyst
Jul 01	Festival attendance update	Positive	+23.1%	Record 42,000-plus attendance and expanded venue plans supported the live-entertainment growth update.
Jun 25	Divestiture agreement	Positive	+0.7%	Binding Cycurion asset-sale agreement outlined cash, note, earnout, and warrants consideration.
Jun 22	Festival attendance update	Positive	-6.1%	Record festival attendance and venue expansion plans accompanied the announcement.
Jun 15	Ticket inventory update	Positive	-7.1%	Ticket inventory reached sellout and 90% sold levels across scheduled days.
Jun 11	Live-show plans	Neutral	+0.0%	Plans announced for more than 20 live shows in 2027 near Wichita.

24h Move is the share-price change in the day after each event; other market factors may also have contributed.

Pattern Detected

Positive announcements produced mixed outcomes, with two notable declines alongside two gains and one flat reaction.

Key Terms

secured promissory note, anti-dilution protections, liquidation preferences, registration rights

4 terms

secured promissory note financial

"a $4.25 million secured promissory note"

A secured promissory note is a written promise to repay borrowed money that is backed by specific assets pledged as collateral; if the borrower fails to pay, the lender can seize those assets to recover losses. Investors care because the collateral reduces the lender’s risk and can make the loan safer and more likely to be repaid, similar to a pawnshop loan where an item lowers the lender’s exposure if the borrower defaults.

anti-dilution protections financial

"Convertible into common stock with customary anti-dilution protections"

Anti-dilution protections are contract terms that adjust an investor's ownership or share price if a company later issues new shares at a lower price than the investor originally paid, so the investor doesn't lose as much value or voting power. They matter to investors because they limit downside from later, cheaper financings—like giving extra pieces to someone whose slice of pie would otherwise shrink—and influence expected returns and future ownership stakes.

liquidation preferences financial

"Includes senior liquidation preferences, class voting protections"

Liquidation preferences are contract terms that determine who gets paid first and how much when a company is sold, merged, or shuts down. Think of them like a special checkout lane that lets certain investors reclaim a set amount—often their original investment or a multiple—before other owners receive any proceeds; this protection changes how much different stakeholders can expect to get from an exit and influences investment value and negotiating power.

registration rights regulatory

"class voting protections, and registration rights"

Registration rights are contractual promises that let investors require a company to file paperwork with securities regulators so those investors can sell their shares to the public. They matter because they create a path to liquidity and an exit plan—without them, investors may be stuck holding shares for a long time. Think of them like a reserved ticket that guarantees access to a public marketplace when the holder is ready to sell.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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Captures $250,000 in immediate non-refundable capital, eliminates warrants in favor of preferred equity, and sharpens execution on its $100B live entertainment and ticketing expansion.

OVERLAND PARK, KS, July 27, 2026 (GLOBE NEWSWIRE) -- Kustom Entertainment, Inc. (Nasdaq: KUST) (“Kustom” or the “Company”), an emerging force in live music festival production and proprietary ticketing operations, today announced a major upgrade to its divestiture strategy. On July 23, 2026, the Company executed the Amendment No. 1 and Forbearance / Extension Agreement to its Asset Purchase Agreement with Cycurion, Inc. (Nasdaq: CYCU) for the sale of Kustom’s legacy video solutions business assets.

The upgraded agreement increases the total valuation to $6.1 million, injects immediate non-refundable capital directly into Kustom, and swaps out warrants for high-yield Series H Preferred Stock—all while extending the targeted closing window to September 15, 2026. All conditions precedent under the original agreement have been fully satisfied or waived, with both companies fully aligned to complete the transaction on or before the extended date.

This strategic move completes Kustom’s transformation into a pure-play live entertainment powerhouse, fully dedicating corporate energy and resources toward its rapidly expanding festival footprint, proprietary ticketing technology, and dynamic growth strategy under the ticker “KUST.”

Key Transaction Upgrades & Financial Terms:

• Immediate $250,000 Non-Refundable Cash Injection: Cycurion has delivered an immediate $250,000 non-refundable cash payment to Kustom. This upfront liquidity is earned immediately by Kustom and will only credit toward the final purchase price upon closing.
  
  
• Boosted Valuation to $6.1 Million: Base deal consideration rises to $6.1 million, featuring $1.25 million in total upfront cash (inclusive of the $250k extension payment) and a $4.25 million secured promissory note (36-month term at 7% annual interest).
  
  
• High-Yield $600,000 Series H Preferred Stock (Replacing Warrants): Kustom has canceled the previously planned 2,000,000 warrants ($2.80 strike price), replacing them with newly created, value-accretive Series H Preferred Stock issued by Cycurion featuring:

• 12.0% Annual Cumulative Dividend: Paid quarterly in shares of Cycurion common stock.
  
• $1.45 Conversion Price: Convertible into common stock with customary anti-dilution protections.
  
• Institutional-Grade Protections: Includes senior liquidation preferences, class voting protections, and registration rights.
  

• Optimized Transition Timeline: The Outside Closing Date is extended to September 15, 2026, ensuring an orderly transition for legacy customers while allowing Kustom to capitalize fully on its peak summer/fall event calendar.

Executive Leadership Perspective

“This upgraded agreement is a win-win: it underscores Cycurion’s resolute commitment to acquiring our legacy assets while immediately fortifying Kustom’s balance sheet with non-refundable capital and high-yield preferred equity,” said Stanton E. Ross, CEO of Kustom Entertainment.

“Swapping volatile warrants for 12% dividend-bearing stock creates strong downside protection and direct income yield for our shareholders. Best of all, it allows our team to be 100% focused on scaling our live entertainment engine, expanding our proprietary ticketing platforms, and executing our ambitious festival pipeline.”

Accelerating Momentum in a $100 Billion Market

Divesting the legacy video segment establishes a leaner, agile operating structure designed to capture market share across the global $100 billion addressable live event industry.

Kustom’s strategic pivot builds directly on the milestone success of its flagship event—the Country Stampede Music Festival, which celebrated its 30th Anniversary in June 2026. Looking ahead to 2027, the festival is officially expanding to Gilley’s Park City in Park City, KS (Wichita metro area). The move doubles capacity to 35,000 fans per show and serves as the anchor for more than 20 planned live event days across 2026 and 2027.

About Kustom Entertainment, Inc.

Kustom Entertainment, Inc. (Nasdaq: KUST) is an emerging leader in live event production and entertainment ticketing technology. The Company specializes in large-scale music festivals and end-to-end event management solutions. By leveraging proprietary ticketing platforms and premier venue partnerships, Kustom is dedicated to driving high-margin monetization across the entire live event lifecycle—from the initial ticket sale to the final encore. For more information, visit www.kustom440.com.

Forward-Looking Statements

Statements made in this press release that are not descriptions of historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are based on management’s current expectations and assumptions and are subject to risks and uncertainties with the proposed divestiture. These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will,” “would” or the negative or plural of these words or similar expressions or variations. If such risks or uncertainties materialize or such assumptions prove incorrect, our business, operating results, financial condition, and stock price could be materially negatively affected. You should not place undue reliance on such forward-looking statements, which speak only as of today’s date. All statements other than statements of historical fact are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the Company’s performance or achievements to be materially different from any expected future results, performance, or achievements, including: (i) the ability of the parties to complete the proposed transaction on the extended terms and timing, or at all; (ii) the risk that the Company’s stock price may fluctuate during the pendency of the proposed transaction and may decline if the proposed transaction is not completed; (iii) the risk that disruptions from the proposed transaction will harm the Company’s business, including current plans and operations; (iv) the diversion of management’s time and attention from ordinary course business operations; (v) potential adverse reactions or changes to business relationships resulting from the announcement or pendency of the amendment to the agreement; (vi) the satisfaction of ongoing operational covenants through the extended closing date; and the risks described in the Company’s annual and quarterly filings with the U.S. Securities and Exchange Commission. The Company undertakes no duty to update forward-looking statements except as required by law.

Media & Investor Contacts
Stanton E. Ross, CEO
Kustom Entertainment, Inc.
Phone: (913) 456-KUST (5878)
Email: info@kustoment.com
Websites: www.kustoment.com | www.kustom440.com | www.countrystampede.com

FAQ

What are the key terms of Kustom Entertainment’s (Nasdaq: KUST) amended Cycurion divestiture deal?

The amended deal values Kustom’s legacy video assets at $6.1 million. According to Kustom, consideration includes $1.25 million upfront cash (with a $250,000 non-refundable payment already received) and a $4.25 million secured note at 7% over 36 months, plus $600,000 in Series H Preferred Stock.

How much immediate cash does Kustom Entertainment (KUST) receive from the amended Cycurion agreement?

Kustom receives an immediate $250,000 non-refundable cash payment from Cycurion. According to Kustom, this extension payment is earned upon receipt, strengthens near-term liquidity, and will credit toward the final purchase price only if the legacy video asset sale successfully closes by the extended outside date.

What is the 12% yielding Series H Preferred Stock in the KUST-Cycurion transaction?

Cycurion issues $600,000 of Series H Preferred Stock to Kustom, yielding a 12% annual cumulative dividend. According to Kustom, dividends are paid quarterly in Cycurion common shares, with a $1.45 conversion price, senior liquidation preference, class voting protections, and registration rights replacing 2,000,000 previously planned warrants.

When is the new outside closing date for Kustom Entertainment’s sale of its legacy video business to Cycurion?

The outside closing date is extended to September 15, 2026. According to Kustom, all original conditions precedent have been satisfied or waived, and the extension is intended to support an orderly legacy customer transition while Kustom focuses on its peak 2026 summer and fall live events calendar.

How does the Cycurion divestiture support Kustom Entertainment’s (KUST) live entertainment and ticketing strategy?

The divestiture removes Kustom’s legacy video segment, sharpening focus on live festivals and proprietary ticketing. According to Kustom, resources shift to expanding its festival footprint, including scaling the Country Stampede Music Festival and supporting more than 20 planned live event days across 2026 and 2027.

What happens to the 2,000,000 Cycurion warrants in Kustom Entertainment’s revised deal?

The previously planned 2,000,000 Cycurion warrants with a $2.80 strike price are cancelled. According to Kustom, they are replaced by $600,000 of Series H Preferred Stock that provides a 12% cumulative dividend, equity conversion at $1.45, and institutional-style protections instead of more volatile warrant exposure.

How is the $6.1 million consideration in Kustom Entertainment’s divestiture with Cycurion structured?

The $6.1 million package combines $1.25 million cash and a $4.25 million secured note. According to Kustom, the note runs 36 months at 7% interest, while the structure also includes $600,000 of 12% Series H Preferred Stock issued by Cycurion to Kustom.