Cycurion adds Secuvant going-concern warning
Management says integration and potential support from Cycurion do not alleviate Secuvant’s substantial doubt about continuing as a going concern.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Rhea-AI Filing Summary
Cycurion amended its acquisition report to add Secuvant’s audited 2025 and 2024 statements, unaudited results for the six months ended June 30, 2026 and 2025, pro forma information and supplemental management discussion. Cycurion acquired all of Secuvant’s membership interests on June 3, 2026, for $2.875 million paid to former members: $875,000 in cash and 888,888 shares of Series I Convertible Preferred Stock. The interim statements use Secuvant’s historical accounting basis, excluding acquisition-related fair-value adjustments, goodwill and intangible assets; pro forma figures are not necessarily indicative of results on the assumed transaction dates or of future results.
Secuvant’s revenue was $2,336,556 in 2025, versus $2,485,868 in 2024, while net income was $786,925 versus $168,532. For the six months ended June 30, 2026, revenue was $1,058,323 and net income was $255,339, compared with $1,194,855 and $422,548 a year earlier; operating cash flow was negative $102,658 versus positive $335,755. Management concluded substantial doubt exists about Secuvant’s ability to continue as a going concern within one year after the statements are available to be issued. Its plans do not alleviate that doubt, and Cycurion is not obligated to provide financial support.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointAcquisition: Cycurion completed the $2.875 million Secuvant transaction. 4.9% of market cap
- Minor point2025 net income: Secuvant reported $786,925, compared with $168,532 in 2024.
Negative
- Moderate pointGoing-concern doubt: Management says plans do not alleviate substantial doubt within one year.
- Minor point2025 revenue: Secuvant reported $2,336,556, compared with $2,485,868 in 2024.
- Minor pointFirst-half revenue: Secuvant reported $1,058,323, compared with $1,194,855 in 2025.
- Minor pointFirst-half net income: Secuvant reported $255,339, compared with $422,548 in 2025.
- Minor pointOperating cash flow: Secuvant used $102,658, versus $335,755 provided in the prior-year period.
Filing Explained
Secuvant’s June 30 cash of $318,430 coexisted with a $14,720 working-capital deficit and management’s unalleviated substantial-doubt conclusion.
After the
At
8-K Event Classification
Key Figures
Key Terms
going concern financial
contract liabilities financial
performance obligation financial
pushdown accounting technical
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much did CYCU pay to acquire Secuvant?
How did Secuvant perform in 2025?
Why did Secuvant report substantial doubt about its ability to continue as a going concern?
What were Secuvant’s first-half 2026 financial results?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date
of report (Date of earliest event reported):
(Exact Name of Registrant as Specified in Its Charter)
| (State
or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS
Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging
growth company
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Explanatory Note
This Amendment is being filed to provide the financial statements required by Item 9.01(a) of Form 8-K and the unaudited pro forma financial information required by Item 9.01(b) of Form 8-K, and to furnish management’s discussion and analysis of financial condition and results of operations of Secuvant as supplemental information.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired.
The audited financial statements of Secuvant as of December 31, 2025, and 2024 and for the years then ended, together with the related notes and the report of WWC, P.C., independent registered public accounting firm, and the unaudited condensed interim financial statements of Secuvant as of June 30, 2026 and for the six months ended June 30, 2026 and 2025, together with the related notes, are filed as Exhibit 99.1 to this Current Report on Form 8-K/A and are incorporated herein by reference.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed combined financial information of the Company giving effect to the acquisition of Secuvant is filed as Exhibit 99.2 to this Current Report on Form 8-K/A and is incorporated herein by reference.
The unaudited pro forma condensed combined financial information has been prepared for informational purposes only in accordance with Article 11 of Regulation S-X and is not necessarily indicative of the financial position or results of operations that would have occurred had the acquisition been completed on the dates assumed therein, nor is it necessarily indicative of future results.
Supplemental Information.
Management’s discussion and analysis of financial condition and results of operations of Secuvant as of and for the years ended December 31, 2025, and 2024 and as of and for the six months ended June 30, 2026 and 2025 is furnished as Exhibit 99.3 to this Current Report on Form 8-K/A and is incorporated herein by reference.
(d) Exhibits.
| Exhibit No. | Description | |
| 23.1 | Consent of WWC, P.C., independent registered public accounting firm. | |
| 99.1 | Historical Financial Statements of Secuvant, LLC | |
| 99.2 | Unaudited Pro Forma Condensed Combined Financial Information. | |
| 99.3 | Management’s Discussion and Analysis of Financial Condition and Results of Operations of Secuvant, LLC. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CYCURION, INC. | ||||
| Date: | October 28, 2026 | By: | /s/ L. Kevin Kelly | |
| Name: | L. Kevin Kelly | |||
| Title: | Chief Executive Officer | |||
Exhibit 99.1
HISTORICAL FINANCIAL STATEMENTS OF SECUVANT, LLC
Index
| A. | Audited
Financial Statements as of December 31, |
| B. | Unaudited
Condensed Financial Statements as of June 30, |
| 1 |
SECUVANT, LLC
FINANCIAL STATEMENTS
For
the Years Ended December 31,
| 2 |
SECUVANT, LLC
TABLE OF CONTENTS
| Report of Independent Registered Public Accounting Firm | 4 |
| Balance Sheets | 5 |
| Income Statements | 6 |
| Statements of Changes in Members’ Deficit | 7 |
| Statements of Cash Flows | 8 |
| Notes to Financial Statements | 9–22 |
| 3 |
| 4 |
SECUVANT, LLC
BALANCE SHEETS
December 31, 2025 and 2024
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 478,981 | $ | 339,565 | ||||
| Accounts receivable | 296,978 | 492,065 | ||||||
| Prepaid expenses and other current assets | 68,782 | 10,540 | ||||||
| Total current assets | 844,741 | 842,170 | ||||||
| Non-current assets: | ||||||||
| Property and equipment, net | 78,697 | 314 | ||||||
| Software development costs, net | 77,158 | 99,289 | ||||||
| Total assets | $ | 1,000,596 | $ | 941,773 | ||||
| LIABILITIES AND MEMBERS’ DEFICIT | ||||||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 241,850 | $ | 623,099 | ||||
| Deferred revenue and customer deposits | 800,496 | 1,121,180 | ||||||
| Line of credit | — | 60,000 | ||||||
| Current portion of notes payable | 13,001 | 4,446 | ||||||
| Current portion of note payable – related party | 44,000 | 44,000 | ||||||
| Total current liabilities | 1,099,347 | 1,852,725 | ||||||
| Non-current liabilities: | ||||||||
| Notes payable, net of current portion | 273,400 | 204,124 | ||||||
| Note payable – related party, net of current portion | 106,333 | 150,333 | ||||||
| Total liabilities | 1,479,080 | 2,207,182 | ||||||
| Commitments and contingencies (Note 14) | ||||||||
| MEMBERS’ DEFICIT | ||||||||
| Members’ capital | 281,782 | 281,782 | ||||||
| Accumulated deficit | (760,266 | ) | (1,547,191 | ) | ||||
| Total members’ deficit | (478,484 | ) | (1,265,409 | ) | ||||
| Total liabilities and members’ deficit | $ | 1,000,596 | $ | 941,773 | ||||
The accompanying notes are an integral part of these financial statements.
| 5 |
SECUVANT, LLC
INCOME STATEMENTS
For the Years Ended December 31, 2025 and 2024
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | 2,336,556 | $ | 2,485,868 | ||||
| Cost of revenue | 736,942 | 1,276,063 | ||||||
| Gross profit | 1,599,614 | 1,209,805 | ||||||
| Operating expenses: | ||||||||
| Selling, general and administrative expenses | 509,569 | 445,841 | ||||||
| Management and consulting fees – related parties | 319,008 | 379,073 | ||||||
| Depreciation of property and equipment | 8,956 | 2,640 | ||||||
| Amortization of software development costs | 81,638 | 78,847 | ||||||
| Total operating expenses | 919,171 | 906,401 | ||||||
| Income from operations | 680,443 | 303,404 | ||||||
| Other income (expense): | ||||||||
| Interest expense | (14,871 | ) | (28,013 | ) | ||||
| Other income (expense), net | 121,353 | (106,859 | ) | |||||
| Total other income (expense), net | 106,482 | (134,872 | ) | |||||
| Net income | $ | 786,925 | $ | 168,532 | ||||
The accompanying notes are an integral part of these financial statements.
| 6 |
SECUVANT, LLC
STATEMENTS OF CHANGES IN MEMBERS’ DEFICIT
For
the Years Ended December 31,
Members’ Capital | Accumulated Deficit | Total Members’ Deficit | ||||||||||
| Balance, December 31, 2023 | $ | 281,782 | $ | (1,715,723 | ) | $ | (1,433,941 | ) | ||||
| Net income | — | 168,532 | 168,532 | |||||||||
| Balance, December 31, 2024 | 281,782 | (1,547,191 | ) | (1,265,409 | ) | |||||||
| Net income | — | 786,925 | 786,925 | |||||||||
| Balance, December 31, 2025 | $ | 281,782 | $ | (760,266 | ) | $ | (478,484 | ) | ||||
The accompanying notes are an integral part of these financial statements.
| 7 |
SECUVANT, LLC
STATEMENTS OF CASH FLOWS
For
the Years Ended December 31,
| December 31, 2025 | December 31, 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 786,925 | $ | 168,532 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation of property and equipment | 8,956 | 2,640 | ||||||
| Amortization of software development costs | 81,638 | 78,847 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 195,087 | (432,940 | ) | |||||
| Prepaid expenses and other current assets | (58,243 | ) | 7,867 | |||||
| Accounts payable and accrued liabilities | (381,249 | ) | (134,271 | ) | ||||
| Deferred revenue and customer deposits | (320,684 | ) | (112,156 | ) | ||||
| Net cash provided by (used in) operating activities | 312,430 | (421,481 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Capitalized software development costs | (59,505 | ) | (6,529 | ) | ||||
| Purchases of equipment | (1,439 | ) | — | |||||
| Net cash used in investing activities | (60,944 | ) | (6,529 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from line of credit | — | 60,000 | ||||||
| Repayments of line of credit | (60,000 | ) | — | |||||
| Repayments of note payable – related party | (44,000 | ) | (44,000 | ) | ||||
| Repayments of notes payable | (8,070 | ) | (5,154 | ) | ||||
| Net cash (used in) provided by financing activities | (112,070 | ) | 10,846 | |||||
| Net increase (decrease) in cash | 139,416 | (417,164 | ) | |||||
| Cash, beginning of year | 339,565 | 756,729 | ||||||
| Cash, end of year | $ | 478,981 | $ | 339,565 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid for interest | 14,871 | 27,655 | ||||||
| Non-cash financing activities: | ||||||||
| Vehicle acquired through issuance of note payable | 85,900 | — | ||||||
The accompanying notes are an integral part of these financial statements.
| 8 |
SECUVANT, LLC
NOTES TO FINANCIAL STATEMENTS
For
the Years Ended December 31,
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Secuvant, LLC (the “Company”, “Secuvant”, “we”, “us” or “our”) is a Utah limited liability company headquartered in Utah. The Company provides managed cybersecurity services to commercial customers, principally in the United States. Cybersecurity services include managed detection and response (“MDR”), risk and program management (“RPM”), and threat and vulnerability management (“TVM,” marketed as Panoptic), together with security assessments, penetration testing and consulting projects. The Company is governed by its Amended and Restated Operating Agreement dated November 5, 2019, and its managing member directs its day-to-day operations.
Acquisition by Cycurion, Inc.
On June 3, 2026, Cycurion, Inc. (“Cycurion”), a Delaware corporation whose common stock is listed on The Nasdaq Global Market, acquired 100% of the membership interests of the Company pursuant to an Agreement and Plan of Merger dated May 21, 2026, under which Cycurion Merger Sub, LLC, a wholly owned subsidiary of Cycurion, merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Cycurion (the “Acquisition”). As a result, the Company is a wholly owned subsidiary of Cycurion, and Cycurion, as the Company’s parent, controls the Company’s operations, financing and cash management. The Company’s services and technology are being integrated into Cycurion’s cybersecurity offerings. The Acquisition is further described in Note 17.
Emerging Growth Company
Cycurion is an emerging growth company as defined in Section 2(a) of the Securities Act of 1933, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards, and Cycurion has elected not to opt out of this extended transition period. Because these financial statements are included in a filing of Cycurion, the Company applies new or revised accounting standards using the effective dates applicable to private companies. This may make comparison of the Company’s financial statements with those of a public company that is neither an emerging growth company nor an emerging growth company that has opted out of the extended transition period difficult or impossible because of the potential differences in accounting standards used.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The
accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).
These financial statements have been prepared pursuant to Rule 3-05 and Article 8 of Regulation S-X for inclusion in a Current Report
on Form 8-K of Cycurion. The Company’s fiscal year ends on December 31, and the accompanying financial statements present the Company’s
financial position as of December 31,
Use of Estimates
Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, and the disclosure of contingent assets and liabilities. The Company regularly assesses these estimates. We base our estimates on historical experience, currently available information, and various other assumptions that we believe are reasonable under the circumstances. Management evaluates these estimates and assumptions on an ongoing basis, including those relating to the period over which revenue is recognized, the allowance for credit losses, the useful lives of property and equipment and software development costs, the valuation and impairment of software development costs and other long-lived assets, the classification of debt maturities, and contingencies. The Company does not recognize revenue using cost-based measures of progress. Actual results could differ from those estimates. The impact of changes in estimates is recorded in the period in which they become known.
| 9 |
Revenue Recognition
The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). The Company accounts for a contract with a customer that is within the scope of this topic only when the five steps of revenue recognition under ASC 606 are met. Revenue is derived primarily from managed cybersecurity services provided to commercial customers, which are recognized over time as the services are delivered.
Step 1 – Identify the contract with a customer. The Company enters into agreements with customers that create enforceable rights and obligations and for which it is probable that the Company will collect the consideration to which it will be entitled as services are transferred to the customer. Contracts are generally documented in master services agreements and statements of work that specify the services, the service period, pricing and payment terms. The Company also evaluates whether two or more agreements should be accounted for as one single contract.
Step
2 – Identify the performance obligations. At contract inception, the Company determines whether the services to be provided are
to be accounted for as a single performance obligation or as multiple performance obligations. Each managed service (MDR, RPM and TVM)
is a stand-ready obligation consisting of a series of distinct service periods that are substantially the same and have the same pattern
of
Step 3 – Determine the transaction price. When determining the total transaction price, the Company identifies both fixed and variable consideration elements within the contract. The Company estimates variable consideration as the most likely amount to which the Company expects to be entitled, limited to the extent that it is probable that a significant reversal will not occur in a subsequent period. The Company’s contracts consist primarily of fixed monthly, quarterly or annual fees; variable consideration is limited to fees for hours used in excess of contractual allotments, which are recognized when the hours are used. Contracts do not include rights of return, warranties, rebates or discounts. Because customers are invoiced in advance and the period between payment and the transfer of services is one year or less, the Company does not adjust the transaction price for a significant financing component. Sales and similar taxes collected from customers are excluded from the transaction price.
Step 4 – Allocate the transaction price. When a contract includes more than one performance obligation, the Company allocates the transaction price to each performance obligation based on its relative standalone selling price, which is generally the contractually stated price for the service when sold separately.
Step 5 – Recognize revenue when, or as, performance obligations are satisfied. Revenue for managed services is recognized over time, ratably over the service period, using a time-based measure of progress, because the customer simultaneously receives and consumes the benefits as the Company performs. Professional services are recognized as the services are performed. Reimbursable out-of-pocket expenses billed to customers are recognized as revenue on a gross basis, with the related costs included in cost of revenue, because the Company is the principal in those arrangements.
Customers are generally invoiced monthly, quarterly or annually in advance, and certain contracts require a final-month prepayment that is held until the end of the contract. Amounts invoiced in advance of performance are recorded as deferred revenue (a contract liability). Customer deposits represent amounts received that are refundable or have not yet been applied to a contract.
The Company accounts for contract costs in accordance with ASC Topic 340-40, Other Assets and Deferred Costs – Contracts with Customers. The incremental costs of obtaining a contract, which consist of sales commissions, are expensed as incurred under the practical expedient for costs whose amortization period would be one year or less. Costs to fulfill contracts, principally third-party platform license fees and outside contractor costs, are expensed as incurred because they do not generate or enhance resources that will be used to satisfy future performance obligations.
Cash
Cash is stated at cost, which approximates fair value, and consists of demand deposits with financial institutions. The Company’s cash balances may, from time to time, exceed insured limits of $250,000 established by the Federal Deposit Insurance Corporation (“FDIC”). At December 31, 2025 and 2024, balances at one institution exceeded the FDIC limit by approximately $228,000 and $89,000, respectively. The Company has not experienced any losses in such accounts, and management believes that the Company is not exposed to significant credit risk on its cash balances.
| 10 |
Accounts Receivable and Allowance for Credit Losses
Accounts receivable includes the following:
Billed receivables: Billed receivables are balances for which an invoice has been prepared and issued and is collectible under standard contract terms, generally within 30 days.
Unbilled
receivables: Unbilled receivables are balances that have not yet been billed due to timing, for which the Company has fulfilled all requirements
to bill the customer. Because customers are generally invoiced in advance of service, the Company had no unbilled receivables
The Company maintains an allowance for credit losses on its accounts receivable, which includes both billed and unbilled receivables measured at amortized cost. The allowance is a contra-asset account representing management’s estimate of amounts not expected to be collected over the life of the receivable.
The Company estimates expected credit losses in accordance with ASC Topic 326, Financial Instruments – Credit Losses, based on historical loss experience, current conditions, and reasonable and supportable forecasts. Receivables are evaluated collectively, grouped by similar risk characteristics, which for the Company primarily reflects the composition of its commercial customer base, and individually when specific information indicates that a balance may not be collectible. Qualitative adjustments are applied as necessary to reflect conditions that may differ from historical experience.
The
allowance is reviewed and updated at each reporting date. When a specific receivable is determined to be uncollectible, it is written
off against the allowance. Recoveries of amounts previously written off are recognized when received. The Company has historically experienced
minimal credit losses and recorded no write-offs during the periods presented; accordingly, no allowance was recorded
Concentrations
Financial
instruments that potentially subject the Company to concentration of credit risk consist principally of cash and accounts receivable.
The Company’s customer base consists of commercial enterprises, and a small number of customers account for a significant portion
of billings and accounts receivable. The Company monitors the financial condition of its customers and the credit quality of its receivable
portfolio and does not require collateral from its customers. Customers representing 10% or more of billings or accounts receivable,
and vendors representing 10% or more of purchases or accounts
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation. Depreciation is recorded over the assets’ estimated useful lives using the straight-line method, which is three years for computer equipment, five to seven years for furniture and equipment, and five years for vehicles. Leasehold improvements are amortized over the shorter of their useful life or the remaining term of the lease.
Upon sale or retirement of property and equipment, the cost and related accumulated depreciation are eliminated from the accounts and any gain or loss on such disposition is reflected in the income statements. Fully depreciated assets no longer in service are removed from the accounts. Repairs and maintenance costs are expensed as incurred. Major renewals and improvements are capitalized and depreciated over their estimated useful lives.
Software Development Costs
The
Company develops software used to deliver its TVM (Panoptic) service and related client portals, which customers access as a service
and do not take possession of. The Company accounts for these costs in accordance with ASC Topic 350-40, Intangibles – Goodwill
and Other – Internal-Use Software (“ASC 350-40”). Under ASC 350-40, the Company capitalizes certain software development
costs when the preliminary project stage is
Capitalized software development costs are amortized on a straight-line basis over the estimated economic life of the application of three years, beginning when the asset is ready for its intended use (Note 7).
Intangible Assets
The Company’s intangible assets consist of its capitalized software development costs, which have finite useful lives. The Company has no goodwill and no indefinite-lived intangible assets. The Company evaluates intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company recognizes an impairment charge measured as the excess of the carrying amount over the asset’s fair value.
| 11 |
Impairment of Long-Lived Assets
The
Company reviews long-lived assets, including property and equipment and software development costs, for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of an asset
or asset group is assessed based on a comparison of the carrying amount to the estimated undiscounted future cash flows expected to be
generated by the asset or asset group. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company recognizes
an impairment charge measured as the excess of the carrying value over the fair value. No impairment was recorded during the years ended
December 31,
Fair Value Measurements
U.S. GAAP provides a framework for measuring fair value and expands disclosures about fair value measurements. The framework requires fair value measurements to be classified and disclosed in one of the following categories:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities;
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
As
of December 31,
Income Taxes
The
Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”), using the asset and liability
method. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
During the periods presented, the Company was a limited liability company treated as a partnership for U.S. federal and state income tax purposes. As a pass-through entity, the Company’s taxable income or loss was reported by its members on their individual income tax returns, and the Company was not subject to entity-level income taxes. Accordingly, no provision for income taxes, no deferred tax assets or liabilities and no valuation allowance are recognized in the accompanying financial statements
The
Company recognizes the financial statement effects of uncertain tax positions when it is more likely than not, based on the technical
merits, that the position will be sustained upon examination by the taxing authority. The Company has evaluated its tax positions, including
its status as a pass-through entity, and concluded that there are no significant uncertain tax positions requiring recognition. The Company
classifies interest and penalties related to uncertain tax positions as a component of other income (expense), net. The Company’s
tax returns for
Effective for the year ended December 31, 2025, the Company adopted ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” on a prospective basis. The ASU requires a tabular rate reconciliation with specific categories, disclosure of income taxes paid disaggregated by federal, state and foreign jurisdictions, and other disaggregated disclosures. Because the Company is a pass-through entity that is not subject to entity-level income taxes and paid no income taxes during the periods presented, the adoption did not result in any additional disclosures.
Government Assistance
U.S. GAAP did not provide authoritative guidance for government assistance received by business entities during the periods presented. The Company accounts for the Employee Retention Credit (“ERC”) by analogy to International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance, recognizing the credit when there is reasonable assurance that the Company has complied with the conditions attached to it and that the credit will be received, which the Company concluded occurred upon receipt of the refund (Note 12).
| 12 |
Leases
The
Company accounts for leases in accordance with ASC Topic 842, Leases, and has elected the short-term lease exemption for leases with
a term of twelve months or less. The Company rents office and storage space on a month-to-month basis and has no leases with terms greater
than twelve months; accordingly, no right-of-use assets or lease liabilities are
Segment Reporting
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM, its Chief Executive Officer, reviews the Company’s results of operations as a whole to make decisions. The Company has one operating and reportable segment, which is the delivery of managed cybersecurity services to commercial customers. The CODM uses net income, as reported in the income statements, to assess performance and allocate resources, and the significant segment expenses regularly provided to the CODM are the expense categories presented in the income statements. All of the Company’s revenue is earned from customers in the United States, and all of its long-lived assets are located in the United States.
The Company adopted ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which requires expanded disclosures about significant segment expenses and other items for single-segment entities, based on the information regularly presented and reviewed by the CODM. Accordingly, the Company concluded that no additional expense disclosures are required other than the breakout currently disclosed in the financial statements and footnotes.
The measure of segment assets is total assets as reported on the balance sheets, and expenditures for segment assets consist of capitalized software development costs and purchases of equipment as reported in the statements of cash flows. Segment revenue, significant segment expenses (cost of revenue; selling, general and administrative expenses; management and consulting fees – related parties; depreciation of property and equipment; and amortization of software development costs), other segment items (interest expense and other income (expense), net) and segment net income are presented in the income statements, and interest expense and depreciation and amortization are also presented in the statements of cash flows. There are no reconciling items between segment net income and the Company’s net income.
Advertising and Marketing Costs
Advertising and marketing costs are expensed as incurred and are included in selling, general and administrative expenses in the income statements.
Recent Accounting Pronouncements – Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure, on an annual and interim basis, of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, including by entities with a single reportable segment. The Company adopted this standard for the year ended December 31, 2025, and has applied the required disclosures on a retrospective basis for all periods presented. Adoption had no effect on the Company’s financial position, results of operations or cash flows.
Recent Accounting Pronouncements – Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40), which requires public entities to disclose, on both an annual and interim basis, additional information about certain expense categories in tabular form. The standard is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its disclosures.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments provide a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and contract assets. The update is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years, and is applied prospectively. Early adoption is permitted. The Company does not expect this ASU to have a material impact on its financial statements.
| 13 |
In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU simplifies the capitalization guidance by removing all references to prescriptive and sequential software development stages (“project stages”) throughout ASC 350-40. The ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those fiscal years, and may be applied prospectively, under a modified transition approach based on the status of the respective projects, or retrospectively. Early adoption is permitted. Because the Company capitalizes software development costs (Note 7), the Company is evaluating the provisions of this ASU and does not expect it to have a material impact on its financial statements.
In
December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The ASU clarifies interim disclosure
requirements and the applicability of Topic
In December 2025, the FASB issued ASU 2025-12, Codification Improvements. The ASU addresses thirty-three items representing changes to the Codification that clarify, correct errors or make minor improvements, and is not intended to result in significant changes for most entities. The ASU is effective for annual reporting periods beginning after December 15, 2026, and the adoption method may vary on an issue-by-issue basis. Early adoption is permitted. The Company does not expect this ASU to have a material impact on its financial statements.
The Company has reviewed all other recently issued accounting pronouncements and does not believe that any such pronouncements will have a material impact on its financial statements.
NOTE 3. GOING CONCERN
The accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern. 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.
Management
evaluated whether conditions and events, considered in the aggregate, raise substantial doubt about the Company’s ability to continue
as a going concern within one year after the date the financial statements are available to be issued. That evaluation considered the
Company’s members’ deficit of $478,484 and working capital deficit of $254,606 at December 31, 2025, the concentration of
its billings in a small number of customers (Note 15), the decline in its billings in 2025 compared with 2024, and its post-Acquisition
cost structure. It also considered that Cycurion, the Company’s parent since June 3, 2026, has disclosed substantial doubt about
its own ability to continue as a going concern in its Annual Report on Form 10-K for the year ended December 31,
Management’s plans to address these conditions include completing the integration of the Company’s operations into Cycurion’s operations, which eliminated the Company’s management fee arrangement and personnel costs following the Acquisition (Note 17); continuing to deliver services under existing customer contracts, which are generally billed in advance; and obtaining financial support from Cycurion as needed. However, Cycurion is not obligated to provide financial support to the Company, Cycurion has disclosed substantial doubt about its own ability to continue as a going concern, and there can be no assurance that management’s plans will be successful. Accordingly, management’s plans do not alleviate the substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are available to be issued. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| 14 |
NOTE 4. REVENUE RECOGNITION
Managed Detection and Response (MDR)
The Company’s MDR service provides continuous (24x7x365) monitoring of a customer’s environment for security threats, together with investigation, alerting and response, delivered through an integrated combination of a third-party security operations platform, the Company’s security tools and the Company’s security personnel. The platform, tools and monitoring services are highly interdependent and are not sold separately, and the customer cannot benefit from any one of them without the others; accordingly, the MDR service is accounted for as a single performance obligation that is satisfied over time. MDR contracts generally have terms of one to three years and are invoiced monthly, quarterly or annually in advance. Revenue is recognized ratably over the service period, and amounts invoiced or collected in advance of service are recorded as deferred revenue until the service is provided. MDR contracts do not include variable consideration.
Risk and Program Management (RPM)
The Company’s RPM service provides ongoing security program management, governance, risk assessment and advisory support for a fixed periodic fee that includes a specified allotment of hours. The service is a series of distinct, substantially similar periods of service transferred over time and is accounted for as a single performance obligation. Revenue for the fixed fee is recognized ratably over the service period, and amounts invoiced in advance are recorded as deferred revenue. Fees for hours used in excess of the contractual allotment are variable consideration that is recognized as the additional services are performed.
Threat and Vulnerability Management (TVM – Panoptic)
The Company’s TVM service, marketed as Panoptic, provides continuous vulnerability scanning, risk prioritization and remediation tracking through the Company’s hosted software, together with analyst support. Customers access the software as a service and do not have the right to take possession of it. The service is accounted for as a single performance obligation satisfied over time, and revenue is recognized ratably over the subscription period. Subscriptions are generally invoiced annually or quarterly in advance, and amounts invoiced in advance are recorded as deferred revenue. TVM contracts do not include variable consideration.
Professional Services and Reimbursable Expenses
Security assessments, penetration testing and other project-based professional services are separate performance obligations recognized as the services are performed; setup fees that are not distinct are recognized over the related managed service period. Reimbursable expenses are billed to customers at cost and recognized as revenue when the related costs are incurred.
The
following table disaggregates revenue by service line for the years ended December 31,
Table 4.1: Disaggregated Revenue
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Managed detection and response (MDR) | $ | 1,359,660 | $ | 1,386,433 | ||||
| Threat and vulnerability management (TVM) | 716,933 | 790,013 | ||||||
| Risk and program management (RPM) | 247,500 | 300,109 | ||||||
| Professional services and setup fees | — | 9,313 | ||||||
| Reimbursable expenses | 12,463 | — | ||||||
| Revenue | $ | 2,336,556 | $ | 2,485,868 | ||||
Contract Balances
Contract liabilities consist of deferred revenue, which represents amounts invoiced in advance of the related services, and customer deposits. The Company has no contract assets.
Table 4.2: Contract Balances
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Deferred revenue, beginning of year | $ | 1,058,132 | $ | 1,170,288 | ||||
| Add: current period deferrals (amounts invoiced in advance) | 2,013,643 | 2,373,712 | ||||||
| Less: revenue recognized during the period | (2,336,556 | ) | (2,485,868 | ) | ||||
| Deferred revenue, end of year | $ | 735,219 | $ | 1,058,132 | ||||
| Customer deposits, end of year | 65,277 | 63,048 | ||||||
| Total contract liabilities, end of year | $ | 800,496 | $ | 1,121,180 | ||||
| 15 |
NOTE 5. ACCOUNTS RECEIVABLE, NET
Table 5: Details of Accounts Receivable, Net
| As of December 31, | ||||||||
| 2025 | 2024 | |||||||
| Billed accounts receivable | $ | 296,978 | $ | 492,065 | ||||
| Unbilled accounts receivable | — | — | ||||||
| Allowance for credit losses | — | — | ||||||
| Accounts receivable, net | $ | 296,978 | $ | 492,065 | ||||
The
Company recorded no provision for credit losses and had no write-offs of receivables during the years ended December 31,
NOTE 6. PROPERTY AND EQUIPMENT, NET
Table 6: Details of Property and Equipment, Net
| As of December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Gross carrying amount | Accumulated depreciation | Net carrying amount | Gross carrying amount | Accumulated depreciation | Net carrying amount | |||||||||||||||||||
| Computer equipment | $ | 4,104 | $ | (2,717 | ) | $ | 1,387 | $ | 4,547 | $ | (4,233 | ) | $ | 314 | ||||||||||
| Vehicles | 85,900 | (8,590 | ) | 77,310 | — | — | — | |||||||||||||||||
| Property and equipment, net | $ | 90,004 | $ | (11,307 | ) | $ | 78,697 | $ | 4,547 | $ | (4,233 | ) | $ | 314 | ||||||||||
During
the years ended December 31,
NOTE 7. SOFTWARE DEVELOPMENT COSTS
The
Company incurs costs to develop new modules, functionalities and integrations for its TVM (Panoptic) platform and related client portals,
which it uses to deliver services to customers. Capitalized costs consist principally of fees paid to outside developers and are amortized
on a straight-line basis over three years once the software is ready for its intended use. During the year ended December 31, 2024, the
Company removed fully amortized software development costs of $94,112 that were no longer in service, together with the related accumulated
amortization, from the accounts. Capitalized software development costs consist of enhancements that were placed in service as they were
completed and are amortized from the dates they were placed in service. As of December 31,
Table 7.1: Details of Software Development Costs, Net
| As of December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||
| Gross carrying amount | Accumulated amortization | Net carrying amount | Gross carrying amount | Accumulated amortization | Net carrying amount | |||||||||||||||||||
| Software development costs, net | $ | 301,603 | $ | (224,445 | ) | $ | 77,158 | $ | 242,097 | $ | (142,808 | ) | $ | 99,289 | ||||||||||
| 16 |
Table 7.2: Capitalized Software Development Costs
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Capitalized software development costs | $ | 59,505 | $ | 6,529 | ||||
Table 7.3: Details of Software Development Cost Amortization
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Amortization expense | $ | 81,638 | $ | 78,847 | ||||
NOTE 8. NOTES PAYABLE
Notes payable are presented in order of the dates on which they were obtained.
Table 8.1: Details of Notes Payable
| As of December 31, | ||||||||
| 2025 | 2024 | |||||||
| Economic Injury Disaster Loan | $ | 204,447 | $ | 208,570 | ||||
| Vehicle loan | 81,954 | — | ||||||
| Total notes payable | 286,401 | 208,570 | ||||||
| Less: current portion | (13,001 | ) | (4,446 | ) | ||||
| Notes payable, net of current portion | $ | 273,400 | $ | 204,124 | ||||
Economic Injury Disaster Loan
In June 2020, the Company entered into a $150,000 loan with the U.S. Small Business Administration (the “SBA”) under its Economic Injury Disaster Loan (“EIDL”) assistance program; the loan was increased in January 2022, when the Company received additional proceeds of $50,000. The loan bears interest at 3.75% per annum and is payable in monthly installments of $1,016, including principal and interest, maturing in June 2050. The loan is collateralized by substantially all of the Company’s business assets. Cycurion will become a guarantor of the loan upon approval by the SBA in connection with the Acquisition (Note 17); the loan remains an obligation of the Company.
Vehicle Loan
In June 2025, the Company financed the purchase of a vehicle with an $85,900 installment note collateralized by the vehicle, payable in monthly installments of approximately $1,240, including interest at approximately 8.3% per annum, maturing in May 2033. The note was assumed by the Company’s managing member in April 2026 in connection with the member’s purchase of the vehicle (Note 17).
Maturities
Table 8.2: Scheduled Principal Maturities of Notes Payable
| For the years ending December 31, | Amount | |||
| 2026 | $ | 13,001 | ||
| 2027 | 13,901 | |||
| 2028 | 14,870 | |||
| 2029 | 15,913 | |||
| 2030 | 17,038 | |||
| Thereafter | 211,678 | |||
| Total | $ | 286,401 | ||
Interest
Interest
expense was $14,871 and $28,013 for the years ended December 31,
| 17 |
NOTE 9. LINE OF CREDIT
Table 9: Details of Line of Credit
| As of December 31, | ||||||||
| 2025 | 2024 | |||||||
| Line of credit | $ | — | $ | 60,000 | ||||
In December 2024, the Company borrowed $60,000 under a revolving credit facility with WebBank (Intuit QuickBooks Capital). The balance was repaid in full in January 2025, and no amounts were outstanding at December 31, 2025.
NOTE 10. MEMBERS’ DEFICIT
The
Company is governed by its Amended and Restated Operating Agreement dated November 5, 2019, and is managed by its managing member. Members’
liability is limited to their capital contributions, and profits and losses are allocated to members in accordance with their ownership
interests. Distributions are made at the discretion of the managing member, subject to the terms of the operating agreement. There were
no member contributions or distributions during the years ended December 31,
Membership
interests consist of Class A units (500,000,000 authorized) and Class B units (100,000,000 authorized). At December 31, 2025, 496,250,000
Class A units and 30,065,790 Class B units were issued and outstanding (495,625,000 and 30,690,790, respectively, at December 31, 2024).
The Class B units held by a former employee are subject to forfeiture of 625,000 units on each anniversary of the employee’s August
29, 2021 termination date through August 29, 2026, and the forfeited units are reissued as Class A units to Clear Path Investments, an
entity owned by the Company’s managing member. Net income for 2024 and 2025 is allocated to members in proportion to their ownership
interests
Table 10: Members’ Deficit by Member
Clear Path Investments | Lighthouse Business Catalysts | Brian Tenney | Don Ainslie | Total | ||||||||||||||||
| Ownership interest – December 31, 2024 | 79.92 | % | 14.25 | % | 5.00 | % | 0.83 | % | 100.00 | % | ||||||||||
| Ownership interest – December 31, 2025 | 80.04 | % | 14.25 | % | 5.00 | % | 0.71 | % | 100.00 | % | ||||||||||
| Balance, December 31, 2023 | $ | (1,249,865 | ) | $ | (244,491 | ) | $ | 76,714 | $ | (16,299 | ) | $ | (1,433,941 | ) | ||||||
| Allocation of net income – 2024 | 134,691 | 24,016 | 8,426 | 1,399 | 168,532 | |||||||||||||||
| Balance, December 31, 2024 | $ | (1,115,174 | ) | $ | (220,475 | ) | $ | 85,140 | $ | (14,900 | ) | $ | (1,265,409 | ) | ||||||
| Allocation of net income – 2025 | 628,911 | 112,137 | 39,346 | 6,531 | 786,925 | |||||||||||||||
| Balance, December 31, 2025 | $ | (486,263 | ) | $ | (108,338 | ) | $ | 124,486 | $ | (8,369 | ) | $ | (478,484 | ) | ||||||
Balances include members’ capital contributed of $119,282 (Clear Path Investments) and $162,500 (Brian Tenney), which was unchanged during the periods presented. Ownership interests are based on the Company’s capitalization table.
NOTE 11. EMPLOYEE BENEFIT PLAN
The
Company did not sponsor its own retirement plan. Through July 2025, the Company’s employees were co-employed through a professional
employer organization (“PEO”), Insperity, and eligible employees could participate in a defined contribution 401(k) plan
sponsored by the PEO as a multiple employer plan. Eligibility, vesting and the employer matching formula were governed by the PEO’s
plan document and the Company’s elections under it. Employee deferrals and the Company’s matching contributions were funded
through the PEO each bi-weekly payroll period. The Company’s arrangement with the PEO, and its employees’ participation in
the plan, ended in July 2025, and the Company had no further obligations under the plan. Employer matching contributions were $3,112
and $19,964 for the years ended December 31,
| 18 |
NOTE 12. GOVERNMENT ASSISTANCE – EMPLOYEE RETENTION CREDIT
In January 2025, the Company received refunds of $104,298 under the Coronavirus Aid, Relief, and Economic Security (CARES) Act Employee Retention Credit (ERC) program related to qualified wages paid in 2020 and 2021. Consistent with its policy (Note 2), the Company recognized the credit upon receipt, and it is presented in other income (expense), net within the income statements for the year ended December 31, 2025. ERC claims remain subject to examination by the Internal Revenue Service, and the Company could be required to repay amounts determined to be ineligible; the Company believes it met the eligibility requirements.
NOTE 13. RELATED PARTY TRANSACTIONS
The Company entered into transactions with its managing member, entities owned by its members and a former member. These transactions are described below.
Management Services – Clear Path Investments
Clear
Path Investments, an entity owned by the Company’s managing member, provides management services to the Company, including the
services of the Company’s Chief Executive Officer, billed bi-weekly. Management fees were $199,008 and $199,073 for the years ended
December 31,
Consulting Services – Lighthouse Business Catalysts
Lighthouse
Business Catalysts, LLC, a member of the Company, provides business consulting and board-development services to the Company under a
monthly retainer. Consulting fees were $120,000 and $180,000 for the years ended December 31,
The following table presents management and consulting fees – related parties as presented in the income statements:
Table 13.1: Management and Consulting Fees – Related Parties
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Clear Path Investments – management fees | $ | 199,008 | $ | 199,073 | ||||
| Lighthouse Business Catalysts – consulting fees | 120,000 | 180,000 | ||||||
| Management and consulting fees – related parties | $ | 319,008 | $ | 379,073 | ||||
Software Development Services – JourneyTEAM
JourneyTEAM,
an entity owned by a member of the Company, provides software development services to the Company. The Company paid service fees of $38,551
and $50,824 during the years ended December 31,
Note Payable – Related Party
The
Company has a 10-year, non-interest-bearing note payable to a former member, Todd Neilson, arising from the purchase of Mr. Neilson’s
membership interests in the Company by Ryan Layton, the Company’s managing member, in May 2019. The note is payable in monthly
installments of $3,667 through an escrow agent. No interest has been imputed on the note. The outstanding balance was $150,333 and $194,333
at December 31,
| 19 |
Table 13.2: Details of Note Payable – Related Party
| As of December 31, | ||||||||||||||||
| 2025 | 2024 | Interest rate | Maturity (calendar year) | |||||||||||||
| Note payable – Todd Neilson | $ | 150,333 | $ | 194,333 | 0.0 | % | 2029 | |||||||||
| Less: current portion | (44,000 | ) | (44,000 | ) | ||||||||||||
| Note payable – related party, net of current portion | $ | 106,333 | $ | 150,333 | ||||||||||||
Table 13.3: Scheduled Principal Maturities of Note Payable – Related Party
| For the years ending December 31, | Amount | |||
| 2026 | $ | 44,000 | ||
| 2027 | 44,000 | |||
| 2028 | 44,000 | |||
| 2029 | 18,333 | |||
| Total | $ | 150,333 | ||
Corporate Credit Card
A
member of the Company is the named holder of a corporate credit card used for Company expenses. Balances are obligations of the Company
and are included in accounts payable and accrued liabilities on the balance sheets as of December 31,
NOTE 14. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From
time to time, the Company may be a party to litigation or claims arising in the ordinary course of business, including those relating
to employment matters, relationships with customers, vendors and contractors, and other business matters. Although the outcome of any
such matter is inherently uncertain, management does not believe that there are any pending or threatened litigation or claims that would
have a material adverse effect on the Company’s financial position, results of operations or cash flows as of December 31,
Leases
The
Company rents office and storage space on a month-to-month basis. Rent and storage expense was $6,444 and $6,073 for the years ended
December 31,
Employee Retention Credit
ERC refunds received by the Company remain subject to examination by the Internal Revenue Service (Note 12). The Company has not recorded a liability for potential repayment because it does not believe a loss is probable.
Platform Provider Agreement
The
Company purchases security operations platform licenses from its platform provider (Note 15) under an agreement priced on the volume
of monitored customer assets. As of December 31,
NOTE 15. CONCENTRATIONS, RISKS AND UNCERTAINTIES
Credit Risk
The
Company’s primary bank deposits are located in the United States. Those deposits are
| 20 |
Interest Risk
The
Company’s notes payable bear fixed rates of interest, and its note payable – related party is non-interest-bearing. Accordingly,
the Company’s exposure to interest rate risk is limited to interest
Inflation Risk
Management monitors changes in price levels. Historically, inflation has not materially impacted the Company’s financial statements; however, significant increases in third-party platform license and contractor costs that cannot be passed on to the Company’s customers could adversely impact the Company’s results of operations.
Concentration Risk
Because revenue is recognized ratably from amounts invoiced in advance, the Company measures customer concentration based on amounts invoiced (billings) during each year. Customers accounting for 10% or more of billings in either year were as follows:
Table 15.1: Billings Concentration by Customer – Based on % of Billings
| 2025 | 2024 | |||||||||||||||
| Customer | Amount | % | Amount | % | ||||||||||||
| A | $ | 1,226,100 | 60.9 | % | $ | 1,461,138 | 61.6 | % | ||||||||
| B | $ | 211,292 | 10.5 | % | $ | 188,102 | 7.9 | % | ||||||||
Customers accounting for 10% or more of accounts receivable, net, at either balance sheet date were as follows:
Table 15.2: Accounts Receivable Concentration by Customer – Based on % of Accounts Receivable, Net
| December 31, 2025 | December 31, 2024 | |||||||||||||||
| Customer | Amount | % | Amount | % | ||||||||||||
| A | $ | 240,000 | 80.8 | % | $ | 410,764 | 83.5 | % | ||||||||
Customer A is the same customer identified as Customer A in Table 15.1.
Vendors accounting for 10% or more of purchases (amounts invoiced by vendors) in either year were as follows.
Table 15.3: Purchase Concentration by Vendor – Based on % of Purchases
| 2025 | 2024 | |||||||||||||||
| Vendor | Amount | % | Amount | % | ||||||||||||
| A | $ | 606,880 | 42.3 | % | $ | 818,896 | 52.7 | % | ||||||||
| B | $ | 265,728 | 18.5 | % | $ | 176,798 | 11.4 | % | ||||||||
| C | $ | 175,000 | 12.2 | % | $ | 180,000 | 11.6 | % | ||||||||
| D | $ | 165,156 | 11.5 | % | $ | 133,388 | 8.6 | % | ||||||||
Vendors B and C are related parties (Note 13).
Table 15.4: Accounts Payable Concentration by Vendor – Based on % of Accounts Payable
| December 31, 2025 | December 31, 2024 | |||||||||||||||
| Vendor | Amount | % | Amount | % | ||||||||||||
| A | $ | 195,573 | 86.9 | % | $ | 409,933 | 91.1 | % | ||||||||
Vendor A is the Company’s security operations platform provider, on which the Company relies for the delivery of its MDR services.
NOTE 16. FAIR VALUE DISCLOSURES
There
were no assets or liabilities recorded at fair value on a recurring basis as of December 31,
The
carrying amounts of cash, accounts receivable, accounts payable and accrued liabilities approximate their fair values because of the
short-term nature of these instruments. The Company estimates the fair value of its notes payable by discounting the contractual cash
flows of each instrument at estimated market rates for debt with similar terms and credit risk, based on the prime rate plus a credit
spread of 6.0% (12.75% and 13.50%
| 21 |
Table 16.1: Carrying Amounts and Estimated Fair Values of Debt
| December 31, 2025 | December 31, 2024 | |||||||||||||||
| Carrying amount | Fair value | Carrying amount | Fair value | |||||||||||||
| Economic Injury Disaster Loan | $ | 204,447 | $ | 93,108 | $ | 208,570 | $ | 88,836 | ||||||||
| Vehicle loan | 81,954 | 81,954 | — | — | ||||||||||||
| Note payable – related party | 150,333 | 122,238 | 194,333 | 146,913 | ||||||||||||
| Line of credit | — | — | 60,000 | 60,000 | ||||||||||||
| Total | $ | 436,734 | $ | 297,300 | $ | 462,903 | $ | 295,749 | ||||||||
The estimated fair values of the EIDL loan and the note payable – related party are less than their carrying amounts because the EIDL loan bears a below-market fixed rate of 3.75% available through a government program and the note payable – related party is non-interest-bearing.
NOTE 17. SUBSEQUENT EVENTS
The
Company evaluated subsequent events from the date of the balance sheet as of December 31,
Sale of Vehicle to Managing Member
On April 7, 2026, the Company sold its vehicle to its managing member, who assumed the outstanding vehicle loan of $79,157; the Company recognized a gain on sale of $6,541.
Settlement of Customer Deposit
In May 2026, the Company settled a customer deposit of $63,048 by refunding $31,524; the customer released the remaining balance, which, together with another customer credit balance of $2,229, was recognized as other income of $33,753.
Acquisition by Cycurion, Inc.
On June 3, 2026, Cycurion acquired 100% of the membership interests of the Company for consideration of $2.875 million, consisting of $875,000 in cash and 888,888 shares of Cycurion Series I Convertible Preferred Stock (Note 1). The consideration was paid by Cycurion to the Company’s former members and is not an obligation of the Company. The Company continues as a wholly owned subsidiary of Cycurion, and its services and technology are being integrated into Cycurion’s cybersecurity offerings.
At the closing of the Acquisition, the management fee arrangement with Clear Path Investments, a related party, and the Company’s contract operations arrangement ended, and the consulting retainer with Lighthouse Business Catalysts was last billed June 1, 2026 (Note 13). Cycurion will become a guarantor of the Company’s EIDL loan upon approval by the SBA; the loan remains an obligation of the Company (Note 8). Following the Acquisition, the Company has no employees; its head of sales was hired by Cycurion, its bookkeeper is paid by Cycurion, and its other employees have separated.
| 22 |
SECUVANT, LLC
CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
For
the Six Months Ended June 30,
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SECUVANT, LLC
TABLE OF CONTENTS
| Condensed Balance Sheets | 25 |
| Condensed Income Statements | 26 |
| Condensed Statements of Changes in Members’ Deficit | 27 |
| Condensed Statements of Cash Flows | 28 |
| Notes to Condensed Financial Statements | 29–38 |
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SECUVANT, LLC
CONDENSED BALANCE SHEETS
June
30, 2026 and December 31, 2025
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 318,430 | $ | 478,981 | ||||
| Accounts receivable | 187,945 | 296,978 | ||||||
| Prepaid expenses and other current assets | 18,288 | 68,782 | ||||||
| Total current assets | 524,663 | 844,741 | ||||||
| Non-current assets: | ||||||||
| Property and equipment, net | 1,073 | 78,697 | ||||||
| Software development costs, net | 69,733 | 77,158 | ||||||
| Total assets | $ | 595,469 | $ | 1,000,596 | ||||
| LIABILITIES AND MEMBERS’ DEFICIT | ||||||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 94,103 | $ | 241,850 | ||||
| Deferred revenue and customer deposits | 396,494 | 800,496 | ||||||
| Current portion of notes payable | 4,786 | 13,001 | ||||||
| Current portion of note payable – related party | 44,000 | 44,000 | ||||||
| Total current liabilities | 539,383 | 1,099,347 | ||||||
| Non-current liabilities: | ||||||||
| Notes payable, net of current portion | 194,898 | 273,400 | ||||||
| Note payable – related party, net of current portion | 84,333 | 106,333 | ||||||
| Total liabilities | 818,614 | 1,479,080 | ||||||
| Commitments and contingencies (Note 13) | ||||||||
| MEMBERS’ DEFICIT | ||||||||
| Members’ capital | 281,782 | 281,782 | ||||||
| Accumulated deficit | (504,927 | ) | (760,266 | ) | ||||
| Total members’ deficit | (223,145 | ) | (478,484 | ) | ||||
| Total liabilities and members’ deficit | $ | 595,469 | $ | 1,000,596 | ||||
The accompanying notes are an integral part of these condensed financial statements.
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SECUVANT, LLC
CONDENSED INCOME STATEMENTS
For the Six Months Ended June 30, 2026 and 2025 (Unaudited)
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Revenue | $ | 1,058,323 | $ | 1,194,855 | ||||
| Cost of revenue | 241,129 | 416,171 | ||||||
| Gross profit | 817,194 | 778,684 | ||||||
| Operating expenses: | ||||||||
| Selling, general and administrative expenses | 413,477 | 263,831 | ||||||
| Management and consulting fees – related parties | 166,738 | 144,000 | ||||||
| Depreciation of property and equipment | 4,609 | 314 | ||||||
| Amortization of software development costs | 38,460 | 43,065 | ||||||
| Total operating expenses | 623,284 | 451,210 | ||||||
| Income from operations | 193,910 | 327,474 | ||||||
| Other income (expense): | ||||||||
| Interest expense | (6,375 | ) | (6,726 | ) | ||||
| Gain on sale of vehicle – related party | 6,541 | — | ||||||
| Other income, net | 61,263 | 101,800 | ||||||
| Total other income, net | 61,429 | 95,074 | ||||||
| Net income | $ | 255,339 | $ | 422,548 | ||||
The accompanying notes are an integral part of these condensed financial statements.
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SECUVANT, LLC
CONDENSED STATEMENTS OF CHANGES IN MEMBERS’ DEFICIT
For
the Six Months Ended June 30,
| Members’ Capital | Accumulated Deficit | Total Members’ Deficit | ||||||||||
| Balance, December 31, 2024 | $ | 281,782 | $ | (1,547,191 | ) | $ | (1,265,409 | ) | ||||
| Net income | — | 243,052 | 243,052 | |||||||||
| Balance, March 31, 2025 | 281,782 | (1,304,139 | ) | (1,022,357 | ) | |||||||
| Net income | — | 179,496 | 179,496 | |||||||||
| Balance, June 30, 2025 | $ | 281,782 | $ | (1,124,643 | ) | $ | (842,861 | ) | ||||
| Balance, December 31, 2025 | $ | 281,782 | $ | (760,266 | ) | $ | (478,484 | ) | ||||
| Net income | — | 177,274 | 177,274 | |||||||||
| Balance, March 31, 2026 | 281,782 | (582,992 | ) | (301,210 | ) | |||||||
| Net income | — | 78,065 | 78,065 | |||||||||
| Balance, June 30, 2026 | $ | 281,782 | $ | (504,927 | ) | $ | (223,145 | ) | ||||
The accompanying notes are an integral part of these condensed financial statements.
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SECUVANT, LLC
CONDENSED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2026 and 2025 (Unaudited)
| June 30, 2026 | June 30, 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 255,339 | $ | 422,548 | ||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
| Depreciation of property and equipment | 4,609 | 314 | ||||||
| Amortization of software development costs | 38,460 | 43,065 | ||||||
| Gain on sale of vehicle – related party | (6,541 | ) | — | |||||
| Adjustments of loans payable interest | (2,303 | ) | — | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 109,033 | 383,751 | ||||||
| Prepaid expenses and other current assets | 50,494 | 10,540 | ||||||
| Accounts payable and accrued liabilities | (147,747 | ) | (364,771 | ) | ||||
| Deferred revenue and customer deposits | (404,002 | ) | (159,692 | ) | ||||
| Net cash (used in) provided by operating activities | (102,658 | ) | 335,755 | |||||
| Cash flows from investing activities: | ||||||||
| Capitalized software development costs | (31,035 | ) | (36,051 | ) | ||||
| Net cash used in investing activities | (31,035 | ) | (36,051 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Repayments of line of credit | — | (60,000 | ) | |||||
| Repayments of note payable – related party | (22,000 | ) | (22,000 | ) | ||||
| Repayments of notes payable | (4,858 | ) | (2,062 | ) | ||||
| Net cash used in financing activities | (26,858 | ) | (84,062 | ) | ||||
| Net (decrease) increase in cash | (160,551 | ) | 215,642 | |||||
| Cash, beginning of period | 478,981 | 339,565 | ||||||
| Cash, end of period | $ | 318,430 | $ | 555,207 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid for interest | 5,648 | 6,726 | ||||||
| Non-cash investing and financing activities: | ||||||||
| Vehicle acquired through issuance of note payable | — | 85,900 | ||||||
| Vehicle sold to managing member in exchange for assumption of note payable | 79,157 | — | ||||||
The accompanying notes are an integral part of these condensed financial statements.
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SECUVANT, LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS
For
the Six Months Ended June 30,
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Secuvant, LLC (the “Company”, “Secuvant”, “we”, “us” or “our”) is a Utah limited liability company headquartered in Utah. The Company provides managed cybersecurity services to commercial customers, principally in the United States. Cybersecurity services include managed detection and response (“MDR”), risk and program management (“RPM”), and threat and vulnerability management (“TVM,” marketed as Panoptic), together with security assessments, penetration testing and consulting projects. The Company is governed by its Amended and Restated Operating Agreement dated November 5, 2019.
Acquisition by Cycurion, Inc.
On June 3, 2026, Cycurion, Inc. (“Cycurion”), a Delaware corporation whose common stock is listed on The Nasdaq Global Market, acquired 100% of the membership interests of the Company pursuant to an Agreement and Plan of Merger dated May 21, 2026, under which Cycurion Merger Sub, LLC, a wholly owned subsidiary of Cycurion, merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Cycurion (the “Acquisition”). The consideration of $2.875 million, consisting of $875,000 in cash and 888,888 shares of Cycurion Series I Convertible Preferred Stock, was paid by Cycurion to the Company’s former members and is not an obligation of the Company. As a result of the Acquisition, Cycurion, as the Company’s parent, controls the Company’s operations, financing and cash management, and the Company’s services and technology are being integrated into Cycurion’s cybersecurity offerings.
The Company did not elect to apply pushdown accounting under ASC Subtopic 805-50, Business Combinations – Related Issues. Accordingly, the accompanying condensed financial statements continue to reflect the Company’s historical basis of accounting for all periods presented, including the period from June 3 through June 30, 2026, and do not reflect the fair value adjustments, goodwill or intangible assets recognized by Cycurion in its accounting for the Acquisition.
At the closing of the Acquisition, the management fee arrangement with Clear Path Investments, a related party, and the Company’s contract operations arrangement ended, and the consulting retainer with Lighthouse Business Catalysts was last billed June 1, 2026 (Note 12). Cycurion will become a guarantor of the Company’s Economic Injury Disaster Loan upon approval by the U.S. Small Business Administration; the loan remains an obligation of the Company (Note 8). Following the Acquisition, the Company has no employees; its head of sales was hired by Cycurion, its bookkeeper is paid by Cycurion, and its other employees have separated. The Company incurred legal and accounting fees in connection with the Acquisition, which are included in selling, general and administrative expenses.
Emerging Growth Company
Cycurion is an emerging growth company as defined in Section 2(a) of the Securities Act of 1933, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards, and Cycurion has elected not to opt out of this extended transition period. Because these condensed financial statements are included in a filing of Cycurion, the Company applies new or revised accounting standards using the effective dates applicable to private companies. This may make comparison of the Company’s financial statements with those of a public company that is neither an emerging growth company nor an emerging growth company that has opted out of the extended transition period difficult or impossible because of the potential differences in accounting standards used.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The
accompanying condensed financial statements as of June 30,
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Certain information and disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC for interim financial reporting. Management believes that the unaudited condensed financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2026 or any future period. These condensed financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto as of and for the years ended December 31, 2025 and 2024, which describe the Company’s significant accounting policies. There have been no material changes to those policies during the six months ended June 30, 2026, other than the adoption of ASU 2025-05 described below.
Use of Estimates
Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, and the disclosure of contingent assets and liabilities. The Company regularly assesses these estimates. We base our estimates on historical experience, currently available information, and various other assumptions that we believe are reasonable under the circumstances. Management evaluates these estimates and assumptions on an ongoing basis, including those relating to the period over which revenue is recognized, the allowance for credit losses, the useful lives of property and equipment and software development costs, the valuation and impairment of software development costs and other long-lived assets, the classification of debt maturities, and contingencies. Actual results could differ from those estimates. The impact of changes in estimates is recorded in the period in which they become known.
Recent Accounting Pronouncements – Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure, on an annual and interim basis, of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, including by entities with a single reportable segment. The Company adopted this standard for the year ended December 31, 2025, and has applied the required disclosures on a retrospective basis for all periods presented. Adoption had no effect on the Company’s financial position, results of operations or cash flows.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and contract assets. The Company adopted ASU 2025-05 on January 1, 2026 on a prospective basis. Adoption did not have a material effect on the Company’s condensed financial statements.
Recent Accounting Pronouncements – Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40), which requires public entities to disclose, on both an annual and interim basis, additional information about certain expense categories in tabular form. The standard is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU simplifies the capitalization guidance by removing all references to prescriptive and sequential software development stages (“project stages”) throughout ASC 350-40. The ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those fiscal years, and may be applied prospectively, under a modified transition approach based on the status of the respective projects, or retrospectively. Early adoption is permitted. Because the Company capitalizes software development costs (Note 7), the Company is evaluating the provisions of this ASU and does not expect it to have a material impact on its financial statements.
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In
December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The ASU clarifies interim disclosure
requirements and the applicability of Topic
In December 2025, the FASB issued ASU 2025-12, Codification Improvements. The ASU addresses thirty-three items representing changes to the Codification that clarify, correct errors or make minor improvements, and is not intended to result in significant changes for most entities. The ASU is effective for annual reporting periods beginning after December 15, 2026, and the adoption method may vary on an issue-by-issue basis. Early adoption is permitted. The Company does not expect this ASU to have a material impact on its financial statements.
The Company has reviewed all other recently issued accounting pronouncements and does not believe that any such pronouncements will have a material impact on its financial statements.
NOTE 3. GOING CONCERN
The accompanying condensed financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern. 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.
Management
evaluated whether conditions and events, considered in the aggregate, raise substantial doubt about the Company’s ability to continue
as a going concern within one year after the date the condensed financial statements are available to be issued. That evaluation considered
the Company’s members’ deficit of $223,145 and working capital deficit of $14,720
Management’s plans to address these conditions include completing the integration of the Company’s operations into Cycurion’s operations, which eliminated the Company’s management fee arrangement and personnel costs following the Acquisition (Note 1); continuing to deliver services under existing customer contracts, which are generally billed in advance; and obtaining financial support from Cycurion as needed. However, Cycurion is not obligated to provide financial support to the Company, Cycurion has disclosed substantial doubt about its own ability to continue as a going concern, and there can be no assurance that management’s plans will be successful. Accordingly, management’s plans do not alleviate the substantial doubt about the Company’s ability to continue as a going concern within one year after the date the condensed financial statements are available to be issued. The accompanying condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4. REVENUE RECOGNITION
Managed Detection and Response (MDR)
The Company’s MDR service provides continuous (24x7x365) monitoring of a customer’s environment for security threats, together with investigation, alerting and response, delivered through an integrated combination of a third-party security operations platform, the Company’s security tools and the Company’s security personnel. The platform, tools and monitoring services are highly interdependent and are not sold separately, and the customer cannot benefit from any one of them without the others; accordingly, the MDR service is accounted for as a single performance obligation that is satisfied over time. MDR contracts generally have terms of one to three years and are invoiced monthly, quarterly or annually in advance. Revenue is recognized ratably over the service period, and amounts invoiced or collected in advance of service are recorded as deferred revenue until the service is provided. MDR contracts do not include variable consideration.
| 31 |
Risk and Program Management (RPM)
The
Company’s RPM service provides ongoing security program management, governance, risk assessment and advisory support for a fixed
periodic fee that includes a specified allotment of hours. The service is a series of distinct, substantially similar periods of service
transferred over time and is accounted for as a single performance obligation. Revenue for the fixed fee is recognized ratably over the
service period, and amounts invoiced in advance are recorded as deferred revenue. Fees for hours used in excess of the contractual allotment
are variable
Threat and Vulnerability Management (TVM – Panoptic)
The Company’s TVM service, marketed as Panoptic, provides continuous vulnerability scanning, risk prioritization and remediation tracking through the Company’s hosted software, together with analyst support. Customers access the software as a service and do not have the right to take possession of it. The service is accounted for as a single performance obligation satisfied over time, and revenue is recognized ratably over the subscription period. Subscriptions are generally invoiced annually or quarterly in advance, and amounts invoiced in advance are recorded as deferred revenue. TVM contracts do not include variable consideration.
Professional Services and Reimbursable Expenses
Security assessments, penetration testing and other project-based professional services are separate performance obligations recognized as the services are performed; setup fees that are not distinct are recognized over the related managed service period. Reimbursable expenses are billed to customers at cost and recognized as revenue when the related costs are incurred.
The
following table disaggregates revenue by service line for the six months ended June 30,
Table 4.1: Disaggregated Revenue
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Managed detection and response (MDR) | $ | 619,417 | $ | 703,527 | ||||
| Threat and vulnerability management (TVM) | 315,156 | 359,520 | ||||||
| Risk and program management (RPM) | 123,750 | 123,750 | ||||||
| Reimbursable expenses | — | 8,058 | ||||||
| Revenue | $ | 1,058,323 | $ | 1,194,855 | ||||
Contract Balances
Contract liabilities consist of deferred revenue, which represents amounts invoiced in advance of the related services, and customer deposits. The Company has no contract assets.
Table 4.2: Contract Balances
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Deferred revenue, beginning of period | $ | 735,219 | $ | 1,058,132 | ||||
| Add: current period deferrals (amounts invoiced in advance) | 719,598 | 1,035,163 | ||||||
| Less: revenue recognized during the period | (1,058,323 | ) | (1,194,855 | ) | ||||
| Deferred revenue, end of period | $ | 396,494 | $ | 898,440 | ||||
| Customer deposits, end of period | — | 63,048 | ||||||
| Total contract liabilities, end of period | $ | 396,494 | $ | 961,488 | ||||
In May 2026, the Company settled a customer deposit of $63,048 by refunding $31,524; the customer released the remaining balance, which, together with another customer credit balance of $2,229, was recognized as other income of $33,753 and is included in other income, net in the condensed income statements for the six months ended June 30, 2026.
| 32 |
NOTE 5. ACCOUNTS RECEIVABLE, NET
Table 5: Details of Accounts Receivable, Net
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Billed accounts receivable | $ | 187,945 | $ | 296,978 | ||||
| Unbilled accounts receivable | — | — | ||||||
| Allowance for credit losses | — | — | ||||||
| Accounts receivable, net | $ | 187,945 | $ | 296,978 | ||||
The
Company recorded no provision for credit losses and had no write-offs of receivables during the six months ended June 30,
NOTE 6. PROPERTY AND EQUIPMENT, NET
Table 6: Details of Property and Equipment, Net
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||
| Gross carrying amount | Accumulated depreciation | Net carrying amount | Gross carrying amount | Accumulated depreciation | Net carrying amount | |||||||||||||||||||
| Computer equipment | $ | 4,104 | $ | (3,031 | ) | $ | 1,073 | $ | 4,104 | $ | (2,717 | ) | $ | 1,387 | ||||||||||
| Vehicles | — | — | — | 85,900 | (8,590 | ) | 77,310 | |||||||||||||||||
| Property and equipment, net | $ | 4,104 | $ | (3,031 | ) | $ | 1,073 | $ | 90,004 | $ | (11,307 | ) | $ | 78,697 | ||||||||||
During
the six months ended June 30,
NOTE 7. SOFTWARE DEVELOPMENT COSTS
The
Company incurs costs to develop new modules, functionalities and integrations for its TVM (Panoptic) platform and related client portals,
which it uses to deliver services to customers. Capitalized costs consist principally of fees paid to outside developers and are amortized
on a straight-line basis over three years once the software is ready for its intended use. During the six months ended June 30, 2026,
the Company capitalized $31,035 of fees paid to outside developers for enhancements to its TVM (Panoptic) platform (Table 7.2), which
increased the gross carrying amount of software development costs from $301,603
Table 7.1: Details of Software Development Costs, Net
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||
| Gross carrying amount | Accumulated amortization | Net carrying amount | Gross carrying amount | Accumulated amortization | Net carrying amount | |||||||||||||||||||
| Software development costs, net | $ | 332,638 | $ | (262,905 | ) | $ | 69,733 | $ | 301,603 | $ | (224,445 | ) | $ | 77,158 | ||||||||||
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Table 7.2: Capitalized Software Development Costs
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Capitalized software development costs | $ | 31,035 | $ | 36,051 | ||||
Table 7.3: Details of Software Development Cost Amortization
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Amortization expense | $ | 38,460 | $ | 43,065 | ||||
NOTE 8. NOTES PAYABLE
Notes payable are presented in order of the dates on which they were obtained.
Table 8.1: Details of Notes Payable
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Economic Injury Disaster Loan | $ | 199,684 | $ | 204,447 | ||||
| Vehicle loan | — | 81,954 | ||||||
| Total notes payable | 199,684 | 286,401 | ||||||
| Less: current portion | (4,786 | ) | (13,001 | ) | ||||
| Notes payable, net of current portion | $ | 194,898 | $ | 273,400 | ||||
Economic Injury Disaster Loan
In June 2020, the Company entered into a $150,000 loan with the U.S. Small Business Administration (the “SBA”) under its Economic Injury Disaster Loan (“EIDL”) assistance program; the loan was increased in January 2022, when the Company received additional proceeds of $50,000. The loan bears interest at 3.75% per annum and is payable in monthly installments of $1,016, including principal and interest, maturing in June 2050. The loan is collateralized by substantially all of the Company’s business assets. In connection with the Acquisition, Cycurion will become a guarantor of the loan upon approval by the SBA; the loan remains an obligation of the Company.
Vehicle Loan
In
June 2025, the Company financed the purchase of a vehicle with an $85,900 installment note collateralized by the vehicle, payable in
monthly installments of approximately $1,240, including interest at approximately 8.3% per annum, maturing in May 2033. The note was
assumed by the Company’s managing member on April 7,
Maturities
Table 8.2: Scheduled Principal Maturities of Notes Payable
| For the twelve months ending June 30, | Amount | |||
| 2027 | $ | 4,786 | ||
| 2028 | 4,968 | |||
| 2029 | 5,158 | |||
| 2030 | 5,354 | |||
| 2031 | 5,559 | |||
| Thereafter | 173,859 | |||
| Total | $ | 199,684 | ||
Interest
Interest
expense was $6,375 and $6,726 for the six months ended June 30,
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NOTE 9. MEMBERS’ DEFICIT
The
Company is governed by its Amended and Restated Operating Agreement dated November 5, 2019, and through the date of the Acquisition was
managed by its managing member. Members’ liability is limited to their capital contributions, and profits and losses are allocated
to members in accordance with their ownership interests. Distributions are made at the discretion of the managing member, subject to
the terms of the operating agreement. There were no member contributions or distributions during the six months ended June 30,
Membership
interests consist of Class A units (500,000,000 authorized) and Class B units (100,000,000 authorized). Immediately before the Acquisition,
496,250,000 Class A units and 30,065,790 Class B units were issued and outstanding (495,625,000 and 30,690,790, respectively, at June
30, 2025). The Class B units held by a former employee were subject to forfeiture of 625,000 units on each anniversary of the employee’s
August 29,
Table 9: Members’ Deficit by Member
| Clear Path Investments | Lighthouse Business Catalysts | Brian Tenney | Don Ainslie | Cycurion, Inc. | Total | |||||||||||||||||||
| Balance, December 31, 2024 | $ | (1,115,174 | ) | $ | (220,475 | ) | $ | 85,140 | $ | (14,900 | ) | $ | — | $ | (1,265,409 | ) | ||||||||
| Ownership interest – June 30, 2025 | 79.92 | % | 14.25 | % | 5.00 | % | 0.83 | % | — | 100.00 | % | |||||||||||||
| Allocation of net income – six months ended June 30, 2025 | 337,701 | 60,213 | 21,127 | 3,507 | — | 422,548 | ||||||||||||||||||
| Balance, June 30, 2025 | $ | (777,473 | ) | $ | (160,262 | ) | $ | 106,267 | $ | (11,393 | ) | $ | — | $ | (842,861 | ) | ||||||||
| Allocation of net income – July 1 through December 31, 2025 | 291,210 | 51,924 | 18,219 | 3,024 | — | 364,377 | ||||||||||||||||||
| Balance, December 31, 2025 | $ | (486,263 | ) | $ | (108,338 | ) | $ | 124,486 | $ | (8,369 | ) | $ | — | $ | (478,484 | ) | ||||||||
| Allocation of net income – January 1 through June 2, 2026 | 115,288 | 20,525 | 7,202 | 1,023 | — | 144,038 | ||||||||||||||||||
| Balance, June 2, 2026 | $ | (370,975 | ) | $ | (87,813 | ) | $ | 131,688 | $ | (7,346 | ) | $ | — | $ | (334,446 | ) | ||||||||
| Ownership interest – June 2, 2026 | 80.04 | % | 14.25 | % | 5.00 | % | 0.71 | % | — | 100.00 | % | |||||||||||||
| Acquisition of membership interests by Cycurion – June 3, 2026 | 370,975 | 87,813 | (131,688 | ) | 7,346 | (334,446 | ) | — | ||||||||||||||||
| Allocation of net income – June 3 through June 30, 2026 | — | — | — | — | 111,301 | 111,301 | ||||||||||||||||||
| Balance, June 30, 2026 | $ | — | $ | — | $ | — | $ | — | $ | (223,145 | ) | $ | (223,145 | ) | ||||||||||
Balances
include members’ capital contributed before the Acquisition of $119,282 (Clear Path Investments) and $162,500 (Brian Tenney), which
was unchanged during the periods presented and is included in the balance attributable to Cycurion
The
balances at June 30, 2026 in Table 9 present the Company’s total members’ deficit of $223,145 by holder. Because the Company
did not apply pushdown accounting (Note 1), the Acquisition did not change the Company’s historical members’ capital or accumulated
deficit, and the condensed balance sheet
| 35 |
NOTE 10. EMPLOYEE BENEFIT PLAN
The
Company did not sponsor its own retirement plan. Through July 2025, the Company’s employees were co-employed through a professional
employer organization (“PEO”), Insperity, and eligible employees could participate in a defined contribution 401(k) plan
sponsored by the PEO as a multiple employer plan. Eligibility, vesting and the employer matching formula were governed by the PEO’s
plan document and the Company’s elections under it. Employee deferrals and the Company’s matching contributions were funded
through the PEO each bi-weekly payroll period. The Company’s arrangement with the PEO, and its employees’ participation in
the plan, ended in July 2025, and the Company had no further obligations under the plan. Employer matching contributions were $0 and
$2,920 for the six months ended June 30,
NOTE 11. GOVERNMENT ASSISTANCE – EMPLOYEE RETENTION CREDIT
In
January 2025, the Company received refunds of $104,298 under the Coronavirus Aid, Relief, and Economic Security (CARES) Act Employee
Retention Credit (ERC) program related to qualified wages paid in 2020 and 2021. Consistent with its accounting policy, which is described
in Note 2 to its audited financial statements for the years ended December 31,
NOTE 12. RELATED PARTY TRANSACTIONS
The Company entered into transactions with its managing member, entities owned by its members, a former member and, following the Acquisition, Cycurion. These transactions are described below.
Management Services – Clear Path Investments
Clear
Path Investments, an entity owned by the Company’s managing member, provided management services to the Company, including the
services of the Company’s Chief Executive Officer, billed bi-weekly, until the Acquisition on June 3, 2026, when the arrangement
ended. Management fees were $106,738 and $84,000 for the six months ended June 30,
Consulting Services – Lighthouse Business Catalysts
Lighthouse
Business Catalysts, LLC, a member of the Company before the Acquisition, provided business consulting and board-development services
to the Company under a monthly retainer. Consulting fees were $60,000 for each of the six months ended June 30,
| 36 |
The following table presents management and consulting fees – related parties as presented in the condensed income statements:
Table 12.1: Management and Consulting Fees – Related Parties
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Clear Path Investments – management fees | $ | 106,738 | $ | 84,000 | ||||
| Lighthouse Business Catalysts – consulting fees | 60,000 | 60,000 | ||||||
| Management and consulting fees – related parties | $ | 166,738 | $ | 144,000 | ||||
Software Development Services – JourneyTEAM
JourneyTEAM, an entity owned by a member of the Company before the Acquisition, provides software development services to the Company. The Company paid service fees of $22,369 and $21,300 during the six months ended June 30, 2026 and 2025, respectively, a portion of which was capitalized as software development costs (Note 7). Accounts payable and accrued liabilities included $5,364 and $9,578 due to JourneyTEAM at June 30, 2026 and December 31, 2025, respectively.
Note Payable – Related Party
The
Company has a 10-year, non-interest-bearing note payable to a former member, Todd Neilson, arising from the purchase of Mr. Neilson’s
membership interests in the Company by Ryan Layton, the Company’s managing member before the Acquisition, in May 2019. The note
is payable in monthly installments of $3,667 through an escrow agent. No interest has been imputed on the note. In April 2026, the note
was amended so that the Acquisition did not accelerate its maturity, and the note remains payable on its original terms. The outstanding
balance was $128,333 and $150,333
Table 12.2: Details of Note Payable – Related Party
| June 30, 2026 | December 31, 2025 | Interest rate | Maturity (calendar year) | |||||||||||||
| Note payable – Todd Neilson | $ | 128,333 | $ | 150,333 | 0.0 | % | 2029 | |||||||||
| Less: current portion | (44,000 | ) | (44,000 | ) | ||||||||||||
| Note payable – related party, net of current portion | $ | 84,333 | $ | 106,333 | ||||||||||||
Table 12.3: Scheduled Principal Maturities of Note Payable – Related Party
| For the twelve months ending June 30, | Amount | |||
| 2027 | $ | 44,000 | ||
| 2028 | 44,000 | |||
| 2029 | 40,333 | |||
| Total | $ | 128,333 | ||
Sale of Vehicle to Managing Member
On April 7, 2026, the Company sold its vehicle to its managing member, who assumed the outstanding vehicle loan of $79,157; the Company recognized a gain on sale of $6,541 (Note 6).
Corporate Credit Card
A
member of the Company is the named holder of a corporate credit card used for Company expenses. Balances are obligations of the Company
and are included in accounts payable and accrued liabilities on the condensed balance sheets as of June 30,
Cycurion, Inc.
Following the Acquisition on June 3, 2026, Cycurion is the Company’s parent and a related party. In connection with the Acquisition, Cycurion will become a guarantor of the Company’s EIDL loan upon approval by the SBA (Note 8). There were no other transactions between the Company and Cycurion from June 3 through June 30, 2026.
| 37 |
NOTE 13. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From
time to time, the Company may be a party to litigation or claims arising in the ordinary course of business, including those relating
to employment matters, relationships with customers, vendors and contractors, and other business matters. Although the outcome of any
such matter is inherently uncertain, management does not believe that there are any pending or threatened litigation or claims that would
have a material adverse effect on the Company’s financial position, results of operations or cash flows as of June 30,
Leases
The
Company rents office and storage space on a month-to-month basis. Rent and storage expense was $2,346 and $2,552 for the six months ended
June 30,
Employee Retention Credit
ERC refunds received by the Company remain subject to examination by the Internal Revenue Service (Note 11). The Company has not recorded a liability for potential repayment because it does not believe a loss is probable.
Platform Provider Agreement
The
Company purchases security operations platform licenses from its platform provider (Note 14) under an agreement priced on the volume
of monitored customer assets. As of June 30,
NOTE 14. CONCENTRATIONS, RISKS AND UNCERTAINTIES
Credit Risk
The Company’s primary bank deposits are located in the United States. Those deposits are provided protection under FDIC insurance up to a maximum of $250,000. Any deposits in excess of that amount are at risk of loss if the bank becomes insolvent. The Company is subject to risk borne from credit extended to customers, which is mitigated by billing in advance of service.
Interest Risk
The Company’s notes payable bear fixed rates of interest, and its note payable – related party is non-interest-bearing. Accordingly, the Company’s exposure to interest rate risk is limited to interest on credit card balances and any future borrowings.
Inflation Risk
Management monitors changes in price levels. Historically, inflation has not materially impacted the Company’s financial statements; however, significant increases in third-party platform license and contractor costs that cannot be passed on to the Company’s customers could adversely impact the Company’s results of operations.
Concentration Risk
Because revenue is recognized ratably from amounts invoiced in advance, the Company measures customer concentration based on amounts invoiced (billings) during each period. Customers accounting for 10% or more of billings in either period were as follows:
Table 14.1: Billings Concentration by Customer – Based on % of Billings
| 2026 | 2025 | |||||||||||||||
| Customer | Amount | % | Amount | % | ||||||||||||
| A | $ | 333,286 | 45.7 | % | $ | 494,877 | 47.8 | % | ||||||||
| B | $ | 211,292 | 29.0 | % | $ | 211,292 | 20.4 | % | ||||||||
| C | $ | 75,000 | 10.3 | % | $ | 86,556 | 8.4 | % | ||||||||
Customers accounting for 10% or more of accounts receivable, net, at either balance sheet date were as follows:
Table 14.2: Accounts Receivable Concentration by Customer – Based on % of Accounts Receivable, Net
| June 30, 2026 | December 31, 2025 | |||||||||||||||
| Customer | Amount | % | Amount | % | ||||||||||||
| A | $ | 160,002 | 85.1 | % | $ | 240,000 | 80.8 | % | ||||||||
Customer A is the same customer identified as Customer A in Table 14.1.
Vendors accounting for 10% or more of purchases (amounts invoiced by vendors) in either period were as follows.
Table 14.3: Purchase Concentration by Vendor – Based on % of Purchases
| 2026 | 2025 | |||||||||||||||
| Vendor | Amount | % | Amount | % | ||||||||||||
| A | $ | 138,088 | 20.3 | % | $ | 359,086 | 48.0 | % | ||||||||
| B | $ | 146,799 | 21.6 | % | $ | 128,666 | 17.2 | % | ||||||||
| C | $ | 60,000 | 8.8 | % | $ | 90,000 | 12.0 | % | ||||||||
| D | $ | 99,297 | 14.6 | % | $ | 81,556 | 10.9 | % | ||||||||
| E | $ | 68,871 | 10.1 | % | $ | 5,175 | 0.7 | % | ||||||||
Vendors B and C are related parties (Note 12).
Table 14.4: Accounts Payable Concentration by Vendor – Based on % of Accounts Payable
| June 30, 2026 | December 31, 2025 | |||||||||||||||
| Vendor | Amount | % | Amount | % | ||||||||||||
| A | $ | 24,165 | 31.2 | % | $ | 195,573 | 86.9 | % | ||||||||
| F | $ | 19,201 | 24.8 | % | $ | — | 0.0 | % | ||||||||
Vendor A is the Company’s security operations platform provider, on which the Company relies for the delivery of its MDR services. Vendor F is the Company’s outside accounting firm.
NOTE 15. FAIR VALUE DISCLOSURES
There
were no assets or liabilities recorded at fair value on a recurring basis as of June 30, 2026 or December 31, 2025. Assets that are measured
at fair value on a nonrecurring basis include property and equipment and software development costs, which are recognized at fair value
when they are considered to be impaired. There were no fair value adjustments for assets and liabilities measured on a nonrecurring basis
during the six months ended June 30,
The
carrying amounts of cash, accounts receivable, accounts payable and accrued liabilities approximate their fair values because of the
short-term nature of these instruments. The Company estimates the fair value of its notes payable by discounting the contractual cash
flows of each instrument at estimated market rates for debt with similar terms and credit risk, based on the prime rate plus a credit
spread of 6.0% (12.75% at both June 30,
Table 15.1: Carrying Amounts and Estimated Fair Values of Debt
| June 30, 2026 | December 31, 2025 | |||||||||||||||
| Carrying amount | Fair value | Carrying amount | Fair value | |||||||||||||
| Economic Injury Disaster Loan | $ | 199,684 | $ | 92,549 | $ | 204,447 | $ | 93,108 | ||||||||
| Vehicle loan | — | — | 81,954 | 81,954 | ||||||||||||
| Note payable – related party | 128,333 | 107,425 | 150,333 | 122,238 | ||||||||||||
| Total | $ | 328,017 | $ | 199,974 | $ | 436,734 | $ | 297,300 | ||||||||
The estimated fair values of the EIDL loan and the note payable – related party are less than their carrying amounts because the EIDL loan bears a below-market fixed rate of 3.75% available through a government program and the note payable – related party is non-interest-bearing.
NOTE 16. SUBSEQUENT EVENTS
The
Company evaluated subsequent events from the date of the balance sheet as of June 30,
| 38 |
Exhibit 99.2
CYCURION, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On June 3, 2026, Cycurion, Inc. (“Cycurion” or the “Company”) completed its acquisition of Secuvant, LLC (“Secuvant”) pursuant to an Agreement and Plan of Merger dated May 21, 2026 (the “Acquisition”). Secuvant is now an indirect wholly owned subsidiary of Cycurion.
The
following unaudited pro forma condensed combined statements of operations for the year ended December 31,
The pro forma information is derived from, and should be read together with, the following:
| ● | Cycurion’s audited consolidated financial statements for the year ended December 31, 2025, included in its Annual Report on Form 10-K; |
| ● | Cycurion’s unaudited condensed consolidated financial statements for the six months ended June 30, 2026, included in its Quarterly Report on Form 10-Q; |
| ● | Secuvant’s
audited financial statements for the year ended December 31, |
The pro forma information is presented for illustrative purposes only. It does not necessarily indicate the results that would have been achieved had the Acquisition occurred on January 1, 2025, or the future results of the combined company. The purchase price allocation is preliminary, and the final allocation may differ materially, including through the recognition of identifiable intangible assets and related amortization.
| 1 |
CYCURION, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2025
Cycurion, Inc. (Historical) | Secuvant, LLC (Historical, as reclassified) | Transaction Accounting Adjustments | Note 4 | Pro Forma Combined | ||||||||||||||
| Revenue | $ | 15,133,647 | $ | 2,336,556 | $ | — | $ | 17,470,203 | ||||||||||
| Cost of revenue | 13,521,329 | 736,942 | — | 14,258,271 | ||||||||||||||
| Gross profit | 1,612,318 | 1,599,614 | — | 3,211,932 | ||||||||||||||
| Operating expenses: | ||||||||||||||||||
| Selling, general and administrative | 9,258,199 | 919,171 | — | (b) | 10,177,370 | |||||||||||||
| Stock compensation | 3,898,867 | — | — | 3,898,867 | ||||||||||||||
| Business combination expenses | 11,870,114 | — | 116,531 | (a) | 11,986,645 | |||||||||||||
| Total operating expenses | 25,027,180 | 919,171 | 116,531 | 26,062,882 | ||||||||||||||
| Operating (loss) income | (23,414,862 | ) | 680,443 | (116,531 | ) | (22,850,950 | ) | |||||||||||
| Other income (expense): | ||||||||||||||||||
| Interest income | 27,538 | — | — | 27,538 | ||||||||||||||
| Interest expense | (1,763,831 | ) | (14,871 | ) | — | (1,778,702 | ) | |||||||||||
| Gain (loss) on debt settlement, net | 1,221,635 | — | — | 1,221,635 | ||||||||||||||
| Other (expense) income, net | (129,564 | ) | 121,353 | — | (8,211 | ) | ||||||||||||
| Total other income (expense), net | (644,222 | ) | 106,482 | — | (537,740 | ) | ||||||||||||
| (Loss) income before income taxes | (24,059,084 | ) | 786,925 | (116,531 | ) | (23,388,690 | ) | |||||||||||
| Provision for income tax | — | — | — | (c) | — | |||||||||||||
| Net (loss) income | (24,059,084 | ) | 786,925 | (116,531 | ) | (23,388,690 | ) | |||||||||||
| Less: net loss attributable to non-controlling interest | 393,376 | — | — | 393,376 | ||||||||||||||
| Net (loss) income attributable to Cycurion, Inc. | $ | (23,665,708 | ) | $ | 786,925 | $ | (116,531 | ) | $ | (22,995,314 | ) | |||||||
| Net loss per share: | ||||||||||||||||||
| Basic | $ | (107.52 | ) | (d) | $ | (104.51 | ) | |||||||||||
| Diluted | $ | (107.12 | ) | (d) | $ | (104.51 | ) | |||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||
| Basic | 220,039 | 220,039 | ||||||||||||||||
| Diluted | 220,455 | 220,039 | ||||||||||||||||
See accompanying notes to the unaudited pro forma condensed combined financial information.
| 2 |
CYCURION, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2026
Cycurion historical includes Secuvant from June 3, 2026; Secuvant historical covers January 1 through June 2, 2026.
Cycurion, Inc. (Historical) | Secuvant, LLC (Historical, as reclassified) | Transaction Accounting Adjustments | Note 4 | Pro Forma Combined | ||||||||||||||
| Revenue | $ | 7,025,696 | $ | 885,409 | $ | — | $ | 7,911,105 | ||||||||||
| Cost of revenue | 5,244,001 | 216,594 | — | 5,460,595 | ||||||||||||||
| Gross profit | 1,781,695 | 668,814 | — | 2,450,509 | ||||||||||||||
| Operating expenses: | ||||||||||||||||||
| Selling, general and administrative | 5,385,015 | 470,675 | — | (b) | 5,855,690 | |||||||||||||
| Stock compensation | 652,555 | — | — | 652,555 | ||||||||||||||
| Business combination expenses | — | 116,531 | (116,531 | ) | (a) | — | ||||||||||||
| Total operating expenses | 6,037,570 | 587,206 | (116,531 | ) | 6,508,245 | |||||||||||||
| Operating (loss) income | (4,255,875 | ) | 81,608 | 116,531 | (4,057,736 | ) | ||||||||||||
| Other income (expense): | ||||||||||||||||||
| Interest income | 17,742 | — | — | 17,742 | ||||||||||||||
| Interest expense | (432,793 | ) | (5,374 | ) | — | (438,167 | ) | |||||||||||
| Gain (loss) on debt settlement, net | (1,930,427 | ) | — | — | (1,930,427 | ) | ||||||||||||
| Other (expense) income, net | — | 67,804 | — | 67,804 | ||||||||||||||
| Total other income (expense), net | (2,345,478 | ) | 62,430 | — | (2,283,048 | ) | ||||||||||||
| (Loss) income before income taxes | (6,601,353 | ) | 144,038 | 116,531 | (6,340,784 | ) | ||||||||||||
| Provision for income tax | — | — | — | (c) | — | |||||||||||||
| Net (loss) income | (6,601,353 | ) | 144,038 | 116,531 | (6,340,784 | ) | ||||||||||||
| Less: net loss attributable to non-controlling interest | 717,117 | — | — | 717,117 | ||||||||||||||
| Net (loss) income attributable to Cycurion, Inc. | $ | (5,884,236 | ) | $ | 144,038 | $ | 116,531 | $ | (5,623,667 | ) | ||||||||
| Net loss per share: | ||||||||||||||||||
| Basic | $ | (6.88 | ) | (d) | $ | (6.59 | ) | |||||||||||
| Diluted | $ | (6.88 | ) | (d) | $ | (6.59 | ) | |||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||
| Basic | 853,283 | 853,283 | ||||||||||||||||
| Diluted | 853,283 | 853,283 | ||||||||||||||||
See accompanying notes to the unaudited pro forma condensed combined financial information.
| 3 |
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note 1 — Description of the Acquisition
On June 3, 2026, Cycurion acquired 100% of the membership interests of Secuvant, a Utah limited liability company that provides managed cybersecurity services. Consideration consisted of $875,000 in cash and 888,888 shares of Series I convertible preferred stock with a fair value of $2,000,000. It also included contingent earn-out consideration, payable over three years if revenue and gross margin hurdles are met, with an estimated fair value of $3,119,851: $623,970 payable in cash and $2,495,881 payable in common stock. In connection with the Acquisition, Cycurion will become a guarantor of Secuvant’s U.S. Small Business Administration Economic Injury Disaster Loan upon approval by the SBA. That loan and Secuvant’s note payable to a former member remain obligations of Secuvant and are included in the liabilities assumed in the preliminary purchase price allocation (Note 3).
Note 2 — Basis of Presentation
The Acquisition is accounted for as a business combination under ASC 805, with Cycurion as the accounting acquirer. The pro forma statements of operations combine the historical results of Cycurion and Secuvant, adjusted to give effect to the Acquisition as if it had occurred on January 1, 2025. Only transaction accounting adjustments are presented; no autonomous entity adjustments or management’s adjustments have been reflected.
Cycurion’s
historical results for the six months ended June 30,
Secuvant’s historical financial statements were prepared in accordance with U.S. GAAP. Certain amounts have been reclassified to conform to Cycurion’s presentation (Note 5). Management is not aware of differences in accounting policies that would materially affect the pro forma information. The review of accounting policies is ongoing, including Secuvant’s policy for capitalized internal-use software.
Note 3 — Preliminary Purchase Price Allocation
The following preliminary allocation is as reported in Note 6 of Cycurion’s Form 10-Q for the period ended June 30, 2026. The allocation is subject to change during the measurement period, which ends no later than June 30, 2027, as third-party valuations of identifiable intangible assets are completed.
| Amount | ||||
| Cash consideration | $ | 875,000 | ||
| Series I convertible preferred stock | 2,000,000 | |||
| Contingent earn-out — cash | 623,970 | |||
| Contingent earn-out — common stock | 2,495,881 | |||
| Total purchase consideration | 5,994,851 | |||
| Less: cash acquired | (558,014 | ) | ||
| Purchase consideration, net of cash acquired | $ | 5,436,837 | ||
| Accounts receivable | 23,458 | |||
| Prepaid expenses | 23,895 | |||
| Accounts payable | (265,294 | ) | ||
| Deferred revenue | (392,471 | ) | ||
| Loans payable, current | (4,689 | ) | ||
| Loans payable, non-current | (327,010 | ) | ||
| Net identifiable liabilities assumed | (942,111 | ) | ||
| Goodwill | 6,378,948 | |||
| Net assets acquired | $ | 5,436,837 | ||
No identifiable intangible assets have yet been recognized separately from goodwill. If identifiable intangible assets such as customer relationships or developed technology are recognized, the pro forma statements of operations would include amortization expense, which could be material.
| 4 |
Note 4 — Transaction Accounting Adjustments
(a) Acquisition-related costs. This adjustment removes $116,531 of legal and advisory costs incurred by Secuvant in connection with the Acquisition during the period January 1 through June 2, 2026, and reflects them in the year ended December 31, 2025, as if incurred at the assumed acquisition date. These costs are not expected to recur. Cycurion did not recognize acquisition-related costs for the Acquisition in its historical statements of operations for the periods presented; accordingly, no adjustment for Cycurion costs is required.
(b) Amortization of intangible assets. No adjustment is reflected because the preliminary allocation does not separately recognize identifiable intangible assets (Note 3).
(c) Income taxes. Secuvant was treated as a partnership for income tax purposes before the Acquisition, so its historical statements include no provision for income taxes. Following the Acquisition, Secuvant’s results are included in Cycurion’s consolidated income tax returns. Cycurion maintains a full valuation allowance against its net deferred tax assets and recorded no income tax provision in the periods presented. Accordingly, no income tax adjustment has been reflected.
(d)
Net loss per share. Pro forma basic and diluted net loss per share are based on Cycurion’s historical weighted average shares outstanding.
Historical and pro forma share and per share amounts have been retroactively adjusted to reflect the 1-for-8 reverse stock split of Cycurion’s
common stock effective August 28, 2026. The Series I convertible preferred stock issued as consideration is not common stock. Shares
issuable under the earn-out are contingently issuable, and potentially dilutive securities are
Note 5 — Reclassifications of Secuvant Historical Amounts
Secuvant’s historical statements of operations have been reclassified to conform to Cycurion’s presentation as follows:
| ● | Salaries, management and consulting fees, professional services, general and administrative expenses, and depreciation and amortization are presented within selling, general and administrative expenses. |
| ● | Acquisition-related
legal and advisory costs of $116,531 incurred January 1 through June 2, |
| ● | The Employee Retention Credit ($104,298 in 2025), the gain on sale of a vehicle, and other income and expense items are presented within other (expense) income, net. |
| 5 |
Exhibit 99.3
SECUVANT, LLC
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For
the Years Ended December 31,
The
following discussion and analysis of the financial condition and results of operations of Secuvant, LLC (“Secuvant,” the
“Company,” “we,” “us” or “our”) should be read together with the Company’s audited
financial statements as of and for the years ended December 31,
Cautionary note regarding forward-looking statements. This discussion contains forward-looking statements, including statements about customer retention, billings trends, cost structure, liquidity and the effects of the transaction. These statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including those described under “Known Trends and Uncertainties” below and under “Risk Factors” in Cycurion, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2025. We undertake no obligation to update forward-looking statements except as required by law.
Overview
Secuvant
is a Utah-based provider of managed cybersecurity services to mid-market commercial organizations. Substantially all of our revenue is
recurring and is earned from three
| ● | Managed detection and response (“MDR”) — 24x7 monitoring, detection and response delivered on a third-party security operations platform; |
| ● | Risk and program management (“RPM”) — ongoing security program, governance and risk-management services; and |
| ● | Threat and vulnerability management (“TVM”), marketed as Panoptic — continuous vulnerability identification and remediation tracking, launched in 2024. |
Recurring
Over 2024 and 2025 we changed our delivery model, reducing employed service-delivery personnel and relying more on our platform provider, outside contractors and management services provided by Clear Path Investments, an entity affiliated with our managing member.
This shift substantially reduced cost of revenue and increased gross margin.
On June 3, 2026, Cycurion, Inc. acquired 100% of the membership interests of the Company. Secuvant continues as a wholly owned subsidiary of Cycurion. Its services and technology are being integrated into Cycurion’s cybersecurity offerings and supported by Cycurion’s shared management, sales and administrative functions, rather than operated as a standalone unit. The historical results discussed below reflect Secuvant as an independent company and are not necessarily indicative of its results as part of Cycurion.
Key metrics
We use the following metrics to evaluate the business. Billings is a non-GAAP measure, defined as revenue plus the change in deferred revenue during the period; we use it as an indicator of invoiced demand and near-term cash collections. Billings is not a substitute for revenue and may not be comparable to similarly titled measures of other companies.
| FY 2025 | FY 2024 | 6M 2026 | 6M 2025 | |||||||||||||
| Revenue | $ | 2,336,556 | $ | 2,485,868 | $ | 1,058,323 | $ | 1,194,855 | ||||||||
| Billings (non-GAAP) | 2,013,643 | 2,373,712 | 719,598 | 1,035,163 | ||||||||||||
| Gross margin | 68.5 | % | 48.7 | % | 77.2 | % | 65.2 | % | ||||||||
| Customers invoiced during period | 10 | 15 | 7 | 9 | ||||||||||||
| Largest customer (% of billings) | 60.9 | % | 61.6 | % | 45.7 | % | 47.8 | % | ||||||||
| Deferred revenue, end of period | 735,219 | 1,058,132 | 396,494 | 898,440 | ||||||||||||
| 1 |
Reconciliations of billings to revenue:
| FY 2025 | FY 2024 | |||||||
| Revenue | $ | 2,336,556 | $ | 2,485,868 | ||||
| Add: deferred revenue, end of period | 735,219 | 1,058,132 | ||||||
| Less: deferred revenue, beginning of period | (1,058,132 | ) | (1,170,288 | ) | ||||
| Billings | $ | 2,013,643 | $ | 2,373,712 | ||||
| 6M 2026 | 6M 2025 | |||||||
| Revenue | $ | 1,058,323 | $ | 1,194,855 | ||||
| Add: deferred revenue, end of period | 396,494 | 898,440 | ||||||
| Less: deferred revenue, beginning of period | (735,219 | ) | (1,058,132 | ) | ||||
| Billings | $ | 719,598 | $ | 1,035,163 | ||||
Known Trends and Uncertainties
| ● | Declining
billings and customer count. Billings decreased 15.2% in 2025 and 30.5% in the first half
of 2026 compared with the prior-year periods, and the number of customers invoiced declined
from 15 in 2024 to 10 in 2025 and 7 in the first half of 2026. Because revenue is recognized
ratably from previously billed amounts, lower billings lead revenue declines; deferred revenue
decreased from $1,058,132 |
| ● | Revenue
will decline as prepaid deferred revenue is consumed. Revenue recognized in April–June
2026 averaged approximately $173,000 per month, while billings under current contracts average
approximately $100,000 per month. The difference reflects recognition of amounts billed in
prior periods, including multi-period prepayments, and deferred revenue decreased to $396,494
|
| ● | Customer concentration. Alsco, Inc. and its affiliates accounted for approximately 61% of billings in 2025 and 46% in the first half of 2026, with quarterly billings to Alsco declining from approximately $243,000 per quarter in 2025 to approximately $160,000–$173,000 per quarter in 2026. The loss of, or a further reduction in services to, this customer would materially reduce revenue and cash flows. |
| ● | Platform dependency. MDR services are delivered on a third-party security operations platform ReliaQuest, whose license fees are our largest cost. Changes in pricing or availability of the platform would affect gross margin. |
| ● | Integration into Cycurion. Following the acquisition, Secuvant’s services are being combined with Cycurion’s offerings. Customer contracts, billing, platform arrangements and administrative functions may be assigned to or shared with Cycurion. The management fee paid to Clear Path Investments, a related party ($199,008 in 2025), and the contract operations arrangement ended at closing. The Lighthouse Business Catalysts consulting retainer ($120,000 per year) was last billed June 1, 2026. In addition, Secuvant may bear shared-services charges from Cycurion. As a result, Secuvant’s standalone cost structure and results will not be comparable to the historical periods presented. |
| ● | Transaction costs. Legal and accounting fees increased to $184,237 in the first half of 2026 from $16,186 in the prior-year period, principally in connection with the acquisition. |
| ● | Non-recurring items. 2025 results include $104,298 of Employee Retention Credit refunds, and 2024 results include $127,392 of other expense from corrections of prior-period vendor balances. The first half of 2026 includes $33,753 from the release of customer deposits and credit balances, a $15,000 vendor credit and a $6,541 gain on the sale of a vehicle to a member. |
| 2 |
Results
of Operations — Six Months Ended June 30,
| 2026 | 2025 | $ change | % change | % of rev 2026 | % of rev 2025 | |||||||||||||||||||
| Revenue | $ | 1,058,323 | $ | 1,194,855 | $ | (136,532 | ) | -11.4 | % | 100.0 | % | 100.0 | % | |||||||||||
| Cost of revenue | 241,129 | 416,171 | (175,042 | ) | -42.1 | % | 22.8 | % | 34.8 | % | ||||||||||||||
| Gross profit | 817,194 | 778,684 | 38,510 | 4.9 | % | 77.2 | % | 65.2 | % | |||||||||||||||
| Selling, general and administrative | 413,477 | 263,831 | 149,646 | 56.7 | % | 39.1 | % | 22.1 | % | |||||||||||||||
| Management and consulting fees | 166,738 | 144,000 | 22,738 | 15.8 | % | 15.8 | % | 12.1 | % | |||||||||||||||
| Depreciation and amortization | 43,069 | 43,379 | (310 | ) | -0.7 | % | 4.1 | % | 3.6 | % | ||||||||||||||
| Income from operations | 193,910 | 327,474 | (133,564 | ) | -40.8 | % | 18.3 | % | 27.4 | % | ||||||||||||||
| Interest expense | (6,375 | ) | (6,726 | ) | 351 | 5.2 | % | -0.6 | % | -0.6 | % | |||||||||||||
| Gain on sale of vehicle – related party | 6,541 | — | 6,541 | n/m | 0.6 | % | 0.0 | % | ||||||||||||||||
| Other income, net | 61,263 | 101,800 | (40,537 | ) | -39.8 | % | 5.8 | % | 8.5 | % | ||||||||||||||
| Net income | $ | 255,339 | $ | 422,548 | $ | (167,209 | ) | -39.6 | % | 24.1 | % | 35.4 | % | |||||||||||
Revenue
| 2026 | 2025 | $ change | % change | |||||||||||||
| Managed detection and response | $ | 619,417 | $ | 703,527 | $ | (84,110 | ) | -12.0 | % | |||||||
| Risk and program management | 123,750 | 123,750 | — | 0.0 | % | |||||||||||
| Threat and vulnerability management | 315,156 | 359,520 | (44,364 | ) | -12.3 | % | ||||||||||
| Reimbursable expenses | — | 8,058 | (8,058 | ) | -100.0 | % | ||||||||||
| Total revenue | $ | 1,058,323 | $ | 1,194,855 | $ | (136,532 | ) | -11.4 | % | |||||||
Revenue decreased $136,532, or 11.4%. MDR revenue decreased $84,110 (12.0%) and TVM revenue decreased $44,364 (12.3%), reflecting fewer customers (7 invoiced compared with 9) and reduced services to our largest customer. RPM revenue was unchanged at $123,750. Reimbursable expenses of $8,058 in 2025 did not recur.
Cost of revenue and gross margin
Cost of revenue decreased $175,042, or 42.1%, to $241,129, primarily due to a $136,604 reduction in platform license costs consistent with lower monitored volume, lower outside contractor costs ($15,207) and the absence of personnel and reimbursable costs incurred in 2025. Gross margin increased to 77.2% from 65.2%.
Operating expenses
Selling, general and administrative expenses increased $149,646 to $413,477, driven by legal and accounting fees of $184,237 compared with $16,186 in 2025, principally related to the transaction. Excluding those fees, selling, general and administrative expenses decreased $18,404, reflecting lower contract operations costs ($99,297 compared with $111,500) and lower travel and marketing spending.
Management and consulting fees increased $22,738 to $166,738, reflecting higher management fees from Clear Path Investments, a related party ($106,738 compared with $84,000); the arrangement ended at closing. Fees to Lighthouse Business Catalysts, also a related party, were $60,000 in both periods before a $15,000 credit recorded in other income in 2026. Depreciation and amortization was $43,069 compared with $43,379.
Other income (expense)
Interest expense was $6,375 compared with $6,726. In April 2026, we sold our vehicle to our managing member, who assumed the related loan, and recognized a gain of $6,541, which is presented separately. Other income, net was $61,263 compared with $101,800. 2026 includes $33,753 from the release of a customer deposit forgiven by the customer and other customer credit balances, the $15,000 vendor credit, $9,480 from closing out balances of terminated customers and a $3,030 adjustment of debt balances to lender statements. 2025 included $104,298 of Employee Retention Credit refunds.
| 3 |
As a result, net income decreased to $255,339 from $422,548.
Results
of Operations — Year Ended December 31,
| 2025 | 2024 | $ change | % change | % of rev 2025 | % of rev 2024 | |||||||||||||||||||
| Revenue | $ | 2,336,556 | $ | 2,485,868 | $ | (149,312 | ) | -6.0 | % | 100.0 | % | 100.0 | % | |||||||||||
| Cost of revenue | 736,942 | 1,276,063 | (539,121 | ) | -42.2 | % | 31.5 | % | 51.3 | % | ||||||||||||||
| Gross profit | 1,599,614 | 1,209,805 | 389,809 | 32.2 | % | 68.5 | % | 48.7 | % | |||||||||||||||
| Selling, general and administrative | 509,569 | 445,841 | 63,728 | 14.3 | % | 21.8 | % | 17.9 | % | |||||||||||||||
| Management and consulting fees | 319,008 | 379,073 | (60,065 | ) | -15.8 | % | 13.7 | % | 15.2 | % | ||||||||||||||
| Depreciation and amortization | 90,594 | 81,487 | 9,107 | 11.2 | % | 3.9 | % | 3.3 | % | |||||||||||||||
| Income from operations | 680,443 | 303,404 | 377,039 | 124.3 | % | 29.1 | % | 12.2 | % | |||||||||||||||
| Interest expense | (14,871 | ) | (28,013 | ) | 13,142 | 46.9 | % | -0.6 | % | -1.1 | % | |||||||||||||
| Other income, net | 121,353 | (106,859 | ) | 228,212 | 213.6 | % | 5.2 | % | -4.3 | % | ||||||||||||||
| Net income | $ | 786,925 | $ | 168,532 | $ | 618,393 | 366.9 | % | 33.7 | % | 6.8 | % | ||||||||||||
Revenue
| 2025 | 2024 | $ change | % change | |||||||||||||
| Managed detection and response | $ | 1,359,660 | $ | 1,386,433 | $ | (26,773 | ) | -1.9 | % | |||||||
| Risk and program management | 247,500 | 300,109 | (52,609 | ) | -17.5 | % | ||||||||||
| Threat and vulnerability management | 716,933 | 790,013 | (73,080 | ) | -9.3 | % | ||||||||||
| Professional services and setup fees | — | 9,313 | (9,313 | ) | -100.0 | % | ||||||||||
| Reimbursable expenses | 12,463 | — | 12,463 | n/m | ||||||||||||
| Total revenue | $ | 2,336,556 | $ | 2,485,868 | $ | (149,312 | ) | -6.0 | % | |||||||
Revenue decreased $149,312, or 6.0%. TVM revenue decreased $73,080 (9.3%), RPM revenue decreased $52,609 (17.5%) and MDR revenue decreased $26,773 (1.9%), reflecting a decline in customers invoiced from 15 to 10. Professional services and setup fees of $9,313 in 2024 did not recur, partially offset by $12,463 of reimbursable expenses billed in 2025.
Cost of revenue and gross margin
Cost of revenue decreased $539,121, or 42.2%. Personnel costs decreased $435,601 to $10,768 as service-delivery employees transitioned off payroll during 2024, and platform license costs decreased $156,814, partially offset by a $39,370 increase in outside contractor costs. Gross margin increased to 68.5% from 48.7%.
Operating expenses
Selling, general and administrative expenses increased $63,728, primarily due to higher professional and outside services ($252,729 compared with $198,925), reflecting contract operations services of $220,100 compared with $128,308, including $55,000 billed by Lighthouse Business Catalysts, a related party, for an outside contractor.
Management and consulting fees decreased $60,065 to $319,008, principally due to a reduction in the retainer of Lighthouse Business Catalysts, a related party, from $15,000 to $10,000 per month. Management fees to Clear Path Investments, a related party, were $199,008 in 2025 compared with $199,073 in 2024.
Depreciation and amortization increased to $90,594 from $81,487. Amortization of capitalized software increased to $81,638 from $78,847, and depreciation of property and equipment increased to $8,956 from $2,640, principally from the vehicle acquired in June 2025.
| 4 |
Other income (expense)
Interest expense decreased to $14,871 from $28,013, reflecting lower credit card balances and repayment of the line of credit in January 2025. Other income, net was $121,353 in 2025, including $104,298 of Employee Retention Credit refunds received in January 2025, compared with ($106,859) in 2024, which included $127,392 of other expense from corrections of prior-period vendor balances.
As a result, net income increased to $786,925 from $168,532.
Non-GAAP Financial Measures
We present EBITDA and Adjusted EBITDA as supplemental measures of operating performance. EBITDA is net income before interest expense, income taxes and depreciation and amortization. Adjusted EBITDA further excludes the Employee Retention Credit, gains on sales of assets and prior-period balance corrections, which we do not consider indicative of ongoing operations. These measures are not prepared in accordance with U.S. GAAP, should not be considered alternatives to net income, and may not be comparable to similarly titled measures of other companies.
| 6M 2026 | 6M 2025 | |||||||
| Net income | $ | 255,339 | $ | 422,548 | ||||
| Interest expense | 6,375 | 6,726 | ||||||
| Depreciation and amortization | 43,069 | 43,379 | ||||||
| Income taxes (pass-through entity) | — | — | ||||||
| EBITDA | 304,783 | 472,653 | ||||||
| Less: employee retention credit | — | (104,298 | ) | |||||
| Less: gain on sale of vehicle - related party | (6,541 | ) | — | |||||
| Add: other expense (prior-period balance corrections) | — | 3,769 | ||||||
| Adjusted EBITDA | $ | 298,242 | $ | 372,124 | ||||
| FY2025 | FY2024 | |||||||
| Net income | $ | 786,925 | $ | 168,532 | ||||
| Interest expense | 14,871 | 28,013 | ||||||
| Depreciation and amortization | 90,594 | 81,487 | ||||||
| Income taxes (pass-through entity) | — | — | ||||||
| EBITDA | 892,390 | 278,032 | ||||||
| Less: employee retention credit | (104,298 | ) | — | |||||
| Add: other expense (prior-period balance corrections) | 3,769 | 127,392 | ||||||
| Adjusted EBITDA | $ | 791,861 | $ | 405,424 | ||||
Liquidity and Capital Resources
Our principal source of liquidity is cash generated from customer billings, which are generally invoiced quarterly or annually in advance. At June 30, 2026, we had cash of $318,430, compared with $478,981 at December 31, 2025. We have no committed credit facility; the $60,000 line of credit outstanding at December 31, 2024 was repaid in January 2025. Because billings are concentrated in the last month of each quarter, cash balances fluctuate significantly within each quarter; month-end cash ranged from $175,595 to $745,570 during the eighteen months ended June 30, 2026.
| June 30, 2026 | December 31, 2025 | December 31, 2024 | ||||||||||
| Cash | $ | 318,430 | $ | 478,981 | $ | 339,565 | ||||||
| Total current assets | 524,663 | 844,741 | 842,170 | |||||||||
| Total current liabilities | 539,383 | 1,099,347 | 1,852,725 | |||||||||
| Working capital (deficit) | (14,720 | ) | (254,606 | ) | (1,010,555 | ) | ||||||
| Working capital excluding deferred revenue and customer deposits | 381,774 | 545,890 | 110,625 | |||||||||
| Total debt (incl. related-party note and LOC) | 328,017 | 436,734 | 462,903 | |||||||||
| Members’ equity (deficit) | (223,145 | ) | (478,484 | ) | (1,265,409 | ) | ||||||
| 5 |
We
had a working capital deficit of $14,720 at June 30, 2026 and $254,606 at December 31, 2025, and a members’ deficit of $223,145
at June 30, 2026 and $478,484 at December 31, 2025. Current liabilities include deferred revenue that will be settled primarily through
the delivery of services rather than cash; excluding deferred revenue and customer deposits, working capital was $381,774 and $545,890,
respectively. Billings have declined, our largest customer represented approximately 46% of billings in the first half of 2026, and net
cash used in operating activities was $102,658 in the first half of 2026. At the June 3,
Cash flows
| 6M 2026 | 6M 2025 | FY 2025 | FY 2024 | |||||||||||||
| Net cash provided by (used in) operating activities | $ | (102,658 | ) | $ | 335,755 | $ | 312,430 | $ | (421,481 | ) | ||||||
| Net cash used in investing activities | (31,035 | ) | (36,051 | ) | (60,944 | ) | (6,529 | ) | ||||||||
| Net cash provided by (used in) financing activities | (26,858 | ) | (84,062 | ) | (112,070 | ) | 10,846 | |||||||||
| Net change in cash | $ | (160,551 | ) | $ | 215,642 | $ | 139,416 | $ | (417,164 | ) | ||||||
Operating
activities. Net cash used in operating activities was $102,658 in the first half of 2026, compared with net cash provided of $335,755
in the
Investing activities. Investing activities consist of capitalized internal-use software development costs and equipment purchases: $31,035 in the first half of 2026, $36,051 in the first half of 2025, $60,944 in 2025 ($59,505 of software development costs and $1,439 of computer equipment) and $6,529 in 2024.
Financing activities. Financing activities consist of scheduled payments on the note payable to a former member ($3,666.66 per month), payments on the SBA Economic Injury Disaster Loan and the vehicle loan, and in 2024 and 2025 borrowings and repayment of the $60,000 line of credit. In April 2026, a member assumed the $79,157 vehicle loan in connection with purchasing the vehicle from the Company (non-cash).
| 6 |
Material cash requirements
Our material cash requirements from known contractual obligations consist of scheduled debt principal payments, summarized below as of June 30, 2026, and interest on the SBA loan of approximately $7,400 per year. We also purchase security operations platform licenses from our platform provider under an agreement priced on the volume of monitored customer assets; at June 30, 2026 and December 31, 2025, we were committed to purchase platform licenses of $171,742 and $127,649, respectively (Note 13 to the unaudited condensed financial statements and Note 14 to the audited financial statements). The related-party management fee, contract operations and consulting arrangements ended at closing. We have no lease obligations with terms longer than twelve months. In connection with the acquisition, Cycurion, Inc. will become a guarantor of the SBA loan upon approval by the SBA; the loan remains our obligation, and no prepayment is planned.
| Total | < 1 year | 1–3 years | 3–5 years | > 5 years | ||||||||||||||||
| SBA EIDL | $ | 199,684 | $ | 4,786 | $ | 10,126 | $ | 10,913 | $ | 173,859 | ||||||||||
| Note payable - related party | 128,333 | 44,000 | 84,333 | — | — | |||||||||||||||
| Total | $ | 328,017 | $ | 48,786 | $ | 94,459 | $ | 10,913 | $ | 173,859 | ||||||||||
Critical Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires estimates that affect reported amounts. We consider the following estimates critical because they require significant judgment and changes could materially affect our results:
| ● | Capitalized
internal-use software. We capitalize qualifying costs incurred during the application development
stage of internal-use software and amortize them over an estimated useful life of three years.
Judgment is required to determine which costs qualify and the useful life. Development costs
of $59,505 in 2025 and $31,035 in the first half of 2026 were capitalized. Our enhancements
are placed in service as they are completed and amortized from those dates. Software development
costs, net were $77,158 |
| ● | Revenue recognition and contract balances. Revenue from managed services is recognized ratably over the service period. Judgment is limited to identifying performance obligations and the treatment of setup fees and final-month prepayments; we treat setup fees that are not distinct as part of the related service. Customer deposits are recognized as income only when the customer releases them. |
| ● | Employee Retention Credit. We recognize government assistance when there is reasonable assurance the conditions have been met and the amount will be received, which we determined occurred upon receipt in January 2025. The credit remains subject to IRS examination. |
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity or capital resources.
Recently Issued Accounting Pronouncements
See Note 2 to the financial statements.
Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
| 7 |