S-1/A: Cycurion Files S-1/A for Equity Offering Amidst Losses

Cycurion, Inc. filed an S-1/A registration statement for a primary offering of up to 7,000,000 shares under an Equity Purchase Agreement and a secondary offering of various securities, while reporting significant net losses and a going concern doubt.

Summary

• Cycurion, Inc. is registering a primary offering of up to 7,000,000 shares of common stock under an Equity Purchase Agreement with Yield Point NY LLC, and a secondary offering of 119,326 shares of common stock, 395,866 shares underlying warrants, 83,333 shares underlying a pre-funded warrant, and 696,146 shares from Series G Convertible Preferred Stock conversion.
• The company reported a net loss of $(18,560,558) for the nine months ended September 30, 2025, a significant increase from a net income of $109,712 for the same period in 2024.
• Revenue for the nine months ended September 30, 2025, decreased by 15.4% to $11,591,003 compared to $13,694,614 in the prior year period.
• Operating loss for the nine months ended September 30, 2025, was $(18,394,701), a substantial decline from an operating income of $1,115,892 in the same period of 2024.
• Cycurion successfully regained compliance with Nasdaq's minimum bid price requirement on November 11, 2025, following a 1-for-30 reverse stock split effected on October 27, 2025.
• The company's accumulated deficit increased to approximately $21.8 million as of September 30, 2025, from $3.2 million as of December 31, 2024, and it had a net working capital deficit of $9.6 million.
• Substantial doubt exists regarding Cycurion's ability to continue as a going concern due to recurring losses and negative operating cash flows.
• Key strategic developments include the formation of Cycurion Crypto Inc. in July 2025, new partnerships with AgileBlue and NACCHO, and significant contract awards totaling an additional $4.6 million in September 2025, building on a previously announced $69 million.
• The company completed a business combination with Western Acquisition Ventures Corp. on February 14, 2025, and subsequently integrated SLG Innovation, Inc. as a Variable Interest Entity (VIE) on March 31, 2025.
• Executive compensation agreements for L. Kevin Kelly (CEO) and Alvin McCoy III (CFO) include annual base salaries of $325,000 and $500,000 in equity compensation for the first year, plus performance bonuses.

Sentiment

Score: 2

Explanation: The company faces severe financial distress with significant net losses, negative operating cash flow, a substantial accumulated deficit, and a going concern warning. While there are some positive operational developments and Nasdaq compliance has been regained, the underlying financial health is extremely weak, and the equity offering will cause significant dilution.

Positives

• Regained compliance with Nasdaq's minimum bid price requirement on November 11, 2025, and other listing rules (MVLS, MVPHS) in August 2025.
• Secured additional $4.6 million in new contracts in September 2025, adding to a previously announced $69 million in contracts, indicating continued business acquisition.
• Formed Cycurion Crypto Inc. in July 2025 to diversify reserves, enhance investor appeal, and position the company in blockchain security.
• Launched the ARx Platform for the corporate sector in March 2025, offering a comprehensive cybersecurity solution.
• Expanded strategic partnerships with AgileBlue, NACCHO, CentralSquare Technologies, LLC, and Journal Technologies, leading to new contracts and service delivery expansions.
• Gross profit margin improved to 20.5% in 2024 from 13.7% in 2023, and operating income increased to $2,416,113 in 2024 from $326,411 in 2023.
• Net income of $1,229,601 in 2024, a turnaround from a net loss of $(2,097,013) in 2023.

Negatives

• Reported a substantial net loss of $(18,560,558) for the nine months ended September 30, 2025, compared to a net income of $109,712 for the same period in 2024.
• Experienced a 15.4% decrease in revenue for the nine months ended September 30, 2025, to $11,591,003, attributed to delayed contract start dates and a focus on more profitable business.
• Operating activities resulted in a net cash outflow of $(8,771,919) for the nine months ended September 30, 2025, significantly higher than $(1,165,585) in the prior year period.
• Accumulated deficit increased to approximately $21.8 million as of September 30, 2025, from $3.2 million at December 31, 2024.
• Maintained a net working capital deficit of $9.6 million as of September 30, 2025, indicating liquidity challenges.
• The exercise price of PIPE Warrants and Public Warrants is $345.00 per share, significantly higher than the common stock's closing price of $3.48 on December 1, 2025, making their exercise unlikely.
• Issuances of common stock under the Equity Purchase Agreement and for debt conversions will cause substantial dilution to existing stockholders.
• Incurred $11,240,114 in business combination expenses during the nine months ended September 30, 2025.
• The company is subject to a 1% U.S. federal excise tax on stock repurchases, with a liability of $1,167,173 as of September 30, 2025.

Risks

• Issuances of common stock to Yield Point will cause substantial dilution to existing stockholders and may cause the stock price to decline.
• The sale of a substantial number of Put Stock in the public market could adversely affect the prevailing market price of shares.
• May not have access to the full $60 million available under the Equity Purchase Agreement due to market conditions or other factors.
• Yield Point will pay less than the then-prevailing market price for common stock, potentially causing further price decline.
• Limited operating history makes it difficult to evaluate future business and prospects.
• Recurring net losses and a net working capital deficit raise substantial doubt about the ability to continue as a going concern.
• Requires substantial additional funding in the future, which may not be available on acceptable terms, or at all, potentially leading to delays, reductions, or cessation of operations.
• Inability to innovate and offer solutions addressing the dynamic threat landscape could lead to loss of competitiveness, revenue, and operating results.
• Reliance on personnel with extensive information-security expertise, and the inability to attract and retain such qualified personnel, could harm the business.
• As a cybersecurity provider, the company is a target of cyber-attacks and other cyber risks that could adversely impact reputation and operating results.
• Future acquisitions could disrupt business, harm financial condition, and operating results if integration is unsuccessful or anticipated benefits are not realized.
• Dependence on a few large clients for a significant portion of revenue (93% in 2024, 88% in 2023 from top ten customers) creates concentration risk.
• Failure of Congress to approve appropriations bills in a timely manner for federal government agencies could delay and reduce spending, causing revenue and profit loss.
• Reliance on U.S. General Services Administration Multiple Award Schedule (GSA Schedule) and other Indefinite Delivery/Indefinite Quantity (IDIQ) contracts creates revenue volatility risk.
• If products or professional services fail to detect vulnerabilities or respond to cybersecurity incidents, or contain undetected errors, brand and reputation could be harmed.
• Management team has limited experience managing a public company, potentially leading to increased costs and diverted attention.
• Common stock price may be volatile, and a short squeeze due to high demand exceeding supply could lead to extreme price volatility.
• Increases in market interest rates may reduce demand for common stock and cause its price to decline.
• Failure to comply with corporate governance laws and financial reporting standards could lead to investigations or sanctions.
• Potential future sales pursuant to registration rights granted to stockholders may depress the market price for common stock.
• The Reverse Stock Split may decrease the liquidity of common stock and may not increase the price over the long-term.

Future Outlook

Cycurion plans to continue improving operations to generate positive cash flows and will seek additional debt or equity financing to fund its business and potential acquisition activities. The company intends to expand its market leadership by continuing to acquire platforms, expanding platform coverage with existing customers, investing in new technology platforms (including AI), and exploring further acquisition opportunities. The company expects to incur significant operating losses for the next few years as it invests heavily in business expansion and growth initiatives.

Management Comments

• Management believes that the valuation and liquidity brought by a public offering of its securities will allow holders of convertible notes and convertible preferred stockholders the mechanism to convert their securities into common stock, which will reduce the company's overall leverage and debt service requirement.
• Management believes that the current cash position, access to the capital markets, and cash flow generated from operations should be sufficient for operating requirements through the next several fiscal years.
• Management is committed to hiring the most knowledgeable professionals to expand and reinforce its team of experts, leveraging world-class talent to improve and expand upon its understanding of the cybersecurity environment.
• Management prides itself on having the capability and resources to successfully implement a management strategy that delivers the solutions needed to stay within budget and on schedule.

Industry Context

The IT and cybersecurity solutions market is fragmented, competitive, and constantly evolving. Cycurion faces intense competition from larger, well-established companies like Palo Alto Networks, CrowdStrike Holdings Inc., and Fortinet, Inc., which possess greater financial, technical, and marketing resources. The industry demands continuous innovation to address dynamic threat landscapes, and competition has led to declining prices and margins for many cybersecurity services. Cycurion's strategy of organic growth and strategic acquisitions aims to navigate this competitive environment by offering customized solutions and leveraging government-level experience.

Comparison to Industry Standards

• Cycurion operates in a highly competitive cybersecurity market, competing with established leaders such as Palo Alto Networks, CrowdStrike Holdings Inc., and Fortinet, Inc. These larger competitors generally possess significantly greater financial, technical, marketing, and other resources, longer operating histories, and more diverse strategic plans.
• The company's gross profit margin of 20.5% in 2024, while an improvement from 13.7% in 2023, is likely below the margins of leading cybersecurity firms, which often achieve higher profitability due to scale, proprietary technology, and strong brand recognition.
• Cycurion's recurring net losses and accumulated deficit, coupled with a going concern warning, contrast sharply with the financial stability and consistent profitability typically seen in mature, industry-leading companies.
• The reliance on government contracts for a substantial portion of revenue (93% from top ten customers in 2024) indicates a potential lack of diversification compared to broader industry players serving a wider commercial base.
• The high exercise price of Public Warrants and PIPE Warrants ($345.00 vs. $3.48 market price) suggests a significant disconnect from current market valuation, unlike typical warrant structures in more stable, growth-oriented companies.

Management Changes

Corporate Governance

Legal Proceedings

• Object3, LLC initiated an arbitration proceeding against Cloudburst Security, LLC (a wholly-owned subsidiary) for approximately $228,000 in unpaid consulting services. This proceeding has been settled as of the date of the prospectus.

Related Party Transactions

• A promissory note for $230,000 was entered into with Western Acquisition Ventures Sponsor LLC (the Sponsor) on September 20, 2024, with a 10% annual interest rate, payable upon the Business Combination.
• Personal guarantees were provided by Emmit McHenry, Kurt McHenry, and Alvin McCoy III (officers and stockholders) in support of a Main Street Bank loan, with approximately $3 million owed as of December 2, 2025.
• Axxum Technologies LLC purchased an AT&T contract relationship from Archura, LLC, a company owned by Emmit McHenry and Kurt McHenry, at the end of 2018. Total sales from these purchase orders were $119,279 in 2024 and $144,820 in 2023.
• Promissory notes were issued to a director on April 26, 2023, for $55,000, $27,500, and $20,900.
• Promissory notes were issued to a director on June 22, 2023, for $82,500 and $165,000.
• A promissory note was issued to a director on July 6, 2023, for $55,000.
• A promissory note was issued to a director on July 21, 2023, for $181,500.
• A promissory note in the amount of $20,250 was issued to an officer on August 24, 2024.
• Western Acquisition Ventures Corp. (Western) entered into multiple promissory notes with Cycurion Sub, Inc. from July 2023 to January 2025, with amounts increasing and maturity dates extended, totaling $554,269 borrowed by Western as of September 30, 2024.
• Cycurion Sub entered into promissory notes with Western on September 24, 2024, January 6, 2025, and January 24, 2025, for principal amounts of $210,555.56, $55,555.56, and $327,777.78, respectively, all with a 10% annual interest rate.

Stakeholder Impact

• Shareholders will experience substantial dilution from the primary offering of up to 7,000,000 shares under the Equity Purchase Agreement and potential future equity issuances for warrant exercises, convertible note conversions, and employee incentive plans.
• The sale of a large number of shares by selling stockholders and Yield Point could depress the market price of common stock, negatively impacting existing shareholders' investment value.
• The company's recurring losses, negative operating cash flow, and accumulated deficit raise substantial doubt about its ability to continue as a going concern, posing a significant risk of complete loss of investment for stockholders if additional funding is not secured.
• Employees and management may face increased pressure to achieve profitability and secure additional funding to sustain operations and growth initiatives.
• Customers may benefit from continued innovation and expanded service offerings, but the company's financial instability could raise concerns about long-term service continuity.
• Creditors face risks due to the company's high level of indebtedness and debt service obligations, which could be exacerbated if the company fails to generate sufficient cash flow or secure additional financing.

Next Steps

• Continue efforts to generate positive cash flows from operations.
• Seek additional debt or equity financing to fund business and potential acquisition activities.
• File one or more additional registration statements to register remaining shares under the Equity Purchase Agreement and other outstanding convertible securities.
• Finalize accounting for the SLG Innovation Inc. business combination by March 31, 2026.
• Complete necessary regulatory filings for the iQSTEL stock-for-stock dividend distribution by December 15, 2025, with distribution by December 31, 2025.
• Continue to develop and broaden exposure and security solutions, including expanding coverage and entering new contracts focused on program management, cybersecurity, disaster recovery, and business continuity.
• Explore further acquisition opportunities for businesses, technology, AI platforms, and development personnel.

Key Dates

Recommendation

Cycurion, Inc. is in a precarious financial position, evidenced by a significant net loss of $(18.56) million for the nine months ended September 30, 2025, a substantial accumulated deficit of $(21.8) million, and a net working capital deficit of $(9.6) million. The auditor has raised 'substantial doubt' about the company's ability to continue as a going concern. While the company has regained Nasdaq compliance and announced new contracts and partnerships, these operational positives are overshadowed by severe financial distress and ongoing cash burn from operations. The primary equity offering of up to 7 million shares, coupled with the potential conversion of other securities, will lead to significant dilution for existing shareholders. The current market price of $3.48 is vastly below the $345.00 exercise price of many warrants, indicating a disconnect and making cash exercise unlikely. Given the high risk of insolvency, substantial dilution, and continued operating losses, a seasoned investor or institution would likely recommend a 'strong sell' to mitigate further capital loss.

Keywords

Cybersecurity, IT Services, SEC Filing, S-1/A, Equity Offering, Dilution, Nasdaq Compliance, Going Concern, Financial Performance, Reverse Stock Split, Managed Security Services, Government Contracts, Strategic Partnerships, Capital Raise