8-K: Cycurion to Acquire Kustom Video Division, Boost Revenue

Cycurion, Inc. announced an MOU to acquire Kustom Entertainment's video-solutions division, expecting to enhance public safety solutions and significantly increase revenue and cross-selling opportunities.

Summary

• Cycurion, Inc. (NASDAQ: CYCU) has entered into a Memorandum of Understanding (MOU) to acquire the video-solutions division of Kustom Entertainment, Inc. (NASDAQ: KUST).
• The contemplated transaction is valued between $6.0 million and $8.4 million.
• The purchase price will be paid with $1.0 million to $1.4 million in cash and the remainder in Cycurion preferred stock.
• The acquisition is anticipated to increase Cycurion's revenues by approximately $5.1 million, representing a 35% increase in 2026 compared to 2025.
• It is also expected to add approximately $8.0 million in backlog from Kustom's established contracts and recurring subscription models.
• The deal aims to create a comprehensive, secure ecosystem for public safety agencies and enterprises by combining Kustom's video and evidence management expertise with Cycurion's AI-powered cybersecurity platforms.
• The preferred stock conversion price will be 20% above the 30-day VWAP of Cycurion's common stock before closing, subject to adjustments and down round protection.
• The transaction is subject to customary closing conditions, including regulatory and shareholder approvals, and either party can terminate the MOU with 30-days notice prior to a definitive agreement.

Sentiment

Score: 8

Explanation: The announcement is overwhelmingly positive, detailing significant revenue and backlog additions, strategic synergies, and an accretive financial structure. The only minor caveats are the MOU stage and potential future dilution from preferred stock, which are common in such transactions.

Positives

• Expected to be a highly accretive acquisition with minimal cash outlay ($1.0-1.4 million cash, remainder in preferred stock).
• Anticipated to increase revenues by approximately $5.1 million, or 35%, in 2026 compared to 2025.
• Expected to add approximately $8.0 million in backlog from Kustom's established contracts and recurring subscription models.
• Strengthens recurring revenue through Kustom's subscription-based video storage, cloud management, and service contracts.
• Preserves cash for growth initiatives due to the equity-heavy payment structure.
• Enables margin expansion and synergies by integrating high-margin recurring models with cybersecurity services.
• Provides immediate access to Kustom's extensive client footprint, including agencies from all 50 U.S. states and over 30 countries, and over 300 subscription contracts as of 2025.
• Creates powerful cross-selling synergies, potentially generating approximately $100,000 per month in additional revenue by introducing advanced cybersecurity solutions to Kustom's customers.
• Enhances the existing public safety footprint, allowing integration with CentralSquare Technologies' solutions for a fully secure, end-to-end public safety ecosystem.
• Drives long-term value by integrating physical security video with cyber defenses, supporting government and enterprise expansion, and accelerating innovation.

Negatives

• The transaction is currently an MOU, not a definitive agreement, and either party can terminate it with 30-days notice.
• A substantial portion of the purchase price will be paid in preferred stock, which could lead to dilution for existing common shareholders upon conversion.
• The preferred stock includes "down round protection," which could further dilute common shareholders if future equity raises occur at a lower valuation.

Risks

• The anticipated closing of the transactions contemplated by the MOU is not guaranteed.
• Risks related to the integration of the businesses of Cycurion and Kustom's video-solutions division.
• Any potential legal proceedings related to the transaction.
• The future performance of Cycurion's stock.
• General risks and uncertainties that could cause actual results to differ materially from forward-looking statements, as detailed in Cycurion's most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K.

Future Outlook

Cycurion expects the acquisition to be transformative and accretive, driving immediate topand bottom-line growth, strengthening recurring revenue, and unlocking significant cross-selling potential. The company anticipates creating a comprehensive, secure ecosystem for public safety agencies and enterprises by integrating Kustom's video and evidence management expertise with its AI-powered cybersecurity platforms. They project an increase of approximately $5.1 million in annual revenues (35% increase in 2026 vs. 2025) and an $8.0 million backlog addition, with potential for $100,000 per month in additional cross-selling revenue.

Management Comments

• "This acquisition is expected to be transformative and accretive for Cycurion shareholders. By combining Kustoms proven video and evidence management expertise with our AI-powered cybersecurity platforms, we expect to create a comprehensive, secure ecosystem for public safety agencies and enterprises. The deal is expected to deliver immediate topand bottom-line growth, strengthen recurring revenue, and unlock significant cross-selling potential all at what we believe is an attractive valuation." Kevin Kelly, Chairman and CEO of Cycurion.
• "We are excited to move forward under this MOU as we consider the potential sale of our Video Solutions Division to Cycurion. We believe Cycurions expertise and resources can help further advance the innovative video and evidencemanagement technologies developed by our team, and we look forward to continuing constructive discussions as the process advances." Stan Ross, Chairman, President and CEO of Kustom.

Industry Context

This acquisition positions Cycurion to capitalize on the growing demand for integrated public safety and cybersecurity solutions. The convergence of physical security (video surveillance) and digital security (cybersecurity) is a key trend, especially for government and enterprise clients managing sensitive data. By combining AI-driven cybersecurity with mobile video surveillance and evidence management, Cycurion aims to offer an end-to-end secure ecosystem, addressing the critical need for data protection in law enforcement and public safety sectors. This move also leverages existing partnerships, such as with CentralSquare Technologies, to create a more robust offering in the public safety software market.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to benchmark the acquisition's valuation or expected financial impact against industry standards.
• The company states it believes the acquisition is at an "attractive valuation" and "highly accretive," but no specific industry multiples or benchmarks are provided to support this claim.

Legal Proceedings

• The forward-looking statements section mentions "any potential legal proceedings" as a risk, but no specific current or pending legal proceedings are detailed in the context of the acquisition or the company's operations.

Stakeholder Impact

• Shareholders (Cycurion): Expected to benefit from immediate topand bottom-line growth, strengthened recurring revenue, and significant cross-selling potential, leading to an accretive transaction. However, the issuance of preferred stock with down round protection could lead to future dilution of common shareholders.
• Shareholders (Kustom): Will receive Cycurion preferred stock, aligning them with Cycurion's long-term upside, and a cash component.
• Customers (Kustom's video-solutions division): Expected to gain access to enhanced, integrated public safety and cybersecurity solutions, benefiting from Cycurion's AI-powered cybersecurity platforms and secure ecosystem.
• Public Safety Agencies/Enterprises: Expected to benefit from a comprehensive, secure ecosystem for managing sensitive video evidence and data, with ironclad protection against cyber threats.

Next Steps

• Execution of a definitive agreement for the acquisition.
• Completion of customary closing conditions, including regulatory approvals and applicable shareholder approval.
• Cycurion to use commercially reasonable best efforts to file and cause a registration statement covering the resale of common stock issuable upon conversion of preferred stock to be declared effective within 90 days following the closing.
• Continuing constructive discussions between Cycurion and Kustom as the process advances.

Key Dates

Recommendation

The announcement details a highly strategic and financially accretive acquisition for Cycurion. The expected 35% revenue increase and $8.0 million backlog addition, coupled with significant cross-selling opportunities and an equity-heavy payment structure preserving cash, indicate strong future growth potential. The integration of Kustom's video solutions with Cycurion's cybersecurity platforms creates a robust, in-demand offering for the public safety sector. While the MOU stage and potential dilution from preferred stock are considerations, the overall strategic fit and financial projections suggest a substantial positive impact on the company's valuation and future performance, making it an attractive investment.

Keywords

Cybersecurity, Video Surveillance, Public Safety, Acquisition, MOU, Kustom Entertainment, AI-driven security, Managed Services, Law Enforcement Technology, Evidence Management, Corporate Governance, NASDAQ