Cycurion, Inc. (CYCU) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026. Cycurion, Inc. is a cybersecurity and information technology services provider operating through subsidiaries including Axxum Technologies, Cloudburst Security, and SLG Innovation (consolidated as a Variable Interest Entity). The Company is classified as a non-accelerated filer, smaller reporting company, and emerging growth company. As of May 12, 2026, there were 8,590,021 shares of common stock outstanding.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenue | $3,268,620 | $3,870,050 |
| Gross Profit | $688,358 | $677,763 |
| Gross Margin | 21.1% | 17.5% |
| Operating Loss | $(2,371,170) | $(10,097,505) |
| Net Loss (Attributable to Cycurion) | $(2,128,462) | $(10,248,486) |
| Cash and Cash Equivalents | $2,028,718 | $2,269,195 |
| Working Capital Deficit | $(12,000,000) | N/A |
| Accumulated Deficit | $(29,007,543) | $(13,461,859) |
| Total Debt (Current + Non-Current) | ~$7.5M (Excl. Factoring) | N/A |
Note: Total debt includes Bank Loan ($2.7M), Loans Payable ($0.97M), Factoring Liability ($1.6M), Convertible Notes ($0.2M), and Promissory Notes ($2.5M).
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased 15.5% to $3.27M, attributed to the planned wind-down of legacy contracts and delayed start dates for new federal, state, and local contracts.
- Margin Improvement: Gross margin improved to 21.1% from 17.5% due to cost-saving efforts and portfolio optimization.
- Operating Expenses: Operating expenses dropped significantly to $3.06M from $10.78M in Q1 2025. The prior year included $10.44M in one-time business combination expenses. However, Selling, General, and Administrative (SG&A) expenses increased to $2.74M from $0.34M due to public company costs and full consolidation of SLG expenses.
- Stock Compensation: Stock compensation expenses were $315,833 in Q1 2026, compared to $0 in Q1 2025.
- Cash Flow: Net cash used in operating activities was $2.89M, slightly higher than the $2.75M used in Q1 2025.
Outlook, Risks, and Contingencies
- Going Concern Warning: The filing explicitly states there is substantial doubt regarding the Company's ability to continue as a going concern. This is due to a $12M working capital deficit, a $29M accumulated deficit, and negative operating cash flows. Management plans to raise capital via public offerings and convert debt to equity to mitigate insolvency risk.
- Nasdaq Compliance: The Company previously faced delisting proceedings regarding the minimum bid price rule but announced in November 2025 that it had regained compliance. The hearing scheduled for November 2025 was canceled.
- Subsequent Events:
- Raised approximately $2.3M through sales of common stock under an Equity Purchase Agreement with Yield Point (April-May 2026).
- Announced a binding agreement to acquire Halo Privacy (secure communications) and HavenX (digital investigations), expected to close within 45 days.
- Updated a non-binding MOU for the acquisition of Kustom Entertainment's legacy video solutions segment.
- Debt Obligations: The Company has significant debt obligations including a revolving line of credit ($2.7M), various promissory notes ($2.5M), and factoring liabilities ($1.6M). Some loans are noted as being in default with management working on settlements.
Investor Verification Checklist
- Liquidity Runway: Verify the sufficiency of the $2.0M cash balance against the $12M working capital deficit and upcoming debt maturities.
- Debt Settlement Status: Confirm the status of loans identified as "in default" (RPA Loan and SLG Loan Payable) and the terms of any settlements.
- Capital Raise Execution: Monitor the effectiveness of the Equity Purchase Agreement with Yield Point and the progress of the Halo Privacy acquisition in generating cash flow.
- Revenue Concentration: Review the top 4 customers who accounted for ~72.6% of Q1 2026 revenue; assess the risk of contract non-renewal.
- Going Concern Mitigation: Evaluate the timeline and probability of converting convertible notes and preferred stock to common stock to reduce leverage.