Cycurion, Inc. (CYCU) - Q2 2025 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2025. Cycurion, Inc. is a cybersecurity solutions provider operating through subsidiaries including Axxum Technologies, Cloudburst Security, and SLG Innovation. The period was defined by the completion of a business combination with Western Acquisition Ventures Corp. (a reverse recapitalization) on February 14, 2025, and the acquisition of a 51% equity interest in SLG Innovation, Inc. on March 31, 2025. The company is currently classified as a non-accelerated filer, smaller reporting company, and emerging growth company.
Key Financial Metrics
| Metric | Q2 2025 (3 Months) | YTD 2025 (6 Months) | YTD 2024 (6 Months) |
|---|---|---|---|
| Net Revenues | $3,887,915 | $7,757,965 | $9,244,167 |
| Gross Profit | $235,937 | $913,700 | $1,370,876 |
| Gross Margin | 6.1% | 11.8% | 14.8% |
| Operating Loss | $(3,766,077) | $(13,863,581) | $697,109 (Income) |
| Net Loss (Attributable to Cycurion) | $(5,188,755) | $(15,437,241) | $(6,381) |
| Cash and Cash Equivalents | $1,013,836 (as of June 30, 2025) | ||
| Total Debt (Current + Non-Current) | ~$7.8M (Excluding factoring liability) | ||
| Factoring Liability | $2,309,160 | ||
| Working Capital | Deficit of $14.4M |
Material Changes vs. Prior Period
- Revenue Decline: Net revenues decreased 22% in Q2 2025 compared to Q2 2024, and 16% on a year-to-date basis. Management attributes this to delayed start dates on federal, state, and local contracts and a strategic shift toward more profitable business lines.
- Margin Compression: Gross margin dropped significantly from 20.5% in Q2 2024 to 6.1% in Q2 2025. Year-to-date margins fell from 14.8% to 11.8%.
- Expense Surge: Selling, General, and Administrative (SG&A) expenses skyrocketed to $4.0M for Q2 2025 (up from $294k in Q2 2024) and $14.8M YTD. This increase is primarily driven by one-time merger and acquisition costs, legal fees, and consulting expenses related to the de-SPAC transaction and SLG acquisition.
- Debt Settlement: The company recorded a loss on debt settlement of $907,983 in Q2 2025 and $766,330 YTD, resulting from converting convertible notes and promissory notes into preferred stock and common equity.
- Goodwill Increase: Total goodwill increased from $6.6M to $20.8M, primarily due to the $14.2M recognized from the SLG Innovation acquisition.
Guidance, Outlook, Risks, and Unusual Items
- 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 an accumulated deficit of $18.7M, a working capital deficit of $14.4M, and a net cash outflow from operations of $6.3M YTD. Continuation depends on raising additional capital and generating positive operating cash flow.
- Nasdaq Compliance Issues: The company received notices of non-compliance with Nasdaq listing rules regarding:
- Minimum bid price (below $1.00 for 30 consecutive days).
- Market Value of Listed Securities (MVLS) below $50M.
- Market Value of Publicly Held Shares (MVPHS) below $15M.
- Capital Raising: Management plans to register shares for a public offering and utilize an Equity Purchase Agreement (Equity Line) to raise capital. In July 2025 (subsequent event), the company utilized the equity line to sell shares for net proceeds of $919,527.
- Unusual Items: Significant stock-based compensation of $10.5M was recorded YTD 2025, largely related to the business combination and executive retention packages. Additionally, a $1.17M excise tax liability was recorded related to stock redemptions under the Inflation Reduction Act.
Investor Verification Checklist
- Liquidity Runway: Verify the sufficiency of the $1.0M cash balance against the $14.4M working capital deficit and upcoming debt maturities.
- Nasdaq Status: Monitor the company's progress in meeting the $1.00 bid price and market value thresholds by the October 2025 deadline to avoid delisting.
- Debt Structure: Review the terms of the $2.3M factoring liability and the various promissory notes, several of which are noted as being in default.
- Revenue Concentration: Note that a single customer (Customer A) accounted for 29.3% of Q2 2025 revenue, creating significant concentration risk.
- SLG Integration: Assess the financial performance of the newly acquired SLG Innovation (51% owned) and the impact of the non-controlling interest on net income.
- Equity Dilution: Track the impact of the Equity Line of Credit and warrant exercises on share count, which increased from ~10.6M to ~40.4M shares outstanding during the period.