Cycurion, Inc. (CYCU) - Q3 2025 10-Q Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2025. Cycurion, Inc. is a cybersecurity solutions provider operating through subsidiaries including Axxum Technologies, Cloudburst Security, and Cycurion Innovation. The company completed a business combination with Western Acquisition Ventures Corp. in February 2025 (accounted for as a reverse recapitalization) and entered into a Management Services Agreement with SLG Innovation, Inc. in March 2025, consolidating SLG as a Variable Interest Entity (VIE). The company is classified as a non-accelerated filer, smaller reporting company, and emerging growth company.
Key Financial Metrics
| Metric | Q3 2025 (3 Months) | Q3 2024 (3 Months) | YTD 2025 (9 Months) | YTD 2024 (9 Months) |
|---|---|---|---|---|
| Net Revenues | $3.83 million | $4.45 million | $11.59 million | $13.69 million |
| Gross Profit | $0.27 million | $0.72 million | $1.18 million | $2.09 million |
| Gross Margin | 7.1% | 16.1% | 10.2% | 15.3% |
| Operating Loss | $(4.53) million | $0.42 million (Income) | $(18.39) million | $1.12 million (Income) |
| Net Loss (Attributable to Cycurion) | $(3.12) million | $0.12 million (Income) | $(18.56) million | $0.11 million (Income) |
| Diluted EPS | $(1.59) | $0.11 | $(14.75) | $0.11 |
| Cash and Equivalents (End of Period) | $3.65 million | $0.08 million | $3.65 million | $0.08 million |
| Total Debt (Current + Non-Current) | ~$7.35 million | ~$7.35 million | ~$7.35 million | ~$7.35 million |
Note: Debt figures include bank loans, loans payable, factoring liability, and promissory notes. Specific total debt is derived from summing current and non-current debt line items on the balance sheet.
Material Changes vs. Prior Period
- Revenue Decline: Net revenues decreased 13.9% QoQ and 15.4% YTD compared to 2024, attributed to delayed federal contract start dates and a strategic focus on more profitable business lines.
- Margin Compression: Gross margin dropped significantly from 16.1% in Q3 2024 to 7.1% in Q3 2025.
- Operating Expenses Surge: Operating expenses increased dramatically to $4.80 million in Q3 2025 from $0.30 million in Q3 2024. This includes $2.08 million in stock compensation and significant business combination expenses recognized in the first nine months of 2025 ($11.24 million).
- Debt Settlement Gains: The company recorded a net gain on debt settlement of $2.02 million in Q3 2025 and $1.25 million YTD, partially offsetting operating losses.
- Goodwill Increase: Total goodwill increased from $6.59 million to $20.84 million, primarily due to the $14.25 million recognized from the SLG Innovation acquisition.
- Liquidity Improvement: Cash and cash equivalents increased from $38,742 at year-end 2024 to $3.65 million at Q3 2025, driven by financing activities including warrant exercises and an equity line of credit.
Guidance, Outlook, Risks, and Unusual Items
- Going Concern: The filing explicitly states substantial doubt regarding the company's ability to continue as a going concern due to a working capital deficit of $9.6 million and an accumulated deficit of $21.8 million. Continuation depends on raising additional capital and generating positive operating cash flows.
- Nasdaq Compliance: The company faced delisting proceedings due to a bid price below $1.00. A 1-for-30 reverse stock split was effected on October 27, 2025. On November 11, 2025, Nasdaq confirmed the company regained compliance, and the delisting hearing was canceled.
- Capital Resources: The company entered an Equity Purchase Agreement with Yield Point NYC LLC for up to $60 million. YTD 2025 financing activities provided $10.78 million, including $5.87 million from the equity line and $3.66 million from warrant exercises.
- Unusual Items: Significant non-cash stock compensation ($3.09 million YTD) and business combination expenses ($11.24 million YTD) heavily impacted the bottom line. A $1.17 million excise tax liability related to stock redemptions is recorded.
- Outlook: Management plans to register shares for a public offering to raise capital and convert debt/equity instruments to reduce leverage. No specific revenue guidance was provided in the text.
Investor Verification Checklist
- Going Concern Status: Verify the company's ability to secure additional financing given the $9.6 million working capital deficit and reliance on future capital raises.
- Debt Covenants: Review the terms of the Main Street Bank loans and other promissory notes for potential defaults or covenant breaches given the operating losses.
- SLG Integration: Assess the financial performance and integration progress of SLG Innovation, which now represents a majority of revenues but added significant goodwill and liabilities.
- Reverse Stock Split Impact: Monitor post-split trading liquidity and share price stability to ensure continued Nasdaq compliance.
- Revenue Concentration: Note that Customer A represented 29.5% of Q3 2025 revenue; verify the stability of this key government/commercial contract.
- Equity Dilution: Evaluate the impact of the complex capital structure (multiple series of preferred stock, warrants, and convertible notes) on future dilution.