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Item 7. Management’s Discussion and Analysis

2025-04-17 compared with 2024-04-26 · 479 added, 124 removed, 0 unchanged (100% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto which are included in “Item 8.

Financial statements and Supplementary Data” of this Annual Report on Form 10-K.

Certain information contained in the discussion and analysis set forth below includes forward-looking statements.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” “Item 1A.

Risk Factors” and elsewhere in this Annual Report on Form 10-K.

We are a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more target businesses (a “Business Combination”).

We intend to effectuate our Business Combination using cash from the proceeds of our initial public offering (“IPO”) and the sale of the placement units that occurred simultaneously with the completion of our IPO, our capital stock, debt or a combination of cash, stock, and debt.

We have identified an acquisition target and, as described in further detail below, executed a merger agreement with the intention of closing a Business Combination on or before the time allotted to do so.

We expect to continue to incur significant costs in the pursuit of these acquisition plans and cannot assure you that we will be successful.

The information that follows under the heading “ Proposed Business Combination ” and elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information relevant to assess the Company from our management’s perspective regarding the Company.

Proposed Business Combination

Business Combination

On November 21, 2022, the Company., WAV Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Registrant (“Merger Sub”), which will be formed at, or prior to, closing, Cycurion, Inc., a corporation organized under the laws of Ontario (“Cycurion”), and Emmit McHenry as Cycurion stockholders’ representation (the “Stockholders’ Representative”), entered into an Agreement and Plan of Merger (“Merger Agreement”) pursuant to which, among other things, Cycurion will be merged with the Merger Sub (the “Merger,” and together with the other transactions related thereto, the “Proposed Transactions”), with Cycurion surviving the Merger as a wholly-owned subsidiary of Registrant.

There is no guarantee that a merger will take place.

Sponsor Support Agreement

Contemporaneously with the execution of the Merger Agreement, the Sponsor, a Delaware limited liability company, delivered the Support Agreement, pursuant to which, among other things, Sponsor agreed to vote in favor of the Merger and the transactions contemplated by the Merger Agreement.

Stockholder Support Agreement

Contemporaneously with the execution of the Merger Agreement, certain officers and directors of the Company delivered Support Agreements, pursuant to which, among other things, the Company stockholders agreed to vote in favor of the Merger and the transactions contemplated by the Merger Agreement.

In addition, the Company agreed to use its best efforts to obtain additional Support Agreements from certain of its stockholders.

Registration Rights Agreement

In connection with the Closing, Cycurion, the Company, and certain of their respective stockholders will enter into a registration rights agreement (the “Registration Rights Agreement”).

Pursuant to the Registration Rights Agreement, the Combined Company will be required to file a registration statement covering the resale of registrable securities held by the stockholder’s party thereto.

The Merger Agreement may be terminated at any time prior to the consummation of the Merger by mutual written consent of Cycurion, as applicable, and Company and in certain other limited circumstances, including if the Merger has not been consummated by July 11, 2024.

Either the Company or Cycurion may also terminate the Merger Agreement if certain Proposals fail to receive the requisite vote for approval and other conditions, as defined in the Merger Agreement are not met.

If the Merger Agreement is terminated, the Merger Agreement, and all above agreements, will become void, and there will be no liability under the Merger Agreement on the part of any party thereto, except as set forth in the Merger Agreement.

Results of Operations

We have neither engaged in any operations nor generated any operating revenues to date.

Our only activities for the year ended December 31, 2023 were organizational activities and the search for a prospective Business Combination.

We do not expect to generate

any operating revenues until after the completion of our Business Combination at the earliest.

We generate non-operating income in the form of interest income from the proceeds of the IPO placed in the Trust Account.

We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.

For the year ended December 31, 2023, we had a net loss of $1,034,593.

This consisted of $1,098,724 in professional fees, general and administrative expenses and franchise taxes, $72,824 of income tax expense and $235,095 of change in fair value of the forward purchase agreement, partially offset by $372,050 of interest income on marketable securities in the Trust Account.

For the year ended December 31, 2022, we had a net loss of $700,925.

This consisted of $1,853,300 in professional fees and general and administrative expenses, $250,739 of income tax expense, and $163,296 of franchise tax expense offset by $1,566,410 of net gain on marketable securities in the Trust Account.

Liquidity and Capital Resources

As of December 31, 2023, we had $8,651 in restricted cash available exclusively for payment of current tax liabilities.

As of December 31, 2023, we had a working capital deficit of $3,187,882.

The Company’s liquidity is to be satisfied through the proceeds from loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties held outside of the Trust Account.

The Company’s officers, directors, and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs.

Accordingly, the Company may not be able to obtain additional financing.

For the year ended December 31, 2023, net cash used in operating activities was $940,730, which is primarily due to a net loss of $1,034,593, change in fair value of forward purchase agreement of $235,095, interest income on marketable securities of $372,050, and changes in operating assets and liabilities of $230,818.

Net cash provided by investing activities was $114,269,494 which was due to the withdrawal from the Trust Account to pay redeeming shareholders of $114,329,594 and $60,100 deposited into the Trust Account.

Net cash used in financing activities was $114,129,594 which was due to the payment made for the redemption of shares of $114,329,594 and $200,000 in loan proceeds received from Cycurion.

For the year ended December 31, 2022, net cash used in operating activities was $1,318,432, which is primarily due to a net loss of $700,925, changes in working capital of $948,903, and gain on marketable securities of $1,566,410.

Net cash used in investing activities was $115,625,000, which was due primarily to the proceeds of the IPO deposited into the Trust Account.

Net cash provided by financing activities was $117,749,000, which was primarily due to the IPO proceeds and the proceeds from private placement.

We have incurred, and expect to continue to incur, significant costs in pursuit of our acquisition plans.

We may have insufficient funds available to operate our business prior to our Business Combination.

Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of public shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.

Going Concern

In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standard Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the mandatory liquidation and subsequent dissolution described in Note 1 to the financial statements included in this annual report on Form 10-K, should the Company be unable to complete a Business Combination, raises substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance of these financial statements.

The Jumpstart Our Business Startup Act (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies.

We qualify as an “emerging growth company” under the JOBS Act and are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies.

We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

As such, our financial statements may not be comparable to companies that comply with public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act.

Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of executive compensation to median employee compensation.

These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.

Off-Balance Sheet Financing Arrangements

Contractual Obligations

Registration Rights

The holders of Founder Shares, Private Placement Units and units that may be issued upon conversion of working capital loans, if any, are entitled to registration rights pursuant to a registration rights agreement that was signed on the date of the IPO.

These holders are entitled to certain demand and “piggyback” registration rights.

However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered.

The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

The Company granted the underwriters a 45-day option from the final prospectus relating to the IPO to purchase up to 1,500,000 additional Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions.

On January 14, 2022, the underwriters fully exercised their over-allotment option and purchased 1,500,000 Units at $10.00 per Unit.

The underwriters were paid an underwriting fee of $500,000 at the closing of the IPO.

As an additional underwriting fee, on June 16, 2021, the Sponsor transferred 1,207,500 of the Founder Shares to an affiliate of A.G.P.

On November 22, 2021, the Company effected a 2 for 3 reverse stock split of its common stock, and A.G.P.

sold back to the Sponsor 55,000 Founder Shares for $478, such that A.G.P.

owns 750,000 Founder Shares.

Business Combination Marketing Agreement

The Company has engaged A.G.P.

as an advisor in connection with a Business Combination to assist the Company in holding meetings with its stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with a Business Combination, assist the Company in obtaining stockholders’ approval for a Business Combination, and assist the Company with its press releases and public filings in connection with a Business Combination.

The Company was to pay A.G.P.

a fee for such marketing services upon the consummation of a Business Combination in an amount equal to 4.5% of the gross proceeds of the IPO, or $5,175,000 in the aggregate (exclusive of any applicable finders’ fees that might become payable).

In connection with the Business Combination contemplated with Cycurion, A.G.P., and the Company amended the fee arrangement whereby rather than the cash fee described above, the Company will distribute 250,000 shares of common stock.

On July 27, 2023, the Company entered into a promissory note with Cycurion for $200,000, pursuant to which the Company can borrow up to an aggregate principal amount of $200,000.

The Promissory Note, with an interest rate of 5% per annum is payable upon the sooner of the consummation of the Business Combination with Cycurion, or January 11, 2024.

If the Company defaults on the loan, or the business combination does not occur, the Company will owe all principal and accrued interest thereto to Cycurion.

Cycurion may not seek recourse against any money held in the Trust Account established pursuant the Borrower’s investment management trust agreement, dated as of January 11, 2022, as amended, by and between the Company and Equiniti Trust Company, nor any of the Company’s directors, officers, and any affiliate.

As of December 31, 2023, the Company has borrowed $200,000 and accrued approximately $4,222 in interest.

No amounts were borrowed as of December 31, 2022.

On January 26, 2024, the Company and Cycurion amended the Promissory Note to increase its amount to $300,000 and extend the maturity date to the earlier of the consummation of the Business Combination or April 11, 2024.

On April 4, 2024, the Company and Cycurion amended the Promissory Note to extend the maturity date to the earlier of the consummation of the Business Combination or July 11, 2024.

Forward Purchase Agreement

On January 10, 2023, the Company, Cycurion, and Alpha, entered into a Forward Share Purchase Agreement (the “FPA”).

Prior to effecting the FPA, Alpha had purchased shares from an unaffiliated party which had elected to redeem 300,000 shares of Common Stock, par value $0.0001 per share (such purchased Shares, the “Recycled Shares”.) Under the terms of the FPA, once the proposed Business Combination is effective, and twelve months (or six to nine months if submitted in writing to the Company) have elapsed, Alpha may elect to sell and transfer to the Company up to that number of shares that are then held by Alpha, and the Company shall purchase from Alpha, up to that number of shares that are then held by Alpha, but not to exceed 300,000 shares in the aggregate unless otherwise agreed to in writing by all parties, at a price per share equal to the Redemption Price (as defined in the charter.)

The FPA provides that subject to conditions under the FPA on the date that is 12 months after the closing of the Business Combination (the “BC Closing”);

provided that, Alpha, at Alpha’s sole discretion, may accelerate such date to any of six (6) months after the BC Closing and nine (9) months after the BC Closing by providing notice to WAVS of its election to so accelerate at least two (2) calendar days prior to such date (any such date, the “Put Date”), Alpha may elect to sell and transfer to WAVS up to that number of Shares that are then held by Alpha, but not to exceed 300,000 Shares in the aggregate at a price per Recycled Share equal to the Redemption Price (as defined in Section 9.2(a) of the Current Charter) (the “Shares Purchase Price”).

The Put Date may be accelerated by Alpha if (i) the Shares are delisted from the New York Stock Exchange of NASDAQ, (ii) the Agreement is terminated for any reason after the date redemption requests are due in connection with the stockholder vote to approve the Business Combination, or (iii) during any 30 consecutive trading day period following the closing of the Business Combination, the VWAP Price (as defined below) for 20 trading days during such period shall be less than $3.00 per Share.

For purposes of this Agreement, the “VWAP Price” per Share shall be determined for any trading day or any specified trading period using the Rule 10b-18 volume weighted average price per share of Common Stock as reported via a Bloomberg Terminal.

The FPA also provides that WAV shall reimburse Alpha for all reasonable and necessary brokerage commissions incurred in connection with the Alpha’s acquisition of Shares, in an amount not to exceed $0.05 per Share and $0.02 per disposition of each Share (see Note 6 to the financial statements).

On January 22, 2024, the Company terminated this Forward Purchase Agreement.

Employment Agreements

On December 27, 2023, we entered into an employment agreement with James P.

McCormick whereby the Company agreed to pay a total of $125,000 of total compensation annually, including $40,000 in cash and $85,000 in stock payment.

Critical Accounting Estimates

Derivative liabilities - Forward Purchase Agreement

The Company accounts for its Forward Purchase Agreement (“FPA”) (see Note 6 to the financial statements) in accordance with the guidance contained in ASC 815-40, “Derivatives and Hedging”, under which the FPA does not meet the criteria for equity treatment and must be recorded as a liability.

Accordingly, the Company classified the FPA as a liability at its fair value and adjusts the FPA to fair value at each reporting period.

This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the statements of operations.

The FPA is valued using PWERM and certain components of the FPA are valued under the Monte Carlo model.

Recent Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 - Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies.

The guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted.

The Company adopted ASU 2016-13 on January 1, 2023.

The adoption of ASU 2016-13 did not have a material impact on its financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”), which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions.

ASU 2023-09 will become effective for annual periods beginning after December 15, 2024.

The Company is still reviewing the impact of ASU 2023-09.

The Company’s management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Throughout this

section, unless otherwise noted, “we,” “our,” “us,” “Cycurion” and the “Company”

refer to Cycurion, Inc.

should read the following discussion of our financial condition and results of operations in conjunction with our financial statements

and the notes included elsewhere in this annual report.

The following discussion contains forward-looking statements that involve certain

risks and uncertainties.

Our actual results could differ materially from those discussed in these statements.

Factors that could cause

or contribute to these differences include those discussed below and elsewhere in this annual report, particularly under the “Risk

Factors” and “Disclosure Regarding Forward-Looking Statements” sections.

plans and basis of presentation:

were incorporated in Delaware in 2017 as KAE Holdings, Inc, with the purpose of acquiring operating entities in the cybersecurity industry.

July 14, 2020, we changed our corporate name from KAE Holdings, Inc.

to Cyber Secure Solutions, Inc., and, on April 24, 2021, to Cycurion,

On February 14, 2025, the date of closing of our de-SPAC transaction, we merged into Western Acquisition Ventures

and changed that company’s name to Cycurion, Inc.

deliver high-quality, cybersecurity solutions to federal government civilian, defense, and judiciary agencies in addition to commercial

clients across a variety of industries.

We, through our operating subsidiaries and strategic partnerships, have numerous prime and subcontracts

with key government agencies.

Our growth engine is driven by organic business solutions and strategic acquisitions of cyber/ infrastructure

service providers.

For a description of our Business, please see “Item 1.

Our operating subsidiaries are wholly owned by Cycurion Sub., Inc., a Delaware

corporation that, until the closing date of the de-SPAC, was known as “Cycurion, Inc.” We continue to conduct our business

through the three below-described entities, which are now indirectly wholly-owned second-tier subsidiaries by virtue of the recent closing

of the de-SPAC transaction.

Technologies LLC

Organized in the Commonwealth of Virginia on December 29, 2006, Axxum is

a cybersecurity provider with successful assignments within the multiple sub-agencies of the Department of Homeland Security.

Axxum in November 2017.

Following the acquisition, we continued Axxum’s core operations of providing contractor services to its

existing federal government customer base while leveraging our existing processes and tools to expand its commercial footprint.

information security focus produces several key benefits:

Client Focus:

Axxum’s projects are overseen directly by its program managers, all

of whom have information security backgrounds and are fully authorized to promptly implement

client requirements throughout the performance life cycle.

● Streamlined

and Process Focused:

Axxum’s streamlined infrastructure leverages ISO quality standards

integrated with emerging and established technologies, allowing it to engineer innovative

solutions without building in excessive overhead.

● Outstanding

Axxum has a reputation of employing cybersecurity experts.

is a cybersecurity provider with successful assignments within highly sensitive government agencies and other commercial organizations.

We acquired Cloudburst in April 2019.

Following the acquisition, we continued Cloudburst’s core operations of providing mission-critical

and highly sensitive government agencies and other commercial organizations with high-quality, innovative cybersecurity services.

focuses on providing tailored solutions that leverage the industry’s best minds and technologies to predict, protect, detect, respond,

and sustain our clients from the latest evolving cyber threats.

Innovation, Inc.

was formed in connection with our acquisition of assets

from Sabres, a leading Israeli-based cyber security provider.

It operates our Cycurion Security Platform’s line of products allows

our customers to improve their cyber posture with its MDP SaaS platform.

This platform efficiently bundles and easily implements the external

protection of a Web Application Firewall (WAF) and the internal protection of Bot Mitigation.

Bot Mitigation is the reduction of risk

to applications, Application Program Interfaces (APIs), and backend services from malicious bot traffic that fuels common automated attacks,

such as Distributed Denial of Service (DDoS) campaigns and vulnerability probing.

The costs of single-layer security can be measured in

terms of money, time, and risk, as well as the damage wrought by a data breach, which millions of businesses experience each year.

this interaction of the WAF and Bot Mitigation, the MDP is able to reinforce these layers of security and generate new security layers

in real time in response to emerging threats.

This process is directed by our Cycurion Security Platform’s proprietary, cloud-based

artificial intelligence (“AI”) algorithm.

Crucially, the AI underpinning the MDP platform is constantly evolving to counter

Through a crowdsourcing process, the cloud-based MDP learns from every threat to any protected application and uses that

newly acquired knowledge to protect all MDP clients better.

Subcontractor

— Prime contractor relationship

Innovation, Inc.

are currently a subcontractor for several keystone contracts held by SLG.

The SLG team has an average of over 25 years of experience

in the development, planning, implementation, and management of information systems.

SLG’s leadership team offers years of combined

success in answering the needs of government agencies and healthcare organizations across the country.

SLG team has worked nationally, as it has served over 25 Department of Health and Human Services agencies, all 50 state governments,

and over 250 local governments.

Since SLG’s inception, it has primarily focused on customers in the middle of the country.

team of professionals has successfully delivered Information Technology, Project Management, and Subject Matter Services to key health

and human service projects, including, but not limited to, state Medicaid programs in Illinois, Indiana, Nebraska, and Tennessee, the

Indiana Division of Aging, Illinois Early Intervention, the University of Illinois Division of Specialized Care for Children, the Multiple

Myeloma Research Foundation, and many more.

established a subcontractor — prime contractor relationship with SLG in the fall of 2019, where we serviced several government

agencies and commercial customers, State of New Mexico, Cognizant, KPMG, and the University of Illinois in support of SLG.

Axxum Technologies

and SLG Innovation that relationship in 2020.

A subcontractor offers its specialized services to a prime contractor.

Unlike prime contractors,

who focus on the managerial side of the government contract, subcontractors tend to dedicate their efforts to lending subject matter

expertise and delivery of service to the project.

Technically strong subcontractors, along with a strong subcontractor plan are essential

to boost the success of a project.

a result of the strong technical skills and experience of the cyber teams at Cycurion and its subsidiaries, SLG Innovation entered into

a Master Services Agreement (MSA) with Axxum Technologies to provide services to SLG customers.

The MSA is task order driven and the

number of task orders is modified periodically depending on actual customer requirements for IT and Cybersecurity services.

last three years, Axxum Technologies has assisted SLG Innovation in growing its revenue and customer base.

As a result, SLG Innovation

now represents a majority of Cycurion revenues.

Acquisition Agreement

revenues from SLG in our 2024 and 2023 fiscal years were $14,703,887 and $13,837,042, respectively.

The types of agreements to which

SLG is a party are discussed under the heading “Our Business — Key Clients and Historical Performance .” From

our perspective, a major benefit to us of the potential transaction contemplated by the SLG Term Sheet, as described below, would be

that we could “piggyback” on SLG’s historical relationships with the various contracting governmental agencies in our

bidding on future potential agreements.

It is axiomatic in the governmental contracting arena in which we are involved that past performance

on customer assignments as the prime contractor is one of the more important qualifications in competing for new opportunities within

the federal government.

We believe that our acquisition of SLG, if that transaction is closed by us, would yield such “past performance”

qualifications.

April 25, 2023, Cycurion Sub executed a Term Sheet with SLG (the “SLG Term

Sheet”), pursuant to which SLG agreed to be acquired by Cycurion Sub.

The Term Sheet contained all of the material terms and conditions

of two proposed interrelated transactions to be memorialized by the SLG Acquisition Agreeement.

To effectuate the two transactions contemplated

by the SLG Term Sheet, Cycurion Sub will form two subsidiaries, which, upon formation, will initially be wholly owned by Cycurion Sub.

If, when, and as the transactions contemplated by the SLG Term Sheet are consummated, SLG would merge with and into one of the subsidiaries

and survive, thereby becoming a wholly-owned subsidiary of Cycurion Sub.

Because certain of the agreements to which SLG is the prime contractor

require that the majority owner of the prime contractor be a resident of the City of Chicago or of Cook County (depending on the contract),

contemporaneously with the consummation of the first of the two transactions, (i) SLG will divest itself of those agreements with the

residency requirements, (ii) the second newly formed subsidiary will assume those agreements, (iii) Mr.

Ed Burns will become the owner

of a 51% interest in that newly formed subsidiary, and (iv) we will enter into a Management Agreement with that subsidiary, the economic

terms and management/ control terms of which are intended to be the equivalent of complete ownership of that the 49% owned subsidiary.

Ed Burns is currently the 51% owner of SLG and a resident of the City of Chicago.

The SLG Term Sheet provides that, if, when, and

as the transactions contemplated thereby are consummated, the two current owners of SLG will be issued an aggregate of 996,355 shares

of Cycurion common stock.

SLG is fully bound by the terms and provisions of the SLG Term Sheet and

the related Management Agreement structure, although Cycurion Sub is permitted to terminate the SLG Term Sheet and to abandon the transactions

contemplated thereby any time for any reason or for no reason prior to April 11, 2025, with no further obligations on Cycurion Sub’s

As of the date of this Annual Report, although we reserve the right to modify the terms and provisions of the SLG Acquisition Agreement,

we do not currently expect to terminate it and currently expect to close the transactions contemplated during our current fiscal quarter.

Substantially all of the agreements to which SLG is a party have a provision that provides the counterparty to such agreement with a right

to approve an assignment or change in control of SLG prior to its effectiveness.

If an approval is not forthcoming, then the provisions

of the SLG Acquisition Agreement permit us to excise that specific agreement.

Upon such occurrence, we reserve that right to reduce the

consideration that we would otherwise tender to the equity owners of SLG.

amended by the parties, initially effective as of November 29, 2023 and

subsequently effective as of April 29, 2024, August 16, 2024 and December 31, 2024, the SLG Term Sheet expires on the soonest of (i) closing

of the transactions contemplated thereby, (ii) April 11, 2025, if the transactions contemplated thereby have not closed by then, (iii)

Cycurion Sub’s termination thereof, and (iv) the mutual termination by all of the parties thereto.

Notwithstanding anything to the

contrary contained therein, Cycurion Sub may terminate its obligations under the SLG Term Sheet and the transactions contemplated hereby

for any reason or for no reason without any further obligations and without any liability at any time through and including April 11,

The SLG Term Sheet, as amended, consensually superseded, as noted therein, Cycurion Sub’s previous “unidirectional”

agreements with SLG.

The foregoing brief summary description of certain terms and provisions

of (i) the SLG Term Sheet does not purport to be complete and is qualified in its entirety by reference to the full text of the SLG Term

Sheet, a copy of which is attached to this Annual Report as Exhibit 10.12, (ii) the SLG Term Sheet Amendments, a copy of each of which

is attached to this Annual Report as Exhibit 10.12a, Exhibit 10.12b, Exhibit 10.12c, and Exhibit 10.12d, and (iii) the SLG Management

Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the SLG Term Sheet, a copy

of which is attached to this Annual Report as Exhibit 10.12e.

Readers are encouraged to read those Exhibits in full for a more comprehensive

understanding of the transaction contemplated by the SLG Term Sheet.

Acquisition Agreement

Technology Corporation (“ RCR ”) performs certain services for SLG in its role as an SLG subcontractor and, in that

context, became a creditor of SLG.

In connection with the transactions contemplated by the SLG Term Sheet, on April 25, 2023, Cycurion

and RCR also entered into a term sheet (the “ RCR Term Sheet ”) for a distinct, but related transaction.

Sheet contemplates a transaction, pursuant to which RCR will sell to Cycurion all of the accounts receivable of SLG in favor of RCR (but

for those accounts that are less than 90 days old as of the date of consummation of the contemplated transaction).

The consummation of

the transactions contemplated by the RCR Term Sheet is contingent upon the consummation of the transactions contemplated by the SLG Term

Nevertheless, as a result of our entry into the SLG Management Agreement

with SLG, we still currently intend to consummate the transactions contemplated by the RCR Term Sheet in the first half of our current

The RCR Term Sheet provides that, if, when, and as the transactions contemplated thereby are consummated, RCR will be issued

shares of our common stock.

as amended by the parties, initially effective as of November 29, 2023, and subsequently effective as of April 29, 2024, August 16, 2024

and December 31, 2024, the RCR Term Sheet expires on the soonest of (i) closing of the transactions contemplated thereby, (ii) April

11, 2025, if the transactions contemplated thereby have not closed by then, (iii) Cycurion’s termination thereof, and (iv) the

mutual termination by all of the parties thereto.

Notwithstanding anything to the contrary contained therein, Cycurion may terminate

its obligations under the RCR Term Sheet and the transactions contemplated hereby for any reason or for no reason without any further

obligations and without any liability at any time through and including April 11, 2025.

As of the date of this Annual Report, we do not currently expect to terminate the

transactions contemplated by the RCR Term Sheet, as amended, and currently expect to close the transactions in the first half of our current

The foregoing brief summary description of certain terms and provisions

of the RCR Term Sheet does not purport to be complete and is qualified in its entirety by reference to the full text of the RCR Term Sheet,

a copy of which is attached to this Annual Report as Exhibit 10.13 and the full text of the RCR Term Sheet Amendments, a copy of each

of which are attached to this Annual Report as Exhibit 10.13a, 10.13b and 10.13c.

Readers are encouraged to read those Exhibits in full

for a more comprehensive understanding of the transaction contemplated by the RCR Term Sheet.

of Technology

SaaS Asset Purchase

August 17, 2021, we entered into an asset purchase agreement to acquire

certain technology assets of Sabres, a leading Israeli-based cyber security provider.

As part of the asset purchase agreement, we acquired

Multi-Dimensional Protection, Web Application Firewall and Bot Mitigation SaaS platforms, and their associated intellectual property.

The transaction closed on September 30, 2021, and we have integrated the SaaS platforms into our existing services offerings.

Cycurion Security Platform’s (formerly Sabres’) line of products allows our customers to improve their cyber posture with

its MDP SaaS platform.

This platform efficiently bundles and easily implements the external protection of a Web Application Firewall

(WAF) and the internal protection of Bot Mitigation.

Bot Mitigation is the reduction of risk to applications, Application Program Interfaces

(APIs), and backend services from malicious bot traffic that fuels common automated attacks, such as Distributed Denial of Service (DDoS)

campaigns and vulnerability probing.

The costs of single-layer security can be measured in terms of money, time, and risk, as well as

the damage wrought by a data breach, which millions of businesses experience each year.

Through this interaction of the WAF and Bot Mitigation,

the MDP is able to reinforce these layers of security and generate new security layers in real time in response to emerging threats.

This process is directed by our Cycurion Security Platform’s proprietary, cloud-based AI algorithm.

Crucially, the AI underpinning

the MDP platform is constantly evolving to counter new threats.

Through a crowdsourcing process, the cloud-based MDP learns from every

threat to any protected application and uses that newly acquired knowledge to protect all MDP clients better.

Cycurion Security Platform’s (formerly Sabres’) line of products provides solutions for substantially all web application

security needs.

These products provide solutions, whether a client is in need of a web application firewall to comply with regulations

and ensure it has a first line of defense against the hazards that the internet can present or is in need of enterprise-level products

that empower Security Operations Center (SOC) teams and security management.

Our Cycurion Security Platform’s constantly survey

a client’s data to detect security issues in need of attention, send automatic updates, and provide the client with a complete

database of rules and threats.

Multi-Dimensional Protection (MDP)

On-premises option

Dual-Layered Defense (WAF/Bot Mitigation)

Advanced Security Information and Event Management (SIEM) dashboard

Ongoing reporting and alerts

No delays for the end-user

Can connect to any existing WAF

Easy installation on all platforms

Exceptional penetration testing results

No downtime for updating

No hardware required

Biometric WAF

have integrated the technology assets that we acquired from Sabres (which now constitutes our Cycurion Security Platform) into our Managed

Security Services Practice.

We believe that the platform will enhance our service offerings and assist with the expansion of our commercial

The Sabres platform will be managed by our dedicated support team, and will provide real time reporting, response to security

incidents, and will manage all data privacy needs from a single SIEM SaaS platform dashboard.

of Operations for the years ended December 31, 2024 and 2023

Years Ended December 31,

Cost of revenue

Selling, general and administrative

Interest and other expenses

Net income/loss

$ (2,097,013 )

decreased $1,578,723 (8.16%) to $17,771,485 for the year ended December 31, 2024, as compared to $19,350,208 for the year ended December

decrease in the revenues for the year ended December 31, 2024 is attributed to the conclusion of key contracts with the federal government

and state and local agencies, partially offset by new business segments and contracts.

cost of revenue for the year ended December 31, 2024, was approximately $14,136,742, nearly all of which is related to costs incurred

while delivering services to our customers and expansion of our employee base to address our business growth.

Conversely, the cost of

revenue for the year ended December 31, 2023, was approximately $16,707,148, nearly all of which is related to costs incurred while

servicing our contracts, including contractual and servicing obligations with our employees and contractors.

This $2,570,406 (15.39%)

decrease in the cost of revenues is directly attributable to lower contractor-related expenses.

and Development

did not have any Research and Development expenses for the years ended December 31, 2024 and December 31, 2023.

General and Administrative

general and administrative (“ SG&A ”) expenses decreased by $1,098,019 (47.40%) to $1,218,630 for the year ended

December 31, 2024, compared to $2,316,649 for the year ended December 31, 2023, respectively.

This improvement was primarily due to reduced

legal, administrative, and consulting fees in the 2024 fiscal year.

and Other Expense

and other expense was approximately $(1,186,512) and $(2,419,637) for the years ended December 31, 2024 and 2023, respectively.

expenses for the year ended December 31, 2024 include $1,209,502 in interest-related expenses and losses, related to the payment of our

bank instrument, and other loan obligations.

This $1,233,125 (50.96%) decrease of interest and other expenses is primarily due to reduced

or renegotiated interest expenses in the 2024 fiscal year.

Years Ended December 31,

Cash and cash equivalents at the beginning of the period

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Cash and cash equivalents at the end of the period

the year ended December 31, 2024, net cash used by operating activities was $1,371,281, which included $1,229,601 in net profits, $3,238,749

increase in accounts receivable, $253,902 decrease in deferred revenue, and $908,854 increase in accounts and other payables.

incurred a marginal $6,566 non-cash adjustment to the amortization of debt discount.

the year ended December 31, 2023, net cash used in operating activities was $1,987,771, which included $2,097,013 in net losses,

$4,636,805 increase in accounts receivable, $242,099 increase in deferred revenue, and $3,105,223 increase in accounts and other payables.

We also incurred a $1,094,131 non-cash adjustment to the amortization of debt discount.

the year ended December 31, 2024, net cash used in investing activities was approximately $885,066.

This was primarily used in the purchase

of equipment, and servicing notes issued by WAVS.

the year ended December 31, 2023, net cash used in investing activities was approximately $706,707.

This was used in the purchase of

the year ended December 31, 2024, net cash provided by financing activities was $1,689,268.

The net cash provided includes $1,000,000

in proceeds from a private placement, $405,000 in proceeds from notes payables and $252,314 in proceeds from our line of credit.

the year ended December 31, 2023, net cash provided by financing activities was $3,206,162.

The net cash provided includes $2,000,000

in proceeds from a private placement and $1,084,000 in proceeds from notes payables, offset by $193,305 used in the repayment of bank

From the date

of the closing of our de-SPAC transaction (February 14, 2025) to April 17, 2025, otherwise unaffiliated persons converted 2,999.3 shares

of the Company’s Series B Preferred Stock into 5,998,653 shares of the Company’s common stock and 6,666,667 shares of the

Company’s Series D Preferred Stock into 6,666,667 shares of the Company’s common stock.

From the date of the closing of our

de-SPAC transaction (February 14, 2025) to April 17, 2025, otherwise unaffiliated persons exercised 694,530 Series A warrants for the

purchase of 694,530 shares of the Company’s common stock;

2,400,000 Series B warrants for the purchase of 4,800,000 shares of the

Company’s common stock;

4,382,033 Series D warrants for the purchase of 8,764,066 shares of the Company’s common stock;

270,137 common stock warrants for the purchase of 270,137 shares of the Company’s common stock for gross proceeds of approximately

$3.5 million.

and Capital Resources

have incurred operating losses since inception through the end of our 2023 fiscal year, having had negative cash flow from operations.

As of December 31, 2024, we had an accumulated deficit of approximately $3,203,361, an improvement compared to our accumulated deficit

of approximately $4,432,962 at December 31, 2023.

The decline was the result of net profits of $1,229,601 incurred during our fiscal

Furthermore, we expect possible, significant operating losses for the next few years.

We also utilized cash in operations

of approximately $1,371,281 in the twelve months ended December 31, 2024.

As of December 31, 2024, we had unrestricted cash of approximately

$40.7 thousand, a decrease of $567 thousand from approximately $607 thousand at December 31, 2023.

As of December 31, 2024, our total

assets increased to approximately $25.7 million from approximately $20.8 million at December 31, 2023, primarily due to a $3.2 million

increase in our accounts receivable and $1.8 million increase in investments held in trust.

Based on our current capital resources as

of December 31, 2024, including our unrestricted cash and accounts receivable (net) of $10.3 million, we expect to be able to continue

our operations for a minimum of 12 months as of the date of these financial statements.

We have added the following table that provides

aging analysis of our accounts receivable.

We provided an analysis of the accounts receivable for the years ending 2023 and 2024.

the company has broadened its business customer base, the nature of the payment and cash receipt cycle has change.

Many of the corporate

customers have longer payment terms.

We expect that this trend to continue as we acquire additional commercial customers.

Receivable Aging Analysis without SLG ($)

Nevertheless,

our continuation as a going concern is dependent on our ability to obtain additional financing until we can generate sufficient, consistent

cash flow from operations to meet the expected growth in our obligations.

We intend to continue to seek additional debt or equity financing

to continue our operations.

consolidated financial statements have been prepared on a going concern basis, which implies we may not continue to meet our obligations

and continue our operations for the next fiscal year.

The continuation of our Company as a going concern is dependent upon our ability

to obtain necessary debt or equity financing to continue operations until we begin generating positive cash flow.

is no assurance that we will ever be consistently profitable or, notwithstanding our recent financing activities, that debt or equity

financing will be available to us in the amounts, on terms, and at times deemed acceptable to us, if at all.

The issuance of additional

equity securities by us would result in a significant dilution in the equity interests of our current stockholders.

Obtaining commercial

loans, assuming those loans would be available, would increase our liabilities and future cash commitments.

If we are unable to obtain

financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business, as planned, and as a result

may be required to scale back or cease operations for our business, the result of which would be that our stockholders would lose some

or all of their investment.

The consolidated financial statements do not include any adjustments to reflect the possible future effects

on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable

to continue as a going concern.

sheet arrangements

did not have any off-balance sheet arrangements during the periods presented, and we do not currently have any off-balance sheet arrangements,

as defined in the SEC rules and regulations.

adopted the new revenue standard, ASC 606, on January 1, 2018, using the full retrospective approach.

The adoption did not have an effect

on 2024 or 2023 revenue recognition or a cumulative effect on opening equity, as the timing and measurement of revenue recognition is

materially the same as under ASC 605.

The core principle of the new revenue standard is that a company should recognize revenue to depict

the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to

be entitled in exchange for those goods or services.

The following five steps are applied to achieve that core principle:

Identify the contract with the customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the company satisfies a performance obligation

contracts where the period between when we transfer a promised good or service to the customer and when the customer pays is one year

or less, we have elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant

financing component.

measure and recognize compensation expense for all options based on the estimated fair value of the award on the grant date.

Black-Scholes option-pricing model to estimate the fair value of option awards.

The fair value is recognized as expense on a straight-line

basis over the requisite service period.

We account for forfeitures as they occur.

We recognize expense for awards where vesting is subject

to a market or performance condition based on the derived service period.

Expense for awards with performance conditions would be estimated

and adjusted on a quarterly basis based upon our assessment of the probability that the performance condition will be met.

determination of the grant date fair value of options using an option pricing model is affected principally by our estimated fair value

of shares of our Common Stock and requires management to make a number of other assumptions, including the expected life of the option,

the volatility of the underlying shares, the risk-free interest rate and expected dividends.

The assumptions used in our Black-Scholes

option-pricing model represent management’s best estimates at the time of measurement.

These estimates are complex, involve a number

of variables, uncertainties and assumptions and the application of management’s judgment, as they are inherently subjective.

any assumptions change, our stock-based compensation expense could be materially different in the future.

assumptions are estimated as follows:

Value of Common Stock .

As our Common Stock has not historically been publicly traded,

we estimated the fair value of our Common Stock.

See “ Fair Value of Common Stock ”

and “ Common Stock Valuation Methodology ” sections.

The expected term represents the period that our options are expected to be outstanding.

We calculated the expected term using the simplified method for options based on the average

of each option’s vesting term and the contractual period during which the option can

be exercised, which is typically 10 years following the date of grant.

The expected volatility was based on the historical share volatility of several

of our comparable publicly traded companies over a period of time equal to the expected term

of the options, as we do not have any trading history to use the volatility of our Common

Interest Rate .

The risk-free interest rate was based on the yields of U.S.

Treasury securities

with maturities appropriate for the term of the award.

Dividend Yield .

We have not paid dividends on our Common Stock nor do we expect to pay

dividends in the foreseeable future.

Value of Common Stock

Historically,

for all periods prior to this offering, the fair values of the shares of Common Stock underlying our options were estimated on each grant

date by our board of directors.

In order to determine the fair value, our board of directors considered, among other things, contemporaneous

valuations of our Common Stock and Preferred Stock prepared by unrelated third-party valuation firms in accordance with the guidance

provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities

Issued as Compensation, or the Practice Aid.

Given the absence of a public trading market of our capital stock, our board of directors

exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair

value of our Common Stock, including:

● Contemporaneous

third-party valuations of our Common Stock;

prices, rights, preferences, and privileges of our Preferred Stock relative to our Common

business, financial condition, and results of operations, including related industry trends

affecting our operations;

likelihood of achieving a liquidity event, such as an initial public offering or sale of

our company, given prevailing market conditions;

lack of marketability of our Common Stock;

market performance of comparable publicly traded companies;

and global economic and capital market conditions and outlook.

accounting policies and significant judgments and estimates

financial statements are prepared in accordance with GAAP.

The preparation of our financial statements requires us to make estimates,

assumptions and judgments that affect the reported amounts of assets, liabilities, costs, and expenses.

We base our estimates and assumptions

on historical experience and other factors that we believe to be reasonable under the circumstances.

We evaluate our estimates and assumptions

on an ongoing basis.

Our actual results may differ from these estimates.

Our most critical accounting policies are summarized below.

See Note 2 to our consolidated financial statements for the years ended December 31, 2024 and 2023 for a description of our other significant

accounting policies.

review goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter of each fiscal year or more

frequently if impairment indicators arise.

The review of impairment consists of using a qualitative approach to determine whether it

is more than likely that the fair value of the assets is less than their respective carrying values or a one-step qualitative impairment

performing the qualitative assessment, we consider many factors in evaluating whether the carrying value of goodwill may not be recoverable,

including an analysis of the firm’s contract backlog and sales pipeline.

While the contract backlog is confirmed contractual wins,

the sales pipeline is evaluated by management to determine the uncertainty of the pipeline.

Each potential contractual win is assigned

a probability of win score to address the potential uncertainty.

Thus, it provides a conservative estimate of any future contractual

If, based on the qualitative assessment results, it is concluded that the fair value of a reporting unit may not exceed its carrying

value, additional quantitative impairment testing is performed.

quantitative test requires that the carrying value of each reporting unit be compared with its estimated fair value.

If the carrying

value of a reporting unit is greater than its fair value, a goodwill impairment charge will be recorded for the difference (up to the

carrying value of goodwill).

use a discounted cash flow approach to determine the fair value of a reporting unit.

The determination of discounted cash flows of the

reporting units and assets and liabilities within the reporting units requires significant estimates and assumptions.

These estimates

and assumptions primarily include, but are not limited to, the discount rate being the weighted average cost of capital (WACC) for the

firm, terminal growth rates, earnings before depreciation and amortization, and capital expenditures forecasts.

to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates.

We evaluate the merits

of each significant assumption, both individually and in the aggregate, used to determine the fair value of the reporting units, as well

as the fair values of the corresponding assets and liabilities within the reporting units.

that we operated at a net profit in 2024, we performed quantitative impairment testing as second step to validate our qualitative testing.

Based on our quantitative impairment testing, the fair value of goodwill substantially exceeds the carrying value.

Axxum Technologies

Cloudburst Security

Total Cycurion Goodwill

accounting pronouncements

Note 2 to our consolidated financial statements for the years ended December 31, 2024 and 2023 for a description of recent accounting

pronouncements applicable to our financial statements.

QUANTITATIVE AND

QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by

Rule 12b-2 of the Exchange Act and are not required to provide information require under this item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis