What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-13 compared with 2025-06-06 · 254 added, 294 removed, 154 unchanged (78% of the section changed)

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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 quarterly report on Form 10-Q.

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 quarterly report.

plans and basis of presentation:

We were originally incorporated as KAE Holdings,

Inc., under the laws of the State of Delaware in 2017, with the purpose of acquiring and holding operating entities in the cybersecurity

following discussion is intended to help the reader understand our business, financial condition, results of operations, liquidity and

capital resources.

You should read this discussion in conjunction with “Risk Factors,” “Special Note Regarding Forward-Looking

Statements,” and our financial statements and related notes included in our Annual Report on Form 10-K for fiscal year 2024 filed

with the SEC on April 17, 2025 (the “2024 Form 10-K”) and elsewhere in this Quarterly Report on Form 10-Q, as applicable.

Forward-Looking

quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act,

and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”).

Forward-looking statements are neither historical

facts nor assurances of future performance.

Instead, they are based only on our current beliefs, expectations, and assumptions regarding

the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions.

This includes, without limitation, statements regarding the financial position and the plans and objectives of management for our future

Such statements can be identified by the fact that they do not relate strictly to historical or current facts.

in this quarterly report on Form 10-Q, words such as “anticipate,” “believe,” “continue,” “could,”

“estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,”

“potential,” “predict,” “project,” “should,” “strive,” “would”

and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not

forward-looking.

risks include the risks that are identified in the “Risk Factors” section of this quarterly report and of our Annual Report

on Form 10-K for the fiscal year ended December 31, 2024, and also include, among others, risks associated with the following:

occurrence of any event, change or other circumstances, including the outcome of any legal

proceedings that may be instituted against us;

ability to maintain the listing of our securities on The Nasdaq Stock Market, and the potential

liquidity and trading of our securities;

risk of disruption to our current plans and operations;

ability to recognize the anticipated benefits of our business and the recently closed de-SPAC

transaction, which may be affected by, among other things, competition and the ability to

grow, manage growth profitably, and retain key employees;

related to our business;

in applicable laws or regulations;

ability to meet our future capital requirements to fund our operations, which may involve

debt and/or equity financing, and to obtain such debt and/or equity financing on favorable

terms, and our sources and uses of cash;

ability to achieve and sustain profitability of our existing lines of business and through

our wholly owned subsidiaries;

ability to raise sufficient capital to continue to acquire cybersecurity companies;

ability to attract and retain qualified cybersecurity talent;

ability to successfully execute acquisitions, integrate the acquired businesses, and create

synergies as a global cybersecurity consolidator;

ability to efficiently acquire customers and maintain high client retention rates;

ability to attract and retain qualified key technology or management personnel and to expand

our management team;

ability to stay in compliance with laws and regulations currently applicable to, or which

may become applicable to our business both in the United States and internationally;

ability to maintain existing license agreements;

estimates regarding expenses, future revenue, capital requirements, and need for additional

ability to achieve and maintain profitability in the future;

financial performance;

factors disclosed under the section entitled “Risk Factors” in this quarterly

report on Form 10-Q.

forward-looking statements are based on information available as of the date of this quarterly report on Form 10-Q and current expectations,

forecasts, and assumptions, and involve a number of judgments, risks, and uncertainties.

Accordingly, forward-looking statements should

not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking

statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or

otherwise, except as may be required under applicable securities laws.

and Business Overview

were originally incorporated as KAE Holdings, Inc., under the laws of the State of Delaware in 2017, with the purpose of acquiring and

holding operating entities in the cybersecurity industry.

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

to Cyber Secure Solutions, Inc., and, on February 24,

2021, to Cycurion, Inc.

We have one first-tier wholly-owned subsidiary, Cycurion

(formerly Cycurion, Inc., until February 14, 2025), and three indirectly wholly-owned second-tier subsidiaries:

(i) Axxum Technologies

LLC (“Axxum”), a Virginia limited liability company formed in December 2006, (ii) Cloudburst Security LLC (“Cloudburst”),

a Virginia limited liability company formed in January 2007, and (iii) Cycurion Innovation, Inc., a Delaware corporation formed in September

2021, in connection with our acquisition of assets from Sabres Security Ltd.

(“Sabres”), a leading Israeli-based cyber security

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

commercial clients across a variety of industries.

Through our operating subsidiaries and strategic partnerships, we 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.

own our operating subsidiaries through 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

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

have one first-tier wholly-owned subsidiary, Cycurion Sub, Inc.

(formerly Cycurion, Inc., until February 14, 2025), and three indirectly

wholly-owned second-tier subsidiaries:

(i) Axxum Technologies LLC (“Axxum”), a Virginia limited liability company formed

in December 2006, (ii) Cloudburst Security LLC (“Cloudburst”), a Virginia limited liability company formed in January 2007,

and (iii) Cycurion Innovation, Inc., a Delaware corporation formed in September 2021, in connection with our acquisition of assets from

Sabres Security Ltd.

(“Sabres”), a leading Israeli-based cyber security provider.

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

clients across a variety of industries.

Through our operating subsidiaries and strategic partnerships, we 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.

own our operating subsidiaries through 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

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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 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,

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Innovation, Inc.

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 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,

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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

by the SLG Acquisition Agreement.

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

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prior to April 11, 2025, with no further obligations on Cycurion Sub’s part.

As of the date of this quarterly 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.

As of the date of this quarterly 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

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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 the Annual Report on

Form 10-K filed with the SEC on April 17, 2025 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.

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 the Annual Report on Form 10-K filed with the SEC

on April 17, 2025 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

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

As of the date of this quarterly 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 second half of our current fiscal year.

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 the Annual Report on

Form 10-K filed with the SEC on April 17, 2025 as Exhibit 10.13 and the full text of the RCR Term Sheet Amendments, a copy of each

of which are attached to the Annual Report on Form 10-K filed with the SEC on April 17, 2025 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.

As of the date of this quarterly 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 second half of our current fiscal year.

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 the Annual Report on Form 10-K filed

with the SEC on April 17, 2025 as Exhibit 10.13 and the full text of the RCR Term Sheet Amendments, a copy of each of which are attached

to the Annual Report on Form 10-K filed with the SEC on April 17, 2025 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

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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 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.

(APIs), and backend services from malicious bot traffic that fuels common automated attacks, such as DDoS campaigns and vulnerability

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

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

of Operations for the three months ended March 31, 2025 and 2024

Months Ended March 31,

Cost of revenue

Selling, general and administrative

Interest and other expenses

Net income/loss

number of factors have contributed to our second quarter of fiscal year 2025 results of operations, the most significant of which are

described below.

More details on these changes are presented below within our “Results of Operations” section.

The execution of the SLG Innovation Inc.

The completion of the business combination with Western Acquisition

Ventures Corp.

of Operations

Consolidated Results of Operations

For the Three Months Ended

For the Six Months Ended

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

Cost of revenues

Gross profit percentage

Operating expenses:

Selling, general and administrative expenses

Operating (loss)/income

(13,863,581 )

for the three months ended March 31, 2025, were $3,870,050, as compared to $4,242,855 for the three months ended March 31, 2024, a decrease

of $372,805, representing 8.79% decrease in revenues.

attribute this decrease in the revenues for the three months ended March 31, 2025, to delayed start dates of new

federal, state and local contracts and focus on more profitable business.

cost of revenue for the three months ended March 31, 2025, was approximately $3,192,287 nearly all of which is related to costs incurred

while delivering services to our customers.

Conversely, the cost of revenue for the three months ended March 31, 2024, was approximately

$3,896,141, nearly all of which is related to costs incurred while servicing our contracts, including contractual and servicing obligations

with our employees and contractors.

$703,854 (18.07%) decrease in the cost of revenues is directly attributable to reduced expenses brought about by the reduced revenue

and more profitable business.

and Development

did not have any Research and Development expenses for the three months ended March 31, 2025 and the three months ended March 31, 2024.

General and Administrative

selling, general and administrative (“SG&A”) expenses were $10,775,268 and $378,977 for the three months ended March

31, 2025 and 2024, respectively.

We attribute this $10,396,291 (2743.25%) increase in SG&A expenses to merger

and acquisition efforts in the legal, administrative, and consulting operations in the three months ended March 31, 2025.

and Other Expenses

and other expenses were approximately $150,981 for the three months ended March 31, 2025, while the Company had interest and other expenses

of $280,212 for the three months ended March 31, 2024.

The interest and other expenses for the three months ended March 31, 2025 include

$178,890 in interest expense, $113,744 in other expense and $141,653 gain on settlement of debts.

Three months Ended March 31

Cash and cash equivalents at the beginning of the period

Net cash provided by (used in) operating activities

Interest income

Interest expense

Loss on debt settlement, net

Other (expense)/income

Other expense, net

(Loss)/income before income taxes

(15,538,900 )

Provision for income tax

Net (loss)/income

$ (5,290,418 )

$ (15,538,900 )

Net loss attributable to non-controlling interest

Net (loss)/income attributable to Cycurion

$ (5,188,759 )

$ (15,437,241 )

for the three months ended June 30, 2025 decreased $1,113,397 or 22% compared to the three months ended June 30, 2024.

For the six months

ended June 30, 2025, revenues decreased by $1,486,202 or 16% compared to same period in 2024.

attribute this decrease in the revenues in 2025 compared to 2024 to delayed start dates of new federal, state and local contracts and

the company’s focus on more profitable business.

cost of revenue for the three and six months ended June 30, 2025, was approximately $3,651,978 and $6,844,265, respectively, compared

to $3,977,150 and $7,873,291 for the same periods in 2024, respectively.

The cost of revenue is driven by the costs incurred while delivering

services to our customers.

general and administrative (“SG&A”) expenses

selling, general and administrative (“SG&A”) expenses increased in 2025 compared to 2024 due to additional expenses being

recognized in 2025 related to merger and acquisition efforts in the legal, administrative, and consulting operations.

While costs associated

with the Western merger are considered one-time costs, there will be continued SG&A costs greater than the 2024 amounts as the company

expense for the three and six months ended June 30, 2025 was $615,392 and $794,283, respectively, compared to $482,355 and $713,830 for

the three and six months ended June 30, 2024.

The change in interest expense is a result of a the underlying debt instruments.

information refer to debt footnotes.

and Capital Resources

primary sources of liquidity are cash on hand, cash from operations, borrowings under our debt financing arrangements and equity raises

through our equity line.

As of June 30, 2025, we had $1,013,836 in cash and cash equivalents.

We believe that our current cash position,

access to the capital markets and cash flow generated from operations should be sufficient for our operating requirements through the

next several fiscal years.

Net Changes in Cash and Cash Equivalents

For the Six Months Ended

June 30, 2025

June 30, 2024

Net cash used in operating activities

$ (6,303,122 )

Net cash provided by/(used in) investing activities

Net cash provided by financing activities

Cash and cash equivalents at the end of the period

the three months ended March 31, 2025, net cash used by operating activities was $2,745,109, which included $9,250,00 in stock based

compensation, $1,300,686 decrease in accounts receivable, $467,761 decrease in accounts payable and $11,415 decrease in advance and pre-payments

to suppliers.

the three months ended March 31, 2024, net cash used by operating activities was $272,446, which included $312,475 in net losses, $507,077

decrease in accounts receivable, $529,981 increase in accounts and other payables, and $10,000 increase in stock based compensation.

the three months ended March 31, 2025, net cash provided in investing activities was approximately $1,799,523.

This was attributed

to cash withdrawn from the Trust Account for redemption and cash released from the Trust Account to the Company.

the three months ended March 31, 2024, net cash used in investing activities was approximately $105,001.

This was wholly attributed

to the purchase of equipment.

the three months ended March 31, 2025, net cash provided by financing activities was $3,173,991.

Net increase/(decrease) in cash and cash equivalents

Cash Used In Operating Activities

the six months ended June 30, 2025, net cash used by operating activities was $6,303,122, compared to $850,413 for the six months ended

June 30, 2024.

The main driver of this increase is the additional merger expenses incurred in 2025.

Cash Provided By/(Used In) Investing Activities

the six months ended June 30, 2025, net cash provided in investing activities was approximately $1,695,523, compared to a $592,000 use

of cash for the six months ended June 30, 2024.

The cash inflow in 2025 was a result of the Trust Account for redemption and cash released

from the Trust Account to the Company.

Cash Provided by Financing Activities

the six months ended June 30, 2025, net cash provided by financing activities was $5,580,645.

The net cash provided includes $3,664,671

proceeds provided from the exercise of warrants, $1,001,216 cash used in redemption of common stock for redemption, $513,200 in proceeds

provided from notes payable, $386,500 in proceeds provided convertible noted payable and $20,000 used in the repayment of other notes

the three months ended March 31, 2024, net cash used by financing activities was $23,483.

The net cash used includes $16,980 in repayment

of line of credit, $6,503 used in the repayment of bank borrowings.

and Capital Resources

have incurred operating losses since inception through the period ended March 31, 2025, having had negative cash flow from operations.

As of March 31, 2025, we had an accumulated deficit of approximately $13,461,859, as compared to our accumulated deficit of approximately

$3,203,361 at December 31, 2024.

The increase of our accumulated deficit was a result of our net losses for the three months ended March

proceeds provided from the exercise of warrants, $2,376,500 in proceeds from convertible notes payable, $1,001,216 cash used in redemption

of common stock for redemption, $513,200 in proceeds provided from notes payable, $265,504 in proceeds from the equity line of credit

and $20,000 used in the repayment of other notes payable.

the six months ended June 30, 2024, net cash provided by financing activities was $1,032,678.

The company received $1,000,000 from a

private placement.

have incurred operating losses since inception through the period ended June 30, 2025, having had negative cash flow from operations.

As of June 30, 2025, we had an accumulated deficit of approximately $18,853,937, as compared to our accumulated deficit of approximately

$3,203,361 as of December 31, 2024.

The increase of our accumulated deficit was a result of our net losses for the six months ended June

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

We also utilized cash in operations of approximately $6,303,122

$2,745,109 in the three months ended March 31, 2025.

As of March 31, 2025, we had unrestricted cash of approximately $2.3 million,

an increase of $2.2 million from approximately $38,000 at December 31, 2024.

As of March 31, 2025, our total assets increased to

approximately $31.6 million from approximately $25.6 million at December 31, 2024, primarily due to increases in goodwill.

our current capital resources as of March 31, 2025, including our unrestricted cash and accounts receivable (net) of $3.9 million,

we expect to be able to continue our operations for a minimum of 12 months as of the date of this quarterly report.

Nevertheless,

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

consistent c ash 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.

in the six months ended June 30, 2025.

As of June 30, 2025, we had unrestricted cash of approximately $1.0 million, an increase of $1.0

million from approximately $38,000 at December 31, 2024.

As of June 30, 2025, our total assets increased to approximately $30.7 million

from approximately $25.6 million at December 31, 2024, primarily due to increases in goodwill.

Based on our current capital resources

as of June 30, 2025, including our unrestricted cash and accounts receivable, net of $4.1 million, we expect to be able to continue

our operations for a minimum of 12 months as of the date of this quarterly report.

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

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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.

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.

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

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as defined in the SEC rules and regulations.

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 three months ended March 31, 2025 and 2024 for a description of our other

significant accounting policies.

Goodwill represents the excess of the purchase price

over the fair value of the net tangible and identifiable assets acquired in a business combination.

Goodwill is reviewed for impairment

annually during the fourth quarter of each fiscal year, or more frequently if impairment indicators arise.

The review of goodwill impairment

consists of either using a qualitative approach to determine whether it is more likely than not that the fair value of the assets

is less than their respective carrying values or a one -step quantitative impairment test.

In performing the qualitative assessment,

we consider many factors in evaluating whether the carrying value of goodwill may not be recoverable.

If, based on the results of the

qualitative assessment, it is concluded that it is not more likely than not that the fair value of a reporting unit exceeds

its carrying value, additional quantitative impairment testing is performed.

The 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).

Fair value is generally determined

using a discounted cash flow analysis.

During the three months ended March 31, 2025 and 2024, no impairment of goodwill was recognized.

Software development costs

The Company is undergoing new Software as a Service

(“SaaS”) product development based on an acquired SaaS platform in previous years, which has not been utilized in its original

Cost from the acquired SaaS platform, functionalities and modules and the redesigned features of the distinct new SaaS product are

accounted for under ASC 985-20 (Costs of Software to Be Sold, Leased, or Marketed).

Development costs were capitalized as “Software

Development in Progress” after achieving technological feasibility.

Accounting for long-lived assets

The Company annually reviews its long-lived assets

for impairment or whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable.

may be the result of becoming obsolete from a change in the industry or new technologies.

Impairment is present if the carrying amount

of an asset is less than its undiscounted cash flows to be generated.

If an asset is considered impaired, a loss is recognized

based on the amount by which the carrying amount exceeds the fair market value of the asset.

Assets to be disposed of are reported at

the lower of the carrying amount or fair value less costs to sell.

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

The adoption did not have an effect

on 2023 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.

performance obligation is to provide a development service that enhances an asset that the customer controls.

We receive upfront payments

in advance of providing services and payment upon reaching milestones.

are not able to reasonably measure the outcome of our performance obligations that are satisfied over time because we are in the early

stages of the contracts.

Therefore, the amount of performance that will be required in our contracts cannot be reliably estimated and

we recognize revenue up to the amount of costs incurred.

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

the 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.

If 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 pronouncements

Note 2 to our consolidated financial statements for the three months ended March 31, 2025 and 2024 for a description of recent accounting

pronouncements applicable to our financial statements.

Accounting Policies and Estimates

preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make

estimates, judgments, and assumptions that affect the amounts reported.

Actual results could differ from those estimates.

The 2024 Form

10-K, as filed with the SEC on April 17, 2025, includes a summary of critical accounting policies we believe are the most important to

aid in understanding our financial results.

There have been no changes to those critical accounting policies that have had a material

impact on our reported amounts of assets, liabilities, revenues, or expenses during the six months ended June 30, 2025.

Quantitative and Qualitative Disclosures about Market Risk

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What changed 10-Q

Item 2. Management’s Discussion and Analysis