Cycurion, Inc. 10-Q

ITEM 2. Management’s 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. The 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 Statements This 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 operations. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used 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. These 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: ● the occurrence of any event, change or other circumstances, including the outcome of any legal proceedings that may be instituted against us; ● the ability to maintain the listing of our securities on The Nasdaq Stock Market, and the potential liquidity and trading of our securities; ● the risk of disruption to our current plans and operations; ● the 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; ● costs related to our business; ● changes in applicable laws or regulations; ● our 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; ● our ability to achieve and sustain profitability of our existing lines of business and through our wholly owned subsidiaries; ● our ability to raise sufficient capital to continue to acquire cybersecurity companies; ● our ability to attract and retain qualified cybersecurity talent; ● our ability to successfully execute acquisitions, integrate the acquired businesses, and create synergies as a global cybersecurity consolidator; ● our ability to efficiently acquire customers and maintain high client retention rates; ● our ability to attract and retain qualified key technology or management personnel and to expand our management team; ● our 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; ● our ability to maintain existing license agreements; ● our estimates regarding expenses, future revenue, capital requirements, and need for additional financing; ● our ability to achieve and maintain profitability in the future; ● our financial performance; and ● other factors disclosed under the section entitled “Risk Factors” in this quarterly report on Form 10-Q. These 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. 35 General and Business Overview 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 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 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. We 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. Our Subsidiaries Cycurion Sub, Inc. We 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. Axxum 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. We acquired 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. Cloudburst Security LLC Cloudburst 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. Cloudburst 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. Cycurion Innovation, Inc. Cycurion 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. 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 artificial intelligence (“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. SLG 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. 36 The 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. The 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. We 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. As 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. Over the 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. SLG Acquisition Agreement Our 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. On 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 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 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. Mr. 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 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. 37 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 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, 2025. 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 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. RCR Acquisition Agreement RCR 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. The RCR Term 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 Sheet. 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 second half of our current fiscal year. 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. Further, 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 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. 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 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. Acquisition of Technology Sabres SaaS Asset Purchase On 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. Our 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 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. 38 Our 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. We 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 business. 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. Financial Overview A 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. acquisition. ●  The completion of the business combination with Western Acquisition Ventures Corp. Results of Operations Table MD&A 1: 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 Net revenues $ 3,887,915 $ 5,001,312 $ 7,757,965 $ 9,244,167 Cost of revenues 3,651,978 3,977,150 6,844,265 7,873,291 Gross profit 235,937 1,024,162 913,700 1,370,876 Gross profit percentage 6.1 % 20.5 % 11.8 % 14.8 % Operating expenses: Selling, general and administrative expenses 4,002,018 294,790 14,777,281 673,767 Operating (loss)/income (3,766,081 ) 729,372 (13,863,581 ) 697,109 Interest income - 20,211 - 20,211 Interest expense (615,392 ) (482,355 ) (794,283 ) (713,830 ) Loss on debt settlement, net (907,983 ) - (766,330 ) - Other (expense)/income (962 ) 38,866 (114,706 ) (9,871 ) Other expense, net (1,524,337 ) (423,278 ) (1,675,319 ) (703,490 ) (Loss)/income before income taxes (5,290,418 ) 306,094 (15,538,900 ) (6,381 ) Provision for income tax - - - - Net (loss)/income $ (5,290,418 ) $ 306,094 $ (15,538,900 ) $ (6,381 ) Less: Net loss attributable to non-controlling interest (101,659 ) - (101,659 ) - Net (loss)/income attributable to Cycurion $ (5,188,759 ) $ 306,094 $ (15,437,241 ) $ (6,381 ) Revenue Revenues 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. We 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. 39 Cost of Revenue The 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. Selling, general and administrative (“SG&A”) expenses Our 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 expands. Interest expense Interest 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. For further information refer to debt footnotes. Liquidity and Capital Resources Our 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. Cash Flow Table MD&A 2: 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 ) $ (850,413 ) Net cash provided by/(used in) investing activities 1,695,523 (592,000 ) Net cash provided by financing activities 5,580,645 1,032,678 Net increase/(decrease) in cash and cash equivalents $ 973,046 $ (409,735 ) Net Cash Used In Operating Activities For 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. Net Cash Provided By/(Used In) Investing Activities For 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. Net Cash Provided by Financing Activities For 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, $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. For 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. 40 Going Concern We 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 30, 2025. Furthermore, we expect continued, significant operating losses for the next few years. We also utilized cash in operations of approximately $6,303,122 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. Our 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. There 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. Off-balance sheet arrangements We 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. Critical Accounting Policies and Estimates The 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. 41 Item 3. Quantitative and Qualitative Disclosures about Market Risk As a “smaller reporting company,” as that term is defined in Rule 229.10(f)(1), we are not required to provide the information required by this Item.