Cycurion (CYCU) risk factors, FY2025 10-K

What changed since the prior 10-K

New

• NewRisks Related to Our Business and Operations

  We derive a substantial portion of our revenue from a limited number of contracts and clients, and the loss of any significant contract or client relationship could materially reduce our revenue and profitability

  Revenue is concentrated among state and local government contracts, and key client losses in fiscal 2025 reduced revenue.

• NewRisks Related to Our Business and Operations

  Our contracts with state and local government agencies are subject to funding risks, including dependence on federal funding that flows through those agencies, which creates uncertainty in our revenue

  State and local clients rely on federal funding subject to annual appropriations, shutdowns, and Department of Government Efficiency cuts.

• NewRisks Related to Our Business and Operations

  Recent and ongoing federal and state government cost-reduction initiatives may reduce demand for our services and disrupt our contracting pipeline

  Federal cost-reduction initiatives by DOGE and cuts at CISA and FedRAMP have disrupted federal grant programs supporting state and local cybersecurity.

• NewRisks Related to Our Business and Operations

  The competitive landscape for cybersecurity and IT services is intense, and if we do not continue to innovate we may not remain competitive and our revenue and operating results could suffer

  The market is intense and fragmented, requiring continuous innovation against larger defense contractors with greater financial resources.

• NewRisks Related to Our Business and Operations

  The government contracting process is lengthy, complex, and subject to protest and delay, which makes our revenue difficult to predict

  Government procurement is protracted, vulnerable to bid protests, and relies on IDIQ and GSA schedule contracts without minimum order guarantees.

• NewRisks Related to Our Business and Operations

  Our government contracts are subject to audit, investigation, modification, and termination by the government, which could result in adverse findings, reduced revenue, or other penalties

  Government contracts allow unilateral termination for convenience or cause, and violations of the False Claims Act risk civil or criminal penalties.

• NewRisks Related to Cybersecurity and Technology

  A cybersecurity breach or incident affecting our systems, our clients' systems, or our AI-enhanced ARx platform could damage our reputation, expose us to liability, and undermine the market confidence that is fundamental to our business

  A cyberattack against the company, its clients, or the AI-enhanced ARx platform could damage reputation and expose it to liability.

• NewRisks Related to Cybersecurity and Technology

  The cybersecurity regulatory environment is rapidly evolving, and our failure to comply with new and changing requirements could result in penalties, loss of contracts, and competitive disadvantage

  Compliance with NIST SP 800-171, CMMC, and FedRAMP imposes heavy dual compliance costs on both internal systems and client solutions.

• NewRisks Related to Cybersecurity and Technology

  Our AI-enhanced ARx platform and other technology solutions are at an early stage of market adoption, and there is no assurance that these products will achieve broad commercial acceptance

  The AI-enhanced ARx platform and Cyber Shield MSSP are early-stage products facing adoption risks and adversarial AI manipulation threats.

• NewRisks Related to Our Financial Condition and Capital Structure

  Our level of indebtedness and debt service obligations could adversely affect our financial condition and make it more difficult to fund our operations

  Significant indebtedness requires substantial cash flow for debt service and increases vulnerability to economic downturns.

• NewRisks Related to Our Financial Condition and Capital Structure

  Our allocation of capital to cryptocurrency investments involves speculative risk and may not align with the expectations of our shareholders or clients

  Subsidiary Cycurion Crypto holds speculative Bitcoin and Ethereum, risking losses and unfavorable investor perceptions.

• NewRisks Related to Our Growth Strategy and Acquisitions

  Our growth strategy depends in part on acquisitions, which involve integration risks, potential liabilities, and the diversion of management's attention, and if we fail to retain existing clients and attract new clients through acquisitions, we may not achieve profitability

  Acquisition strategies involve integration challenges, competition for targets, and potential unforeseen liabilities from past operations.

• NewRisks Related to Our Securities and Nasdaq Listing

  There can be no assurance that our securities will continue to be listed on Nasdaq in the future

• NewRisks Related to Our Securities and Nasdaq Listing

  If we fail to comply with the continued minimum closing bid requirements of the Nasdaq Global Market or other requirements for continued listing, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted

• NewRisks Related to Our Securities and Nasdaq Listing

  Following the Reverse Stock Split, the resulting market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve

• NewRisks Related to Our Securities and Nasdaq Listing

  You may experience immediate and substantial dilution as a result of an offering by us and any future offering and may experience additional dilution in the future

• NewRisks Related to Legal, Regulatory, and Compliance Matters

  As a provider of cybersecurity services to government clients, we are subject to heightened data protection obligations, and any compliance failure could result in significant penalties and loss of client trust

• NewRisks Related to Legal, Regulatory, and Compliance Matters

  The Financial Industry Regulatory Authority, Inc. ("FINRA") has adopted sales practice requirements that may also limit a stockholder's ability to buy and sell our common stock

• NewRisks Related to Legal, Regulatory, and Compliance Matters

  Changes in government contracting regulations, procurement preferences, or small business set-aside policies could reduce our contract opportunities

• NewRisks Related to Operating as a Public Company

  We qualify as an "emerging growth company" and a "smaller reporting company," and if we take advantage of certain exemptions from disclosure requirements, it could make our securities less attractive to investors

• NewRisks Related to Taxation

  Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition

• NewRisks Related to Taxation

  Changes in tax laws or regulations that are applied adversely to us or our customers may materially adversely affect our business, prospects, financial condition and operating results

• NewRisks Related to Taxation

  Our ability to use certain tax attributes may be or become subject to limitation

• NewRisks Related to Taxation

  Macroeconomic conditions, including inflation, rising interest rates, and economic uncertainty, could adversely affect our business, our clients’ budgets, and our cost structure

Dropped

• DroppedRisks Related to Our Business Generally

  Cycurion has a limited operating history upon which you can evaluate our future business and prospects

  Limited operating history since incorporation in 2017 and subsequent subsidiary acquisitions.

• DroppedRisks Related to Our Business Generally

  Cycurion’s net income was $1,229,601 for the year ended December 31, 2024 and net loss was $(2,097,013) December 31, 2023. Cycurion may continue to incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications, and delays and other unknown events

  Net income fluctuations between 2023 and 2024 and potential future net losses.

• DroppedRisks Related to Our Business Generally

  As of December 31, 2024, Cycurion had approximately $20.2 million of indebtedness and other liabilities outstanding

  Indebtedness of approximately $20.2 million as of December 31, 2024.

• DroppedRisks Related to Our Business Generally

  We may issue additional shares of common stock or preferred stock under an employee incentive plan, which would dilute the interest of our stockholders

• DroppedRisks Related to Our Business Generally

  Cycurion’s ability to grow and compete in the future will be adversely affected if adequate capital is not available to it or not available on favorable terms

• DroppedRisks Related to Our Business Generally

  If Cycurion does not continue to innovate and offer solutions and professional services that address the dynamic threat landscape, it may not remain competitive and its revenue and operating results could suffer

  Potential dilution from issuing additional common or preferred stock under employee incentive plans.

• DroppedRisks Related to Our Business Generally

  Cycurion regularly attempts to benchmark its employee and contractor compensation against compensation paid within our industry and, if possible, make annual adjustments to the compensation it pays in order to remain competitive in the market

  Reliance on capital availability on favorable terms for growth and normal operations.

• DroppedRisks Related to Our Business Generally

  If Cycurion is unable to hire, retain, train, and motivate qualified personnel and senior management, its business could suffer

  Need to innovate and attract top talent to address dynamic cybersecurity threat landscapes.

• DroppedRisks Related to Our Business Generally

  Cycurion must continually enhance its training, existing solutions and technology tools and develop or acquire new solutions and tools, or it will lose clients and its competitive position will suffer

• DroppedRisks Related to Our Business Generally

  Cycurion faces intense competition in the cybersecurity industry, especially from larger, well-established companies

  Benchmarking employee compensation against industry standards to retain staff.

• DroppedRisks Related to Our Business Generally

  If our products or professional services fail to detect vulnerabilities or identify and respond to cybersecurity incidents, or if our products contain undetected errors or defects, our brand and reputation could be harmed, which could have an adverse effect on our business and results of operations

  Dependence on hiring, retaining, and training qualified personnel and senior management.

• DroppedRisks Related to Our Business Generally

  We intend to grow our client base significantly through acquisitions of other service providers. If we fail to retain existing clients and attract new clients through acquisitions, we may never achieve profitability

  Requirement to continually enhance training, solutions, and technology tools.

• DroppedRisks Related to Our Business Generally

  As a cybersecurity provider, we are a target of cyber-attacks and other cyber risks that could adversely impact our reputation and operating results

  Intense competition from larger, well-established cybersecurity companies.

• DroppedRisks Related to Our Business Generally

  The loss of, or a significant reduction, in purchases by any of our larger clients could adversely affect our business and financial results

  Risk of products or professional services failing to detect vulnerabilities or cyber attacks.

• DroppedRisks Related to Our Business Generally

  Substantially all of our revenue is generated from contracts with Federal governmental entities

  Client acquisition and retention strategies via service provider buyouts to achieve profitability.

• DroppedRisks Related to Our Business Generally

  Our reliance on U.S. General Services Administration Multiple Award Schedule (“GSA Schedule”) contracts and other Indefinite Delivery/Indefinite Quantity (“IDIQ”) contracts creates the risk of volatility in our revenue and profit levels

• DroppedRisks Related to Our Business Generally

  Future acquisitions could disrupt our business and harm our financial condition and operating results

• DroppedRisks Related to Our Business Generally

  We are dependent on the continued services and performance of our senior management and other key employees, the loss of any of whom could adversely affect our business, operating results, and financial condition

• DroppedRisks Related to Our Business Generally

  Any material weakness in our internal controls could adversely affect our business

• DroppedRisks Related to Our Business Generally

  We may not be able to manage our growth effectively or improve our operational, financial, and management information systems, which would impair our results of operations

• DroppedRisks Related to Our Business Generally

  We may issue additional shares of Cycurion common stock or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions, repayment of outstanding indebtedness or under the Equity Incentive Plan, without stockholder approval, in a number of circumstances

• DroppedRisks Related to Our Business Generally

  If we are unable continually to add new customer offerings, innovate, and increase efficiencies, our ability to attract new customers may be adversely affected

• DroppedRisks Related to the SLG Assignment Agreement

  We may fail to consummate some, or all of the assumptions contemplated by the SLG Assignment Agreement

• DroppedRisks Related to the SLG Assignment Agreement

  Due Diligence may not reveal all issues with respect to SLG

• DroppedRisks Related to the SLG Assignment Agreement

  We may incur significant unforeseen costs related to our possible assumption of the to-be-assigned SLG agreements, which, if assumed by us, would result in our becoming the prime contractor thereunder, that are the subject of the SLG Assignment Agreement

• DroppedRisks Related to the SLG Assignment Agreement

  There is no assurance that we will be able to integrate becoming the prime contractor under the to-be-assigned SLG agreements into our business model, which could then result in significant disruption to our business

• DroppedRisks Related to the SLG Assignment Agreement

  There is no assurance that any or all the counterparties to the to-be-assigned SLG agreements, which, if we are able to assume, would result in our becoming the prime contractor thereunder, will permit such assignment by SLG and assumption by us

• DroppedRisks Related to the SLG Assignment Agreement

  There is no assurance that the to-be-assigned SLG agreements, which, if assumed by us, would result in our becoming the prime contractor thereunder, will perform as expected

• DroppedRisks Related to Securities Markets and Investment in Our Common Stock

  Cycurion has no current plans to pay dividends on its shares of common stock

• DroppedRisks Related to Securities Markets and Investment in Our Common Stock

  We are an emerging growth company, and the reduced reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors

• DroppedRisks Related to Securities Markets and Investment in Our Common Stock

  We face risks related to compliance with corporate governance laws and financial reporting standards

• DroppedRisks Related to Securities Markets and Investment in Our Common Stock

  There can be no assurance that our common stock will continue to trade on The Nasdaq Global Market or another national securities exchange

• DroppedRisks Related to Securities Markets and Investment in Our Common Stock

  The Company currently is (and from time to time in the recent past, the Company has been) out of compliance with the standards and requirements for continued listing on Nasdaq

• DroppedRisks Related to Securities Markets and Investment in Our Common Stock

  Nasdaq may delist our securities from trading on its exchange

• DroppedRisks Related to Securities Markets and Investment in Our Common Stock

  The market price of the Company’s shares of common stock is likely to be highly volatile, and you may lose some or all of your investment

• DroppedRisks Related to Securities Markets and Investment in Our Common Stock

  Increases in market interest rates may cause potential investors to seek higher returns and therefore reduce demand for our common stock, which could result in a decline in our stock price

• DroppedRisks Related to Securities Markets and Investment in Our Common Stock

  Volatility in the price of our common stock may subject us to securities litigation

• DroppedRisks Related to Securities Markets and Investment in Our Common Stock

  Because the Company does not anticipate paying any cash dividends in the foreseeable future, capital appreciation, if any, would be your sole source of gain

• DroppedRisks Related to Securities Markets and Investment in Our Common Stock

  The Company’s share price may fluctuate

• DroppedRisks Related to Operating as a Public Company

  The Company’s management team has limited skills related to experience managing a public company

• DroppedRisks Related to Operating as a Public Company

  As Cycurion continues to expand via opportunities for acquisitions, investments or strategic alliances as a public company, we expect that management and other personnel will need to divert attention from operational and other business matters to ensure the success of these opportunities

Reworded

• 99% rewrittenRisks Related to Our Securities and Nasdaq Listing

  Our common stock price may be volatile and as a result you could lose all or part of your investment

  Updated to cite post-de-SPAC stock price volatility, Nasdaq listing risks, and the inability to realize de-SPAC transaction benefits.

• 99% rewrittenRisks Related to Taxation

  If securities or industry analysts do not publish research or reports about us, or publish negative reports, our share price and trading volume could decline

  Clarified impacts of analyst coverage, noting that lack of research or missed earnings estimates directly harm trading volume and stock price.

  Was: If securities or industry analysts do not publish research or reports about the Company, or publish negative reports, the Company’s share price and trading volume could decline

• 95% rewrittenRisks Related to Our Human Capital

  We rely on personnel with extensive information security expertise, including security-cleared professionals, and the loss of, or our inability to attract and retain, qualified personnel could harm our business

  Added specific mention of nationwide shortages of security-cleared personnel and intense competition from better-capitalized firms.

  Was: Cycurion relies on personnel with extensive information security expertise and the loss of, or its inability to attract and retain, qualified personnel in the highly competitive labor market for such expertise could harm its business

• 89% rewrittenRisks Related to Our Securities and Nasdaq Listing

  Potential future sales pursuant to registration rights and under Rule 144 may depress the market price for our shares of common stock

  Specified that officers, directors, and principal stockholders hold shares eligible for resale under registration rights and Rule 144.

  Was: Potential future sales pursuant to registration rights granted by the Company and under Rule 144 may depress the market price for our shares of common stock

• 89% rewrittenRisks Related to Operating as a Public Company

  Our historical management team has limited experience managing a public company, and we may incur significantly increased costs as a result of operating as a public company

  Added details on historical management's lack of public company experience and challenges interacting with public investors.

  Was: Cycurion may incur significantly increased costs and devote substantial management time as a result of operating as a public company

• 86% rewrittenRisks Related to Legal, Regulatory, and Compliance Matters

  Anti-takeover provisions contained in our charter and bylaws, as well as provisions of Delaware law, could impair a takeover attempt

  Added concrete anti-takeover defenses, including no cumulative voting, board vacancy-filling rights, and a prohibition on written consent.

• 83% rewrittenRisks Related to Our Securities and Nasdaq Listing

  Volatility in the price of our common stock may subject us to securities litigation, which could cause us to incur significant expense, hinder execution of business and growth strategy and impact our stock price

  Refined language on securities class action litigation risks following stock price volatility.

  Was: Cycurion’s business and operations could be negatively affected if it becomes subject to any securities litigation or stockholder activism, which could cause Cycurion to incur significant expense, hinder execution of business and growth strategy and impact its stock price

• 79% rewrittenRisks Related to Our Growth Strategy and Acquisitions

  Our strategic partnerships and international expansion expose us to a range of business risks and uncertainties

  Named specific partnerships like LSV-TECH in Latin America and NACCHO, plus added risks of international expansion.

  Was: Our strategic partnerships expose us to a range of business risks and uncertainties that could have a material adverse impact on our business and financial results

• 74% rewrittenRisks Related to Legal, Regulatory, and Compliance Matters

  Accusations of intellectual property infringement by third parties, regardless of accuracy, could result in significant costs and harm our business

  Was: Accusations against us by third parties of infringement or other violations of their intellectual property rights, regardless of the accuracy of these assertions, could result in significant costs and harm our business and operating results

• 72% rewrittenRisks Related to Our Financial Condition and Capital Structure

  We will require substantial additional funding in the future, which may not be available to us on acceptable terms, or at all, and, if not so available, may require us to delay, limit, reduce, or cease our operations

• 66% rewrittenRisks Related to Our Financial Condition and Capital Structure

  Our recurring losses, net working capital deficit, and accumulated deficit have raised substantial doubt regarding our ability to continue as a going concern

  Was: Cycurion’s recurring losses, net working capital, and accumulated deficit resulting from substantial operating losses have raised substantial doubt regarding its ability to continue as a going concern

• 66% rewrittenRisks Related to Legal, Regulatory, and Compliance Matters

  If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, investors' views of us, and the value of our common stock

  Was: If we fail to maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, investors’ views of us, and, as a result, the value of our common stock

• 57% rewrittenRisks Related to Our Securities and Nasdaq Listing

  Future offerings of debt or preferred equity securities could adversely affect the market price of our common stock

  Was: Future offerings of debt, which would be senior to our common stock upon liquidation, and/or preferred equity securities, which may be senior to our common stock for purposes of distributions or upon liquidation, could adversely affect the market price of our common stock

• 44% rewrittenRisks Related to Our Business and Operations

  Our business strategy may impose limitations in our ability to accurately forecast future revenue and operating results

• 35% rewrittenRisks Related to Legal, Regulatory, and Compliance Matters

  Our insurance policies may not adequately protect us from all business risks, leaving us exposed to significant uninsured liabilities

  Was: Our insurance policies are expensive and protect us only from some business risks, which will leave us exposed to significant uninsured liabilities

All 41 risk factors

Headings as the filing states them, in filing order.

Other Cycurion 10-Ks

• FY2024 10-K risk factors

  58 risks

  Substantially all revenue depends on federal government contracts, creating high exposure to public sector procurement risks. The company carries $20.2 million in indebtedness alongside a working capital deficit. Operations rely heavily on key personnel like Emmit McHenry in the competitive cybersecurity labor market.

  Filed Apr 17, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.