Cycurion, Inc.

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 March 31, 2026, we had $2.0 million in cash and cash equivalents. As of March 31, 2026, there was substantial doubt regarding the Company's ability to continue as a going concern, as the Company had a net working capital deficit and an accumulated deficit resulting from substantial losses incurred during the three months ended March 31, 2026 and from prior periods. The Company's ability to continue as a going concern depends upon its ability to market and sell its products to generate positive operating cash flows. As of March 31, 2026, the Company had an accumulated deficit of $29.0 million and a working capital deficit of $12.0 million. In addition, the Company had a net cash outflow of $2.9 million from operating activities during the three months ended March 31, 2026. These circumstances continued to give rise to substantial doubt as to whether the Company will be able to continue as a going concern and did not alleviate the doubt outstanding from 2025.

Management's plan is to continue improving operations to generate positive cash flows and register shares of its common stock in order to undertake a public offering to raise additional capital. Management believes that the valuation and liquidity brought by a public offering of its securities will allow holders of convertibles notes, and convertible preferred stockholders the mechanism to convert their securities into common stock that will reduce the Company's overall leverage and debt service requirement. If the Company is not able to continue generating positive operating cash flows, and raise additional capital, there is the risk that the Company may become insolvent.

Cash Flow

Net Cash Used In Operating Activities

For the three months ended March 31, 2026, net cash used by operating activities was $2.9 million, compared to $2.7 million for the three months ended March 31, 2025. The slight increase in cash used in operating activities is the result numerous factors since the first quarter of 2025 had many business combinations expenses. The company has expanded the corporate level team compared to first quarter 2025, but has been able to partially offset some of those cash outflows by focusing on cost saving initiatives through the organization.

Net Cash (Used in)/Provided By Investing Activities

For the three months ended March 31, 2026, net cash used in by investing activities was approximately $0.1 million, compared to $1.8 million net cash provided by investing activities for the three months ended March 31, 2025. The cash inflow in 2025 was a result of the Trust Account in connection with redemption and cash released from the Trust Account to the Company.

Net Cash (Used in)/Provided by Financing Activities

For the three months ended March 31, 2026, net cash used by financing activities was $0.2 million, which was repayments on the revolving line of credit. For the three months ended March 31, 2025, net cash provided by financing activities was $3.2 million, driven by $3.3 million in proceeds from exercise of warrants, partially offset by cash outflow of $1.0 million related to the redemption of common stock subject to redemption. Other inflows and outflows are the result of various proceeds and repayments on notes and bank borrowings.

Going Concern

We have incurred operating losses since inception through the period ended March 31, 2026, having had negative cash flow from operations. As of March 31, 2026, we had an accumulated deficit of approximately $29.0 million, as compared to our accumulated deficit of approximately $26.9 million as of December 31, 2025. The increase of our accumulated deficit was a result of our net losses for the three months ended March 31, 2026.

Furthermore, we expect continued, significant operating losses for the next few years. We also utilized cash in operations of approximately $2.9 million for the three months ended March 31, 2026. As of March 31, 2026, we had unrestricted cash of approximately $2.0 million, a decrease of $3.2 million from approximately $5.3 million as of December 31, 2025. As of March 31, 2026, our total assets decreased to approximately $31.4 million from approximately $33.5 million as of December 31, 2025, primarily due to decreases in cash. Based on our current capital resources as of March 31, 2026, including our unrestricted cash and accounts receivable, net of $5.4 million, we expect to be able to continue our operations for a minimum of 12 months as of the date of this 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 unaudited 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.