# Cycurion, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [Cycurion, Inc.](/companies/cycu.md) (CIK 1868419)
- Form: 10-Q
- Filed: 2025-06-06
- Accepted by EDGAR: Jun 5, 2025, 21:58 ET
- Period: 2025-03-31
- Accession: 0001641172-25-013920
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1868419/000164117225013920/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1868419/000164117225013920/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $3.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2025-01-01 to 2025-03-31 | $3.2m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2025-01-01 to 2025-03-31 | $677.8k | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2025-01-01 to 2025-03-31 | $10.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | −$10.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2025-01-01 to 2025-03-31 | $178.9k | us-gaap:InterestExpenseNonoperating |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | −$10.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.56 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.56 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 18,271,618 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | −$2.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $70.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2025-03-31 | $2.3m | us-gaap:Cash |
| Current assets | at 2025-03-31 | $6.7m | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $31.5m | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $21.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-03-31 | $22.1m | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $12.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 36,782 characters.

*Throughout this section, unless otherwise noted, “we,” “our,” “us,” “Cycurion” and the “Company” refer to* Cycurion, Inc.

*You 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.*

### Management’s 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 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.

### Our Business

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.

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 Agreeement. To effectuate the two transactions contemplated by the SLG Term Sheet, Cycurion Sub will form two subsidiaries, which, upon formation, will initially be wholly owned by Cycurion Sub. If, when, and as the transactions contemplated by the SLG Term Sheet are consummated, SLG would merge with and into one of the subsidiaries and survive, thereby becoming a wholly-owned subsidiary of Cycurion Sub. Because certain of the agreements to which SLG is the prime contractor require that the majority owner of the prime contractor be a resident of the City of Chicago or of Cook County (depending on the contract), contemporaneously with the consummation of the first of the two transactions, (i) SLG will divest itself of those agreements with the residency requirements, (ii) the second newly formed subsidiary will assume those agreements, (iii) Mr. Ed Burns will become the owner of a 51% interest in that newly formed subsidiary, and (iv) we will enter into a Management Agreement with that subsidiary, the economic terms and management/ control terms of which are intended to be the equivalent of complete ownership of that the 49% owned subsidiary. 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.

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.

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.

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

### Three Months Ended March 31,

|  | 2025 | 2024 |
| --- | ---: | ---: |
| Revenue | $3,870,050 | $4,242,855 |
| Cost of revenue | 3,192,287 | 3,896,141 |
| Gross profit | 677,763 | 346,714 |
| Selling, general and administrative | 10,775,268 | 378,977 |
| Interest and other expenses | (150,981) | (280,212) |
| Net income/loss | $(10,248,486) | $(312,475) |

### Revenue

Revenues 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.

We 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

The 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.

This $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.

### Research and Development

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

### Selling, General and Administrative

Our 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.

### Interest and Other Expenses

Interest 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.

### Cash Flows

### The Three months Ended March 31

|  | 2025 | 2024 |
| --- | ---: | ---: |
| **Cash and cash equivalents at the beginning of the period** | $40,790 | $607,869 |
| Net cash provided by (used in) operating activities | (2,745,109) | (272,446) |
| Net cash provided by (used in) investing activities | 1,799,523 | (105,001) |
| Net cash provided by financing activities | 3,173,991 | (23,483) |
| **Cash and cash equivalents at the end of the period** | $2,269,195 | $206,939 |

### Operating Activities

For 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.

For 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.

### Investing Activities

For 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.

For 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.

### Financing Activities

For the three months ended March 31, 2025, net cash provided by financing activities was $3,173,991. The net cash provided includes $3,309,921 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 payable.

For 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.

### Liquidity and Capital Resources

### Going Concern

We 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 31, 2024.

Furthermore, we expect continued, significant operating losses for the next few years. We also utilized cash in operations of approximately $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. Based on 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 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 significant judgments and estimates

Our 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

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 form. 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. Impairment 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.

### Revenue Recognition

We 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:

- Step 1: Identify the contract with the customer
- Step 2: Identify the performance obligations in the contract
- Step 3: Determine the transaction price
- Step 4: Allocate the transaction price to the performance obligations in the contract
- Step 5: Recognize revenue when the company satisfies a performance obligation

For 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.

Our 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.

We 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.

### Stock-based compensation

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

The 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.

These assumptions are estimated as follows:

- Fair 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.
- Expected Term. 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.
- Expected Volatility. 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 Stock.
- Risk-Free 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.
- Expected Dividend Yield. We have not paid dividends on our Common Stock nor do we expect to pay dividends in the foreseeable future.

### Fair 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;
- the prices, rights, preferences, and privileges of our Preferred Stock relative to our Common Stock;
- our business, financial condition, and results of operations, including related industry trends affecting our operations;
- the likelihood of achieving a liquidity event, such as an initial public offering or sale of our company, given prevailing market conditions;
- the lack of marketability of our Common Stock;
- the market performance of comparable publicly traded companies; and
- U.S. and global economic and capital market conditions and outlook.

### Recent accounting pronouncements

See 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.

## Market risk

As filed, 149 characters.

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.

## Controls and procedures

As filed, 1,337 characters.

### Evaluation of Disclosure Controls and Procedures.

We carried out an evaluation, under the supervision, and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2025, the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure due to material weaknesses in internal control over financial reporting.

### Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the three months ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 429 characters.

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common shares. For risk factors that may cause actual results to differ materially from those anticipated, please refer to “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024.

Filed Jun 6, 2025.
Source: SEC EDGAR, the filing index for accession 0001641172-25-013920. Last ingested by Listed: Nov 5, 2026, 16:38 ET. No prices; not investment advice.