{"url_path":"/sec/cycu/10-k/2026/item-13","section_key":"item-13","section_title":"Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**","topic":"sec","document":{"doc_type":"10-K/A","doc_date":"2026-06-08","source_url":"https://www.sec.gov/Archives/edgar/data/1868419/0001493152-26-027756-index.html","accession_number":"0001493152-26-027756","cik":"0001868419","ticker":"CYCU","issuer_name":"Cycurion, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1868419/0001493152-26-027756-index.html","primary_entity_key":"0001868419","primary_entity_name":"Cycurion, Inc."},"word_count":3674,"has_tables":true,"body_markdown":"**ITEM\n13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**\n\n** **\n\n**Related\nParty Transactions**\n\n \n\nOn\nSeptember 20, 2024, the Company entered into a promissory note (the “Promissory Note”) with Western Acquisition Ventures\nSponsor, LLC (the “Sponsor”) for $230,000, pursuant to which the Company can borrow up to an aggregate cash amount of $230,000.\nThe Promissory Note, with an interest rate of 10% per annum is payable upon the sooner of the consummation of the business combination\nwith Cycurion (the “Business Combination”). During the year ended December 31, 2024, the Company borrowed the full $255,556,\nwith a discount of $25,556, resulting in net proceeds of $230,000. The Company amortized the discount of 25,556 fully in 2025. Additionally,\nthe company has an accrued interest balance of $32,867 related to these notes as of December 31, 2025. These notes are presented with\nother promissory notes on the balance sheet.\n\n \n\nPersonal\nguarantees were entered by Emmit McHenry, Kurt McHenry, and Alvin McCoy, III, as officers and stockholders of Cycurion in support of\na loan from Main Street Bank, of which approximately $3 million is owed as of January 2, 2026.\n\n \n\nAxxum\npurchased an AT&T contract relationship from Archura, LLC, a company owned by Emmit McHenry and Kurt McHenry at the end of 2018.\nThe contract relationship includes five purchase orders to deliver networking services to AT&T and its clients. The total sales of\nthese five purchase orders were $99,653 and $119,279 for the years ended December 31, 2025 and 2024, respectively.\n\n \n\n**Promissory\nNotes with Western**\n\n \n\nOn\nJuly 27, 2023, Western Acquisition Ventures Corp. (“Western”) entered into a promissory note with Cycurion Sub, Inc., a Delaware\ncorporation formerly known as Cycurion, Inc. (“Cycurion Sub”) for $200,000, pursuant to which Western can borrow up to an\naggregate principal amount of $200,000. The Promissory Note, with an interest rate of 5% per annum is payable upon the sooner of the\nconsummation of the Business Combination with Cycurion Sub, or January 11, 2024. If Western defaulted on the loan, or the business combination\ndid not occur, Western will owe all principal and accrued interest thereto to Cycurion Sub. Cycurion Sub may not seek recourse against\nany money held in the trust account established pursuant to the investment management trust agreement, dated as of January 11, 2022,\nas amended, by and between Western and Equiniti Trust Company, nor any of Western’s directors, officers, and any affiliate. As\nof September 30, 2024, Western has borrowed $554,269 and accrued approximately $21,906 in interest. As of December 31, 2023, Western\nhas borrowed $200,000 and accrued approximately $4,222 in interest. On January 26, 2024, Western and Cycurion Sub amended the Promissory\nNote to increase its amount to $300,000 and extend the maturity date to the earlier of the consummation of the Business Combination or\nApril 11, 2024. On April 4, 2024, Western and Cycurion Sub amended the Promissory Note to extend the maturity date to the earlier of\nthe consummation of the Business Combination or July 11, 2024. On May 3, 2024, Western and Cycurion Sub amended the Promissory Note to\nincrease its principal amount to $554,269. On July 2, 2024, Western and Cycurion Sub amended the Promissory Note to extend the maturity\ndate of this note to the earlier of the consummation of the Business Combination or January 11, 2025. On October 9, 2024, Western and\nCycurion Sub amended the Promissory Note to extend the maturity date of this note to the earlier of the consummation of the Business\nCombination or January 11, 2025. On January 8, 2025, Western and Cycurion Sub amended the Promissory Note to extend the maturity date\nof this note to the earlier of the consummation of the Business Combination or April 11, 2025. On October 9, 2024, Western and Cycurion\nSub amended the Promissory Note to extend the maturity date of this note to the earlier of the consummation of the Business Combination\nor January 11, 2025. On January 8, 2025, Western and Cycurion Sub amended the Promissory Note to extend the maturity date of this note\nto the earlier of the consummation of the Business Combination or April 11, 2025.\n\n \n\nOn\nJanuary 6, 2025, Cycurion Sub entered into a promissory note with Western for a principal amount of $55,555.56, pursuant to which Cycurion\nSub can borrow up to an aggregate principal amount of $50,000.00. The promissory note, with an interest rate of 10% per annum is payable\nupon the sooner of the consummation of the Business Combination with Cycurion Sub, or six months following the date of the promissory\nnote. If Western defaults on the loan, or the business combination does not occur, Western will owe all principal and accrued interest\nthereto to Western.\n\n \n\n15\n\n \n\n \n\nOn\nJanuary 24, 2025, Cycurion Sub entered into a promissory note with Western for a principal amount of $327,777.78, pursuant to which Cycurion\nSub can borrow up to an aggregate principal amount of $295,000.00. The promissory note, with an interest rate of 10% per annum is payable\nupon the sooner of the consummation of the Business Combination with Cycurion Sub, or six months following the date of the promissory\nnote. If Western defaults on the loan, or the business combination does not occur, Western will owe all principal and accrued interest\nthereto to Western.\n\n \n\n**Founder\nShares**\n\n \n\nOn\nJune 9, 2021, the Sponsor acquired 4,312,500 shares of common stock of Western (the “Founder Shares”) for an aggregate purchase\nprice of $25,000. On June 16, 2021, the Sponsor transferred 1,207,500 of the Founder Shares to A.G.P./Alliance Global Partners (“A.G.P.”)\nfor $7,000. On November 22, 2021, Western effected a 2-for-3 reverse stock split of its common stock, and A.G.P. sold back to the Sponsor\n55,000 Founder Shares for $478, such that the Sponsor owns an aggregate of 70,833 Founder Shares, and A.G.P. owns 25,000 Founder Shares.\nUp to 12,500 Founder Shares (including the Founder Shares transferred to A.G.P.) were subject to forfeiture by the subscribers in case\nthe underwriters did not fully exercise their over-allotment option. Since the underwriters exercised the overallotment option in full\non January 14, 2022, none of the Founder Shares are subject to forfeiture any longer.\n\n \n\nThe\nSponsor, officers and directors have agreed, subject to limited exceptions, not to transfer, assign, or sell any of their Founder Shares\nuntil the earlier to occur of: (A) one year after the completion of the Business Combination or (B) subsequent to the Business Combination,\n(x) if the last sale price of the common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations,\nrecapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business\nCombination, or (y) the date on which Western completes a liquidation, merger, capital stock exchange, or other similar transaction that\nresults in all of Western’s stockholders having the right to exchange their shares of common stock for cash, securities, or other\nproperty.\n\n \n\n**Agreements\nwith A.G.P.**\n\n \n\n**Advisory\nAgreement with A.G.P.**\n\n \n\nA.G.P.\nwas a financial advisor to both Western in connection with the Business Combination transaction. Upon the completion of the Business\nCombination, A.G.P.: (i) received a cash fee of $500,000 shares of Common Stock and warrants to purchase 500,000 shares of Common Stock\nat an exercise price of $150.00 per share. Pursuant to the advisory agreement (the “Advisory Agreement”), Western shall pay\nA.G.P. a total transaction fee equal to $2,500,000 (the “Transaction Fee”) upon the closing of the Business Combination.\nThe Transaction Fee will be payable in the form of preferred shares of Cycurion that are convertible into 16,667 shares of Common Stock\n(such preferred shares or the Common Stock into which they convert, the “Transaction Fee Shares”), for a price per share\nof Common Stock equal to $150.00. A portion of the Transaction Fee Shares shall be subject to forfeiture and return to the Company for\ncancellation once A.G.P. converts and sells Transaction Fee Shares generating sales proceeds (excluding commissions) of $2,500,000.\n\n \n\nThe\nTransaction Fee Shares shall be subject to a lock-up ending on the earlier of (i) the date on which 75% of the outstanding Series B Convertible\nPreferred Stock is converted into shares of the combined company’s common stock and (ii) three months from February 14, 2025, which\nwas the closing date of the de-SPAC (the “Lock-Up Termination Date”). After the Lock-Up Termination Date, A.G.P. may convert\nthe Transaction Fee Shares and sell them subject to a leak-out provision that limits A.G.P.’s sales of Transaction Fee Shares on\nany given date to 10% of the cumulative trading volume of the common stock for such date (including pre-market, market and post-market\ntrading) as reported by Bloomberg, LP. This restriction shall remain in effect beginning on the Lock-Up Termination Date and ending on\nthe date on which 100% of the Series B Convertible Preferred Stock outstanding as of the closing is converted into shares of our Common\nStock.\n\n \n\nThe\nparties amended the Advisory Agreement (the “Amended Advisory Agreement”), pursuant to which Western shall pay A.G.P. the\nTransaction Fee in the form of preferred shares of Cycurion that are convertible into 166,667 shares of Common Stock (such preferred\nshares or the Common Stock into which they convert, the “Amended Transaction Fee Shares”), for a price per share of Common\nStock of $15.00. A portion of the Amended Transaction Fee Shares shall be subject to forfeiture and return to the Company for cancellation\nonce A.G.P. converts and sells Transaction Fee Shares generating sales proceeds (excluding commissions) of $2,500,000.\n\n \n\n16\n\n \n\n \n\nThe\nAmended Transaction Fee Shares shall be subject to a lock-up ending on the earlier of (i) the date on which 75% of the outstanding Series\nB Convertible Preferred Stock is converted into shares of the combined company’s common stock and (ii) six months from the Lock-Up\nTermination Date. After the Lock-Up Termination Date, A.G.P. may convert the Amended Transaction Fee Shares and sell them subject to\na leak-out provision that limits A.G.P.’s sales of Amended Transaction Fee Shares on any given date to 10% of the cumulative trading\nvolume of the common stock for such date (including pre-market, market and post-market trading) as reported by Bloomberg, LP. This restriction\nshall remain in effect beginning on the Lock-Up Termination Date and ending on the date on which 100% of the Series B Convertible Preferred\nStock outstanding as of the closing is converted into shares of our Common Stock.\n\n \n\nUpon\nthe execution of the Advisory Agreement, the Business Combination Marketing Agreement, dated January 11, 2022, between Western and A.G.P.\nin which Western and Cycurion Sub caused the combined company to issue to A.G.P. 16,667 shares of common stock of the combined company\nin full satisfaction of the fees, was terminated, and such shares of common stock extinguished in their entirety.\n\n \n\n**Placement\nAgent Agreement with A.G.P.**\n\n \n\nA.G.P.\nacted as the placement agent for the private placement. Pursuant to a placement agent agreement between A.G.P. and the Company, dated\nDecember 4, 2025, the Company agreed to pay A.G.P. a cash fee equal to 10.0% of the aggregate gross proceeds raised in the ate and a\ncash fee of $500,000, and to reimburse A.G.P. for certain reasonable, documented, and accountable expenses, including legal fees, of\n$60,000 in the aggregate.\n\n \n\n**Agreements\nwith Seward & Kissel LLP**\n\n \n\nOn\nNovember 27, 2024, we entered into a revised engagement letter (the “Revised Engagement Letter”) with Seward & Kissel\nLLP (“Seward & Kissel”), pursuant to which Western and Cycurion agreed to pay approximately $1.3 million of its outstanding\nlegal fees (the “Legal Fees”) in shares of Common Stock in connection with the Business Combination. Following the closing\nof the Business Combination on February 14, 2025 and in connection with the Revised Engagement Letter, we issued to Seward & Kissel\n8,333 shares of Common Stock and the Seward & Kissel pre-funded warrant that is exercisable for approximately $1.3 million in shares\nof Common Stock, or up to 83,333 shares of Common Stock (the “Seward & Kissel Pre-Funded Warrant”); provided that once\nthe net proceeds from the sale of the shares equals the Legal Fees, the remaining shares of Common Stock, including such Common Stock\nexercisable under the Seward & Kissel Pre-Funded Warrant, shall be returned to the Cycurion.\n\n \n\nWe\nplan to enter into an exchange agreement with Seward & Kissel to exchange the Seward & Kissel Pre-Funded Warrant for a convertible\npromissory note that is convertible into such number of shares equal to the Legal Fees.\n\n \n\n**Agreement\nwith Baker & Hostetler LLP**\n\n \n\nIn\n2023, Western agreed to pay approximately $788,030 of its obligations to its counsel, Baker & Hostetler LLP, in shares of Common\nStock following the Business Combination, which will be issued at a price per share equal to $300.00, or 2,627 shares of Common Stock.\n\n \n\n**Lock-up\nAgreements and Leak-out Agreements**\n\n \n\n**Series\nA Convertible Preferred Stock**\n\n \n\nThe\nholders of our Series A Convertible Preferred Stock (and the underlying securities for which the holders have conversion rights) are\nsubject to a one-year lock-up of their securities that commenced on the closing of the Business Combination, subject to release from\nthe lock-up after six months from the closing if, thereafter, the daily trading value of shares of our Common Stock is greater than $150,000\nfor 30 consecutive trading days and the 30-day VWAP for shares of our Common Stock is greater than $5.00.\n\n \n\n17\n\n \n\n \n\nOn\nSeptember 25, 2025, our board of directors waived the Series A Convertible Preferred Stock lock-up restrictions. The holders of our Series\nA Convertible Preferred Stock (and the underlying securities for which the holders have conversion rights) were previously subject to\na one-year lock-up of their securities that commenced on the closing of the Business Combination with Western on February 14, 2025, subject\nto release from the lock-up after six months from the closing if, thereafter, the daily trading value of shares of our Common Stock is\ngreater than $150,000 for 30 consecutive trading days and the 30-day VWAP for shares of our Common Stock is greater than $5.00. As our\nCommon Stock does not meet the conditions set forth above to release the holders of the Series A Convertible Preferred Stock from the\nlock-up restrictions after six months from the closing of the Business Combination, our board of directors deemed it in the best interests\nto waive such lock-up restrictions as the Series A Convertible Preferred Stock accrues approximately $120,000 per year in stock or cash\npayments. If the holders of the Series A Convertible Preferred Stock convert such preferred stock into Common Stock, we could save approximately\n$120,000 in costs on its income statement, which is part of our strategic recapitalization to strengthen its balance sheet and support\ngrowth initiatives.\n\n \n\n**Series\nB Convertible Preferred Stock**\n\n \n\nThe\nholders of our Series B Convertible Preferred Stock (and the underlying securities for which the holders have conversion rights) are\nsubject to different terms depending on the relevant agreements. Prior to the one-for-thirty reverse stock split of the Company’s\nshares of common stock, par value $0.0001, that took effect with the commencement of business on October 27, 2025, 355 shares of Cycurion\nSeries B Convertible Preferred Stock following the Business Combination were converted at the closing of the Business Combination for\n23,666 shares of Common Stock following the Business Combination. Holders are subject to a nine-month leak-out that commenced on the\nclosing of the Business Combination, such that aggregate sales cannot exceed 40% of the daily trading volume of shares of our Common\nStock following the Business Combination.\n\n \n\n**Series\nC Convertible Preferred Stock**\n\n \n\nThe\nholders of our Series C Convertible Preferred Stock (and the underlying securities for which the holders have conversion rights) are\nsubject to a one-year lock-up of their securities that commenced on the closing of the Business Combination, subject to release from\nthe lock-up after six months from the closing if, thereafter, the daily trading value of shares of our Common Stock is greater than $150,000\nfor 30 consecutive trading days and the 30-day VWAP for shares of our Common Stock is greater than $5.00.\n\n \n\n**Series\nD Convertible Preferred Stock**\n\n \n\nThe\nholders of our Series D Convertible Preferred Stock (and the underlying securities for which the holders have conversion rights) are\nsubject to a nine-month leak-out that commenced on the closing of the Business Combination, such that aggregate sales cannot exceed 10%\nof the daily trading volume of shares of our Common Stock following the Business Combination. However, the leak-out provisions shall\nterminate prior to the expiry of the nine-month period in the event that the holders of the Series D Convertible Preferred Stock have\nconverted all of such preferred stock and have sold all of the converted shares into the public markets.\n\n** **\n\n**Series\nE Convertible Preferred Stock**\n\n \n\nThe\nholders of our Series E Convertible Preferred Stock (and the underlying securities for which the holders have conversion rights) are\nsubject to a nine-month lock-up that commenced on March 31, 2025.\n\n \n\n**Series\nF Convertible Preferred Stock**\n\n \n\nThe\nholders of our Series F Convertible Preferred Stock (and the underlying securities for which the holders have conversion rights) are\nnot subject to a lock-up.\n\n \n\n**Series\nG Convertible Preferred Stock**\n\n \n\nThe\nholders of our Series G Convertible Preferred Stock (and the underlying securities for which the holders have conversion rights) are\nnot subject to a lock-up.\n\n \n\n**Series H Convertible Preferred Stock**\n\n \n\nThe holders of our Series H Convertible Preferred\nStock (and the underlying securities for which the holders have conversion rights) are not subject to a lock-up.\n\n \n\n**Series I Convertible Preferred Stock**\n\n \n\nThe holder of our Series I Convertible Preferred Stock\n(and the underlying securities for which the holders have conversion rights) are subject to a lock-up agreement, pursuant to which a significant\nportion of the shares may not be sold or otherwise transferred for a defined period following closing of the merger with Secuvant, LLC\n(six months for approximately $1.5 million of shares and 90 days for approximately $500,000 of shares). Upon expiration of the lock-up\nperiods, holders remain subject to a leak-out agreement, which imposes ongoing limitations on the volume, timing and manner of resale.\n\n \n\n18\n\n \n\n \n\n**A.G.P.**\n\n \n\nThe\nTransaction Fee Shares shall be subject to a lock-up ending on the earlier of (i) the date on which 75% of the outstanding Series B Convertible\nPreferred Stock is converted into shares of our Common Stock and (ii) three months from the Lock-Up Termination Date. After the Lock-Up\nTermination Date, A.G.P. may convert the Transaction Fee Shares and sell them subject to a leak-out provision that limits A.G.P.’s\nsales of Transaction Fee Shares on any given date to 10% of the cumulative trading volume of the common stock for such date (including\npre-market, market, and post-market trading) as reported by Bloomberg, LP. This restriction shall remain in effect beginning on the Lock-Up\nTermination Date and ending on the date on which 100% of the Series B Convertible Preferred Stock outstanding as of the closing is converted\ninto shares of our Common Stock.\n\n \n\nThe\nAmended Transaction Fee Shares shall be subject to a lock-up ending on the earlier of (i) the date on which 75% of the outstanding Series\nB Convertible Preferred Stock is converted into shares of the combined company’s common stock and (ii) six months from the Lock-Up\nTermination Date. After the Lock-Up Termination Date, A.G.P. may convert the Amended Transaction Fee Shares and sell them subject to\na leak-out provision that limits A.G.P.’s sales of Amended Transaction Fee Shares on any given date to 10% of the cumulative trading\nvolume of the common stock for such date (including pre-market, market and post-market trading) as reported by Bloomberg, LP. This restriction\nshall remain in effect beginning on the Lock-Up Termination Date and ending on the date on which 100% of the Series B Convertible Preferred\nStock outstanding as of the closing is converted into shares of our Common Stock.\n\n \n\n**Seward\n& Kissel LLP**\n\n \n\nThe\nholder of the 8,333 shares of Common Stock issued in upon the closing of the Business Combination was subject to a 20-day lock-up that\ncommenced on February 14, 2025, which was the closing of the Business Combination. Those shares are no longer subject to a lock-up. The\nshares of Common Stock underlying the Seward & Kissel Pre-Funded Warrant are not subject to a lock-up period.\n\n \n\n**Baker\n& Hostetler LLP**\n\n \n\nThe\nholder of 2,627 shares of Common Stock is subject to a one-year lock-up of its securities that commenced on February 14, 2025, which\nwas the closing of the Business Combination.\n\n \n\n**Founder\nShares**\n\n \n\nThe\nholder of these securities is subject to a one-year lock-up of its securities that commenced on February 14, 2025, which was the closing\nof the Business Combination.\n\n \n\n**PIPE\nShares**\n\n \n\nThe\nholder of these securities is subject to a 30-day lock-up of its securities that commenced on February 14, 2025, which was the closing\nof the Business Combination.\n\n** **\n\n**Director\nIndependence**\n\n \n\nThe\napplicable listing rules of Nasdaq, on which our shares of Common Stock is listed, generally require that a majority of the members of\na listed company’s board of directors be independent. In addition, the listing rules generally require that, subject to specified\nexceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent.\n\n \n\nIn\naddition, audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order\nto be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in such\nmember’s capacity as a member of the audit committee, the board of directors or any other board committee (i) accept, directly\nor indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries or (ii) be an affiliated\nperson of the listed company or any of its subsidiaries.\n\n \n\nOur\nboard of directors conducts an annual review of the independence of our directors. The board of directors has determined that, as of\nthe date hereof, each of the following members of the board of directors is an “independent director” as defined under the\napplicable Nasdaq standards and SEC rules: Messrs. Peter R. Ginsberg, Reginald S. Bailey, Sr. and Kevin E. O’Brien.\n\n \n\n19"}