Tech security firm Cycurion, Inc. (NASDAQ:CYCU) announced on Thursday the formation of a preliminary agreement to purchase the video-solutions division from Kustom Entertainment, Inc. (NASDAQ:KUST), a specialist in mobile video surveillance technologies. The proposed transaction, executed through a Memorandum of Understanding, is currently valued between $6 million and $8.4 million based on pro forma financials.
The payment structure envisaged includes a cash component estimated between $1 million and $1.4 million, with the remaining balance to be settled in Cycurion preferred stock. Importantly, the preferred stock conversion price is established at a 20% premium over the 30-day volume-weighted average price (VWAP) of Cycurion's common shares prior to deal closure. This conversion price undergoes adjustments to account for corporate actions such as stock splits, dividends, recapitalizations, and provisions for down round protection as detailed in the final agreement documentation.
Furthermore, Kustom holds the option—but not the obligation—to convert the preferred shares into common stock once the underlying shares have been duly registered.
Cycurion CEO Kevin Kelly remarked on the strategic intent, stating, "Integrating Kustom's established expertise in video and evidence management with our advanced AI-powered cybersecurity platform creates a unified and secure ecosystem tailored for public safety organizations and enterprise clients. We anticipate this acquisition will immediately enhance both revenues and profitability, boost our recurring revenue streams, and unlock substantial cross-selling opportunities, all while being acquired at an attractive valuation point."
Revenue Growth and Expanded Customer Base
The incorporation of Kustom's video-solutions business is projected to increase Cycurion's revenue by approximately $5.1 million in 2026 compared to the preceding year, reflecting a roughly 35% uplift. This projection is supported by a substantial backlog close to $8 million, reflecting existing contracts and recurring subscription agreements held by Kustom.
This transaction builds upon Cycurion’s current growth trajectory and projected run-rate improvement. Importantly, the deal grants immediate entry into Kustom’s extensive client network, which spans all 50 U.S. states and over 30 countries worldwide.
Kustom’s distribution network reaches thousands of end-users globally and, as of 2025, includes over 300 active subscription contracts tied to its video-solutions portfolio. This wide-reaching customer base offers Cycurion a platform for growth driven through both product integration and market expansion.
Transaction Conditions and Market Response
The completion of the acquisition remains conditional upon customary closing requirements, including obtaining necessary regulatory consents and approval from shareholders where applicable.
In response to the announcement, Cycurion's shares experienced an intraday rise of 3.89%, closing at $2.60. Conversely, Kustom Entertainment's stock declined by 3.26%, ending at $2.08 during premarket trading on Thursday, as reported by market data provider Benzinga Pro.