OVERLAND PARK, Kansas, July 15, 2026, 07:09 CDT
Kustom Entertainment, Inc. NASDAQ:KUST shares were indicated 57.4% higher at $1.59 before Wednesday’s regular session as the scheduled closing date arrived for the sale of its video-solutions business. The $5.5 million base package is 8.7 times Kustom’s $630,910 market value at Tuesday’s close.
That gap looks large, but the payment mix explains much of it. Buyer Cycurion, Inc. NASDAQ:CYCU is due to pay $1.25 million at closing, while $4.25 million takes the form of a three-year secured note carrying 7% interest. Kustom could also receive up to $1 million under an earnout and warrants for 2 million Cycurion shares.
The Securities and Exchange Commission filing describes July 15 as an anticipated date, not a certainty. Conditions include due diligence, validation of financial projections, carve-out statements suitable for audit and SEC reporting, board approvals, third-party consents and arrangements with key workers. An earlier company announcement had targeted a closing on or before June 30, meaning the timetable has already shifted.
| Company | Tuesday close | Wednesday premarket | Premarket move | Closing market cap |
|---|---|---|---|---|
| Kustom Entertainment | $1.01 | $1.59 | +57.4% | $0.63 million |
| Cycurion | $0.49 | $0.50 | +2.6% | $5.53 million |
Market data at 07:09 CDT. Market capitalizations reflect Tuesday’s closing data.
At $1.59, Kustom’s implied equity value rises to about $997,000, based on 627,000 shares outstanding. The base consideration would still equal roughly 5.5 times that value. This is not a clean arbitrage, however: Kustom is selling one operating unit rather than the whole company, and the proceeds are not necessarily distributed to shareholders. Its first-quarter net loss was $5.89 million on revenue of $4.31 million.
Cycurion’s ability to fund the purchase and carry the note is therefore central. It reported about $2 million of cash at March 31, a $12 million working-capital deficit, meaning current liabilities exceeded current assets, and $2.9 million of operating cash outflow during the quarter. Its filing said continued operations depended on securing more financing and generating positive cash flow. The upfront payment equals roughly 62% of its quarter-end cash, while the note equals 77% of its market capitalization.
| Deal component | Amount and terms | Scale comparison |
|---|---|---|
| Cash at closing | $1.25 million | 2.0 times Kustom’s closing market cap; about 62% of Cycurion’s Q1 cash |
| Secured note | $4.25 million, 7%, three years | 6.7 times Kustom’s market cap; 77% of Cycurion’s market cap |
| Earnout | Up to $1 million | Payable only if performance tests are met; subject to offsets or clawback |
| Cycurion warrants | 2 million shares at $2.80 | Exercise price was 5.7 times Cycurion’s Tuesday close |
Calculations use Tuesday’s market values and Cycurion’s March 31 cash balance.
The note is secured only by the acquired video assets and their proceeds, rather than Cycurion’s other property, except where the final security document provides otherwise. Based on information supplied by the seller, the unit generated about $5.1 million in annual revenue and held an $8 million contracted backlog. The base purchase price is therefore about 1.1 times reported revenue. The valuation is restrained; the financing carries the harder question.
The warrants are rights to buy shares at a fixed price. With Cycurion closing at $0.49, the $2.80 exercise price left them with no intrinsic value on Tuesday. Shares received through an exercise would also face a 12-month resale restriction, with daily sales capped at 10% of the previous session’s trading volume.
For Kustom, completing the sale would advance its shift toward live events and ticketing after its recent name change. “This divestiture sharpens our focus and allows us to direct resources toward the significant opportunity we see in the entertainment sector,” CEO Stanton E. Ross said. The company plans more than 20 show days at Gilley’s Park City during 2027.
Cycurion has pitched the acquired operation as a way to add about 1,000 customer relationships, an estimated 58-patent portfolio and public-safety products it can sell alongside cybersecurity services. In a shareholder update released Tuesday, CEO Kevin Kelly said the company remained focused on “building a stronger, more scalable cybersecurity company while creating long-term value for shareholders.” GlobeNewswire
But the valuation spread can close in either direction. The transaction could slip or fail, the note may prove harder to collect than its face value suggests, the earnout may not be achieved and the warrants could remain worthless. Even after a completed sale, Kustom shareholders would own a smaller entertainment-focused company with recent losses.
The next hard data point is a completion filing confirming that the $1.25 million arrived and the promissory note was issued. Until then, Wednesday’s premarket rally reflects an expected closing rather than a completed transaction.
