Exhibit 99.2
Video Solutions Segment – Pro Forma Operating Financial Statements
The following exhibits present the operating financial statements for the Video Solutions segment. Exhibit 1 presents the segment’s operating assets and liabilities as of June 30, 2026. Exhibit 2 presents the pro forma income statement for fiscal year 2026, combining first-half actual results with the second-half forecast, with detailed assumptions for each line item. Exhibit 3 presents the pro forma operating cash flow derived from projected balance sheet changes, with supporting assumptions for each projected ending balance and its resulting cash impact.
Exhibit 1 — Operating Assets & Liabilities (as of June 30, 2026)
| June 30, 2026 | ||||
| Operating Assets | ||||
| Inventory, net of obsolescence reserve | $ | 1,498,602 | ||
| Accounts Receivable and Subscription Receivable | $ | 5,211,238 | ||
| Allowance for AR doubtful account | $ | (255,000 | ) | |
| Prepaid Expense | $ | 351,188 | ||
| ROU Asset - Building | $ | 109,711 | ||
| Property, Plant & Equipment, net | $ | 63,834 | ||
| Intangible Assets – Patent, net | $ | 168,024 | ||
| Total Operating Assets | $ | 7,147,597 | ||
| Operating Liabilities | ||||
| Deferred Revenue, ST and LT | $ | 6,623,040 | ||
| ROU Obligation - Building | $ | 109,711 | ||
| Accounts Payable | $ | 193,935 | ||
| Accrued Expenses | $ | 199,877 | ||
| Total Operating Liabilities | $ | 7,126,563 | ||
| NET OPERATING ASSETS | $ | 21,034 | ||
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Exhibit 2 — Pro Forma Income Statement
| 2026 (H1 Actual + H2 Forecast) | Assumptions | |||||
| Product Revenue | $ | 1,200,000 | H1 actual $475,518 per the June 2026 close; H2 forecast $724,482. Bottom-up H2 pipeline ($4.74M raw / $1.81M conservatively weighted) covers the H2 forecast ~2.5×. | |||
| Service Revenue | $ | 4,300,000 | H1 actual $1,775,102 + H2 forecast $2,524,898. H2 growth over the H1 run rate is supported by $3,009,194 short-term deferred revenue at 6/30 and the Q4 renewal cycle. Existing deferred base recognized per ASC 606. | |||
| Total Revenue | $ | 5,500,000 | FY2026 of $5.5M reflects H1 actuals plus the H2 forecast, consistent with the Year 1 revenue target under the Agreement. FY2027 $5.8M (+5.5%), the Year 2 target. ~78% recurring. | |||
| COGS – Product | $ | 1,416,047 | H1 operating COGS $610,417 (excludes the one-time inventory charge-off presented below EBITDA). H2: materials $776,230 scaled to the $724K H2 product forecast + storage rent $29,400 = $805,630. FY $1,416,047. | |||
| COGS – Service | $ | 1,277,438 | H1 actual $595,041 (AWS, T-Mobile, Particle/Nova/ADCi, deployment & support labor). H2 forecast $682,397; FY $1,277,438. | |||
| Total COGS | $ | 2,693,485 | ||||
| Gross Profit | $ | 2,806,515 | Margin 51.0%. | |||
| R&D Expense | $ | 571,180 | H1 actual $274,838 + H2 forecast $296,342. Fixed headcount. | |||
| Selling & Promotional | $ | 438,166 | Sales salaries $185,369 + travel $45,000 + trade shows $40,000 + commissions $167,797. | |||
| G&A Expense | $ | 859,037 | Salaries $421,837, contractors $83,200, benefits $84,000, rent $90,000, IT $60,000, insurance $28,000, supplies $12,000, other/unallocated $80,000 (per GL). | |||
| Total SG&A | $ | 1,868,383 | R&D $571,180 + S&P $438,166 + G&A $859,037. | |||
| EBITDA | $ | 938,132 | Margin 17.1%. Presented before the one-time non-cash items shown separately below. | |||
| Inventory Reserve | $ | (567,357 | ) | For conservatism, management recorded a one-time, non-recurring charge-off of excess and obsolete inventory in the June 2026 close. Non-cash: fully reflected in the $2,172,575 obsolescence reserve in Exhibit 1, with no impact on operating cash flow; no further write-downs assumed in H2. | ||
| Provision for credit losses | $ | (169,738 | ) | For conservatism, management recorded a one-time credit loss allowance in the June 2026 close (GL 6130-000-00), growing the reserve from $85,262 at 12/31/25 to $255,000 at 6/30/26 per Exhibit 1. Non-cash: added back in Exhibit 3, with no impact on operating cash flow; no further provision assumed in H2. | ||
| Depreciation | $ | (41,371 | ) | Gross PP&E $542,461, net $63,834 at 6/30/26 → $46,482 by 12/31/26. No CapEx planned. | ||
| Patent Amortization | $ | (58,008 | ) | Net $168,024 at 6/30/26 per Exhibit 1 ($381,635 gross less $213,611 accumulated); amortized at $14,502/quarter to $139,020 by year-end. $80K H2 prosecution costs capitalized to the balance sheet (investing), not amortized until grant; 12/31/26 net $219,020. | ||
| Net Income | $ | 101,658 | EBITDA $938,132 less one-time non-cash items of $737,095, depreciation of $41,371, and patent amortization of $58,008. | |||
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Exhibit 3 — Pro Forma Operating Cash Flow
| Operating Activities | Amount | Assumptions | ||||
| Net Income | $ | 101,658 | Revenue $5,500,000 less COGS $2,693,485 less SG&A $1,868,383 = EBITDA $938,132, less one-time non-cash items $737,095 (inventory charge-off $567,357; credit loss reserve true-up $169,738), depreciation $41,371, and patent amortization $58,008. Both one-time items are added back below; the inventory balance change is measured on a gross (pre-reserve) basis. | |||
| Non-cash adjustments (add-back to net income): | ||||||
| Depreciation | +$41,371 | PP&E net of $87,853 at 12/31/25, $63,834 at 6/30/26 actual (H1 depreciation $24,019), $46,482 projected at 12/31/26. No CapEx planned. | ||||
| Patent amortization | +$58,008 | Patent net of $197,028 at 12/31/25 (derived), $168,024 at 6/30/26 actual per Exhibit 1; amortized at $14,502/quarter to $139,020 before additions. The $80K H2 prosecution costs are capitalized separately in investing (not amortized until grant); 12/31/26 net $219,020. | ||||
| Provision for credit losses | +$169,738 | For conservatism, management recorded a one-time Q2 true-up of $169,738 (GL 6130-000-00, recorded in the June 2026 close), growing the reserve from $85,262 at 12/31/25 to $255,000 at 6/30/26 per Exhibit 1, held flat through year-end (no H2 provision or write-offs assumed); presented as a one-time item in Exhibit 2. Coverage of 4.89% of gross receivables at 6/30. | ||||
| Inventory Reserve | +$567,357 | Non-cash charge-off establishing the excess and obsolete inventory reserve, recorded for conservatism in the June 2026 close (booked 6/30/26, GL 5000-000-00) and presented as a one-time item in Exhibit 2. The offsetting reserve increase is reflected in the gross inventory balance change below. | ||||
| Total non-cash add-backs | $ | 836,474 | ||||
| Changes in operating assets and liabilities: | ||||||
| Inventory increase | $ | (393,065 | ) | Measured on gross inventory (before the obsolescence reserve), consistent with the charge-off add-back above: H1 gross build of $393,065, held at the 6/30 gross level of $3,671,177 through year-end | ||
| AR & subscription increase | $ | (391,656 | ) | 12/31/25 $6,303,284; 6/30/26 actual $5,211,238; 12/31/26 projected $6,694,940 — the H2 rebuild is driven by Q4 subscription billings consistent with the service forecast. | ||
| Prepaid increase | $ | (200,804 | ) | 12/31/25 $150,384; 6/30/26 actual $351,188 per Exhibit 1; held at the 6/30 level through year-end. Reflects annual insurance and maintenance prepayments. | ||
| Deferred revenue increase | +$759,466 | 12/31/25 $7,594,656; 6/30/26 actual $6,623,040; 12/31/26 projected $8,354,122 (+10% over 12/31/25). H1 decline of $972K reflects recognition seasonality; the $1.73M H2 rebuild depends on the Q4 renewal/booking cycle (roughly one-third annual agency deals, two-thirds multi-year bundles) — the plan’s key balance-sheet dependency. | ||||
| AP increase | $ | (116,421 | ) | 12/31/25 $310,356; 6/30/26 actual $193,935; held at the 6/30 level; no H2 inventory build is forecast. | ||
| Accrued expenses increase | +$54,539 | 12/31/25 $145,338; 6/30/26 actual $199,877; held at the 6/30 level through year-end. | ||||
| Net working capital change | $ | (287,941 | ) | Net operating asset uses of $1,102K (inventory $393K, AR $392K, prepaid $201K, AP $116K), partially offset by the deferred revenue and accrual rebuild, for a net working capital absorption of $290K. | ||
| Operating Cash Flow | $ | 650,191 | NI $101,658 + non-cash add-backs $836,474 less working capital absorption $287,941 = $650,191 | |||
| Investing Activities | Amount | Assumptions | ||||
| Patent prosecution costs capitalized | $ | (80,000 | ) | Patent prosecution costs of $80,000 are capitalized as an intangible asset per company policy and classified as an investing outflow. No other capital expenditures planned for the period | ||
| NET CASH | $ | 570,191 | Operating CF $650,191 less investing $80,000. No financing activities. | |||
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Exhibit 4 — Technology Infrastructure (Unrecorded Intangible Asset)
Asset Summary
Platform: Microsoft Dynamics GP 2018 (Version 18.2, Perpetual License)
License Type: Perpetual, owned outright and no ongoing subscription fee.
Microsoft Account Number: 5271773 (Digital Ally)
First Registered: April 23, 2015
Active Modules: 5
Licensed Users: 21 Full Concurrent User CALs + 144 Self-Serve Named User CALs
Active Users: 24 (as of current Microsoft registration)
Annual Maintenance Stack: $24,532/year (documented; NetStandard Quote #1607-1, 7/21/2025) see breakdown below.
Maintenance Prepaid Status: FY2026 renewal prepaid through 9/26/2026.
Original Investment: $2,000,000
Net Book Value: $0 (fully amortized as of December 31, 2025)
Core Business Functions Supported
| ● | Inventory Management: FIFO costing, receiving, and COGS calculation for body-worn camera hardware and related accessories. | |
| ● | Accounts Receivable: AR aging, allowance tracking, and cash application across 100+ active government agency customers. | |
| ● | Accounts Payable: Vendor management and AP aging | |
| ● | Revenue & Commission Deferral: Native deferral profiles (3-, 5-, 7-year) supporting ASC 340-40 | |
| ● | Subscription Billing & Deferred Revenue: Multi-year contract billing and ASC 606 recognition schedules. | |
| ● | Financial Reporting: Full GL, Smart List reporting, and period-end close procedures supporting monthly, quarterly, and annual SEC reporting. | |
| ● | CRM Integration: GP integrates with external CRM platforms (e.g., Salesforce, Dynamics 365 Sales) via standard APIs and third-party connectors for unified customer and contract data. | |
| ● | Barcode & Field Operations -PanatrackerGP: Native GP plug-in for mobile barcode scanning, inventory tracking, and fixed asset management; plug-and-play on the existing GP instance with no custom integration required (panatrack.com). |
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Estimated Replacement Cost
Management’s estimate of the cost to deploy a comparable ERP environment from scratch, based on publicly available industry benchmarks (see Sources below):
| Cost Component | Low | High | Benchmark Basis | |||||||
| Software licensing — perpetual | $ | 150,000 | $ | 300,000 | Equivalent perpetual ERP license (GP or comparable mid-market platform); GP perpetual license acquired by DA in 2015 included 21 concurrent + 144 named user CALs | |||||
| Implementation & configuration | $ | 200,000 | $ | 400,000 | 100–700+ consultant hours at $150–$350/hour (Panorama 2025) | |||||
| Custom development & integrations | $ | 80,000 | $ | 180,000 | CRM and barcode integrations; each gap adds $5,000–$50,000 (DualEntry 2025) | |||||
| Data migration — 10+ years historical | $ | 75,000 | $ | 150,000 | 10+ years of data (since April 2015) across multiple modules; Panorama estimates up to $75,000 for complex migrations | |||||
| Training & change management | $ | 30,000 | $ | 60,000 | Standard allocation per Panorama 2025 ERP Report | |||||
| Business disruption / downtime risk | $ | 50,000 | $ | 100,000 | Lost productivity during cutover; typically excluded from vendor quotes | |||||
| Total Estimated Replacement Cost | $ | 585,000 | $ | 1,190,000 | Conservative; excludes 10+ years of intact historical transaction data and configured integration value | |||||
Benefits to Cycurion
| ● | Perpetual license — no subscription cost: GP is owned outright under a perpetual license; Buyer assumes no ongoing licensing fee, only the annual Enhancement Plan renewal ($259/incident support; annual renewal cost documentable from contract #4098270) | |
| ● | Zero day-one ERP spend: No capital outlay required to stand up financial and operational systems at closing | |
| ● | Immediate operational continuity: Billing, collections, deferred revenue recognition, and financial reporting continue uninterrupted | |
| ● | CRM integration ready: GP’s open API architecture supports connection to external CRM without custom development | |
| ● | Barcode, fixed assets & field operations - Panatrack actively deployed: PanatrackerGP already running with Manufacturing Standard, Fixed Assets, RMA Receiving, and 3 MCLs — no setup or integration required at closing | |
| ● | Prepaid maintenance transfers at closing: FY2026 annual maintenance ($24,532) is prepaid through 9/26/2026; Buyer receives remaining prepaid value as a balance sheet asset on the closing date | |
| ● | Preserved data history: Ten-plus years of customer, contract, and financial records transfer intact (since April 2015) — standalone migration of this volume estimated at $75,000–$150,000 | |
| ● | ASC 805 purchase accounting: Buyer establishes new amortizable tax basis (15-year life, Section 197) at fair value regardless of Seller’s $0 carrying value |
GP is not included in Exhibit 1 operating assets due to its $0 carrying value. Under ASC 805, buyer is required to recognize all identifiable acquired assets at fair value on the acquisition date, independent of our book value.
14001 Marshall Drive ● Lenexa, KS 66215 ● digitalally.com ● 800.440.4947