UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~December 3031, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File No. 000-28745

SideChannel, Inc.

(Exact name of registrant as specified in its charter)

Delaware

86-0837077

State or other jurisdiction of

incorporation or organization

I.R.S. Employer

Identification No.

146 Main Street, Suite 405, Worcester, MA 01608

(Address of principal executive offices) (Zip Code)

(508) 925-0114

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

~~Securities~~Indicate ~~registered~~by ~~pursuant~~check mark whether the registrant (1) has filed all reports required to be filed by Section 1213 or 15(gd) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Common Stock, par value $0.001

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large, accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~August~~February 1317, ~~2025~~2026, the registrant had ~~231~~4,~~229~~467,~~054~~207 shares of common stock outstanding.

SIDECHANNEL, INC.

TABLE OF CONTENTS

		PAGE
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of June 30, 2025 (Unaudited), and September 30, 2024	3
	Condensed Consolidated Balance Sheets as of December 31, 2025 (Unaudited), and September 30, 2025	3
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2025, and 2024	4
	Unaudited Condensed Consolidated Statements of Operations for the three months ended December 31, 2025 and 2024	4
	Unaudited Condensed Consolidated Statement of Stockholders’ Equity for the three and nine months ended June 30, 2025, and 2024	5
	Unaudited Condensed Consolidated Statement of Stockholders’ Equity for the three months ended December 31, 2025 and 2024	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2025, and 2024	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2025 and 2024	6
	Notes to Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3	Quantitative and Qualitative Disclosures About Market Risk	2524
Item 4.	Controls and Procedures	25
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	2726
Item 1A.	Risk Factors	2726
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2726
Item 3.	Defaults Upon Senior Securities	2726
Item 4.	Mine Safety Disclosures	2726
Item 5	Other Information	2726
Item 6.	Exhibits	2827

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SIDECHANNEL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	June 30, 2025			September 30, 2024
	December 31, 2025			September 30, 2025
	(Unaudited)	~~(Unaudited)~~
ASSETS
Current assets
Cash and cash equivalents	$	~~1,149~~495		$	1,~~045~~065
Short-term investments		100			~~250~~100
Accounts receivable, net		~~759~~686			~~732~~553
Deferred costs		15			150
Prepaid expenses and other current assets		328			374
Prepaid expenses and other current assets		453			385
Total current assets		1,609			2,092
Total current assets		2,476			2,562
Fixed assets		13			17
Fixed assets		20			33
Goodwill		1,356			1,356
Total assets	$	32,~~852~~978		$	3,~~951~~465
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	~~530~~445		$	~~729~~515
Deferred revenue		~~882~~677			~~515~~801
Income taxes payable		49			36
Total current liabilities		1,~~416~~131			1,~~247~~322
Total liabilities		1,~~416~~131			1,~~247~~322
Commitments and contingencies (Note 14)		-			-
Common stock, $0.001 par value, 681,000,000 shares authorized; 231,229,054 and 225,975,331 shares issued and outstanding as of June 30, 2025, and September 30, 2024		231			226
Common stock, $0.001 par value, 681,000,000 shares authorized; 4,446,713 shares issued and outstanding as of December 31, 2025, and September 30, 2025		4			4
Additional paid-in capital		22,~~558~~974			22,~~321~~874
Accumulated deficit		(2021,~~353~~131	)		(1920,~~843~~735	)
Total stockholders’ equity		21,~~436~~847			2,~~704~~143
Total liabilities and stockholders’ equity	$	32,~~852~~978		$	3,~~951~~465

The Company’s common stock shares issued and outstanding, common stock and additional paid-in capital as of December 31, 2025, and September 30, 2025, have been retroactively restated for the reverse stock split as described in Note 2 of the accompanying notes, which are an integral part of these unaudited condensed consolidated financial statements.

SIDECHANNEL, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

2025

2024

~~2025~~

~~2024~~

Three Months Ended

~~Nine Months Ended~~

June 30,

December 31,

2025

2024

~~2025~~

~~2024~~

Revenues

1,~~776~~774

1,~~846~~908

~~5,578~~

~~5,509~~

Cost of revenues

~~941~~865

~~944~~1,034

~~2,928~~

~~2,894~~

Gross profit

~~835~~909

~~902~~874

~~2,650~~

~~2,615~~

Operating expenses

General and administrative

~~715~~677

~~778~~660

~~2,030~~

~~2,336~~

Selling and marketing

~~242~~457

~~137~~267

~~736~~

~~562~~

Research and development

~~146~~175

~~141~~153

~~419~~

~~390~~

Total operating expenses

1,~~103~~309

1,~~056~~080

~~3,185~~

~~3,288~~

Operating loss

(~~268~~400

)

(~~154~~206

)

~~(535~~

)

~~(673~~

)

Other income, net

813

Net loss before income tax expense

(~~259~~393

)

(~~146~~193

)

~~(504~~

)

~~(644~~

)

Income tax expense

-2

Net loss

(~~261~~396

)

(~~146~~195

)

~~(510~~

)

~~(645~~

)

Net loss per common share – basic and diluted

(0.0009

)

(0.0004

)

~~(0.00~~

)

~~(0.00~~

)

Weighted average common shares outstanding – basic and diluted

~~231~~4,~~229~~446,~~054~~713

~~225~~4,~~032~~346,~~119~~574

~~228,380,169~~

~~220,770,171~~

The Company’s weighted average common shares outstanding and net loss per common share – basic and diluted for the three months ended December 31, 2025, and December 31, 2024, have been retroactively restated for the reverse stock split as described in Note 2 of the accompanying notes, which are an integral part of these unaudited condensed consolidated financial statements.

SIDECHANNEL, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

	Common Shares		Common Par Value		APIC			Accumulated Deficit			Total Equity
	Shares		Amount		Paid-in Capital			Deficit			Equity
Balance at September 30, 2024		225,975,331	$	226	$	22,321		$	(19,843	)	$	2,704
	Common Stock				Additional			Accumulated			Total
Shares issued for legal settlement		356,400		-		(1	)		-			(1	)
	Shares		Amount		Paid-in Capital			Deficit			Equity
Stock-based compensation		-		-		112			-			112
Balance at September 30, 2025		4,446,713	$	4	$	22,874		$	(20,735	)	$	2,143
Net loss		-		-		-			(195	)		(195	)
Stock-based compensation		-		-		100			-			100
Balance at December 31, 2024		226,331,731	$	226	$	22,432		$	(20,038	)	$	2,620
Net loss		-		-		-			(396	)		(396	)
Stock-based compensation		4,897,323		5		38			-			43
Balance at December 31, 2025		4,446,713	$	4	$	22,974		$	(21,131	)	$	1,847
Net loss		-		-		-			(54	)		(54	)
Balance at March 31, 2025		231,229,054	$	231	$	22,470		$	(20,092	)	$	2,609
Stock-based compensation		-		-		88			-			88
Net loss		-		-		-			(261	)		(261	)
Balance at June 30, 2025		231,229,054	$	231	$	22,558		$	(20,353	)	$	2,436

	Common Shares		Common Par Value		APIC			Accumulated Deficit			Total Equity
	Common Stock				Additional			Accumulated			Total
Balance at September 30, 2023		213,854,781	$	214	$	21,755		$	(18,939	)	$	3,030
	Shares		Amount		Paid-in Capital			Deficit			Equity
Shares issued for 2021 Investor Warrants		7,270,958		7		(7	)		-			-
Balance at September 30, 2024		4,345,680	$	4	$	22,543		$	(19,843	)	$	2,704
Shares issued for services		257,085		-		8			-			8
Balance		4,345,680	$	4	$	22,543		$	(19,843	)	$	2,704
Stock-based compensation		262,486		1		80			-			81
Shares issued for legal settlement		6,854		-		(1	)		-			(1	)
Net loss		-		-		-			(246	)		(246	)
Stock-based compensation		-		-		112			-			112
Balance at December 31, 2023		221,645,310	$	222	$	21,836		$	(19,185	)	$	2,873
Net loss		-		-		-			(195	)		(195	)
Shares issued for services		180,558		-		12			-			12
Balance at December 31, 2024		4,352,534	$	4	$	22,654		$	(20,038	)	$	2,620
Stock-based compensation		2,529,937		2		131			-			133
Balance		4,352,534	$	4	$	22,654		$	(20,038	)	$	2,620
Net loss		-		-		-			(253	)		(253	)
Balance at March 31, 2024		224,355,805	$	224	$	21,979		$	(19,438	)	$	2,765
Balance		224,355,805	$	224	$	21,979		$	(19,438	)	$	2,765
Stock-based compensation		1,619,526		2		207			-			209
Net loss		-		-		-			(146	)		(146	)
Balance at June 30, 2024		225,975,331	$	226	$	22,186		$	(19,584	)	$	2,828
Balance		225,975,331	$	226	$	22,186		$	(19,584	)	$	2,828

The ~~accompanying~~Company’s ~~notes~~common ~~are~~shares anoutstanding ~~integral~~(shares ~~part~~and ofamount) ~~these~~and ~~unaudited~~additional ~~condensed~~paid-in ~~consolidated~~capital ~~financial~~have ~~statements.~~been retroactively restated for the reverse stock split as described in Note 2 of the accompanying notes,

which are an integral part of these unaudited condensed consolidated financial statements.

SIDECHANNEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	2025			2024
	Nine Months Ended June 30,
	Three Months Ended December 31,
	2025			2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(~~510~~396	)	$	(~~645~~195	)
Adjustments to reconcile net loss to net cash flows provided by / (used in) operating activities:
Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:
Depreciation and amortization		~~148~~4			~~144~~49
Legal Settlement Paid in Stock		(1	)
Legal settlement paid in stock		-			(1	)
Stock-based compensation and payments for services, net		~~243~~100			~~443~~112
Changes in operating assets and liabilities:
Accounts receivable, net		(27133	)		~~(31~~147	)
Prepaid expenses and other current assets		(68	)		113
Prepaid expenses and other assets		46			96
Accounts payable and accrued liabilities		(~~199~~70	)		(~~274~~139	)
Deferred revenue		367			367
Income taxes payable		3			2
Income taxes payable		1			-
Deferred revenue		(124	)		4
Net cash provided by / (used in) operating activities		(46	)		117
Net cash provided by (used in) operating activities		(570	)		75
CASH FLOWS FROM INVESTING ACTIVITIES:
Net sale (purchase) of short-term investments		150			-
Net cash provided by / (used in) investing activities		-			-
Purchase of fixed assets		-			(15	)
Net cash provided by / (used in) investing activities		150			(15	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of note payable		-			(50	)
Net cash used in financing activities		-			-
Net cash used in financing activities		-			(50	)
INCREASE (DECREASE) IN CASH		(570	)		75
INCREASE IN CASH		104			52
CASH, BEGINNING OF PERIOD		1,065			1,045
CASH, BEGINNING OF PERIOD		1,045			1,053
CASH, END OF PERIOD	$	495		$	1,120
CASH, END OF PERIOD	$	1,149		$	1,105
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Shares Issued for Services	$	-		$	20
Purchase of RSUs sold by employees to pay for taxes due on vested RSUs		63			118

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SIDECHANNEL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~JUNE~~DECEMBER 3031, 2025 AND 2024

NOTE 1 – DESCRIPTION OF BUSINESS

Our mission is to make cybersecurity simple and accessible for mid-market and emerging companies, a market that we believe is currently underserved. We believe that our cybersecurity product and service offerings provide cybersecurity and privacy risk management solutions for our customers. We anticipate that our target customers will continue to need cost-effective security solutions. We continue to expand our catalogue of services and solutions to address the cybersecurity needs of our customers, including virtual Chief Information Security Officer (“vCISO”), cyber program strategy, zero trust, third-party risk management, compliance readiness, cloud security ~~and architecture~~ services, privacy, threat intelligence, managed end-point security solutions, and cybersecurity awareness.

We are marketing and selling Enclave, a proprietary software product that simplifies important cybersecurity tasks to achieve “microsegmentation.” By combining zero trust network access with certificate management and machine identity, Enclave seamlessly creates a unified security architecture that eliminates traditional network vulnerabilities. This integration enables IT teams to enforce precise access policies based on verified machine identities. Certificate-based identities allow a simplified management for any certificate-based communication, while the zero trust framework continuously validates every connection attempt. This powerful combination delivers robust security without the typical management overhead, allowing organizations to implement sophisticated microsegmentation strategies with remarkable simplicity and minimal resource requirements.

Our ~~growth~~headquarters ~~strategy~~are ~~focuses~~located onat ~~these~~146 ~~three~~Main ~~initiatives:~~Street, Suite 405, Worcester, MA 01608. Our website is www.sidechannel.com.

~~1. Increasing adoption of Enclave,~~ NOTE 2. ~~Securing~~– ~~new~~REVERSE ~~vCISO~~STOCK ~~Services clients, and 3. Adding new Cybersecurity Software and Services offerings.~~SPLIT

~~Most~~On February 12, 2025, at the annual meeting of stockholders, the stockholders of the Company approved and adopted ~~vCISO~~an ~~Services~~amendment ~~agreements~~to ~~are~~the inCompany’s certificate of incorporation, as amended (the ~~form~~“Certificate of Incorporation”), to effectuate a ~~monthly~~reverse ~~subscription;~~stock ~~some~~split ~~clients~~of ~~select~~the aCompany’s ~~prepaid~~outstanding ~~block~~shares of ~~hours~~common orstock, ~~time~~at ~~and~~a ~~materials engagements.~~ratio ~~Rates~~of no less than 1-for-2 ~~vCISO~~and ~~Services~~no ~~range~~more ~~from~~than 1-for-200, ~~$350~~with such ratio to ~~$450~~be ~~per~~determined ~~hour.~~by ~~Each~~the Company’s board of ~~our~~directors ~~vCISOs~~(the is“Board”) ~~generally~~in ~~embedded~~its ~~into~~sole discretion. On August 21, 2025, the ~~C-suite~~Board ~~executive teams~~approved a reverse stock split at a ratio of ~~two~~1-for-52 (2the “Reverse Split”). On January 12, 2026, the Company filed a certificate of amendment to ~~four~~its Certificate of Incorporation (4the “Certificate of Amendment”) with the Secretary of ~~our~~State ~~clients.~~of Wethe ~~augment~~State ~~our~~of ~~vCISO~~Delaware ~~Services~~to ~~offering~~effectuate ~~with~~the aReverse ~~full~~Split. ~~range~~The Certificate of ~~other~~Amendment ~~cybersecurity~~was ~~products~~effective for state ~~and~~law ~~services~~purposes at 4:00 p.m. ET on January 22, ~~including~~2026, ~~third-party~~after ~~software~~the ~~and~~close ~~services~~of trading on the OTCQB, such that wethe ~~resell~~Company’s ~~and~~common ~~those~~stock began ~~delivered~~trading byon ~~our~~a ~~security~~post-Reverse ~~engineer~~Split ~~employees~~basis ~~and~~at ~~independent contractors~~market open on January 23, 2026.

~~Our~~On ~~headquarters~~January ~~are~~16, ~~located~~2026, atthe ~~146~~Company ~~Main~~filed ~~Street,~~a ~~Suite~~certificate ~~405,~~of ~~Worcester,~~correction ~~MA,~~to ~~01608~~the Certificate of Amendment (the “Certificate of Correction”) to correct a scrivener’s error in the Certificate of Amendment. ~~Our~~The ~~website~~Certificate isof ~~www~~Amendment indicated that any fractional shares resulting from the Reverse Split would be rounded “to the nearest whole share” of common stock, rather than providing that any fractional shares would be rounded “up to the nearest whole share” of common stock, as the Company intended.~~sidechannel.com.~~

~~NOTE~~Accordingly, 2at –4:00 ~~SUMMARY~~p.m. OFET ~~SIGNIFICANT~~on ~~ACCOUNTING~~January ~~POLICIES~~22, 2026, after the close of trading on the OTCQB, each 52 shares of issued and outstanding common stock (collectively, the “Pre-Split Common Stock”) were automatically, and without any action on the part of the holder thereof, reclassified such that each 52 shares of Pre-Split Common Stock became one share of common stock, with any resulting fractional shares common stock being rounded up to the nearest whole share of common stock.

~~Basis~~The Reverse Split had no effect on our authorized number of ~~Presentation~~shares of common stock, par value of common stock, total assets, total liabilities or stockholders’ equity. We restated our common shares outstanding (shares and ~~Use~~amount) and the value of ~~Estimates~~our additional paid-in capital (“APIC”) to reflect the number of shares outstanding after the Reverse Split.

The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-01 of Regulation S-X. Accordingly, they do not include all the disclosures required for complete financial statements, and they do include our accounts and those of our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation. References to fiscal year 2025 and fiscal year 2024 used throughout this report shall mean the current fiscal year ending September 30, 2025, and the prior fiscal year ended September 30, 2024, respectively.

InNOTE ~~the~~3 ~~opinion~~– ofGOING ~~management,~~CONCERN the accompanying unaudited condensed consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position, results of operations, and changes in cash flows for the interim periods presented. Certain footnote information has been condensed or omitted from these consolidated financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in our Form 10-K for the fiscal year ended September 30, 2024, filed with the Securities and Exchange Commission on December 13, 2024 (“2024 Form 10-K”). The same accounting policies have been followed in these unaudited interim condensed consolidated financial statements as those applied in the preparation of our consolidated audited financial statements for the year ended September 30, 2024.ASSESSMENT

~~The~~Management ~~preparation~~has ofevaluated ~~financial~~the ~~statements~~Company’s inability ~~conformity~~to ~~with~~continue ~~U.S.~~as ~~GAAP~~a ~~requires~~going usconcern towithin ~~make~~one ~~estimates~~year ~~and~~after ~~assumptions~~the date that ~~affect~~these ~~the~~financial ~~reported~~statements ~~amounts~~are ofissued ~~assets~~in ~~and~~accordance ~~liabilities~~with ~~and~~the ~~disclosure~~Financial ofAccounting ~~contingent~~Standards ~~assets~~Board’s ~~and~~(“FASB”) ~~liabilities~~Accounting atStandards ~~the~~Codification (“ASC”) ~~date~~205-40, Presentation of ~~the~~Financial ~~financial~~Statements ~~statements~~– ~~and~~Going Concern. Management’s evaluation considered the ~~reported~~Company’s ~~amounts~~current offinancial ~~revenue~~condition, ~~and~~including ~~expenses~~its ~~during~~cash ~~the~~position, ~~reporting~~recurring ~~period.~~operating ~~Actual~~losses, ~~results~~and ~~could~~historical ~~differ~~negative cash flows from ~~those~~operations, ~~estimates.~~as ~~Certain~~well ofas ~~our accounts,~~its ~~including~~forecasted ~~goodwill~~results and ~~deferred~~cash ~~tax~~flows ~~assets~~for ~~and~~the ~~liabilities,~~twelve ~~including~~months ~~related~~following ~~valuation~~the ~~allowances,~~date ~~are~~of ~~based~~issuance ~~upon~~of ~~estimates~~these financial statements.

As of December 31, 2025, the Company had incurred recurring operating losses and experienced negative cash flows from operations, and it had limited cash on hand and constrained access to additional sources of capital. We did not have any credit facilities available to us as of December 31, 2025, or as of the filing date of this Quarterly Report. These conditions initially raised substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements were issued. Based on its current cash balance, projected cash used in operations, and other obligations coming due during the next twelve months, management determined that, absent mitigating plans, the Company may not have had sufficient liquidity to fund operations and meet its obligations as they become due over that period.

In response to these conditions, management has developed and begun implementing plans intended to improve liquidity and address the factors that initially raised substantial doubt. These plans include a cost-reduction program that is expected to reduce annual operating expenses by approximately $930 thousand beginning in fiscal year 2026. The cost-reduction program consists of actions such as personnel reductions, renegotiation of vendor contracts, and reductions in discretionary spending. Management has already initiated a portion of these actions as of the date these financial statements were issued. Management’s plans also include seeking additional equity and/or debt financing.

After considering the expected impact of these plans, including the anticipated $930 thousand annual reduction in operating expenses, management believes that the Company will have sufficient liquidity to fund its operations and meet its obligations as they become due within one year after the date that these financial statements were issued. The accompanying financial statements have therefore been prepared on a going concern basis and do not include any adjustments that might result from the outcome of these uncertainties.

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Use of Estimates

The accompanying unaudited condensed consolidated financial statements include our accounts and those of our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Certain of our accounts, including goodwill, identifiable intangibles, and deferred tax assets and liabilities, including related valuation allowances, are based upon estimates. References to fiscal year 2026 and fiscal year 2025 used throughout this report shall mean the current fiscal year ending September 30, 2026, and the prior fiscal year ended September 30, 2025, respectively.

Reclassifications

Certain prior year amounts have been reclassified to be comparable with the current year’s presentation. ~~These~~or ~~reclassifications~~adjusted ~~had~~due ~~no effect~~to onrounding ~~the~~and have ~~previous~~had ~~operations~~no orimpact ~~financial~~on ~~condition~~net ofincome ~~the~~or ~~Company~~stockholders’ equity.

Segment Information

WeThe ~~manage~~Company ~~our~~operates ~~operations~~ as a single ~~operating~~reportable segment ~~for~~focused ~~the~~on ~~purposes~~cybersecurity solutions, which consists of ~~assessing~~two ~~performance~~primary revenue-generating categories: (1) vCISO Services, and ~~making~~(2) ~~operating~~Cybersecurity ~~decisions~~Software and Services.

	●	vCISO Services: This category captures the revenue from the Chief Information Security Officer services that we provide to our clients on a “virtual” or outsourced basis. Embedded into the C-suite executive teams of our clients, our vCISOs deliver services including assessing the cybersecurity risk profile, implementing policies and programs to mitigate risks, and managing the day-to-day tasks to ensure compliance with the adopted cybersecurity framework. Most of our clients use our vCISO Services. Engagements typically include a fixed monthly subscription fee and exceed 12 months because of renewal options of 1, 3, 6, or 12 months.

	●	Cybersecurity Software and Services: This category encompasses an array of cybersecurity software and services that our clients deem necessary to protect their digital assets, including Enclave. These augment our vCISO offering and include a full range of other cybersecurity products and services delivered through a team of security engineers along with a network of third-party service providers and value-added resellers (“VARs”). Commercial relationships with third-party service providers and VARs provide SideChannel with additional internal capabilities to mitigate cybersecurity risks. We earn licensing revenue from software contracts and commissions from third-party service provider partnerships which are included in this revenue category.

Our Chief Executive Officer is our chief operating decision maker (“CODM”). Revenue is the primary segment performance measure reviewed by the CODM for operational and capital allocation decisions.

The following table presents revenue reviewed by the CODM for the three months ended December 31, 2025 and 2024:

SCHEDULE OF DISAGGREGATED REVENUE

	2025		2024
	Three Months Ended
(in thousands)	December 31,
	2025		2024
vCISO Services	$	845	$	1,193
Cybersecurity Software and Services		929		715
Total	$	1,774	$	1,908

Cash, Cash Equivalents, and Short-Term Investments

Cash includes funds deposited in banks.

We consider all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. Highly liquid investments with original maturities of 91 days or more that will mature less than one year from the balance sheet date are classified as short-term investments. Securities with maturities of more than 360 days, if any, are included in “~~Long~~long-term investments.”

Our cash equivalents and short-term investments are placed primarily in money market funds and time deposits and are classified as held-to-maturity based on our positive intent and ability to hold the securities to maturity. We value cash equivalents at their original purchase prices plus interest that has accrued at the stated rate. We value short-term investments at their original purchase prices. Interest earned on short-term investments is accrued in interest receivable, which is included on our balance sheet in “Accounts receivable, net.”

Interest income related to cash equivalents and short-term investments is reported in “Other income, net” on the ~~Condensed~~ Consolidated ~~Statement~~ Statement of Operations.

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amounts and do not bear interest. We grant credit to customers and generally require no collateral. To minimize our risk, we perform ongoing credit evaluations of our customers’ financial condition. Effective January 1, 2023, we follow the guidance in ~~Accounting Standards Codification (“~~ASC”) Topic 326 (Financial Instruments – Credit Losses) in developing our estimate of the allowance for credit losses related to our accounts receivable. The allowance for credit losses is our best estimate of the amount of expected credit losses in our existing accounts receivable. In establishing the amount of allowance for credit losses, we consider all information available as of the reporting date including information related to past events, such as historical loss rates and actual incurred losses, as well as current conditions that may indicate future risk of loss and any other factors of which we are aware, that we believe could impact the ultimate collectability of the related receivables in future periods.

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. We do not have any significant off-balance sheet credit exposure related to our customers. Cash flows from accounts receivable are recorded in operating cash flows.

~~Our~~There ~~analysis~~was ~~indicated~~no webad ~~did~~debt ~~not~~expense ~~require~~recorded anfor ~~allowance~~the ~~for~~three ~~June~~months 30ended December 31, 2025 and 2024.

Fair Value of Financial Instruments

Our financial instruments consisted primarily of cash and cash equivalents, short-term investments, accounts receivable, accounts payable, and accrued expenses. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.

Fair value is focused on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Within the measurement of fair value, the use of market-based information is prioritized over entity specific information, and a three-level hierarchy for fair value measurements is used based on the nature of inputs used in in the valuation of an asset or liability as of the measurement date.

The three-level hierarchy for fair value measurements is defined as follows:

● Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; ● Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly, including inputs in markets that are not considered to be active; and ● Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

For more information about the Company’s accounting policies surrounding fair value investments, see Note 7.

Goodwill, Intangible, and Long-Lived Assets

We account for goodwill and intangible assets in accordance with ASC Topic 350 (Intangibles – Goodwill and Other) and ASC Topic 360 (Property, Plant and Equipment). Finite-lived intangible assets are amortized over their estimated useful economic life and are carried at cost less accumulated amortization. Goodwill is assessed for impairment annually at the beginning of the fourth quarter on a reporting unit basis, or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. Goodwill is considered to be impaired if the fair value of a reporting unit is less than its carrying amount.

If the fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

9Long-lived assets, which consist of finite-lived intangible assets and property and equipment, are assessed for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the estimated undiscounted cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value. The cash flow estimates used to determine the impairment, if any, contain management’s best estimates using appropriate assumptions and projections at that time. There have been no significant events or changes in circumstances during the three months ended December 31, 2025, that would indicate that the carrying amount of the Company’s intangible asset, goodwill, may be impaired as of December 31, 2025.

Long-lived assets, which consist of finite-lived intangible assets and property and equipment, are assessed for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the estimated undiscounted cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value. The cash flow estimates used to determine the impairment, if any, contain management’s best estimates using appropriate assumptions and projections at that time. There have been no significant events or changes in circumstances during the nine months ended June 30, 2025, that would indicate that the carrying amount of the Company’s intangible asset, goodwill, may be impaired as of June 30, 2025.

Revenue Recognition

We recognize revenue in accordance with the guidance in ASC Topic 606 (Revenue from Contracts with Customers).

Nature of Products and Services

We identify, develop, and deploy cybersecurity and privacy risk management solutions for our clients in North America. We categorize our products and services as either vCISO Services or Cybersecurity Software and Services. ~~Cybersecurity~~The ~~Software and Services includes~~ revenue earned from ~~both~~ Enclave, our proprietary software product, ~~and~~as well as the revenue from reselling third-party software and services, ~~that~~is weincluded ~~resell~~in Cybersecurity Software and Services.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is the unit of accounting in Topic 606. A significant portion of our revenue is from clients with whom we have a Master Service Agreement (“MSA”). Each MSA generally contains one or more Statement(s) of Work (“SOW”). Each SOW specifies the products and services and their respective transaction prices. We refer to an MSA and its SOW(s) as a “Contract.”. Our Contracts generally contain monthly service subscriptions, annual software licenses, time and ~~materials~~material based billing, or fixed fee projects.

A Contract’s transaction price is allocated to each distinct performance obligation. For Contracts with multiple performance obligations, we allocate the Contract’s transaction price to each performance obligation based on the relative standalone selling price.

Revenue is recognized over a period of time for monthly service subscriptions and software licenses. Revenue is recognized at a point in ~~time~~ time when, or as, the performance obligation is satisfied for fixed fee projects and time and ~~materials~~material based billing. The ~~assets~~completed work products we create for our clients do not have alternative uses to SideChannel, and our Contracts created a right to payment for work completed. Generally, each of the fixed fee project performance obligations we deliver is accompanied by an upfront payment. Our determination for point in time revenue recognition is based upon client acceptance of the performance obligation.

We do not have any material variable consideration arrangements, client-specific acceptance criteria, or any material payment terms with our clients other than standard payment terms, which generally range from net 15 to net 4530 days.

Principal vsversus Agent

We resell ~~the~~ software and services provided by third parties. When we have discretion over the pricing used in the Contracts with our clients, then we deem ourselves to be the principal for purposes of revenue recognition and record revenue on a gross basis using the price specified in the Contract. This is the case for almost all the third-party software and services we sell. Also consistent ~~with~~in our ~~determination~~determinations to recognize revenue as the principal is our ability to direct the third- party to provide the service to the client on our behalf.

Occasionally, we receive a commission from the sale of third-party software and services, in which case we are an agent and record revenue on a net basis equal to the amount of the commission earned.

Contract Balances

We record accounts receivable at the time of invoicing. To the extent that we do not recognize revenue at the same time as we invoice, we record a liability for deferred revenue. In certain instances, we also receive customer deposits in advance of invoicing and recording of accounts receivable. Deferred revenue and customer deposits are included in current liabilities on our consolidated balance sheets. In these instances, the recognition of revenue is deferred until we have determined that we have satisfied our performance obligations under the Contract.

Costs to Obtain a Contract with a Customer

The costs we incur associated with obtaining contracts with customers are marketing costs incurred with third-party service providers and sales commissions that we pay to our employees, contractors, or third-party sales representatives. Commissions are calculated based on set percentages of the ~~invoice~~revenue value of each product or service sold. Commissions are considered earned by our internal sales personnel ~~and~~at the time we recognize revenue for a particular transaction. Commissions are considered earned by third-party sales representatives at the time wethat ~~invoice~~revenue ~~our~~is ~~customers~~recognized for a particular transaction. We record commission expense in our consolidated statements of operations at the time the commission is earned. Commissions earned but not yet paid are included in current liabilities on our balance sheets. ~~All costs to acquire customers and contracts are reported in operating expenses.~~

Leases

We account for leases in accordance with ASC Topic 842 (Leases). We determine if an arrangement is a lease at inception. A lease contract is within scope if the contract has an identified asset (property, plant, or equipment) and grants the lessee the right to control the use of the asset during the lease term. The identified asset may be either explicitly or implicitly specified in the contract. In addition, the supplier must not have any practical ability to substitute a different asset and would not economically benefit from doing so for the lease contract to be in scope. The lessee’s right to control the use of the asset during the term of the lease must include the ability to obtain substantially all the economic benefits from the use of the asset as well as decision-making authority over how the asset will be used. Leases are classified as either operating leases or finance leases based on the guidance in ASC Topic 842. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment and financing lease liabilities. We do not currently have any financing leases.

Operating lease payments are included in cash outflows from operating activities on our consolidated statements of cash flows.

We have made an accounting policy election not to apply the recognition requirements of ASC Topic 842 to short-term leases (leases with a term of one year or less at the commencement date of the lease). ~~Lease~~Our lease periods are less than one year in duration. Lease expense for short-term lease payments is recognized on a straight-line basis over the lease term.

Following the guidance of ASC Topic 842, we are not required to record ROU assets and operating lease liabilities.

See Note 6 for further disclosures regarding our leases.

Research and Development and Software Development Expenses

All research and development costs, including patent and software development costs, are expensed as incurred.

Stock-Based Compensation

We account for stock-based compensation in accordance with ASC Topic 718 (Compensation – Stock Compensation), which requires that ~~employee~~ employee share-based equity awards be accounted for under the fair value method and requires the use of an option pricing model for estimating fair value of awards, which is then amortized to expense over the service periods. The Company estimates the fair value of share-based payment awards on the date of grant using an option-pricing mode or the fair value of our stock on the grant date. The value of the portion of the award that is ultimately expected to vest is recognized as stock compensation expense over the requisite service period in the Company’s consolidated statements of income. See further disclosures related to our stock-based compensation plans in Note 13.

Legal

We are subject to legal proceedings, claims, and liabilities ~~that~~which arise in the ordinary course of business, and we accrue for losses associated with legal claims when such losses are probable and can be reasonably estimated. These accruals are adjusted as additional information becomes available, or circumstances change. Legal fees are charged to ~~expense~~general and administrative expenses as they are incurred.

Income Taxes

We utilize the asset and liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit ~~carry~~carryforwards ~~forwards~~ and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that the value of such assets will be realized.

We use the two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments. We did not record any liabilities for uncertain tax positions during the three months ended December 31, 2025.

Net Loss Per Common Share

Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the reporting period. The weighted average number of shares is calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in our earnings. Diluted loss per share is the same as basic loss per share during periods where net losses are incurred since the inclusion of the potential common stock equivalents would be anti-dilutive because of the net loss.

Warrants

We ~~account~~evaluate ~~for~~ warrants in accordance with ~~FASB~~ ASC Topics 480 (Distinguishing Liabilities from Equity) and 815 (Derivatives and Hedging). The result of this accounting treatment is that the fair value of the embedded derivative, if required to be bifurcated, is marked-to-market at each balance sheet date and recorded as a liability. The change in fair value is recorded in ~~our~~the ~~consolidated~~Statement ~~statement~~ of ~~operations~~Operations as a component of other income or expense. Upon exercise of a warrant, it is marked to fair value at the exercise date and then that fair value is reclassified to equity.

~~Effect~~Recent ~~of Recently Issued Amendments to Authoritative~~ Accounting ~~Guidance~~Announcements

~~In November 2023, the~~ FASB ~~issued~~issues ~~ASU~~Accounting ~~2023-07,~~Standards ~~“Segment~~Updates ~~Reporting~~ (~~Topic 280~~“ASU”): ~~Improvements~~ to ~~Reportable~~amend ~~Segment~~the ~~Disclosures,”~~authoritative ~~which~~literature ~~provides~~in ~~guidance~~the toASC. ~~improve~~There ~~reportable~~have ~~segment~~been ~~disclosure~~several ~~requirements,~~ASUs ~~primarily~~to ~~through~~date ~~enhanced~~that ~~disclosures~~amend ~~about significant segment expenses. In addition,~~ the ~~guidance~~original ~~enhances~~text ~~interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures~~ of ~~profit~~the orASCs. ~~loss,~~Other ~~provides~~than ~~new~~those ~~segment~~discussed ~~disclosure requirements for entities with a single reportable segment~~below, we ~~and~~believe ~~contains~~those ~~other~~ASUs ~~disclosure~~issued ~~requirements. The purpose of the guidance is~~ to ~~enable~~date ~~investors~~either to(i) ~~better~~provide ~~understand~~supplemental ~~an entity’s overall performance and assess potential future cash flows. The~~ guidance ~~is effective for fiscal years beginning after December 15~~, ~~2023, and~~(ii) ~~interim~~are ~~periods~~technical ~~within fiscal years beginning after December 15~~corrections, ~~2024.~~(iii) ~~For~~are ~~us,~~not ~~annual reporting requirements will be effective for~~applicable ~~our~~to ~~fiscal year 2025 beginning on October 1~~us, ~~2024,~~or ~~and~~(iv) ~~interim~~are ~~reporting~~not ~~requirements~~expected ~~will~~to behave ~~effective~~a ~~beginning~~significant ~~with our first quarter of fiscal year 2026. Early adoption is permitted. We are currently evaluating the~~ impact ~~that the new guidance will have~~ on ~~our consolidated financial statements~~us.

InAccounting ~~December~~Pronouncements 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which updates income tax disclosure requirements primarily by requiring specific categories and greater disaggregation within the rate reconciliation table and disaggregation of income taxes paid, net of refunds, by jurisdiction. All entities are required to apply the guidance prospectively, with the option to apply it retrospectively. The guidance is effective for fiscal years beginning after December 15, 2024, which for us is our fiscal year 2026 beginning on October 1, 2025. Early adoption is permitted. We are currently evaluating the impact that the new guidance will have on our consolidated financial statements.Adopted

12In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which provides guidance to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the guidance enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements. The purpose of the guidance is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. For us, annual reporting requirements were effective for our fiscal year 2025 beginning on October 1, 2024, and interim reporting requirements were effective beginning with our first quarter of fiscal year 2026. We manage our operations as a single operating segment for the purpose of assessing performance and making operating decisions. Our Chief Executive Officer is our CODM. No changes have been made to the presentation of our financial statements because of this pronouncement.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which will require the disclosure of additional information about specific expense categories in the notes to the financial statements. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. For us, annual reporting requirements will be effective for our fiscal year 2028 beginning on October 1, 2027, and interim reporting requirements will be effective beginning with our first quarter of fiscal year 2029. Early adoption is permitted. We are currently evaluating the impact of this amended disclosure guidance.13

~~The~~In ~~Company~~December ~~does~~2023, ~~not~~the ~~believe~~FASB ~~that~~issued ~~any~~ASU ~~recently~~2023-09, ~~issued~~“Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” ~~but~~which ~~not~~updates income ~~yet~~tax ~~effective~~disclosure ~~accounting~~requirements ~~standards~~primarily by requiring specific categories and greater disaggregation within the rate reconciliation table and disaggregation of income taxes paid, ~~when~~net ~~adopted~~of refunds, ~~will~~by ~~have~~jurisdiction. aAll ~~material~~entities ~~effect~~are required to apply the guidance prospectively, onwith the ~~accompanying~~option ~~condensed~~to ~~consolidated~~apply ~~financial~~it ~~statements~~retrospectively. The guidance is effective for fiscal years beginning after December 15, 2024, which for us is our fiscal year 2026 beginning on October 1, 2025.

~~NOTE~~We 3did –not ~~LIQUIDITY~~adopt ~~AND~~additional ~~CAPITAL~~new ~~RESOURCES~~accounting pronouncements during the three months ended December 31, 2025.

AsAccounting ofPronouncements ~~June~~Not ~~30,~~Yet 2025, and September 30, 2024, we had $1.1 million and $1.0 million, respectively, of cash and cash equivalents. In addition, we had $100 thousand in short-term investments as of June 30, 2025, and $250 thousand at September 30, 2024. We incurred net losses during the nine-month period ended June 30, 2025, of $510 thousand.Adopted

~~Our primary~~In ~~requirements~~November ~~for~~2024, ~~liquidity~~the ~~and~~FASB ~~capital~~also ~~are~~issued ASU ~~working capital~~2024-03, ~~research~~Disaggregation ~~and~~of ~~development~~Income Statement Expenses, ~~selling~~which ~~and~~will ~~marketing~~require ~~activities,~~the ~~and~~disclosure ~~other~~of additional information about specific ~~general~~expense ~~corporate~~categories ~~needs.~~in ~~Historically,~~the ~~these~~notes ~~cash~~to ~~requirements~~the ~~have~~financial ~~been~~statements. ~~met~~The ~~through~~guidance ~~cash~~is ~~provided~~effective byfor ~~operating~~fiscal ~~activities~~years ~~and~~beginning ~~cash~~after ~~and~~December 15, ~~cash~~2026, ~~equivalents.~~and Asinterim ofperiods ~~June~~within 30fiscal years beginning after December 15, ~~2025~~2027. For us, weannual ~~are~~reporting ~~not~~requirements ~~party~~will tobe ~~any~~effective for ~~off-balance~~our ~~sheet~~fiscal ~~arrangements~~year ~~that~~2028 ~~have~~beginning ~~had~~on orOctober ~~are~~1, ~~reasonably~~2027, ~~likely to~~and ~~have~~interim areporting ~~current~~requirements orwill ~~future~~be ~~material~~effective ~~effect~~beginning onwith our ~~financial~~first quarter ~~condition,~~of ~~results~~fiscal ofyear ~~operations,~~2029. ~~liquidity,~~Early ~~capital~~adoption ~~expenditures,~~is orpermitted. ~~capital resources~~We are currently evaluating the impact of this amended disclosure guidance.

WeIn ~~believe~~March ~~that our existing cash~~2024, ~~cash~~the ~~equivalents,~~Securities and ~~our~~Exchange ~~anticipated~~Commission ~~cash~~issued ~~flows~~a ~~from~~rule ~~operations~~which will berequire ~~sufficient~~companies to ~~meet~~make ~~our~~certain ~~working~~climate-related disclosures ~~capital,~~in ~~expenditure,~~periodic ~~and contractual obligation requirements for the next 12 months~~filings. ~~Although~~The werule ~~believe~~includes wecertain ~~have~~disclosures ~~adequate~~in ~~sources of liquidity for~~ the ~~next~~footnotes ~~12 months and the foreseeable future, the success~~ of ~~our operations,~~ the ~~global~~financial ~~economic outlook, and the pace of sustainable growth in our markets could impact our business and liquidity.~~statements:

~~NOTE~~● 4capitalized –costs, ~~CASH~~expenditures ~~EQUIVALENTS~~expensed, ~~AND~~and ~~INVESTMENTS~~losses incurred because of severe weather events and other natural conditions, such as hurricanes, tornadoes, flooding, drought, wildfires, extreme temperatures, and sea level rise;

We● ~~have~~capitalized ~~financial~~costs, ~~instruments~~expenditures ~~included~~expensed, ~~as cash equivalents~~ and ~~short-term~~losses ~~investments~~related onto ~~our~~carbon ~~balance~~offsets ~~sheets. Money market funds~~ and ~~time deposits~~renewable ~~with~~energy ~~original~~credits ~~maturities~~or ofcertificates ~~less~~if ~~than~~they ~~90 days~~ are ~~included in “Cash and cash equivalents.” Time deposits with original~~ ~~maturities~~used ~~from~~as ~~91-360~~a ~~days~~material ~~are~~component ~~included in “Short-term investments.” As~~ of ~~June~~a ~~30,~~registrant’s ~~2025,~~plans ~~and~~to ~~September~~achieve ~~30,~~its ~~2024,~~disclosed ~~the~~climate-related ~~Company had~~targets noor ~~long-term~~goals; ~~investments.~~and

~~The~~● ~~following~~whether ~~table~~estimates ~~presents~~and assumptions used to produce the ~~carrying~~financial ~~amounts~~statements ofwere ~~cash~~materially ~~equivalents~~impacted by risks and ~~short~~uncertainties associated with severe weather events and other natural conditions or any disclosed climate-~~term~~related ~~investments:~~targets or transition plans.

The climate-related footnote disclosures are effective for annual filings for the year ending September 30, 2026. The Company is currently evaluating the impact of the adoption of the rule.

The Company does not believe that the above recently issued, but not yet effective, accounting standards, if and when adopted, will have a material effect on the accompanying unaudited condensed consolidated financial statements.

NOTE 5 – CASH EQUIVALENTS AND INVESTMENTS

We have financial instruments included as cash equivalents and short-term investments on our balance sheets. Money market funds and time deposits with maturities of less than 90 days from the purchase date are included in “Cash and cash equivalents.” Time deposits with maturities from 91-360 days are included in “Short-term investments.” As of December 31, 2025, the Company had no long-term investments.

The following table presents the carrying amounts of cash equivalents and short-term investments as of December 31, 2025, and September 30, 2025:

	June 30,			September 30,
	December 31,		September 30,
	2025		2025	~~2024~~
Cash equivalents
Money market funds	$	-201	$	$6-
Total cash equivalents	$	-201	$	$6-
Short-term investments
Time deposits		100		~~250~~100
Total short-term investments	$	100	$	~~$250~~100

Short Term Investment	Carrying Amount		Original Maturity Date
Short-Term Investment	Carrying Amount		Original Maturity Date
Time deposits	$	100	~~August 5, 2025~~	March 8, 2026

For more information about the fair value of the Company’s financial instruments, see Note 7.

NOTE 5 – DEFERRED COSTS

On July 23, 2021, Cipherloc Corporation (“Cipherloc”) entered into a financial advisory and consulting agreement with Paulson Investment Company, LLC (“Paulson”). The agreement with Paulson remains in place after the Business Combination. Pursuant to the agreement, Paulson will provide the following services at the Company’s request: (a) familiarize itself with the Company’s business, assets, and financial condition; (b) assist the Company in developing strategic and financial objectives; (c) assist the Company in increasing its exposure in the software industry; (d) assist the Company in increasing its profile in the investment and financial community through introductions to analysts and potential investors, participation in investment conferences, and exploitation of reasonably available media opportunities; (e) identify potentially attractive merger and acquisition opportunities; (f) review possible innovative financing opportunities; and (g) render other financial advisory services as may be reasonably requested. The term of the agreement is four years from the date of the agreement, unless terminated earlier by either party as provided therein. As compensation for these services, the Company issued to Paulson 4 million shares of the Company’s common stock and agreed to reimburse Paulson for all reasonable and documented expenses incurred by Paulson in connection with providing such services. The fair value of the shares issued was $720 thousand, which Cipherloc recognized as deferred costs which are amortized at a rate of $45 thousand per quarter. The Company expensed $135 thousand for the nine months ended June 30, 2025, and 2024, respectively. The unamortized balance of the deferred costs was $15 thousand at June 30, 2025.

NOTE 6 - LEASES

On December 10, 2021, we entered into a lease for approximately 500 ~~square~~ square feet of office space at 146 Main Street in Worcester, Massachusetts, with the option to renew annually. The annual renewal date is January 1st. Our current lease payment is $986 per month. The lease allows for a 2% increase effective at the beginning of each renewal period. The lease payment will be $1,006 per month during calendar year 2026.

Operating lease ~~expenses~~payments ~~were~~are $9included ~~thousand~~in ~~for~~cash ~~both~~outflows ~~the~~from ~~nine~~operating ~~months~~activities ~~ended~~on ~~June~~our ~~30,~~consolidated ~~2025,~~statements ~~and~~of ~~2024,~~cash ~~respectively~~flows.

WeOperating ~~expect~~lease toexpenses ~~pay~~were ~~approximately~~ $6 3 thousand ~~through~~and ~~December 2025, the remaining term of the Worcester lease. We intend to renew the~~$3 ~~lease~~thousand for ~~another~~the ~~twelve-month~~three ~~period~~months ~~beginning~~ended ~~January~~December 131, ~~2026,~~2025 and ~~ending December 31~~2024, ~~2026, at an annual cost of $12 thousand~~respectively.

We have made an accounting policy election not to apply the recognition requirements of ASC Topic 842 (Leases) to short-term leases (leases with a term of one year or less at the commencement date of the lease). Lease expense for short-term lease payments is recognized on a straight-line basis over the lease term. We do not have any long-term operating leases or financing leases as of December 31, 2025.

We expect to pay approximately $12 thousand over the next 12 months for the Worcester lease.

NOTE 7 – FAIR VALUE MEASUREMENT

ASC Topic 820 “Fair Value Measurement” (“Topic 820”) defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements. Topic 820 is applicable whenever assets and liabilities are measured and included in the financial statements at fair value.

The following tables present the carrying amounts, estimated fair values, and valuation input levels of certain financial instruments: as of December 31, 2025, and September 30, 2025.

	June 30, 2025
	December 31, 2025
	Carrying		Fair Value Measured Using						Fair
(in thousands)	Amount		Level 1		Level 2		Level 3		Value
Short-term investments
Time deposits: 91 - 360 days	$	100	$	-	$	100	$	-	$	100
Total Short-term investments	$	100	$	-	$	100	$	-	$	100
Total short-term investments	$	100	$	-	$	100	$	-	$	100

	September 30, 2024
	September 30, 2025
	Carrying		Fair Value Measured Using						Fair
(in thousands)	Amount		Level 1		Level 2		Level 3		Value
Short-term investments
Time deposits: 91 - 360 days	$	~~250~~100	$	-	$	~~250~~100	$	-	$	~~250~~100
Total Short-term investments	$	250	$	-	$	250	$	-	$	250
Total short-term investments	$	100	$	-	$	100	$	-	$	100

The entire December 31, 2025, balance of time deposits maturing in 91 to 360 days ~~at June 30, 2025, and September 30, 2024,~~ are certificates of deposit issued by a bank at which total deposits ~~exceed~~are less than the FDIC limit of $250 thousand.

NOTE 8 – DEBT

~~The~~SideChannel ~~Company~~did ~~has~~not nohave debt at December 31, 2025.

NOTE 9 -– STOCKHOLDERS’ EQUITY

Common Stock

As of ~~June~~December 31, 2025, and September 30, 2025, we had ~~231~~4,~~229~~446,~~054~~713 shares of common stock outstanding. ~~and~~The ~~were~~outstanding ~~authorized to issue 681,000,000~~ shares ofwere ~~common~~retroactively ~~stock~~restated atfor athe ~~par~~effect ~~value~~ of ~~$0.001 per share.~~the WeReverse ~~had~~Split ~~225~~from 231,~~975~~229,~~331 shares~~054 ofto ~~common stock outstanding as of September 30~~4, ~~2024~~446,713.

14The authorized shares and par value per share of common stock were unchanged by the Reverse Split and remain at 681,000,000 shares and $0.001 per share, respectively.

~~Common~~We restated our common shares outstanding (shares and amount) and the value ~~Stock~~of ~~Issued~~our ~~Under~~APIC ~~Equity~~to ~~Incentive~~reflect ~~Plan~~the number of shares outstanding after the Reverse Split.

During the nine months ended June 30, 2025, 6,398,717 Restricted Stock Units vested for which we issued 4,897,323 shares of common stock and 1,501,394 RSU’s were sold by employees to fund payroll taxes.

Common Stock Issued for Legal Settlement

In April 2021, Eric Marquez, the former Secretary/Treasurer and Chief Financial Officer of Cipherloc, and certain other plaintiffs, filed a lawsuit against Cipherloc and Michael De La Garza, Cipherloc’s former Chief Executive Officer and President, in the 20th Judicial District for Hays County, Texas (Cause No. 20-0818). We executed a settlement agreement with the plaintiffs on December 13, 2024, resulting in the dismissal of the lawsuit with prejudice on January 2, 2025. The settlement agreement required the Company to issue the plaintiffs a combined 356,400 shares of common stock. The shares were issued on December 20, 2024, with a fair market value of $14 thousand.

Common Stock Issued for Cash

We did not issue shares of common stock for cash during the nine months ended June 30, 2025.

Common Stock Issued for Business Combinations

We did not issue shares for mergers or acquisitions related activity during the nine months ended June 30, 2025.

Common Stock Issued for Services

We did not issue shares for services during the nine months ended June 30, 2025.

Preferred Stock

As of ~~June~~December 3031, 2025, we had zero (0) shares of preferred stock outstanding and were authorized to issue 10,000,000 shares of preferred stock at a par value of $0.001 per share.

Warrants

~~The~~We ~~following~~have ~~table~~four ~~summarizes~~categories ~~warrant~~of ~~activity~~warrants ~~for~~outstanding ~~the~~which ~~nine~~are ~~months~~summarized ~~ended~~below ~~June~~along ~~30,~~with ~~2025:~~exercise prices and expiration dates.

SCHEDULE OF WARRANT OUTSTANDING

(In thousands, except prices and lives)	Number of Warrants		Exercise Price		Expiration Date
2018 Placement Agent		106	$	52.00	Aug 7, 2028
2021 Private Placement		231		18.72	Apr 16, 2026
2021 Placement Agent		160		9.36	Apr 16, 2031
2023 Warrant Exchange		335		9.36	Dec 29, 2028
Total Outstanding Warrants		832

The following table summarizes warrant activity for the three months ended December 31, 2025:

SCHEDULE OF WARRANT ACTIVITY

Outstanding Warrants
(In thousands, except prices and lives)	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Life
(In thousands, except prices and remaining lives)	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Life
Outstanding at September 30, 2025		832	$	17.40		2.89
Outstanding at September 30, 2024		43,158	$	0.33		3.89
Granted		—		—		—
Exercised		—		—		—
Canceled/Forfeited		—		—		—
Outstanding at June 30, 2025		43,158	$	0.33		3.14
Outstanding at December 31, 2025		832	$	17.40		2.64

15NOTE 10 – REVENUE FROM CONTRACTS WITH CLIENTS

~~NOTE~~Deferred 10revenue –is ~~REVENUE~~comprised ~~FROM~~of ~~CONTRACTS~~payments ~~WITH~~received ~~CUSTOMERS~~from our clients and customers for products or services in advance of receiving the product or service and primarily occurs for annual software and service contracts including Enclave. The deferred revenue is expected to be earned within 12 months of the balance sheet date.

Disaggregation of Revenues

We disaggregate our revenue from contracts with customers (clients) by service type as indicated in the table below:

SCHEDULE OF DISAGGREGATED REVENUE

	2025		2024
	Nine Months Ended
(in thousands)	June 30,
	2025		2024
vCISO services	$	3,248	$	3,611
Cybersecurity software and services		2,330		1,898
Total	$	5,578	$	5,509

Deferred Revenue

Deferred revenue is comprised of payments received from our clients for products or services in advance of receiving the product or service and primarily occurs for annual software and service contracts, including Enclave. While software contracts can be initiated at any time of year, most of our annual software agreements renewed in our second fiscal quarter ending March 31, 2025.

The deferred revenue is expected to be earned within 12 months of the balance sheet date.

The change in deferred revenue from September 30, 2024, to June 30, 2025, is summarized as follows:

SCHEDULE OF CHANGES IN DEFERRED REVENUE

(In thousands)
Balance at September 30, 2024	$	515
Balance at September 30, 2025	$	801
Deferral of revenue		~~1,374~~323
Recognition of revenue		~~1,007~~(447	)
Balance at June 30, 2025	$	882
Balance at December 31, 2025	$	677

NOTE 11 – BUSINESS RISK AND CREDIT RISK CONCENTRATION INVOLVING CASH

~~One~~No client individually accounted for ~~approximately 13% of our revenue during the three months ended June 30, 2025. No client individually accounted for~~ over 10% of our revenue during the three months ended ~~June~~December 3031, ~~2024, or the nine months ended June 30,~~ 2025, orand 2024.

We had ~~two~~three clients each with an accounts receivable ~~balances~~balance ~~together~~that ~~totaling~~exceeded ~~approximately 30~~10% of ~~our~~ accounts receivable ~~balance~~ at ~~June~~December 3031, 2025.

We maintain our cash, cash equivalents, and short-term investments in accounts held by a highly reputable financial ~~institution~~institutions ~~which,~~(collectively at“Deposits”). ~~times,~~The ~~may exceed federally insured limits as guaranteed by the~~ Federal Deposit Insurance Corporation (“FDIC”). ~~The FDIC~~ insures these ~~deposits~~Deposits up to $250 thousand per financial institution. At times our balance at each institution may exceed the $250 thousand FDIC insured limit. As of ~~June~~December 3031, 2025, ~~approximately~~we ~~$899~~had ~~thousand~~insured ofDeposits ~~our~~totaling ~~cash~~$388 ~~and~~thousand at ~~cash~~three ~~equivalent~~(3) ~~balance~~distinct ~~and~~financial institutions, leaving approximately $~~100~~207 thousand of our ~~short-term~~Deposits ~~investment balance were~~ uninsured. We have not experienced any losses on ~~our cash or short-term investments~~Deposits.

NOTE 12 – RELATED PARTY TRANSACTIONS

~~Brian~~We ~~Haugli,~~did ~~our~~not ~~Chief~~have ~~Executive~~any ~~Officer~~new ~~and~~related ~~stockholder~~party intransactions ~~the~~or ~~Company,~~material ischanges ~~also a principal shareholder of RealCISO Inc. (“RealCISO”). We are a reseller of RealCISO software. We receive revenue from our customers for the use of RealCISO software and pay licensing fees~~ to ~~RealCISO~~existing ~~for~~related ~~such~~party ~~use.~~transactions ~~For~~during the ~~nine~~three months ~~ending~~ended December ~~June 30~~31, 2025~~, and 2024, we paid $77 thousand and $35 thousand, respectively, to RealCISO~~.

WeBrian ~~also~~Haugli, ~~invoiced~~our ~~$17~~Chief ~~thousand~~Executive Officer, a member of our Board of Directors, and ~~$119~~a ~~thousand~~significant ~~from~~stockholder ~~RealCISO~~in ~~for~~the ~~software~~Company, ~~development~~is ~~services~~also ~~that~~a weprincipal ~~provided~~shareholder of RealCISO ~~during~~Inc. (“RealCISO”). We are a reseller of the ~~nine months~~RealCISO ~~ended~~software. ~~June~~We ~~30,~~receive ~~2025,~~revenue from our customers for the use of RealCISO software and ~~2024,~~pay ~~respectively~~licensing fees to RealCISO for such use.

OnFor ~~October 13, 2023,~~ the ~~Association~~three ofmonths ~~the~~ended USDecember ~~Army~~31, ~~(“AUSA”)~~2025, ~~signed~~we anpaid ~~agreement for a cybersecurity risk assessment for approximately~~ $2414 thousand. Onto ~~February~~RealCISO ~~15, 2024, the President of AUSA, Retired U.S. Army General Robert Brown, joined our Board. On July 8, 2024, AUSA signed an agreement~~ for ~~recurring vCISO Services~~licenses, ~~which~~and ~~generated~~invoiced RealCISO $5412 thousand offor ~~revenue during the nine months ended June 30,~~software ~~2025.~~development ~~SideChannel~~services ~~reserved~~that ~~booth space at the AUSA Global Force Symposium held in March 2025. In the nine months ended June 30, 2025,~~ we ~~paid~~provided ~~$8 thousand to AUSA for this event~~RealCISO.

No other related party transactions occurred during the ~~nine~~three months ended ~~June~~December 3031, 2025.

~~NOTE~~For 13fiscal –years ~~STOCK~~ended ~~BASED~~September ~~COMPENSATION~~30, 2025 and 2024, SideChannel paid $75 thousand and $30 thousand to RealCISO for licenses, respectively. We also invoiced $34 thousand and $122 thousand from RealCISO for software development services that we provided RealCISO during fiscal years ended September 30, 2025, and 2024, respectively.

On October 13, 2023, the Association of the US Army (“AUSA”) signed an agreement for a cybersecurity risk assessment for approximately $24 thousand. On February 15, 2024, the President of AUSA, Retired U.S. Army General Robert Brown, joined our Board. On July 8, 2024, AUSA signed an agreement for recurring vCISO Services which generated approximately $9 thousand of revenue in fiscal year 2024 and $54 thousand of revenue in fiscal year 2025 for the Company before terminating in March 2025. SideChannel reserved booth space at the AUSA Global Force Symposium held in March 2025 and paid $8 thousand to AUSA for this event.

NOTE 13 – STOCK-BASED COMPENSATION

We grant equity compensation awards to directors, employees, and contractors under the 2021 Omnibus Equity Compensation Plan. We have granted restricted stock units (“RSUs”) and stock options with service-based vesting conditions with vesting typically occurring over a 3-year period.

The award quantities and grant date fair values have been retroactively adjusted to reflect the Reverse Split.

Restricted Stock Units

The following table summarizes the activity of our RSUs granted under our Equity Incentive Plan during the ~~nine~~three months ended ~~June~~December 3031, 2025:

	Number of RSUs
(In thousands)	Number of RSUs
Outstanding RSUs at September 30, 2024		11,148,270
Outstanding RSUs at September 30, 2025		294
Granted		~~11,487,706~~33
Vested		(~~6,398,717~~0	)
Canceled/Forfeited		(~~708,519~~2	)
Outstanding RSUs at June, 2025		15,528,740
Outstanding RSUs at December 31, 2025		325

OnDuring the quarter ended December 2031, ~~2024~~2025, ~~our~~we ~~Board~~awarded ~~of Directors authorized awarding 1.1~~32,695 ~~million~~ RSUs to ~~each~~new ofemployees. ~~the~~Vesting ~~three~~occurs ~~independent directors vesting~~ over three years beginning on March 1, ~~2025~~2026, and ending on March 1, ~~2027.~~2028, Onfor ~~March 3~~30,771 ~~2025, we~~ granted ~~7,937,706~~ RSUs ~~to officers~~ and ~~employees. During~~ the ~~quarter~~remaining ~~ended June 30, 2025, we awarded 250,000 RSUs to new employees vesting over three years beginning on March~~ 1,924 ~~2026~~vest ~~and ending~~ on March 1, ~~2028~~2026. The average grant date fair value of RSUs granted during the ~~nine~~three months ended ~~June~~December 3031, 2025, was $03.0436. The Company recognizes compensation cost for unvested share-based awards on a straight-line basis over the requisite service period.

Our total stock-based compensation expense for the ~~nine~~three months ended ~~June~~December 3031, 2025, was $~~306~~ 100 thousand for the amortization of outstanding equity compensation grants. Stock-based compensation of $~~262~~ 76 thousand is included in general and administrative expense, $~~11 thousand~~15 thousand in selling and marketing expense, and $33 9 thousand in research and development expense.

17The unamortized stock compensation expense at December 31, 2025, was $531 thousand, and the remaining weighted average term to vesting was 1.64 years.

The unamortized stock compensation expense at June 30, 2025, is $622 thousand, and the remaining weighted average term to vesting is 2.1 years.

Stock Options

The following table summarizes the activity of our stock options granted under our Equity Incentive Plan during the nine months ended June 30, 2025:

SCHEDULE OF STOCK OPTION OUTSTANDING TRANSACTIONS

	Number of Stock Options
Outstanding Options at September 30, 2024		3,300,000
Granted		-
Vested		-
Cancelled/Forfeited		(3,300,000	)
Outstanding Options at June 30, 2025		-

On December 20, 2024, our Board of Directors authorized the termination of stock options previously awarded to independent directors.

NOTE 14 – COMMITMENTS AND CONTINGENCIES

~~Litigation~~We are currently not involved in any litigation that we believe could have a material adverse effect on its financial condition or results of operations.

WeNOTE ~~are~~15 ~~currently~~- ~~not~~SUBSEQUENT ~~involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations.~~EVENTS

~~Recently~~On February 12, 2025, at the ~~Settled~~Company’s ~~Litigation~~annual meeting of stockholders, stockholders approved and adopted an amendment to the Certificate of Incorporation to effectuate a reverse stock split of the Company’s outstanding shares of common stock, at a ratio of no less than 1-for-2 and no more than 1-for-200, with such ratio to be determined by the Board in its sole discretion. On August 21, 2025, the Board approved the 1-for-52 Reverse Split. On January 12, 2026, the Company filed a Certificate of Amendment with the Secretary of State of the State of Delaware to effectuate the Reverse Split. The Certificate of Amendment was effective for state law purposes at 4:00 p.m. ET on January 22, 2026, after the close of trading on the OTCQB, such that the Company’s common stock began trading on a post-Reverse Split basis at market open on January 23, 2026.

~~In April~~On ~~2021~~January 16, ~~Eric Marquez~~2026, the ~~former Secretary/Treasurer and Chief Financial Officer of Cipherloc Corporation, and certain other plaintiffs,~~Company filed a ~~lawsuit~~Certificate ~~against~~of ~~Cipherloc~~Correction ~~Corporation~~to ~~and~~correct ~~Michael~~a ~~De La Garza, Cipherloc~~scrivener’s ~~former~~error ~~Chief Executive Officer and President,~~ in the ~~20th~~Certificate ~~Judicial~~of ~~District for Hays County, Texas (Cause No~~Amendment. ~~20-0818).~~The WeCertificate ~~executed~~of aAmendment ~~settlement agreement with the plaintiffs~~indicated onthat ~~December~~any ~~13,~~fractional ~~2024,~~shares resulting infrom the ~~dismissal~~Reverse ofSplit ~~the~~would ~~lawsuit~~be ~~with~~rounded ~~prejudice on January 2, 2025. The settlement agreement requires the Company~~ “to ~~issue~~ the ~~plaintiffs~~nearest awhole ~~combined~~share” ~~356,400 shares~~ of common stock ~~and pay a total of $95 thousand in cash in six equal~~, ~~quarterly~~rather ~~installments~~than ofproviding ~~approximately~~that ~~$16~~any ~~thousand~~fractional ~~each,~~shares ~~beginning~~would bybe ~~January~~rounded 1,“up ~~2025,~~to ~~and ending by April 1, 2026. The expenses associated with this settlement were included in our results for~~ the ~~fiscal~~nearest ~~year~~whole ~~ended~~share” ~~September~~of 30common stock, ~~2024.~~as ~~Three payments totaling approximately~~the ~~$47~~Company ~~thousand have been made as of June 30, 2025~~intended.

~~NOTE~~Accordingly, at 4:00 p.m. 15ET –on ~~SUBSEQUENT~~January ~~EVENTS~~22, 2026, after the close of trading on the OTCQB, each 52 shares of issued and outstanding Pre-Split Common Stock was automatically, and without any action on the part of the holder thereof, reclassified such that each 52 shares of Pre-Split Common Stock became one share of common stock, with any resulting fractional shares common stock being rounded up to the nearest whole share of common stock. The Company’s common stock began trading on a post-Reverse Split basis at market open on January 23, 2026.

~~We have~~The ~~assessed~~Reverse ~~our~~Split ~~operations~~had ~~through~~no ~~the~~effect ~~filing~~on ~~date~~our authorized number of ~~this~~shares ~~Quarterly~~of ~~Report~~common onstock, ~~Form~~par ~~10-Q~~value ~~and~~of ~~determined~~common ~~that~~stock, ~~there~~total ~~were~~assets, nototal ~~material~~liabilities or stockholders’ equity. ~~subsequent~~We ~~events~~restated ~~requiring~~our ~~adjustment~~common ~~to,~~shares oroutstanding ~~disclosure~~(shares ~~in,~~and ~~our~~amount) ~~condensed~~and ~~consolidated~~the ~~financial~~value ~~statements~~of ~~for~~our APIC to reflect the ~~nine~~number ~~months~~of ~~ended~~shares outstanding ~~June~~after ~~30,~~the ~~2025~~Reverse Split.

On January 23, 2026, in connection with the rounding up of fractional shares resulting from the Reverse Split, the Company issued an aggregate of 20,494 shares of common stock. Of this amount, 397 shares of common stock were issued to to stockholders of record and 20,097 shares of common stock were issued to CEDE & Co.

The Company has evaluated events through February 17, 2026, the filing date of this Quarterly Report on Form 10-Q and determined that there have been no additional subsequent events that occurred that would require adjustments to our disclosures in the unaudited condensed consolidated financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements in our Management’s Discussion and Analysis of Financial Condition and Results of Operations, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” ~~within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934~~. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled “Risk Factors” in ~~2024~~our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 (the “2025 Form 10-K”), and elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). We undertake no obligation to update or revise publicly any forward-looking statements, ~~whether~~ whether because of new information, future events, or otherwise.

This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report, and the audited financial statements and notes thereto and “Part II. Other Information - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contained in our ~~2024~~2025 Form 10-K.

Our logo and some of our trademarks and tradenames are used in this Quarterly Report. Solely for convenience, trademarks, tradenames, and service marks referred to in this Quarterly Report may appear without the ®, ™ and SM symbols. References to our trademarks, tradenames and service marks herein are not intended to indicate in any way that we will not fully assert under applicable law our rights or the rights of the applicable licensors if any, nor that respective owners of other intellectual property rights will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names herein to imply a relationship with, or endorsement or sponsorship of us by, any other persons, firm or entity, except as otherwise so expressly indicated.

The market data and certain other statistical information used throughout this Quarterly Report are based on independent industry publications, ~~reports~~ reports by market research firms or other independent sources that we believe to be reliable sources. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all the disclosures contained in this Quarterly Report, and we believe these industry publications and third-party research, surveys and studies are reliable. We are not aware of any misstatements regarding any third-party information presented in this Quarterly Report; however, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under, and incorporated by reference in, the section entitled “~~Item~~Part II Item 1A. Risk Factors” of this Quarterly Report. These and other factors could cause our future performance to differ materially from our assumptions and estimates. Some market and other data included herein, as well as the data of competitors as they relate to SideChannel (as defined herein), is also based on our good faith estimates.

Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “SideChannel,” and “SideChannel, Inc.” refer specifically to SideChannel, Inc. and its consolidated subsidiaries.

In addition, unless the context otherwise requires and for the purposes of this ~~report~~Quarterly Report only:

●	“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;

●	“SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and

●	“Securities Act” refers to the Securities Act of 1933, as amended.

All references to years relate to the fiscal year ended September 30 of the particular year.

Overview

Our Business

Our mission is to make cybersecurity simple and accessible for mid-market and emerging companies, a market that we believe is currently underserved. We believe that our cybersecurity offerings will identify and develop cybersecurity, privacy, and risk management solutions for our customers. We anticipate that our target customers will continue to need cost-effective security solutions. We continue to expand our catalogue of services and solutions to address the cybersecurity needs of our customers, including virtual Chief Information Security Officer (“vCISO” ~~or “vCISOs”~~), cyber program strategy, zero trust, third-party risk management, compliance readiness, cloud security services, privacy, threat intelligence, managed end-point security solutions, and cybersecurity awareness.

Our growth strategy focuses on these three initiatives:

1.● Increasing adoption of Enclave: By promoting Enclave and our other cybersecurity solutions to our existing vCISO clients, 2we aim to deepen our relationships and provide comprehensive, integrated security solutions. This supports the increased demand for zero trust strategies and remote worker technologies. ● Securing new vCISO Services ~~clients~~Clients: As organizations plan to increase security investments due to breaches and the rising complexity of cyber threats, we aim to expand our client base by offering flexible, expert vCISO Services that address budget constraints and 3the need for rapid security posture establishment. ● Adding new Cybersecurity Software and Services offerings: We plan to enhance our portfolio by incorporating transformational technologies such as AI-based security operations, data security posture management, polymorphic encryption, cyber-physical system security, and application security posture management. This aligns with industry trends and the anticipated incremental spend on application and data security due to generative AI.

We internally report our revenue using two categories. The first, “vCISO Services,” captures the revenue generated by outsourcing fractional, vCISOs to our clients on an ongoing basis. Services delivered by SideChannel through our team of vCISOs include assessing the cybersecurity risk profile, implementing policies and programs to mitigate risks, and managing the day-to-day tasks to ensure compliance with the adopted cybersecurity framework. Most of our clients use our vCISO Services.

vCISO Services engagements typically include a fixed monthly subscription fee for durations longer than twelve (12) months. Hourly rates for vCISO Services time and material projects range from $350 to $450. Each of our vCISOs is generally embedded into the C-suite executive teams of two (2) to four (4) of our clients.

Our second revenue category encompasses an array of Cybersecurity Software and Services that our clients deem necessary to protect their digital assets. These augment our vCISO Services offering and include a full range of other cybersecurity products and services delivered on an ongoing or project basis through our team of cybersecurity professionals along with a network of third-party service providers and value-added resellers (“VARs”). Commercial relationships with third-party service providers and VARs provide SideChannel with additional internal capabilities to mitigate cybersecurity risks. This revenue category includes both licensing revenue from software contracts, commissions from third-party service provider partnerships and sales of our proprietary software, Enclave.

We internally report our revenue using two categories:

	●	vCISO Services: This category captures the revenue from the Chief Information Security Officer services that we provide to our clients on a “virtual” or outsourced basis. Embedded into the C-suite executive teams of our clients, our vCISOs deliver services including assessing the cybersecurity risk profile, implementing policies and programs to mitigate risks, and managing the day-to-day tasks to ensure compliance with the adopted cybersecurity framework. Most of our clients use our vCISO Services. Engagements typically include a fixed monthly subscription fee and exceed 12 months because of renewal options of 1, 3, 6, or 12 months.

	●	Cybersecurity Software and Services: This category encompasses an array of cybersecurity software and services that our clients deem necessary to protect their digital assets, including Enclave. These augment our vCISO offering and include a full range of other cybersecurity products and services delivered through a team of security engineers along with a network of third-party service providers and value-added resellers (“VARs”). Commercial relationships with third-party service providers and VARs provide SideChannel with additional internal capabilities to mitigate cybersecurity risks. We earn licensing revenue from software contracts and commissions from third-party service provider partnerships which are included in this revenue category.

Revenue

The following revenue metrics are for the ~~nine~~three months ended ~~June~~December 3031, 2025, compared to the ~~nine~~three months ended ~~June~~December 3031, 2024:

● Total revenue ~~grew~~decreased by $69134 thousand or 17.30%. ● vCISO Services revenue decreased by $~~363~~348 thousand or 1029.12%. ● Cybersecurity Software and Services category revenue ~~increased~~grew by $~~432~~214 thousand or 2229.89%.

The year-over-year decline in vCISO Services revenue reflects ~~new~~the ~~vCISO~~loss ~~client~~of ~~acquisition~~clients ~~not~~with ~~exceeding~~a ~~vCISO~~higher ~~client~~than ~~churn~~average annual contract value and the transitioning of vCISO Services clients into lower revenue generating Cybersecurity Software and Services. Cybersecurity Software &and Services revenue benefited from these transitions along with the expansion of the software and services offered.

We also monitor new and retained revenue. The revenue earned from clients during our first twelve months of working with them is classified as new, while the revenue earned with clients after our first twelve months of working with them is classified as retained. The following chart provides details on our new and retained revenue for the nine months ended June 30, 2025, and 2024:

Further, we consider revenue retention a key performance indicator. Revenue retention is calculated by dividing retained revenue by the prior year total revenue. The following table shows the revenue retention for the trailing twelve months ended June 30, 2025, and September 30, 2024, by revenue category:

	Trailing Twelve Months Ended
	June 30, 2025			September 30, 2024
vCISO Services		56.8	%		67.7	%
Cybersecurity Software & Services		70.5	%		72.2	%
Total		61.4	%		69.2	%

~~Results~~We also monitor new and retained revenue. The revenue earned from clients during our first twelve months of ~~Operations~~working with them is classified as new, while the revenue earned with clients after our first twelve months of working with them is classified as retained. The following chart provides details on our new and retained revenue for the three months ended December 31, 2025 and 2024:

~~Three~~Further, ~~Months~~we ~~Ended~~consider ~~June~~revenue ~~30,~~retention ~~2025,~~a ~~Compared~~key toperformance ~~Three~~indicator. ~~Months~~Revenue ~~Ended~~retention ~~June~~is calculated by dividing retained revenue by the prior year total revenue. The following table shows the revenue retention for the trailing twelve months ended December 31, 2025, and September 30, ~~2024~~2025, by revenue category:

	Three Months Ended
	Trailing Twelve Months Ended
	June 30,
	December 31, 2025			September 30, 2025
	2025			2024
vCISO Services		56.0	%		56.4	%
Revenues	$	1,776		$	1,846
Cybersecurity Software and Services		81.7	%		76.9	%
Cost of revenues		941			944
Total		65.3	%		63.6	%
Gross profit		835			902
Gross margin		47.0	%		48.9	%
Operating expenses
General and administrative		715			778
Selling and marketing		242			137
Research and development		146			141
Total operating expenses		1,103			1,056
Operating loss		(268	)		(154	)
Other income, net		9			8
Net loss before income tax expense		(259	)		(146	)
Income tax expense		2			-
Net loss	$	(261	)	$	(146	)

Revenue. Our revenue was $1,776 thousand for the quarter ended June 30, 2025, compared to $1,846 thousand for the quarter ended June 30, 2024, a decrease of $70 thousand or 3.8%. This decrease is primarily due to new vCISO client acquisition not exceeding vCISO client churn.

Gross Profit. Our gross profit was $835 thousand and gross margin was 47.0% for the quarter ended June 30, 2025, compared to $902 thousand or 48.9% for the quarter ended June 30, 2024. The decrease in our gross margin was the result of lower utilization of employees and the growth of low-margin third-party software and services. These negative factors were partially offset by an increase in high gross margin Enclave revenue.

Operating Expenses. Our operating expenses increased $47 thousand or 4.5% for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The changes for each operating expense area are discussed below.

General and Administrative Expenses. Our general and administrative expense was $715 thousand for the three months ended June 30, 2025, compared to $778 thousand for the three months ended June 30, 2024, a decrease of $63 thousand or 8.1%. The decrease was achieved by reducing costs related to being a publicly traded company combined with a decrease in stock-based compensation expenses which were partially offset by an increase in personnel costs due to staff increases.

~~Selling~~Results ~~and Marketing Expenses. Our selling and marketing expense was $242 thousand for the three months ended June 30, 2025, compared to $137 thousand for the three months ended June 30, 2024, an increase~~ of ~~$105 thousand or 76.6% due to an increase in employees and the use of third-party service providers to promote Enclave.~~Operations

~~Research~~Three ~~and~~Months ~~Development~~Ended ~~Expenses.~~December ~~Our research and development expense was $146 thousand for the three months ended June 30~~31, 2025, ~~compared~~ Compared to ~~$141~~Three ~~thousand~~Months ~~for~~Ended ~~the~~December ~~three months ended June 30~~31, 2024~~, an increase of $5 thousand or 3.5%. Increased salary expense was partially offset by lower stock-based compensation.~~

Nine Months Ended June 30, 2025, Compared to Nine Months Ended June 30, 2024

	Three Months Ended
	December 31,
(in thousands)	2025			2024
Revenues	$	1,774		$	1,908
Cost of revenues		865			1,034
Gross profit		909			874
Gross margin		51.2	%		45.8	%
Operating expenses
General and administrative		677			660
Selling and marketing		457			267
Research and development		175			153
Total operating expenses		1,309			1,080
Operating loss		(400	)		(206	)

Other income, net		7			13
Net loss before income tax expense		(393	)		(193	)

Income tax expense		3			2
Net loss	$	(396	)	$	(195	)

	Nine Months Ended
	June 30,
	2025			2024
Revenues	$	5,578		$	5,509
Cost of revenues		2,928			2,894
Gross profit		2,650			2,615
Gross margin		47.5	%		47.5	%
Operating expenses
General and administrative		2,030			2,336
Selling and marketing		736			562
Research and development		419			390
Total operating expenses		3,185			3,288
Operating loss		(535	)		(673	)
Other income, net		31			29
Net loss before income tax expense		(504	)		(644	)
Income tax expense		6			1
Net loss	$	(510	)	$	(645	)

Revenue. Our revenue was $1.8 million for the quarter ended December 31, 2025, compared to $1.9 million for the quarter ended December 31, 2024, representing a decrease of $134 thousand or 7.0%. This decrease was primarily due to the loss of clients with higher than average contract value as discussed in the Overview.

~~Revenue.~~Gross Profit. Our ~~revenue~~gross profit was $~~5.6~~909 ~~million~~thousand and gross margin was 51.2% for the ~~nine~~quarter ~~months~~ ended ~~June~~December 3031, 2025, compared to $~~5.5~~874 thousand ~~million~~or 45.8% for the ~~nine~~quarter ~~months~~ ended ~~June 30~~December 31, 2024,. anThe increase in our gross margin was the result of ~~$69~~Enclave, ~~thousand~~which orhas ~~1.3%.~~a high ~~This~~gross ~~revenue~~margin, ~~increase~~contributing isa ~~driven~~larger bypercentage ~~growth~~of our revenue in ~~Cybersecurity~~the ~~Services~~three ~~and~~months ~~Software~~ended byDecember ~~our~~31, 2025, than for the three ~~new~~months ~~and~~ended ~~existing~~December ~~clients~~31, ~~offset~~2024. byAdditional afactors ~~decrease~~contributing to our gross margin increase in ~~vCISO~~the ~~Services~~quarter ~~revenue~~ended December 31, 2025 were improved utilization of service delivery employees in the current fiscal year compared to the prior fiscal year and lower bonus expense accrued in fiscal year 2026 compared to fiscal year 2025.

~~Gross~~Operating ~~Profit~~Expenses. ~~Our~~Operating ~~gross~~expenses ~~profit~~increased ~~was~~ $~~2.7~~229 ~~million~~thousand ~~and~~or ~~gross margin was 47~~21.52% for the ~~nine~~three months ended ~~June~~December 3031, 2025, compared to ~~$2.6~~the ~~million~~three months orended 47December 31, 2024.5% The changes for ~~the~~each ~~nine~~operating ~~months~~expense ~~ended~~area ~~June~~are ~~30,~~discussed ~~2024~~below.

~~Operating~~General and Administrative Expenses. Our ~~operating~~general and administrative expenses ~~decreased~~were $~~103~~677 thousand ~~or 3.1%~~ for the ~~nine~~three months ended ~~June~~December 3031, 2025, compared to $660 thousand for the ~~nine~~ three months ended ~~June~~December 3031, 2024, representing an increase of $17 thousand or 2.6%. The increase ~~changes~~was ~~for~~the ~~each~~result ~~operating~~of ~~expense~~higher ~~area~~personnel ~~are~~expenses ~~discussed~~partially ~~below~~offset by lower consulting, legal, and amortization costs.

Selling and Marketing Expenses. Our sales and marketing expenses were $457 thousand for the three months ended December 31, 2025, compared to $267 thousand for the three months ended December 31, 2024, representing an increase of $190 thousand or 71.2% due to an increase in employees and compensation, consulting costs, and advertising and events.

Research and Development Expenses. Our research and development expenses were $175 thousand for the three months ended December 31, 2025, compared to $153 thousand for the three months ended December 31, 2024, representing an increase of $22 thousand or 14.4% due to an increase in employees and compensation.

General and Administrative Expenses. Our general and administrative expense was $2.0 million for the nine months ended June 30, 2025, compared to $2.3 million for the nine months ended June 30, 2024, a decrease of $306 thousand or 13.1%. The decrease was primarily achieved by reducing costs related to being a publicly traded company combined with a decrease in consulting costs, and stock-based compensation expense, which were partially offset by an increase in accounting fees and personnel costs.

Selling and Marketing Expenses. Our selling and marketing expense was $736 thousand for the nine months ended June 30, 2025, compared to $562 thousand for the nine months ended June 30, 2024, an increase of $174 thousand or 31.0%. An increase in personnel costs and the use of third-party services to promote Enclave were partially offset by a decrease in stock-based compensation expense.

Research and Development Expenses. Our research and development expense was $419 thousand for the nine months ended June 30, 2025, compared to $390 thousand for the nine months ended June 30, 2024, an increase of $29 thousand or 7.4%. The increase is the result of higher personnel costs partially offset by a decrease in stock-based compensation expense.

Liquidity and Capital Resources

During the ~~nine~~three months ended ~~June~~December 3031, 2025, we incurred a net loss of $~~510~~396 thousand, and we ~~had~~used $~~104~~570 thousand of cash ~~provided~~in by operating ~~and~~ ~~investing~~ activities. Our primary source of liquidity and capital resources has been the $1.01 million of cash and cash equivalents at the beginning of ~~the~~ fiscal year ~~supplemented with the cash provided by operating and investing activities during the fiscal year~~2026. We had an accumulated deficit of $2021.41 million as of ~~June~~December 3031, 2025, ~~comprised~~which ~~primarily~~includes of three ~~(3)~~ non-operational expenses ~~totaling~~ totaling $16.8 million: $6.2 million for the contingent consideration and business combination related costs, $5.7 million for the impairment of goodwill, and $4.9 million for the impairment of intangible assets.

We had net working capital of $~~1.1~~478 ~~million~~thousand as of ~~June~~December 3031, 2025, compared to net working capital of $~~1.3~~770 ~~million~~thousand as of September 30, ~~2024~~ 2025. The decline in net working capital iswas primarily due to ~~operating~~a ~~losses~~decrease ~~incurred~~in ~~during~~cash ~~the~~partially ~~fiscal~~offset ~~year~~by a decrease in deferred revenue and accrued expenses.

We had $157 thousand of accounts receivable included in our deferred revenue balance of $677 thousand at December 31, 2025.

We did not have any credit facilities available to us as of December 31, 2025, or as of the filing date of this Quarterly Report.

Cash Flows

The following table summarizes selected items in our unaudited Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~June~~December 3031:

(In thousands)	2025			2024
Net cash provided by (used in):
Operating activities	$	(46570	)	$	~~117~~75
Investing activities		~~150~~-			~~(15~~-	)
Financing activities		-			~~(50~~-	)

Operating Activities

We receive cash each month from ~~client~~revenue ~~payments~~generated from our clients. We use this cash and, ~~if necessary,~~ a portion of our cash reserves to pay for our ~~monthly~~ monthly expenses. Material cash requirements include personnel costs, ~~third-party software~~ and ~~services, and~~ the expenses associated with being a public reporting company.

24Cash used in operating activities was $570 thousand during the three months ended December 31, 2025, and we recorded a net loss of $396 thousand. During the same period, our non-cash charges totaled $104 thousand, comprised of $100 thousand in stock-based compensation expense and $4 thousand in depreciation. The change in our net operating assets and liabilities was primarily due to a $133 thousand increase in accounts receivable due to the invoice volume in the final month of the fiscal quarter, as well as a $124 thousand decrease in deferred revenue. In addition, there was a $70 thousand decrease in accounts payable and accrued liabilities and a $46 thousand decrease in prepaid expenses.

Cash used by operating activities was $46 thousand during the nine months ended June 30, 2025, and we recorded a net loss of $510 thousand. During the same period, our non-cash charges totaled $390 thousand, comprised of $243 thousand in stock-based compensation expense net of RSUs sold by employees and $148 thousand in amortization and depreciation, offset by a $1 thousand adjustment to the legal settlement paid in stock. We typically invoice clients annually for third-party service contracts and software licenses during our second fiscal quarter which resulted in an increase in deferred revenue of $367 thousand at June 30, 2025, compared to September 30, 2024. The deferred revenue increase was partially offset by increases in accounts receivable and prepaid expenses along with the $199 thousand use of cash for the payment of accounts payable and accrued liabilities.

Investing Activities

AThere ~~$250~~were ~~thousand~~no ~~certificate~~investing ofactivities ~~deposit~~for ~~matured~~this onreporting ~~February~~period 5,during ~~2025,~~the ofthree ~~which~~months ~~$100~~ended ~~thousand~~December ~~was reinvested in a certificate of deposit maturing on August 5~~31, 2025~~, resulting in $150 thousand provided by the sale of short-term investments~~.

Financing Activities

There were no financing activities ~~for~~during ~~this~~the ~~reporting~~three ~~period~~months ended December 31, 2025.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as as it is a “smaller reporting company,” as defined byin ~~Rule~~Item ~~229.~~10(f)~~(1)~~ of ~~the~~Regulation ~~SEC~~S-K.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

~~As required~~We ~~by Rule 13a-15(b) of the Exchange Act, we~~ have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this ~~quarterly~~Quarterly ~~report~~Report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act 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, and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this ~~quarterly~~Quarterly ~~report~~Report, at the reasonable assurance level.

The material weaknesses identified, and the related remediation plan are more fully described in our ~~2024~~2025 Form 10-K ~~and Form 10-K/A for the fiscal year ended 2024, filed with the SEC on March 13, 2025~~. The material weaknesses, summarized in the bullet points below, relate to the fact that we did not design and maintain accounting policies, procedures and controls to ensure complete, accurate and timely financial reporting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Specifically, the material weaknesses identified included the following:

● We did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over the preparation and review of account reconciliations, journal entries and classification of certain costs; ● We had not developed and effectively communicated to our employees our accounting policies and procedures, which resulted in inconsistent practices. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness; ● We do not have sufficient, qualified finance and accounting staff with the appropriate U.S. GAAP technical accounting expertise to identify, evaluate and account for accounting and financial reporting, and effectively design and implement systems and processes that allow for the timely production of accurate financial information in accordance with internal financial reporting timelines. As a result, we did not design and maintain formal accounting policies, processes and controls related to complex transactions necessary for an effective financial reporting process; and ● As a high-growth, smaller reporting company that became responsible for listed financial reporting, we have a limited staff and budget available to adequately test and monitor the effectiveness of certain internal controls.

	●	We do not have sufficient, qualified finance and accounting staff with the appropriate U.S. GAAP technical accounting expertise to identify, evaluate and account for accounting and financial reporting, and effectively design and implement systems and processes that allow for the timely production of accurate financial information in accordance with internal financial reporting timelines. As a result, we did not design and maintain formal accounting policies, processes and controls related to complex transactions necessary for an effective financial reporting process; and
	●	As a high-growth, smaller reporting company that is subject to the reporting requirements of the Securities Exchange Act of 1934, we have a limited staff and budget available to adequately test and monitor the effectiveness of certain internal controls.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) of the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.

The information set forth under “Material Weaknesses” above is incorporated herein by reference.

Management, under the supervision of our principal executive officer and our principal financial officer, conducted an evaluation of the effectiveness of internal controls over financial reporting based on the framework in 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of the period covered by this quarterly report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the ~~nine~~three months ended ~~June~~December 3031, 2025, that have materially ~~affected~~ affected or are reasonably likely to materially affect, our internal control over financial reporting, including any corrective actions ~~regarding~~ regarding significant deficiencies and material weaknesses.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

2625

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~From time~~During tothe ~~time~~quarter ended December 31, 2025 weand ~~may~~through ~~become~~the ~~party~~filing todate ~~litigation~~of orthis ~~other~~Quarterly ~~legal~~Report, ~~proceedings~~there ~~that~~were weno ~~consider~~material developments to bethe alegal ~~part~~proceedings ofas ~~the~~disclosed in ~~ordinary~~Part ~~course~~I, Item 3 of ~~our business~~the 2025 Form 10-K.

Such current litigation or other legal proceedings are described in and incorporated by reference in this “Part II - Item 1. Legal Proceedings” of this Form 10-Q from, “Part I - Item 1. Financial Statements” in the notes to financial statements in “Litigation” in Note 14 - Commitments and Contingencies. We believe that the resolution of currently pending matters will not individually or in the aggregate have a material adverse effect on our financial condition or results of operations. Our assessment of current litigation or other legal claims could change considering the discovery of facts not presently known to us, or by decisions of judges, juries, or other finders of fact, that are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.

Additionally, the outcome of litigation is inherently uncertain. If one or more legal matters are resolved against us in a reporting period for amounts more than management’s expectations, our financial condition and operating results for that reporting period could be materially adversely affected.

ITEM 1A. RISK FACTORS

~~There~~Except as set forth below, there have been no ~~further~~ material changes from the risk factors previously disclosed in Part I, Item 1A “Risk Factors” of our ~~2024~~ 2025 Form 10-K.

A reverse stock split may not increase the market price of our common stock or improve liquidity.

On January 23, 2026, we effectuated a reverse stock split of our outstanding common stock at a ratio of 1-for-52. There can be no assurance that the reverse stock split will result in a sustained increase in the market price of our common stock, or that it will have the intended effect of improving liquidity or market perception of our common stock. The market price of our common stock may decline following the reverse stock split, and the reduced number of shares outstanding may adversely affect the liquidity of our common stock.

In addition, reverse stock splits are often viewed negatively by the market, which may adversely affect the trading price of our common stock. If the market price of our common stock does not increase proportionately with the reverse stock split ratio, our stockholders may experience a loss in value. Further, the reverse stock split may result in some stockholders owning fewer shares, which could limit their ability to sell shares at desired prices or times.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Sales of Securities

There were no sales of unregistered securities during the ~~nine~~three months ended ~~June~~December 3031, 2025, or from the period beginning ~~July~~January 1, ~~2025~~2026, ~~through~~ through the filing date of this Quarterly Report.

On December 20, 2024, the Company issued 356,400 shares of common stock as stated in a legal settlement.

On March 3, 2025, we issued 4,897,323 shares of common stock for 6,398,717 Restricted Stock Units (“RSUs”) that vested during the nine months ended June 30, 2025. The number of RSUs sold by these employees to fund payroll taxes for the nine months ended June 30, 2025, was 1,501,394.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

There were no purchases of equity securities by the issuer or affiliated purchasers during the ~~nine~~three months ended ~~June~~December 3031, 2025, and from ~~the~~ the period from ~~July~~January 1, ~~2025~~2026, to the filing date of this Quarterly Report.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

(a) None.

(b) There have been no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors since the Company last provided disclosure in response to the requirements of Item 407(c)(3) of Regulation S-K.

(c) During the quarter ended ~~June~~December 3031, 2025, no director or officer of the Company adopted or terminated a contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) and/or a non-Rule 10b5-1 trading arrangement.

2726

ITEM 6. EXHIBITS

Exhibit No.		Description
3.1		Certificate of Amendment to the Certificate of Incorporation, as amended, of the registrant, as filed January 12, 2026 (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on January 16, 2026).
3.2		Certificate of Correction to the Certificate of Amendment to the Certificate of Incorporation, as amended, of the registrant, as filed January 16, 2026 (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed with the SEC on January 16, 2026).
31.1*		Certification of Principal Executive Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Extension Label Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Presentation Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document
104*		Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set

*	Filed electronically herewith.
**	Furnished electronically herewith, not filed.

2827

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SIDECHANNEL, INC.
Date: August 13, 2025	By:	/s/ Brian Haugli
Date: February 17, 2026	By:	/s/ Brian Haugli
		Brian Haugli
		Chief Executive Officer
		(Principal Executive Officer)
Date: February 17, 2026	By:	/s/ Ryan Polk
		Ryan Polk
		Chief Financial Officer
		(Principal Accounting/Financial Officer)

	SIDECHANNEL, INC.
Date: August 13, 2025	By:	/s/ Ryan Polk
		Ryan Polk
		Chief Financial Officer
		(Principal Accounting/Financial Officer)

Filing Compare · SideChannel, Inc.