What changed in this filing

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Item 1. Financial Statements

2022-08-15 compared with 2022-05-13 · 280 added, 197 removed, 201 unchanged (70% of the section changed)

1 unchanged sentence

BALANCE SHEETS

March 31, 2022

June 30, 2022

September 30, 2021

Current assets

Cash and cash equivalents

Deferred costs

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88,445,832 and 82,927,311 shares outstanding;

and 100,975,461 and 96,342,125 issued as of March 31, 2022, and September 30, 2021, respectively

Treasury stock, at cost, 13,414,814 and 13,414,814 shares as of March 31, 2022, and September 30, 2021, respectively

and 101,860,646 and 96,342,125 issued as of June 30, 2022, and September 30, 2021, respectively

Treasury stock, at cost, 13,414,814 and 13,414,814 shares as of June 30, 2022 and September 30, 2021, respectively

Additional paid-in capital

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Three Months Ended

Six Months Ended

Nine Months Ended

Cost of revenues

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( 2,255,205 )

Other income (expense)

Miscellaneous income

Interest expense

$ ( 1,380,918 )

5 unchanged sentences

accompanying notes to these unaudited condensed financial statements.

OF CASH FLOWS

Six Months Ended

STATEMENTS OF CASH FLOWS

Nine Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

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Adjustments to reconcile net loss to net cash flows used in operating activities:

PPP loan forgiveness

Stock-based compensation

Impairment loss on ROU assets (gain on early termination of operating lease)

Changes in operating assets and liabilities:

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( 2,195,082 )

( 2,566,292 )

CASH FLOWS FROM INVESTING ACTIVITIES:

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Purchase of treasury stock

Proceeds from PPA loan

Repayment PPA loan

Purchase of preferred stock

1 unchanged sentence

Net cash provided by financing activities

(DECREASE) INCREASE IN CASH

INCREASE (DECREASE) IN CASH

( 2,195,082 )

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Shares issued for services, previously in accrued expenses

Shares issued for legal settlement expenses

accompanying notes to these unaudited condensed financial statements.

OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the Six Months ended March 31, 2022

Additional Paid-in

Stockholders’

For the Six Months ended March 31, 2022

For the Nine Months ended June 30, 2022

Balance at September 30, 2021 -

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$ ( 71,530,891 )

Options issued to directors & employees

Stock compensation expense

Shares issued for services

Shares issued for RSU vesting

Shares issued for legal settlement

( 2,833,023 )

$ ( 2,833,023 )

Balance at March 31, 2022

Balance at June 30, 2022 -

$ ( 590,000 )

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Stockholders’

For the Three Months ended March 31, 2022,

Balance at December 31, 2021

For the Three Months ended June 30, 2022,

Balance at March 31, 2022 -

$ ( 590,000 )

$ ( 72,982,996 )

Options issued to directors & employees

Stock compensation expense

Shares issued for services

Shares issued for RSU vesting

Shares issued for legal settlement

( 1,380,918 )

Balance at March 31, 2022

$ ( 1,380,918 )

Balance at June 30, 2022 -

$ ( 590,000 )

$ ( 74,363,914 )

Preferred Stock

Additional Paid-in

Stockholders’

For the Six Months ended March 31, 2021

For the Nine Months ended June 30, 2021

Balance at September 30, 2020

2 unchanged sentences

$ ( 137,962 )

Options issued to directors & employees

Stock compensation expense

Preferred and treasury shares acquired

3 unchanged sentences

$ ( 2,064,153 )

Balance at March 31, 2021

Balance at June 30, 2021

$ ( 590,000 )

$ ( 70,490,761 )

Preferred Stock

Additional Paid-in

Stockholders’

the Three Months ended March 31, 2021,

at December 31, 2020

issued to directors & employees

of common stock, net of issuance costs

at March 31, 2021

For the Three Months ended June 30, 2021,

Balance at March 31, 2021

$ ( 590,000 )

$ ( 70,315,181 )

Stock compensation expense

Issuance of common stock, net of issuance costs

$ ( 175,580 )

Balance at June 30, 2021

$ ( 590,000 )

$ ( 70,490,761 )

accompanying notes to these unaudited condensed financial statements.

TO FINANCIAL STATEMENTS

THE THREE AND SIX MONTHS ENDED MARCH 31, 2022, AND 2021

THE THREE AND NINE MONTHS ENDED JUNE 30, 2022, AND 2021

1 - DESCRIPTION OF BUSINESS

Corporation (the “Company” or “Cipherloc”) was incorporated in the State of Texas on June 22, 1953, under the

name “American Mortgage Company.” Effective August 27, 2014, the Company changed its name to “Cipherloc Corporation.”

Prior to September 30, 2021, the Company was a Texas corporation.

(the “Company” or “SideChannel”), formerly Cipherloc Corporation, was incorporated in the State of Texas

on June 22, 1953, under the name “American Mortgage Company.” Effective August 27, 2014, the Company changed its name to

“Cipherloc Corporation.” Effective July 5, 2022, the Company changed its name to “SideChannel, Inc.” following

its acquisition of SideChannel, Inc., a Massachusetts corporation, on July 1, 2022 (See Note 7 – Subsequent Events).

Prior to September

30, 2021, the Company was a Texas corporation.

The Company became a Delaware corporation effective September 30, 2021.

Company’s headquarters is located at 6836 Bee Cave Road, Building 1, Suite279, Austin, Texas 78746.

The Company’s website

is www.cipherloc.net .

Company is a provider of cybersecurity services and technology to middle market companies.

The Company’s website is www.sidechannel.com.

August 2, 2022, the Company changed its ticker symbol from CLOK to SDCH.

2 - BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS

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opinion, it has included all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation.

Company’s operating results for the six months ended March 31, 2022 are not necessarily indicative of the results that may be expected

Company’s operating results for the nine months ended June 30, 2022 are not necessarily indicative of the results that may be expected

for the entire fiscal year ending September 30, 2022.

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3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company prepares its financial statements in accordance with U.S.

Significant accounting policies are as follows:

and Cash Equivalents

Company considers all highly liquid investments with a maturity at the time of purchase of three months or less to be cash equivalents.

At March 31, 2022, the Company’s cash included cash on hand and cash in the bank.

The balance of such accounts, at times, may exceed

federally insured limits, as guaranteed by the Federal Deposit Insurance Corporation (“FDIC”).

The FDIC insures these deposits

up to $ 250,000 .

As of March 31, 2022, $ 4,140,059 of the Company’s cash balance was uninsured.

The Company has not experienced any

losses of uninsured cash.

Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents.

The Company’s cash includes cash on hand and cash in the bank.

The balance of such accounts, at times, may exceed federally insured

limits, as guaranteed by the Federal Deposit Insurance Corporation (“FDIC”).

The FDIC insures these deposits up to $ 250,000 .

As of June 30, 2022, $ 3,338,912 of the Company’s cash balance was uninsured.

The Company has not experienced any losses related

to uninsured cash balances.

and Diluted Net Loss per Common Share

Company’s computes its basic loss per share by dividing the 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 that number by the amount of time that the applicable shares were outstanding.

Diluted earnings per

share reflects the potential dilution that could occur if vested stock options, warrants, and other commitments of the Company to issue

common stock were exercised, resulting in the issuance of common stock that would share in the earnings of the Company.

As of March 31,

2022, the Company had no shares of preferred stock outstanding.

Company’s diluted loss per share was the same as basic loss per share for the periods in which the Company incurred net losses

since the inclusion of potential common stock equivalents would be anti-dilutive due to the net loss.

For the three and six month periods

ended March 31, 2022, the Company excluded warrants to purchase 79,461,481 shares of its common stock, and 2,000,001 shares of its common

stock issued pursuant to restricted stock units from the calculation of diluted loss per share because the effect would be anti-dilutive.

During the three and six months ended March 31, 2021, the Company excluded warrants to purchase 60,364,253 shares of common stock and

stock options to purchase 699,999 shares of common stock from the calculation of diluted loss per share because their effect would be

Company computes its basic net loss per share by dividing the net loss available to common stockholders by the weighted average number

of shares of common stock outstanding during the reporting period.

The weighted average number of shares is calculated by taking the

number of shares outstanding and weighting that number by the amount of time that the applicable shares were outstanding.

loss per share reflects the potential dilution that could occur if vested stock options, warrants, and other commitments of the Company

to issue shares of common stock were exercised, resulting in the issuance of additional shares of common stock that would share in the

earnings of the Company.

As of June 30, 2022, the Company had no shares of preferred stock outstanding.

Company’s diluted loss per share was the same as the basic loss per share for the periods in which the Company incurred net losses

since the inclusion of potential common stock equivalents would be anti-dilutive due to the Company’s net loss.

For the three months

and nine months ended June 30, 2022, the Company excluded from the calculation of diluted loss per share warrants to purchase 79,461,481

shares of its common stock, and 1,981,484 shares of its common stock issued pursuant to restricted stock units because the effect of

including those shares would be anti-dilutive.

During the three and nine months ended June 30, 2021, the Company excluded from the calculation

of diluted loss per share warrants to purchase 79,461,481 shares of common stock because the effect of including those shares would be

anti-dilutive.

and Development and Software Development Costs

Reclassification

common stock and additional paid in capital line items on the balance sheet have been reclassified to be comparable to the current period’s

presentation.

The reclassification reflects the difference in the par value of the Company’s common stock when it was a Texas corporation,

prior to September 30, 2021, and the par value of the Company’s common stock after it became a Delaware corporation, on September

and Development Costs

Company expenses all research and development costs, including patent and software development costs.

The research and development expenses

incurred by the Company for the three months ended March 31, 2022 and 2021 were $ 140,919 and $ 175,083 , respectively which is a 19.5%

The research and development costs incurred by the Company for the six months ended March 31, 2022 and 2021 were $ 270,558 and

$ 296,876 , respectively.

Company recognizes revenues in accordance with the provisions of ASC 606, “Revenue from Contracts with Customers , ”

and a series of amendments, issued by the Financial Accounting Standards Board (“FASB”).

Company recognizes revenues in accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 606, “Revenue

from Contracts with Customers , ” including a series of amendments, issued by the Financial Accounting Standards Board (“FASB”).

to the Company’s revenue recognition guidance is a five-step revenue recognition model that requires reporting entities to:

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the transaction price to the performance obligations, and

revenue when the performance obligations are satisfied.

Company accounts for a promise to provide a customer with a right to access the Company’s intellectual property as a performance

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License Agreements

the fiscal year ended September 30, 2019, the Company entered into an agreement with SoundFi LLC (“SoundFi”).

agreement provides for a one-year term that automatically renews for subsequent one-year periods unless otherwise terminated by either

The Company received a payment of $ 25,000 from SoundFi during the fiscal year ended September 30, 2020.

However, the Company has

not yet received any payments from SoundFi in the current fiscal year and is uncertain if there will be any such payments.

Company executed a software licensing agreement with Castle Shield Holdings, LLC (“Castle Shield”) during the fiscal year

ended September 30, 2020.

Company executed a software license agreement with Castle Shield Holdings, LLC (“Castle Shield”) during the fiscal year ended

September 30, 2020.

That agreement includes an auto-renewing annual term.

The Company received a $ 10,000 payment from Castle Shield

during the fiscal year ended September 30, 2020, but did not receive any payments from Castle Shield during the fiscal year ended September

However, the Company did receive payments totaling $ 15,417 from Castle Shield during the six months ended March 31, 2021.

Company recognized $ 251 in licensing revenues from Castle Shield during the six months ended March 31, 2022.

Accounting Pronouncements

The Company did not receive any payments from Castle Shield

during the fiscal year ended September 30, 2021.

The Company recognized $ 449 in licensing revenues from Castle Shield during the nine

months ended June 30, 2022.

of Recently Issued Amendments to Authoritative Guidance

Financial Accounting Standards Board (“FASB”) issues Accounting Standards Updates (“ASU”) to amend the authoritative

literature in the ASC.

There have been several ASUs to date that amend the original text of the ASCs.

Other than those discussed below,

the Company believes those ASUs issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not

applicable to the Company or (iv) are not expected to have a significant impact on the Company.

literature in the Accounting Standards Codification (“ASC”).

There have been several ASUs to date that amend the original

text of the ASCs.

Other than those discussed below, the Company believes those ASUs issued to date either (i) provide supplemental guidance,

(ii) are technical corrections, (iii) are not applicable to the Company, or (iv) are not expected to have a significant impact on the

December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

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ASU 2019-12 on October 1, 2021, and the adoption of this update did not have a material impact on the Company’s financial position,

results of operations and cash flows.

results of operations or cash flows.

January 2020, the FASB issued guidance to clarify certain interactions between the guidance to account for equity securities, the guidance

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1, 2021, and the adoption of this update did not have a material impact on the Company’s financial position, results of operations

and cash flows.

or cash flows.

May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock

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Early adoption is permitted.

The Company does not expect the adoption of this guidance will have a material impact on its financial position,

results of operations or cash flows.

June 2016, the FASB issued ASU 2016 - 13, Financial Instruments—Credit Losses, which requires a financial asset

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In November 2019 , the FASB issued ASU 2019 - 10, Financial Instruments—Credit Losses

(Topic 326 ), which pushes back the effective date for public business entities that are smaller reporting companies, as defined

by the SEC, to fiscal years beginning after December 15, 2022.

(Topic 326 ), which delays the effective date of the pronouncement for public business entities that are smaller reporting companies,

as defined by the SEC, to fiscal years beginning after December 15, 2022 .

Early adoption is permitted.

November 2021, the FASB issued guidance to increase the transparency of government assistance received by an entity by requiring disclosures

relating to accounting policy, nature of the assistance, and the effect of the assistance on the financial statements.

The Company is

required to adopt the guidance in the first quarter of its fiscal 2023.

Company does not expect the adoption of this guidance will have a material impact on its financial position, results of operations or

November 2021, the FASB issued ASU 2021-10, Government Assistance, which provided guidance to increase the transparency of government

assistance received by an entity by requiring disclosures relating to the accounting policy, nature of the assistance, and the effect

of the assistance on the financial statements.

The Company is required to adopt the guidance in the first quarter of its fiscal year

Early adoption is permitted.

The Company is currently evaluating

the impact of this guidance on its financial statements.

The Company does not expect the adoption of this guidance will have a material impact on its financial

position, results of operations or cash flows.

August 2020, the FASB issued ASU 2020-06— Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives

and edging—Contracts in Entity’s Own Equity (Subtopic 815-40):

and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an

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Under the amendments

in ASU 2020-06, the embedded conversion features no longer are separated from the host contract for convertible instruments with conversion

features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in

substantial premiums accounted for as paid-in capital.

Consequently, a convertible debt instrument will be accounted for as a single

liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured

at its historical cost, as long as no other features require bifurcation and recognition as derivatives.

in ASU 2020-06, the embedded conversion features in the instruments are no longer separated from the host contract for convertible instruments

with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do

not result in substantial premiums accounted for as paid-in capital.

Consequently, a convertible debt instrument will be accounted for

as a single liability measured at its amortized cost, and a convertible preferred stock will be accounted for as a single equity instrument

measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives.

By removing those separation

models, the interest rate of convertible debt instruments typically will be closer to the coupon interest rate when applying the guidance

models, the interest rate of convertible debt instruments will typically be closer to the coupon interest rate when applying the guidance

in Topic 835, Interest.

The amendments in ASU 2020-06 provide financial statement users with a simpler and more consistent starting point

to perform analyses across entities.

The amendments also improve the operability of the guidance and reduce, to a large extent, the complexities

in the accounting for convertible instruments and the difficulties with the interpretation and application of the relevant guidance.

The amendments in ASU 2020-06 are designed to provide financial statement users with a simpler and more consistent

starting point to perform analyses across entities.

The amendments also improve the operability of the guidance and reduce, to a large

extent, the complexities in the accounting for convertible instruments and the difficulties with the interpretation and application of

the relevant guidance.

Additionally,

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premium amount recorded as paid-in capital.

amendments in ASU 2020-06 are effective for public business entities, excluding entities eligible to be smaller reporting companies,

as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

other entities, the amendments are effective for fiscal years beginning after December 15, 2023.

Early adoption is permitted, but no

earlier than fiscal years beginning after December 15, 2020.

The Company adopted ASU 2020-06 on October 1, 2021, and the adoption of

this update did not have a material impact on the Company’s financial position, results of operations and cash flows.

The Company adopted ASU 2020-06 on October 1, 2021, which adoption did not have a material

impact on the Company’s financial position, results of operations or cash flows.

4– COMMITMENTS AND CONTINGENCIES

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Officer and President, in the 20th Judicial District for Hays County, Texas (Cause No.

LeBlanc claims that he is a former

consultant, employee, and/or officer of the Company, Mr.

LeBlanc’s petition (which has been amended) alleges causes of action against

the Company for alleged violation of the Texas Securities Act, common law fraud against Mr.

breach of fiduciary duty against

breach of contract;

as well as declaratory relief.

LeBlanc seeks damages exceeding $ 1,000,000 , but less than $ 10,000,000 .

The Company believes that Mr.

LeBlanc was fully compensated for his services, and that his claims are without merit.

LeBlanc is also

asserting a claim of partial ownership of certain of the Company’s patents, which the Company believes is without merit.

believes it has meritorious defenses to Mr.

LeBlanc’s allegations, and the Company intends to continue to vigorously defend against

the litigation.

LeBlanc sought damages against the

Company exceeding $ 1 million, but less than $ 10 million.

On May 19, 2022, Mr.

LeBlanc entered into a joint settlement agreement with

the Company, the Company’s directors and officer’s liability carrier, and Mr.

As part of this settlement agreement,

the Company paid Mr.

LeBlanc $ 109,432 in cash and issued him 200,000 shares of the Company’s common stock in exchange for his release

of the Company from all past and future liabilities associated with this matter.

April 2020, Eric Marquez, the former Secretary/Treasurer and Chief Financial Officer of the Company, and certain other plaintiffs filed

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Marquez’s alleged

oral employment agreement, which Mr.

Marquez claims required the Company pay him cash and shares of stock;

oral employment agreement with the Company, which Mr.

Marquez claims required the Company to pay him cash and issue him shares of the

Company’s stock;

unjust enrichment;

and rescission of certain stock purchases made by certain of the plaintiffs, as well as requests for declaratory relief.

sought exceed $ 1,000,000 .

The Company believes it has made all required payments and delivered the stock to the plaintiffs.

is currently being defended by the Company.

The Company believes it has meritorious defenses to the allegations, and the Company intends

to continue to vigorously defend against the litigation.

of March 31, 2022, the Company had no financial obligations for facility lease agreements, except as set forth below.

to December 1, 2021, Tom Wilkinson, the Company’s Chairman of the Board of Directors, provided the Company with the use of office

space that he rents, located at 6836 Bee Caves Road, Building 1, Suite 279, Austin, TX 78746, for its corporate headquarters.

As of December

1, 2021, the Company entered into a month-to-month lease agreement for this office space with Nolen & Associates, under which the

Company pays Nolen & Associates $ 500 per month in rent.

Company’s rent expense totaled $ 1,641 and $ 2,141 for the three and six months ended March 31, 2022, and $ 97,910 and $ 136,188 for

the three and six months ended March 31, 2021, respectively.

April 6, 2020, to supplement its cash balances, the Company submitted an application for a $ 365,430 loan under the Paycheck Protection

Program (“PPP”) sponsored by the U.S.

Small Business Administration (the “SBA Loan”).

On April 12, 2020, the

SBA Loan application was approved, and the Company received the loan proceeds on April 22, 2020.

The SBA Loan had an interest rate of

1 % and was scheduled to mature on April 12, 2022.

quantum meruit;

and rescission of certain stock purchases made by certain of the plaintiffs,

as well as requests for declaratory relief.

Damages sought exceed $ 1,000,000 .

The Company believes it has made all required payments

and delivered all required shares of stock to the plaintiffs.

The case is currently being defended by the Company.

The Company believes

it has meritorious defenses to the allegations, and the Company intends to continue to vigorously defend the litigation.

of June 30, 2022, the Company had no financial obligations for facility lease agreements, except as set forth below.

to December 1, 2021, Tom Wilkinson, the Company’s Chairman of the Board, provided the Company with the use of office space that

he rents, located at 6836 Bee Caves Road, Building 1, Suite 279, Austin, TX 78746, for its corporate headquarters.

After December 1,

2021, the Company entered into a month-to-month lease agreement for this office space with Nolen & Associates, under which the Company

pays Nolen & Associates $ 500 per month in rent.

Company’s rent expense totaled $ 1,500 and $ 3,641 for the three and nine months ended June 30, 2022, and $ 170,265 and $ 306,453 for

the three and nine months ended June 30, 2021, respectively.

April 6, 2020, the Company submitted an application for a $ 365,430 loan under the Paycheck Protection Program sponsored by the U.S.

Business Administration (the “SBA Loan”).

On April 12, 2020, the SBA Loan application was approved, and the Company received

the loan proceeds on April 22, 2020.

The SBA Loan matured on April 12, 2022 .

January 29, 2021, the Company filed for partial forgiveness of $ 192,052 of the SBA Loan, which was approved on June 11, 2021.

The Company’s

reductions in staff that occurred in 2020 prevented the Company from qualifying for full forgiveness of the principal balance of the

April 15, 2021, the Company placed the full $ 365,430 principal balance of the SBA Loan, plus an additional $ 1,000 , in an escrow account.

Upon approval of the partial SBA Loan forgiveness, the Company paid the remaining balance of the SBA Loan, using funds in the escrow

reductions in staff that occurred in 2020 prevented the Company from qualifying for forgiveness of the entire principal balance of the

April 15, 2021, the Company placed the entire $ 365,430 principal balance of the SBA Loan, plus an additional $ 1,000 , into an escrow account.

Upon receiving the partial forgiveness of the SBA Loan described above, the Company paid the remaining balance of the SBA Loan, using

funds in the escrow account.

The Company transferred the remaining balance of the escrow account to the Company’s operating account.

As a result, the

balance of the SBA Loan was $ 0 as of September 30, 2021.

The balance of the SBA Loan was $ 0 as of September 30, 2021.

6 - STOCKHOLDERS’ EQUITY

Company’s certificate of incorporation authorizes the issuance of up to 681,000,000 shares of common stock and 10,000,000 shares

of Series A convertible preferred stock, each with a par value of $ 0.001 per share.

As of March 31, 2022, the Company had 87,560,647

shares of common stock, and no shares of preferred stock, outstanding.

the six months ended March 31, 2022, the Company issued 4,633,336 shares of its common stock as set forth below.

No preferred stock has

been issued during this six-month period.

of blank check preferred stock, each with a par value of $ 0.001 per share.

As of June 30, 2022, the Company had 88,445,832 shares of

common stock outstanding, and had no shares of preferred stock outstanding.

the nine months ended June 30, 2022, the Company issued 5,518,521 shares of its common stock as described below.

with the last quarter of the Company’s fiscal year ended September 30, 2021, the Company’s board of directors elected to

receive one-half of the members’ quarterly compensation in shares of the Company’s common stock, instead of cash.

April 2021 meeting, the Board of Directors also approved a one-time award of 100,000 shares of common stock to each director, subject

to approval of the Company’s new Equity Incentive Compensation Plan by its stockholders.

That approval was received at the Company’s

annual meeting of stockholders in September 2021.

As a result, the Company’s directors have received a total of 633,336 shares

of the Company’s common stock through the one-time grant and three quarterly compensation payments discussed above.

issued the shares for the one-time awards and the fiscal year 2021 fourth quarter awards, totaling 411,112 shares, on January 13, 2022.

The Company issued the shares for the fiscal year 2022 first quarter awards totaling 111,112 on January 31, 2022, and shares for the

second quarter awards totaling 111,112 on March 28, 2022.

July 23, 2021, the Company entered into a financial advisory and consulting agreement with Paulson Investment Company, LLC (“ Paulson ”).

Pursuant to that 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;

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 by the Company.

term of the agreement is four years from the date of the agreement, unless terminated earlier by either party as provided therein.

compensation for the services provided by Paulson under the agreement, on March 20, 2022, the Company issued a total of 4,000,000 shares

of the Company’s common stock to Paulson and three of its employees.

This was valued at $ 720,000 at the date of the consulting

The contract amount was capitalized as deferred contract costs and is being amortized to expense straight-line over the 4-

year service period.

have each of its members receive one-half of such member’s quarterly compensation in the form of shares of the Company’s

common stock, instead of cash.

At its meeting in April 2021, the Company’s board of directors also approved a one-time award of

100,000 shares of the Company’s common stock to each member of the board of directors, subject to the pending approval of the Company’s

Equity Incentive Compensation Plan by the Company’s stockholders.

The Company received that approval at the Company’s annual

meeting of stockholders held in September 2021.

As a result, the members of the Company’s board of directors have received a total

of 744,448 shares of the Company’s common stock through the grants described above.

The Company issued the shares for the one-time

awards, and the fiscal year 2021 fourth quarter awards, totaling 411,112 shares, on January 13, 2022.

The Company issued the remaining

shares for the fiscal year 2022, totaling 111,112 shares, on each of January 31, 2022, March 28, 2022 and June 15, 2022.

July 23, 2021, the Company entered into a four year financial advisory and consulting agreement with Paulson Investment Company, LLC

Pursuant to that agreement, at the Company’s request, Paulson provides the following services:

(a) familiarizing

itself with the Company’s business, assets and financial condition;

(b) assisting the Company in developing strategic and financial

(d) assisting 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;

€ identifying potentially attractive merger and acquisition

opportunities;

(f) reviewing possible innovative financing opportunities and (g) rendering other financial advisory services as may be

reasonably requested by the Company.

The Paulson agreement may be terminated prior to the end of the four year term by either party,

as provided in the agreement with Paulson.

As compensation for the services provided by Paulson under the agreement, on March 20, 2022,

the Company issued to Paulson and three of its employees a total of 4,000,000 shares of the Company’s common stock.

of common stock issued to Paulson and its employees were valued at $ 720,000 as of the date of the consulting agreement.

The Company capitalized

the value of the common shares issued to Paulson as deferred contract costs, which the Company is amortizing to expense straight-line

over the four year contract term.

June 1, 2022, the Company issued a total of 574,073 shares of the Company’s common stock to four employees pursuant to the vesting

of restricted stock units held by those employees.

June 6, 2022, the Company entered into the mediated settlement agreement with Robert LeBlanc described above.

Pursuant to that agreement,

the Company issued a total of 200,000 shares of the Company’s common stock to Mr.

Common Stock Units

October 22, 2021, the Company entered into restricted stock unit award agreements with four employees and one contractor.

granted a total of 2,000,001 shares of restricted stock to these individuals.

The restricted stock awards vest in three equal tranches

on the next three anniversaries of the date of the applicable awards.

The value of the shares of restricted stock was $ 260,000 , based

upon the then current market price of the Company’s common stock of $ 0.13 per share on the grant date.

For the six months ended

March 31, 2022, the Company recorded $ 51,568 in stock compensation expense related to these agreements.

agreements, the Company granted a total of 2,000,001 shares of restricted stock.

The restricted stock unit awards vest in three equal

tranches on the next three anniversaries of the date of the applicable award agreements.

The value of the issued shares of restricted

stock was $ 260,000 , based upon the $ 0.13 per share market price of the Company’s common stock on the date of grant.

June 1, 2022, the Company entered into restricted stock unit award agreements with two employees.

Under those agreements, the Company

granted a total of 555,556 shares of restricted stock.

The granted restricted stock vests in three equal tranches on the next three anniversaries

of the date of the applicable award agreements.

The value of the granted restricted stock was $ 53,889 , based upon the $ 0.10 per share

market price of the Company’s common stock on the date of grant.

For the nine months ended June 30, 2022, the Company recorded

$ 84,305 in stock compensation expense related to the restricted unit award agreements described above.

7 – SUBSEQUENT EVENTS

The Company does not have any subsequent events to report as of

the date of this filing.

July 1, 2022 (the “Closing Date”), the Company completed its acquisition of all of the outstanding equity securities of SideChannel,

Inc., a Massachusetts corporation (the “Subsidiary”), in exchange for shares of the Company’s equity securities (the

“Acquisition”), pursuant to an Equity Securities Purchase Agreement, dated May 16, 2022 (the “Purchase Agreement”).

The Acquisition was previously disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission

on May 18, 2022.

to the Purchase Agreement, on the Closing Date, the former shareholders of the Subsidiary (the “Sellers”) exchanged all of

their equity securities in the Subsidiary for a total of 59,900,000 shares of the Company’s common stock (the “First Tranche

Shares”), and 100 shares of the Company’s newly designated Series A Preferred Stock, $ 0.001 par value (the “Series

A Preferred Stock”).

The Sellers are entitled to receive up to an additional 59,900,000 shares of the Company’s common stock

(the “Second Tranche Shares” and together with the First Tranche Shares and the Series A Preferred Stock, the “Shares”)

at such time that the operations of the Subsidiary, as a subsidiary of the Company, achieves at least $ 5.5 million in revenue (the “Milestone”)

for any twelve-month period occurring after the Closing Date and before the 48-month anniversary of the execution of the Purchase Agreement.

the Closing Date, the Sellers acquired approximately 40.4% of the Company’s outstanding common stock.

If the Subsidiary achieves

the Milestone, and the Sellers are issued the Second Tranche Shares, and assuming that there is no other change in the number of shares

outstanding prior to the issuance of the Second Tranche Shares, the Sellers will hold a total of approximately 57.5% of the Company’s

outstanding common stock .

The number of the Second Tranche Shares may be reduced or increased, based upon whether the Subsidiary’s

working capital as of the Closing Date was less than or more than zero.

The number of the Second Tranche Shares may also be subject to

adjustment based upon any successful indemnification claims made by the Company pursuant to the Purchase Agreement.

Shares are subject to a Lock-Up/Leak-Out Agreement, pursuant to which, subject to certain exceptions, the Sellers may not directly or

indirectly offer to sell, or otherwise transfer, any of the Shares for twenty-four months after the Closing Date without the prior written

consent of the Company.

Notwithstanding the foregoing, pursuant to the Lock-Up/Leak-Out Agreement, each of the Sellers may sell up to

20% of their Shares beginning twelve months after the Closing Date, and the remaining 80% of their shares of Common Stock beginning twenty-four

months after the Closing Date .

The Company is currently performing a formal valuation of the acquisition, including an analysis of any

purchase price adjustments, and a review of the assts and liabilities acquired to determine appropriate fair values.

July 1, 2022, Sammy Davis and David Chasteen resigned from the Company’s Board of Directors (the “Board”).

same date, the Board appointed Deborah MacConnel and Kevin Powers to fill the vacancies resulting from those resignations.

date, the Board expanded the number of members of the Board by two members and approved the appointments of Brian Haugli and Hugh Regan

to fill the vacancies caused by the expansion, to be effective on July 19, 2022.

MacConnel, Mr.

Powers, and Mr.

Regan are considered

independent directors.

As of July 19, 2022, the total number of members of the Board was six (6), including four (4) independent directors.

July 1, 2022, the Board appointed Brian Haugli to the position of Chief Executive Officer of the Company, following the resignation of

David Chasteen from that position.

Chasteen assumed the role of Executive Vice President of the Company on that same date.

July 1, 2022, the Board approved the Company’s entry into restricted stock unit award agreements with two employees and five members

of the Board.

Under those agreements, the Company granted a total of 2,705,556 shares of restricted stock.

The restricted stock awards

vest in three equal tranches on the next three anniversaries of the date of the applicable awards.

The total value of the shares of restricted

stock awarded was $ 270,556 , based upon the market price of $ 0.10 per share of the Company’s common stock on the grant date.

July 5, 2022, the Company filed a Schedule 14-F Information Statement with the Securities and Exchange Commission disclosing the change

in the majority of the members of the Board.

July 5, 2022, the Company changed its name to SideChannel, Inc., the same name as the Subsidiary The Company is in the process of changing

the name of the Subsidiary.

August 2, 2022 the Company changed its ticker symbol from CLOK to SDCH .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements