What changed in this filing

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Item 1. Financial Statements

2026-05-12 compared with 2026-02-17 · 282 added, 308 removed, 390 unchanged (60% of the section changed)

FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED

BALANCE SHEETS

(In thousands, except share and per share data)

December 31, 2025

CONSOLIDATED BALANCE SHEETS

thousands, except share and per share data)

September 30,

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Commitments and contingencies (Note 14)

Common stock, $ 0.001 par

value, 681,000,000 shares authorized;

shares issued and outstanding as of December 31, 2025, and September 30, 2025

Common stock, $ 0.001 par value, 681,000,000 shares authorized;

4,572,757 and 4,446,713 shares issued and outstanding as of March 31, 2026, and September 30, 2025

Additional paid-in capital

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Total liabilities and stockholders’ equity

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.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except share and per share data)

Company’s common stock shares issued and outstanding, common stock and additional paid-in capital as of 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.

CONSOLIDATED STATEMENT OF OPERATIONS

thousands, except share and per share data)

Three Months Ended

Six Months Ended

Cost of revenues

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Weighted average common shares outstanding – basic and diluted

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.

Company’s weighted average common shares outstanding and net loss per common share – basic and diluted for the three and

six months ended March 31, 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.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

Paid-in Capital

thousands, except share data)

Balance at September 30, 2025

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Balance at December 31, 2025

Paid-in Capital

Rounding up of fractional shares

Stock-based compensation

Balance at March 31, 2026

Balance at September 30, 2024

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Balance at December 31, 2024

Company’s common shares outstanding (shares and amount) and additional paid-in capital 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.

Stock-based compensation

Balance at March 31, 2025

Company’s common shares outstanding (shares and amount) and additional paid-in capital have been retroactively restated for the

reverse stock split as described in Note 2 of the accompanying notes,

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Three Months Ended

Six Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Accounts payable and accrued liabilities

Income taxes payable

Deferred revenue

Income taxes payable

Net cash provided by / (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Net cash provided by / (used in) investing activities

Net sale (purchase) of short-term investments

Purchase of fixed assets

Net cash provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

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CASH, END OF PERIOD

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Purchase of RSUs sold by employees to pay for taxes due on vested RSUs

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

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED DECEMBER 31, 2025 AND 2024

THE SIX MONTHS ENDED MARCH 31, 2026 AND 2025

1 – DESCRIPTION OF BUSINESS

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.

mission is to make cybersecurity simple and accessible for emerging to enterprise companies, a market that we believe is currently

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 services, privacy, threat intelligence,

managed end-point security solutions, and cybersecurity awareness.

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.

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 services, privacy, threat intelligence, managed end-point security solutions, and cybersecurity

are marketing and selling Enclave, a proprietary software product that simplifies important cybersecurity tasks to achieve

“microsegmentation.” By combining zero trust network access with asset intelligence, certificate management, and machine

identity, Enclave seamlessly creates a unified security architecture that eliminates traditional network vulnerabilities.

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.

headquarters are located at 146 Main Street, Suite 405, Worcester, MA 01608.

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2 – REVERSE STOCK SPLIT

On February 12, 2025, at the annual meeting of stockholders, the stockholders of the Company approved and adopted

an amendment to the Company’s certificate of incorporation, as amended (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 Company’s board of directors (the “Board”) in its sole discretion.

On August 21, 2025, the Board approved a reverse stock split at a ratio of 1-for-52 (the “Reverse Split”) .

On January 12,

2026, the Company filed a certificate of amendment to its Certificate of Incorporation (the “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.

February 12, 2025, at the annual meeting of stockholders, the stockholders of the Company approved and adopted an amendment to the Company’s

certificate of incorporation, as amended (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 Company’s board of directors (the “Board”) in its sole discretion.

On August 21, 2025, the Board

approved a reverse stock split at a ratio of 1-for-52 (the “Reverse Split”).

On January 12, 2026, the Company filed a certificate

of amendment to its Certificate of Incorporation (the “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.

January 16, 2026, the Company filed a certificate of correction to the Certificate of Amendment (the “Certificate of Correction”)

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any fractional shares would be rounded “up to the nearest whole share” of common stock, as the Company intended.

ET on January 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 .

The Reverse Split had no effect on our

authorized number of shares of common stock, par value of common stock, total assets, total liabilities or stockholders’ equity.

We restated our common shares outstanding (shares and amount) and the value of our additional paid-in capital (“APIC”)

to reflect the number of shares outstanding after the Reverse Split.

ET on January 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.

The Company’s common stock began trading on a post-Reverse Split basis

at market open on January 23, 2026.

Reverse Split had no effect on our authorized number of shares of common stock, par value of common stock, total assets, total liabilities

or stockholders’ equity.

We restated our common shares outstanding (shares and amount) and the value of our additional paid-in

capital (“APIC”) to reflect the number of shares outstanding after the Reverse Split.

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 stockholders of record and 20,097 shares

of common stock were issued to CEDE & Co.

3 – GOING CONCERN ASSESSMENT

Concern Uncertainty

has evaluated the Company’s ability to continue as a going concern within one year after the date that these financial statements

are issued in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification

(“ASC”) 205-40, Presentation of Financial Statements – Going Concern.

Management’s evaluation considered the

Company’s current financial condition, including its cash position, recurring operating losses, and historical negative cash flows

from operations, as well as its forecasted results and cash flows for the twelve months following the date of issuance of these financial

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

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.

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.

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.

are issued, in accordance with ASC 205-40, Presentation of Financial Statements – Going Concern.

As of March 31, 2026, the Company

has incurred recurring operating losses and experienced negative cash flows from operations and has limited cash and other sources of

These conditions, together with the Company’s forecasted cash requirements for operations and other obligations coming

due within the next twelve months, raise substantial doubt about the Company’s ability to continue as a going concern within one

year after the date that these financial statements are issued.

Company’s current business plan assumes continued investment in its product offerings and related support activities.

its current cash balance, projected cash used in operations, and other obligations coming due during the twelve months following the

issuance of these financial statements, management does not believe that the Company will have sufficient liquidity to fund operations

and meet its obligations as they become due during that period without obtaining additional capital or implementing significant changes

to its operations.

particular, management has determined that, for the Company to continue to operate for at least twelve months after the date these financial

statements are issued, it would be necessary either (i) to secure additional equity or debt financing on acceptable terms or (ii) to

eliminate a significant portion of the Company’s product offering and related cost structure.

is actively exploring alternatives to address these conditions, including pursuing additional sources of capital and evaluating potential

changes to the Company’s product portfolio and related operating cost structure.

However, as of the date these financial statements

are issued, the Company has not secured additional financing, has not completed any significant reduction in its product offering, and

there can be no assurance that such actions will be successfully executed or will be sufficient to enable the Company to continue as

a going concern.

Accordingly, substantial doubt about the Company’s ability to continue as a going concern is not alleviated.

accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction

of liabilities in the normal course of business.

The financial statements do not include any adjustments to the carrying amounts and

classification of assets and liabilities or any other adjustments that might result if the Company is unable to continue as a going concern.

4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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.

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

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(1) vCISO Services, and (2) Cybersecurity Software and Services.

vCISO Services:

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.

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”).

relationships with third-party service providers and VARs provide SideChannel with additional internal capabilities to mitigate cybersecurity

We earn licensing revenue from software contracts and commissions from third-party service provider partnerships which are

included in this revenue category.

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.

Chief Executive Officer is our chief operating decision maker (“CODM”).

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reviewed by the CODM for operational and capital allocation decisions.

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

OF DISAGGREGATED REVENUE

Three Months Ended

following table presents revenue reviewed by the CODM for the six months ended March 31, 2026 and 2025:

SCHEDULE OF DISAGGREGATED REVENUE

(in thousands)

Six Months Ended

(in thousands)

vCISO Services

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Effective January

1, 2023 , we follow the guidance in 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.

1, 2023 , we implemented the guidance in 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.

balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered

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are recorded in operating cash flows.

was no bad debt expense recorded for the three months ended December 31, 2025 and 2024.

was no bad debt expense recorded for the six months ended March 31, 2026 and 2025.

Value of Financial Instruments

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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;

Level 3 – inputs to

the valuation methodology are unobservable and significant to the fair value measurement.

1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;

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;

3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

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

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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.

There have been no significant events or changes in circumstances during the six months ended March 31, 2026, that would indicate that

the carrying amount of the Company’s intangible asset, goodwill, may be impaired as of March 31, 2026.

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

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is recognized over a period of time for monthly service subscriptions and software licenses.

Revenue is recognized at a point in

time when, or as, the performance obligation is satisfied for fixed fee projects and time and material based billing.

The 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

Revenue is recognized at a point in time

when, or as, the performance obligation is satisfied for fixed fee projects and time and material based billing.

The 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.

do not have any material variable consideration arrangements, client-specific acceptance criteria, or any material payment terms with

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Leases are classified as either operating leases or finance leases based on the guidance in ASC Topic 842.

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.

leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in our consolidated balance

Finance leases are included in property and equipment and financing lease liabilities.

We do not currently have any financing

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

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Our lease periods are less than one year in duration.

expense for short-term lease payments is recognized on a straight-line basis over the lease term.

Lease expense

for short-term lease payments is recognized on a straight-line basis over the lease term.

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

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We did no t record any liabilities for uncertain tax positions

during the three months ended December 31, 2025.

during the six months ended March 31, 2026.

Loss Per Common Share

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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

warrants were exercised or equity awards vest resulting in the issuance of

common stock that could share in our earnings.

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Accounting Announcements

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,

we believe those ASUs issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable

to us, or (iv) are not expected to have a significant impact on us.

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, we believe those ASUs issued to date either (i) provide

supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us, or (iv) are not expected to have a significant

impact on us.

Pronouncements Adopted

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We manage our operations as a single operating segment for the purpose of assessing performance and making operating

Our Chief Executive Officer is our CODM.

No changes have been made to the presentation of our financial statements because

of this pronouncement.

Our Chief Executive Officer is our chief operating decision maker.

No changes have been made to the presentation of our financial

statements because of this pronouncement.

December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

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us is our fiscal year 2026 beginning on October 1, 2025.

did not adopt additional new accounting pronouncements during the three months ended December 31, 2025.

did not adopt additional new accounting pronouncements during the six months ended March 31, 2026.

Pronouncements Not Yet Adopted

In November 2024, the FASB also 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.

November 2024, the FASB also 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.

We are currently evaluating the impact of this amended disclosure

March 2024, the Securities and Exchange Commission issued a rule which will require companies to make certain climate-related disclosures

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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 is currently

evaluating the impact of the adoption of the rule.

Company does not believe that the above recently issued, but not yet effective, accounting standards, if and when adopted, will have

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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

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

OF CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

with maturities from 91-360 days are included in “Short-term investments.” As of March 31, 2026, the Company had no long-term

following table presents the carrying amounts of cash equivalents and short-term investments as of March 31, 2026, and September 30,

SCHEDULE OF CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

September 30,

(in thousands)

Cash equivalents

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Total short-term investments

Short-Term Investment

Maturity Date

Time deposits

March 8, 2026

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

December 10, 2021, we entered into a lease for approximately 500 square

feet of office space at 146 Main Street in Worcester, Massachusetts, with the option

to renew annually.

December 10, 2021, we entered into a lease for approximately 500

square feet of office space at 146 Main Street in Worcester,

Massachusetts, with the option to renew

The annual renewal date is January 1 st .

Our current lease payment is $ 986

The lease allows for a 2 %

lease allows for a 2 %

increase effective at the beginning of each renewal period.

The lease payment will be $ 1,006

The lease payment is $ 1,006

per month during calendar year 2026.

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

lease expenses were $ 3

thousand and $ 3

thousand for the three months ended December 31, 2025 and 2024, respectively.

lease expenses were $ 6 thousand and $ 6 thousand for the six months ended March 31, 2026 and 2025, respectively.

have made an accounting policy election not to apply the recognition requirements of ASC Topic 842 (Leases) to short-term leases (leases

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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 do not have any long-term operating leases or financing leases as of March 31, 2026.

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

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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.

OF FAIR VALUE OF FINANCIAL INSTRUMENTS

December 31, 2025

of March 31, 2026, and September 30, 2025.

SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS

March 31, 2026

Fair Value Measured Using

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Total short-term investments

entire December 31, 2025, balance of time deposits maturing in 91 to 360 days are certificates of deposit issued by a bank at which total

deposits are less than the FDIC limit of $ 250 thousand.

did no t have debt at December 31, 2025.

did not have debt at March 31, 2026.

9 – STOCKHOLDERS’ EQUITY

of December 31, 2025, and September 30, 2025, we had 4,446,713

shares of common stock outstanding.

The outstanding shares were retroactively restated for the effect of the

Reverse Split from 231,229,054 to 4,446,713 .

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.

We restated our common shares outstanding (shares and amount) and the value

of our APIC to reflect the number of shares outstanding after the Reverse Split.

of December 31, 2025, we had zero ( 0 ) shares of preferred stock outstanding and were authorized to issue 10,000,000 shares of preferred

of March 31, 2026, and September 30, 2025, we had 4,572,757 and 4,446,713 shares of common stock outstanding, respectively.

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.

restated our common shares outstanding (shares and amount) and the value of our APIC to reflect the number of shares outstanding after

the Reverse Split.

The outstanding shares were retroactively restated for the effect of the Reverse Split from 231,229,054 to 4,446,713

for September 30, 2025.

Stock Issued Under Equity Incentive Plan

the six months ended March 31, 2026, 141,870 Restricted Stock Units (“RSUs”) vested for which we issued 105,550 shares of

common stock and 36,320 RSUs were sold by employees to fund payroll taxes.

the six months ended March 31, 2025, 123,062 RSUs vested for which we issued 94,180 shares of common stock and 28,882 RSUs were sold

by employees to fund payroll taxes.

of March 31, 2026, 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.

have four categories of warrants outstanding which are summarized below along with exercise prices and expiration dates.

OF WARRANT OUTSTANDING

(In thousands, except prices and lives)

SCHEDULE OF WARRANT OUTSTANDING

thousands, except prices and dates)

Exercise Price

5 unchanged sentences

Total Outstanding Warrants

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

OF WARRANT ACTIVITY

following table summarizes warrant activity for the six months ended March 31, 2026:

SCHEDULE OF WARRANT ACTIVITY

(in thousands, except prices and lives)

3 unchanged sentences

Canceled/Forfeited

Outstanding at December 31, 2025

Outstanding at March 31, 2026

Approximately 101

thousand of 2021 Private Placement warrants expired on March 31, 2026.

remaining 130 thousand 2021 Private Placement warrants outstanding at March 31, 2026, expired between April 1, 2026, and April

Following the expiration of 2021 Private Placement warrants on April 16, 2026, the total warrants outstanding were 601

thousand with average exercise price $ 16.90

and remaining life of 3.3

years, respectively.

The 2021 Private Placement Warrants contained terms that significantly restricted our options for

raising capital.

The expiration of these warrants provides us with more options to increase liquidity.

10 – REVENUE FROM CONTRACTS WITH CLIENTS

3 unchanged sentences

within 12 months of the balance sheet date.

OF CHANGES IN DEFERRED REVENUE

SCHEDULE OF CHANGES IN DEFERRED REVENUE

(in thousands)

2 unchanged sentences

Recognition of revenue

Balance at December 31, 2025

Balance at March 31, 2026

11 – BUSINESS RISK AND CREDIT RISK CONCENTRATION INVOLVING CASH

client individually accounted for over 10 % of our revenue during the three months ended December 31, 2025 and 2024.

had three clients each with an accounts receivable balance that exceeded 10 % of accounts receivable at December 31, 2025.

client individually accounted for over 10 % of our revenue during the three months ended March 31, 2026.

No one client individually accounted

for over 10 % of our revenue during the six months ended March 31, 2026, or the three or six months ended March 31, 2025.

had no clients with an accounts receivable balance that exceeded 10 % of accounts receivable at March 31, 2026.

maintain our cash, cash equivalents, and short-term investments in accounts held by highly reputable financial institutions (collectively

The Federal Deposit Insurance Corporation (“FDIC”) insures these 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 December 31, 2025, we had

insured Deposits totaling $ 388 thousand

at three (3) distinct financial institutions, leaving approximately $ 207

thousand of our Deposits uninsured.

We have not experienced

any losses on Deposits.

The Federal Deposit Insurance Corporation (“FDIC”) insures these 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 March 31, 2026,

we had insured Deposits totaling $ 149 thousand at three (3) distinct financial institutions, leaving approximately $ 162 thousand of our

Deposits uninsured.

We have not experienced any losses on Deposits.

12 – RELATED PARTY TRANSACTIONS

did not have any new related party transactions or material changes to existing related party transactions during the three months ended

December 31, 2025.

Haugli, our Chief Executive Officer, a member of our Board of Directors, and a significant stockholder in the Company, is also a principal shareholder of RealCISO Inc.

did not have any new related party transactions or material changes to existing related party transactions during the six months ended

March 31, 2026.

Haugli, our Chief Executive Officer, a member of our Board of Directors, and a significant stockholder in the Company, is also a principal

shareholder of RealCISO Inc.

(“RealCISO”).

We are a reseller of the RealCISO software.

We receive revenue from our customers for the use of RealCISO software and pay licensing

fees to RealCISO for such use.

the three months ended December 31, 2025, we paid $ 14 thousand to RealCISO for licenses, and invoiced RealCISO $ 12 thousand for software

development services that we provided RealCISO.

other related party transactions occurred during the three months ended December 31, 2025.

fiscal years ended September 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.

We receive revenue from our customers

for the use of RealCISO software and pay licensing fees to RealCISO for such use.

the six months ended March 31, 2026, we paid $ 66 thousand to RealCISO for licenses, and invoiced RealCISO $ 38 thousand for software development

services that we provided RealCISO.

other related party transactions occurred during the six months ended March 31, 2026.

fiscal years ended September 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.

October 13, 2023, the Association of the US Army (“AUSA”) signed an agreement for a cybersecurity risk assessment for approximately

On February 15, 2024, the President of AUSA, Retired

$ 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.

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.

13 – STOCK-BASED COMPENSATION

3 unchanged sentences

over a 3 -year period.

The award quantities and grant date fair values have been retroactively

adjusted to reflect the Reverse Split.

following table summarizes the activity of our RSUs granted under our Equity Incentive Plan during the three months ended December 31,

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

following table summarizes the activity of our RSUs granted under our Equity Incentive Plan during the six months ended March 31, 2026:

SCHEDULE OF RESTRICTED STOCK UNITS VESTING

2 unchanged sentences

Canceled/Forfeited

Outstanding RSUs at December 31, 2025

the quarter ended December 31, 2025, we awarded 32,695

RSUs to new employees.

Vesting occurs over three

years beginning on March 1, 2026, and ending on March 1, 2028, for 30,771 granted RSUs and the remaining 1,924 vest on March 1, 2026 .

The average grant date fair value of RSUs granted during the three months ended December 31, 2025, was $ 3.36 .

The Company recognizes compensation cost for unvested share-based awards on a straight-line basis over the requisite service period.

total stock-based compensation expense for the three months ended December 31, 2025, was $ 100

thousand for the amortization of outstanding equity compensation

Stock-based compensation of $ 76

thousand is included in general and administrative expense,

thousand in selling and marketing expense, and $ 9

thousand in research and development expense.

unamortized stock compensation expense at December 31, 2025, was $ 531

thousand, and the remaining weighted average term to vesting

Outstanding RSUs at March 31, 2026

March 16, 2026, we awarded 140,497 RSUs vesting over three years beginning on March 1, 2027, and ending on March 1, 2029, to

officers and employees .

During the quarter ended December 31, 2025, we awarded 32,695 RSUs to new employees.

30,771 RSUs awarded during the quarter ended December 31, 2025, occurs over three years beginning on March 1, 2026, and ending on

March 1, 2028, and the remaining 1,924 vested on March 2, 2026.

The average grant date fair value of RSUs granted during the six

months ended March 31, 2026, was $ 2.31 .

The Company recognizes compensation cost for unvested share-based awards on a straight-line basis over the requisite service

total stock-based compensation expense for the six months ended March 31, 2026, was $ 191 thousand for the amortization of outstanding

equity compensation grants.

Stock-based compensation of $ 144 thousand is included in general and administrative expense, $ 29 thousand

in selling and marketing expense, and $ 18 thousand in research and development expense.

unamortized stock compensation expense at March 31, 2026, was $ 707 thousand, and the remaining weighted average term to vesting was 2.33

14 – COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

15 - SUBSEQUENT EVENTS

On February 12, 2025, at the

Company’s 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.

On January 16, 2026, the Company

filed a Certificate of Correction to correct a scrivener’s error in the Certificate of Amendment.

The Certificate of 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.

Accordingly, at 4:00 p.m.

ET on January 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.

The Reverse Split had no effect on our

authorized number of shares of common stock, par value of common stock, total assets, total liabilities or stockholders’ equity.

We restated our common shares outstanding (shares and amount) and the value of our APIC to reflect the number of shares outstanding

after the Reverse Split.

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.

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.

April 16, 2026, the final tranche of 2021 Private Placement Warrants expired.

As of April 17, 2026, the total warrants outstanding were

601 thousand with average exercise price $ 16.90 and remaining life of 3.3 years, respectively.

The 2021 Private Placement Warrants contained

terms that significantly restricted our options for raising capital.

The expiration of these warrants provides us with more options to

increase liquidity.

Company has evaluated events through May 13, 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.

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