What changed in this filing

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Item 1. Financial Statements

2026-08-12 compared with 2026-05-12 · 129 added, 110 removed, 562 unchanged (30% of the section changed)

2 unchanged sentences

thousands, except share and per share data)

June 30, 2026

September 30, 2025

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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

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

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Cost of revenues

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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

nine months ended June 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.

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Balance at March 31, 2026

Stock-based compensation

Balance at June 30, 2026

Balance at September 30, 2024

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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.

Stock-based compensation

Balance at June 30, 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, which are an integral part of these unaudited condensed

consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended March 31,

Nine Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash flows provided by / (used in) operating activities:

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

Depreciation and amortization

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Accounts receivable, net

Prepaid expenses and other assets

Prepaid expenses and other current assets

Accounts payable and accrued liabilities

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Income taxes payable

Net cash provided by / (used in) operating activities

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Net sale (purchase) of short-term investments

Purchase of fixed assets

Net sale of short-term investments

Net cash provided by investing activities

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TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE SIX MONTHS ENDED MARCH 31, 2026 AND 2025

THE NINE MONTHS ENDED JUNE 30, 2026 AND 2025

1 – DESCRIPTION OF BUSINESS

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.

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.

mission is to deliver security leadership and infrastructure to organizations.

Our cybersecurity Enclave platform and fractional security

service offerings provide cybersecurity and privacy risk management solutions for our customers, built on decades of experience across

government, manufacturing, and global enterprises.

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”)

services, cyber program strategy, zero trust, third-party risk management, compliance readiness, cloud security services, privacy, threat

intelligence, managed end-point security solutions, and cybersecurity awareness.

Our vCISO practice helps growing and regulated organizations

build security programs that are practical, measurable, and built to last.

are offering Enclave, our proprietary zero-trust security platform that simplifies important cybersecurity tasks to achieve microsegmentation.

Enclave unifies asset intelligence, network segmentation, and certificate lifecycle management (“CLM”) in a single platform,

combining zero trust network access with machine identity to address 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 combination

strengthens security and allows organizations to implement microsegmentation strategies without adding headcount or operational complexity.

Organizations partner with SideChannel when they need security strategy and security infrastructure, from the same team.

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

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

As of March 31, 2026, the Company

As of June 30, 2026, the Company

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

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reviewed by the CODM for operational and capital allocation decisions.

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

following table presents revenue reviewed by the CODM for the nine months ended June 30, 2026 and 2025:

SCHEDULE OF DISAGGREGATED REVENUE

(in thousands)

Six Months Ended

Nine Months Ended

(in thousands)

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are recorded in operating cash flows.

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

was no bad debt expense recorded for the nine months ended June 30, 2026 and 2025.

Value of Financial Instruments

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limited to the total amount of goodwill allocated to that reporting unit.

assets, which consist of finite-lived intangible assets and property and equipment, are assessed for impairment whenever events or changes

in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these

assets are no longer appropriate.

Each impairment test is based on a comparison of the estimated undiscounted cash flows to the recorded

value of the asset.

assets, which consist of finite-lived intangible assets and property and equipment, are assessed for impairment whenever events or

changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful

lives of these assets are no longer appropriate.

Each impairment test is based on a comparison of the estimated undiscounted cash

flows to the recorded value of the asset.

If impairment is indicated, the asset is written down to its estimated fair value.

The cash flow estimates used to

determine the impairment, if any, contain management’s best estimates using appropriate assumptions and projections at that time.

There have been no significant events or changes in circumstances during the 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.

cash flow estimates used to determine the impairment, if any, contain management’s best estimates using appropriate

assumptions and projections at that time.

We have incurred net losses since determining the carrying amount of our goodwill.

believe additional quarter-over-quarter revenue increases combined with our cost reductions, which began taking effect during the

three months ended March 31, 2026, will likely generate net income and positive cash flow.

There have been no significant events or

changes in circumstances during the nine months ended June 30, 2026, that would indicate that the carrying amount of the

Company’s intangible asset, goodwill, may be impaired as of June 30, 2026.

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

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We did no t record any liabilities for uncertain tax positions

during the six months ended March 31, 2026.

during the nine months ended June 30, 2026.

Loss Per Common Share

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Diluted earnings per share reflects the potential dilution that could occur if

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

common stock that could share in our earnings.

Diluted loss per share is the same as basic loss per share during periods where net losses

are incurred since the inclusion of the potential common stock equivalents would be anti-dilutive because of the net loss.

warrants were exercised or equity awards vest resulting in the issuance of common stock that could share in our earnings.

per share is the same as basic loss per share during periods where net losses are incurred since the inclusion of the potential common

stock equivalents would be anti-dilutive because of the net loss.

evaluate warrants in accordance with ASC Topics 480 (Distinguishing Liabilities from Equity) and 815 (Derivatives and Hedging).

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

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

did not adopt additional new accounting pronouncements during the nine months ended June 30, 2026.

Pronouncements Not Yet Adopted

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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 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,

with maturities from 91-360 days are included in “Short-term investments.” As of June 30, 2026, the Company had no long-term

following table presents the carrying amounts of cash equivalents and short-term investments as of June 30, 2026, and September 30, 2025:

SCHEDULE OF CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

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The annual renewal date is January 1 st .

lease allows for a 2 %

The lease allows for a 2 %

increase effective at the beginning of each renewal period.

The lease payment is $ 1

per month during calendar year 2026.

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

lease expenses were $ 9 thousand and $ 9 thousand for the nine months ended June 30, 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 March 31, 2026.

We do not have any long-term operating leases or financing leases as of June 30, 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 March 31, 2026, and September 30, 2025.

of June 30, 2026, and September 30, 2025.

SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS

March 31, 2026

June 30, 2026

Fair Value Measured Using

(in thousands)

Cash Equivalents

Money Market Funds

Total Cash Equivalents

Short-term investments

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Total short-term investments

did not have debt at March 31, 2026.

did not have debt at June 30, 2026.

9 – STOCKHOLDERS’ EQUITY

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

of June 30, 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

5 unchanged sentences

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

the nine months ended June 30, 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

the nine months ended June 30, 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 June 30, 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 three categories of warrants outstanding which are summarized below along with exercise prices and expiration dates.

SCHEDULE OF WARRANT OUTSTANDING

thousands, except prices and dates)

(in thousands, except prices and dates)

Exercise Price

1 unchanged sentence

2018 Placement Agent

2021 Private Placement

2021 Placement Agent

1 unchanged sentence

Total Outstanding Warrants

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

following table summarizes warrant activity for the nine months ended June 30, 2026:

SCHEDULE OF WARRANT ACTIVITY

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Canceled/Forfeited

Outstanding at March 31, 2026

Outstanding at June 30, 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.

thousand of 2021 Private Placement warrants expired on March 31, 2026, and an additional 130

thousand of 2021 Private Placement warrants expired between April 1, 2026, and April 16, 2026.

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

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Recognition of revenue

Balance at March 31, 2026

Balance at June 30, 2026

11 – BUSINESS RISK AND CREDIT RISK CONCENTRATION INVOLVING CASH

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

client individually accounted for over 10 % of our revenue during the three months ended June 30, 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.

for over 10 % of our revenue during the nine months ended June 30, 2026 or 2025;

one client accounted for over 10 % of our revenue during

the three months ended June 30, 2025.

had no clients with an accounts receivable balance that exceeded 10 % of accounts receivable at June 30, 2026.

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

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At times our balance at each institution may exceed the $ 250 thousand FDIC insured limit.

As of March 31, 2026,

As of June 30, 2026,

we had insured Deposits totaling $ 237 thousand at three (3) distinct financial institutions, leaving approximately $ 89 thousand of our

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12 – RELATED PARTY TRANSACTIONS

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

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

June 30, 2026.

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

shareholder of RealCISO Inc.

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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

the nine months ended June 30, 2026, we paid $ 85 thousand to RealCISO for licenses, and invoiced RealCISO $ 62 thousand for software development

services that we provided RealCISO.

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

other related party transactions occurred during the nine months ended June 30, 2026.

fiscal years ended September 30, 2025 and 2024, SideChannel paid $ 75 thousand and $ 30 thousand to RealCISO for licenses, respectively.

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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:

following table summarizes the activity of our RSUs granted under our Equity Incentive Plan during the nine months ended June 30, 2026:

SCHEDULE OF RESTRICTED STOCK UNITS VESTING

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Canceled/Forfeited

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

Outstanding RSUs at June 30, 2026

the quarter ended June 30, 2026, we awarded 23,799 RSUs, vesting over three years beginning March 1, 2027, and ending on March 1,

2029 , to directors and employees.

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.

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

Vesting of 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.

average grant date fair value of RSUs granted during the nine months ended June 30, 2026, was $ 2.26 .

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 nine months ended June 30, 2026, was $ 287 thousand for the amortization of outstanding

equity compensation grants.

1 unchanged sentence

in selling and marketing expense, and $ 26 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

unamortized stock compensation expense at June 30, 2026, was $ 634

thousand, and the remaining weighted average term to vesting was 2

14 – COMMITMENTS AND CONTINGENCIES

are currently not involved in any litigation that we believe could have a material adverse effect on its financial condition or results

are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results

of operations.

15 - SUBSEQUENT EVENTS

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.

On July 27, 2026, the Company filed a Certificate of Withdrawal of Certificate of Designation of Series A Preferred

Stock (the “Certificate of Withdrawal”) with the Secretary of State of the State of Delaware.

The Company previously filed

a Certificate of Designation providing for the Company’s Series A preferred stock.

As of July 27, 2026, no shares of Series A preferred

stock were outstanding.

The Certificate of Withdrawal had the effect of eliminating the Series A preferred stock.

The previously designated

shares of Series A preferred stock have been returned as authorized preferred stock available for designation and issuance as determined

by the Company’s Board of Directors.

Company has evaluated events through August 12, 2026, the filing date of this Quarterly Report on Form 10-Q and determined that, except as set forth above, there

have been no 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