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Risk Factors - SDCH

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$SDCH Risk Factor changes from 00/12/12/24/2024 to 00/12/18/25/2025

Item 1A.

Risk Factors” (“Risk Factors”) and elsewhere in this Annual Report on Form 10-K. These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate; therefore, we cannot assure you that the forward-looking statements included in this Annual Report on Form 10-K will prove to be accurate.

Some of these and other risks and uncertainties that could cause actual results to differ materially from such forward-looking statements are more fully described in Risk Factors and elsewhere in this Annual Report on Form 10-K, or those discussed in other documents we filed with the Securities and Exchange Commission (“SEC”). Except as may be required by applicable law, we undertake no obligation to publicly update or advise of any change in any forward-looking statement, whether as a result of new information, future events, or otherwise. In making these statements, we disclaim any obligation to address or update each factor in future filings with the SEC or communications regarding our business or results, and we do not undertake to address how any of these factors may have caused changes to discussions or information contained in previous filings or communications.

In addition, any of the matters discussed above may have affected our past results and may affect future results, so that our actual results may differ materially from those expressed in this Annual Report on Form 10-K and in prior or subsequent communications.

Other Information - Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contained in this Annual Report on Form 10-K.

We are not aware of any misstatements regarding any third-party information presented in this Annual Report on Form 10-K; however, these estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under, and incorporated by reference in, Risk Factors of this Annual Report on Form 10-K. These and other factors could cause our future performance to differ materially from our assumptions and estimates. Some market and other data included herein, as well as the data of competitors as they relate to SideChannel, is also based on our good faith estimates. 3 PART I ITEM 1. BUSINESS Business Overview & Strategy SideChannel is a cybersecurity advisory services and software company. Our mission is to make cybersecurity simple and accessible for mid-market and emerging companies, a market that we believe is currently underserved. Our solutions provide effective cybersecurity risk management for our clients. We anticipate that our target customers will continue to need cost-effective security solutions. We continue to expand our catalogue of services and solutions to address the cybersecurity needs of our customers, including virtual Chief Information Security Officer (“vCISO”), cyber program strategy, zero trust, third-party risk management, compliance readiness, cloud security and architecture services, privacy, threat intelligence, managed end-point security solutions, and awareness and training. This specifically includes: 4 In the context of SideChannel’s offerings, Enclave is well-positioned to address these challenges faced by enterprises in achieving a zero trust environment: ● Establishing a clear scope, ● Communicating success through strategic and operational metrics, and ● Anticipating increase in staffing and costs without delays. By integrating access control, microsegmentation, encryption, machine identity management, and secure networking concepts into a unified solution, Enclave provides a comprehensive solution for managing cybersecurity controls effectively. It allows IT professionals to segment enterprise networks efficiently, allocate the right personnel to those segments, and direct traffic seamlessly. 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. We offer cybersecurity service solutions designed to address financial and espionage-driven breaches effectively, minimize end-user errors, and ensure rapid incident response. Our offerings in data security, application security, network security, security operations, and risk management position us to meet these challenges.sidechannel.com). Revenue Categories We internally report our revenue using two categories: 5 Growth Strategy Our growth strategy focuses on these three initiatives: ● Increasing adoption of Enclave: By promoting Enclave and our other cybersecurity solutions to our existing vCISO clients, we aim to deepen our relationships and provide comprehensive, integrated security solutions. This supports the increased demand for zero trust strategies and remote worker technologies. ● Securing new vCISO Services Clients: As organizations plan to increase security investments due to breaches and the rising complexity of cyber threats, we aim to expand our client base by offering flexible, expert vCISO services that address budget constraints and the need for rapid security posture establishment. ● Adding new Cybersecurity Software and Services offerings: We plan to enhance our portfolio by incorporating transformational technologies such as AI-based security operations, data security posture management (“DSPM”), polymorphic encryption, cyber-physical system (“CPS”) security, and application security posture management (“ASPM”). The first three controls in CIS version 8 call for organizations to: ● Critical Control 1: “Establish and maintain an accurate, detailed, and up-to-date inventory of all enterprise assets with the potential to store or process data.” ● Critical Control 2: “Actively manage (inventory, track, and correct) all software (operating systems and applications) on the network so that only authorized software is installed and can execute, and that unauthorized and unmanaged software is found and prevented from installation or execution.” ● Critical Control 3: “Configure data access control lists based on a user’s need to know. Apply data access control lists, also known as access permissions, to local and remote file systems, databases, and applications.” We built Enclave to primarily address these three extremely critical cybersecurity controls along with other controls in CIS version 8. Enclave seamlessly combines access control, microsegmentation, encryption, and other secure networking concepts to create a comprehensive solution. Through software, it allows IT professionals to easily segment the enterprise network, place the right staff in those segments, and direct traffic. Unlike open, traditional models, Enclave allows for near-limitless micro-segmented networks to operate insulated from one another. During 1996, the Company acquired the operations of Eden Systems, Inc. (“Eden”), which became a wholly owned subsidiary of the Company. Eden was engaged in water treatment and the retailing of cleaning products. Eden’s operations were sold on October 1, 1997. On May 16, 1996, the Company changed its name to National Scientific Corporation. From September 30, 1997, through the year ended September 30, 2001, the company aimed its efforts in the research and development of semiconductor proprietary technology and processes and in raising capital to fund its operations and research. Effective August 27, 2014, the Company changed its name to Cipherloc Corporation (“Cipherloc”) after it began engaging in cybersecurity software development. The Company redomiciled and became a Delaware corporation on September 30, 2021., f.k.a. SideChannel, Inc. and Cipherloc. The combined entity changed its name to SideChannel, Inc., on July 5, 2022, and the acquiree is now named SCS, Inc. (“SCS”) and for accounting purposes, is a subsidiary of the Company. The success of our software product, Enclave, depends on our ability to provide our customers with reliable, innovative features and benefits that are delivered before, or at least no later than, our competitors. When the demands of product development exceed the capacity or knowledge of our in-house staff, we retain temporary third-party consultants to assist us. Our research and development expenditures for the fiscal years ended September 30, 2025, and September 30, 2024, were $562 thousand and $546 thousand, respectively. A growing list of referral partners recommend SideChannel to their clients as the primary option to identify, assess, and mitigate cybersecurity risks. Certain referral partners receive a commission upon a referral becoming a SideChannel client. As of September 30, 2025, we had three (3) employees dedicated to selling and marketing activities. Some of our competitors have greater financial, technical, sales, marketing, and other resources than we do. Because of these and other factors, competitive conditions in the markets we operate in are likely to continue to intensify in the future, as participants compete for market share. Increased competition could result in price reductions for our products and services, possibly reducing our net revenue and profit margins and resulting in a loss of our market share, any of which would likely harm our business. We believe that our future results depend largely upon our ability to serve our clients and customers with the products and services described earlier better than our competitors, and by offering new services and product enhancements, whether such product and service offerings are developed internally or through acquisition. We also believe that we must provide product and service offerings that compete favorably against those of our competitors with respect to ease of use, reliability, performance, range of useful features, reputation and price. We anticipate that we will face increasing pricing pressures from our competitors in the future. Since there are low barriers to entry into the cybersecurity services and software markets, we believe competition in these markets will persist and intensify in the future. Our chief services competitors include companies such as Optiv, NCC, Coalfire, PwC, EY, Deloitte, and GuidePoint. Our primary software competitors are companies such as Check Point, Cisco, CrowdStrike, F5 Networks, HPE, Huawei, Illumio, Juniper, Microsoft, Netskope, Palo Alto Networks, SonicWALL, Sophos, and zScaler. Intellectual Property Protective Measures We believe that our intellectual property is an important and vital asset, which enables us to develop, market, and sell our products and services and enhance our competitive position. Our intellectual property includes our proprietary business and technical know-how, inventions, works of authorship, and confidential information. To protect our intellectual property, we rely primarily upon legal rights in trade secrets, patents, copyrights, and trademarks, in addition to our policies and procedures, security practices, contracts, and relevant operational measures. We protect the confidentiality of our proprietary information by entering into non-disclosure agreements with our employees, contractors, and other entities with which we do business. In addition, our license agreements related to our software and proprietary information include confidentiality terms. These agreements are generally non-transferable. We also employ access controls and associated security measures to protect our facilities, equipment, and networks. Currently, we have six active patents registered with the U.S. Patent and Trademark Office. We employ procedures to label copyrightable works with the appropriate proprietary rights notices, and we actively enforce our rights in the United States and abroad. However, these measures may not provide us with adequate protection from infringement, and our intellectual property rights may be challenged.S. Patent and Trademark Office (“USPTO”). In the United States, we can maintain our trademark rights and renew trademark registrations for as long as the trademarks are in use. 8 Government Regulation Export Control Regulations We expect that all our products will be subject to U.S. export control laws and applicable foreign government import, export and/or use requirements. The level of such control generally depends on the nature of the products in question. Often, the level of export control is impacted by the nature of the software and cybersecurity incorporated into our products. In those countries where such controls apply, the export of our products may require an export license or authorization. However, even if a transaction qualifies for a license exception or the equivalent, it may still be subject to corresponding reporting requirements. For the export of some of our products, we may be subject to various post-shipment reporting requirements. Minimal U.S. export restrictions apply to all our products, whether or not they perform cybersecurity functions. In addition, certain of our products and related services may be subject to the International Traffic in Arms Regulations (ITAR) if our software or services are specifically designed or modified for defense purposes. If we become engaged in manufacturing or exporting ITAR-controlled goods and services (even if we do not export such items), we will be required to register with the U.S. State Department. To date, Export Control Regulations have had no material impact on our business. Enhancements to our existing products may be subject to review under the Export Administration Act to determine what export classification they will receive. In addition, any new products that we release in the future will also be subject to such review before we can export them. The U.S. Congress continues to discuss the correct level of export control in possible anti-terrorism legislation. Such export regulations may be modified at any time. Modifications to these export regulations could reduce or eliminate our ability to export some or all of our products from the United States in the future, which could put us at a disadvantage in competing with companies located outside of the U.S. Modifications to U.S. export regulations could restrict us from exporting our existing and future products. Any such modifications to export regulations may put us at a competitive disadvantage with respect to selling our products internationally. Applicable laws may include U.S. federal laws and implementing regulations, such as the GLBA and HIPAA, as well as state and international laws and regulations, including the California Consumer Privacy Act (CCPA) and the European Union General Data Protection Regulation (GDPR). Some of these laws have requirements on the transmittal of data from one jurisdiction to another. In the event our systems are compromised, many of these privacy laws require that we provide notices to our customers whose personally identifiable data may have been compromised. Additionally, if we transfer data in violation of these laws, we could be subjected to substantial fines. To mitigate the risk of having such data compromised, we use cybersecurity, software and other security procedures to protect our databases. We also had approximately 15 independent contractors that provide services to us. We anticipate that we will need to increase our staffing in the foreseeable future. ITEM 1A. RISK FACTORS Our business, financial condition and results of operations and the market price for our common stock are subject to numerous risks, many of which are driven by factors that we cannot control or predict. An investment in our common stock involves a high degree of risk.

You should carefully consider the following information about these risks, together with the other information contained in this Annual Report on Form 10-K, including the information regarding “Forward-Looking Statements” earlier in this Form 10-K immediately prior to Part I, Item 1 and “Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before investing in our common stock. If any of the events anticipated by the risks described below occur, our results of operations and financial condition could be adversely affected, which could result in a decline in the market price of our common stock, causing you to lose all or part of your investment. Additional risks that we do not yet know of, or that we currently think are immaterial, may also affect our business and results of operations. You should consider an investment in our common stock to be risky, and you should invest in our common stock and securities convertible into our common stock only if you can withstand a complete loss and wide fluctuations in the market value of your investment. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management. We cannot predict whether future issuances of our common stock, or resale of shares in the open market, will decrease the market price of our common stock. The consequence of any such issuances or resale of our common stock on our market price may be increased as a result of the fact that our common stock is thinly, or infrequently, traded. The exercise of any outstanding options, or the vesting of any restricted stock, that we may grant to directors, executive officers and other employees in the future, or the issuance of common stock in connection with acquisitions and other issuances of our common stock, may decrease the market price of our common stock. Holders of our common stock have a risk of potential dilution if we issue additional shares of common stock in the future. The exercise or conversion of stock options, warrants, preferred stock, or convertible securities will dilute the ownership percentage of our then existing stockholders. The dilutive effect of the exercise or conversion of these securities may adversely affect our ability to obtain additional capital. The holders of these securities may be expected to exercise or convert their securities when we are able to obtain additional equity capital on terms more favorable than these securities. On September 13, 2021, our stockholders approved an equity incentive plan authorized by our Board of Directors under which we may issue equity awards that may increase the number of outstanding shares of common stock. In the future, we may grant additional stock options, warrants, preferred stock or convertible securities. The warrants to purchase 12,011,114 shares of our common stock issued to investors in a private placement transaction that closed on April 16, 2021, contain anti-dilution rights such that if we issue, or are deemed to have issued, common stock or common stock equivalents at a price less than the then exercise price of those warrants, the exercise price of those warrants will automatically be reduced to such lower value, and the number of shares of common stock issuable upon exercise thereafter will be adjusted proportionately, so that the aggregate exercise price payable upon exercise of such warrants is the same prior to and after such reduction in exercise price. As a result, the effect of the anti-dilution right may cause significant dilution to our other stockholders. All the 12,011,114 warrants will expire on April 16, 2026. The warrants to purchase 8,332,439 shares of our common stock issuable upon exercise of warrants issued to the placement agent in the private placement include a weighted average anti-dilution right in the event we issue any shares of common stock or equivalents with a value less than the then exercise price. As a result, the effect of the anti-dilution right may cause significant dilution to our other stockholders. The triggering of the anti-dilution rights in the warrants issued in the private placement may result in such securities being exercisable for a reduced exercise price. As of September 30, 2025, no anti-dilution triggers had occurred. The warrants we issued in the 2021 private placement described in Part II, Item 8, Financial Statements, Note 9, contain various provisions including, but not limited to, various price reset and anti-dilution provisions when new equity is issued in certain transactions including stock issued for cash at a price less than the $0.36 exercise price stated in the 2021 private placement warrants. These provisions inhibit our access to cash for the issuance of common stock which may limit our ability to compete in a very dynamic market through new investments in research and development or selling and marketing. We cannot predict the financial impact of the issuance of the warrants on our financial statements, specifically our balance sheet. We also cannot predict the financial impact of the various provisions included in the warrant agreements. The securities purchase agreement we entered into in connection with the recent private placement contains certain customary covenants. If we do not comply with these covenants, we will be in breach of our obligations under the securities purchase agreement, which may lead to exercise by the investors of the remedies available to them under the securities purchase agreement, which may cause a material impact upon our financial condition. Our common shares are thinly traded, and in the future may continue to be thinly traded, and you may be unable to sell your shares at or near ask prices or at all, if you need to sell your shares to raise money or otherwise desire to liquidate such shares. We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we become more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on its share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that even current trading levels will be sustained. You may be unable to sell your common stock at or above your purchase price, if at all, which may result in substantial losses to you. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price. As a consequence of this enhanced risk, more risk-averse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. We expect that we will need significant additional capital in the future to continue our planned operations, including research and development, increased marketing, hiring new personnel, commercializing our products, and continuing activities as an operating public company. To the extent that we raise additional capital by issuing equity securities, our existing stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions, at prices and in a manner that we determine from time to time, in our discretion. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders. Our common stock is subject to Rules 15g-1 through 15g-9 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which impose certain sales practice requirements on broker-dealers who sell our common stock to persons other than established customers and “accredited investors” (as defined in Rule 501(a) of the Securities Act of 1933, as amended (the “Securities Act”)). For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written consent to the transaction prior to the sale. This rule adversely affects the ability of broker-dealers to sell our common stock and holders of our common stock to sell their shares of our common stock. Additionally, our common stock is subject to SEC regulations applicable to “penny stocks.” Penny stocks include any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain exceptions. The regulations require that, prior to any non-exempt buy/sell transaction in a penny stock, a disclosure schedule proscribed by the SEC relating to the penny stock market must be delivered by a broker-dealer to the purchaser of such penny stock. This disclosure must include the amount of commissions payable and the current price quotations for our common stock. The regulations also require that monthly statements be sent to holders of a penny stock that disclose recent price information for the penny stock and information regarding the limited market for penny stocks. These requirements adversely affect the market liquidity of our common stock. Because our common stock is quoted on the OTCQB instead of a national exchange, our investors may have difficulty selling their stock or may experience negative volatility on the market price of our common stock. Our common stock is quoted on the OTCQB Market, operated by the OTC Markets Group. The OTCQB is often highly illiquid, in part because it does not have a national quotation system by which potential investors can follow the market price of shares, except through information received and generated by a limited number of broker-dealers that make markets in particular stocks. There is a greater chance of volatility for securities that trade on the OTCQB, as compared to a national exchange or quotation system. This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume, and market conditions. Investors in our common stock may experience high fluctuations in the market price and volume of the trading market for our securities. These fluctuations, when they occur, have a negative effect on the market price for our securities. Accordingly, our stockholders may not be able to realize a fair price for their shares when they determine to sell them or may have to hold them for a substantial period of time until the liquidity of the market for our common stock improves. Our charter allows us to issue “blank check” preferred stock and establish its terms, conditions, rights, powers and preferences without stockholder approval. Pursuant to our certificate of incorporation, our Board of Directors has the authority to issue up to 10 million shares of “blank check” preferred stock and to determine the price, rights, preferences, privileges, and restrictions, including voting rights, of those shares without any additional vote or action by our stockholders. The issuance of shares of preferred stock, or the rights associated therewith, could cause substantial dilution to our existing stockholders. Additionally, the dilutive effect of any preferred stock that we may issue may be exacerbated given the fact that such preferred stock may have voting rights, liquidation and/or other rights or preferences that could provide the preferred stockholders with substantial voting control over us and/or give those holders the power to prevent or cause a change in our control. As a result, the issuance of shares of preferred stock may cause the value of our common stock to decrease. Any future dividends on our common stock will be declared at the discretion of our Board of Directors and will depend on, among other things, our earnings, our financial requirements for future operations and growth, and other facts as we may then deem appropriate. Since we do not anticipate paying cash dividends on our common stock, return on your investment, if any, will depend solely on an increase, if any, in the market value of our common stock. If securities or industry analysts do not initiate research coverage on us and, if initiated, fail to publish research or reports, or publish unfavorable research or reports, about our business, our stock price and trading volume may decline. The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us, our business, our markets, and our competitors. We do not currently have any securities or industry analysts that have initiated research coverage on our business. If securities analysts do not cover our common stock, the lack of research or other coverage may adversely affect the market price and decrease the trading volume of our common stock. Furthermore, if one or more of the analysts who do cover us downgrade our stock, or if those analysts issue other unfavorable commentary about us or our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fails to regularly publish reports on us, we could lose visibility in the market, and interest in our stock could decrease, which in turn could cause our stock price or trading volume to decline and may also impair our ability to expand our business and attract new clients and customers to purchase our cybersecurity products and services. The sale of shares of our common stock by our directors and officers may adversely affect the market price for our common stock. Sales of significant amounts of shares of common stock by our officers and directors, or the prospect of such sales, could adversely affect the market price of our common stock. Our management’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock’s market price. The ability of our executive officers and directors to control our business may limit or eliminate other stockholders’ ability to influence corporate affairs.4% of the Company’s total issued and outstanding shares. Risks Related to Our Industry Economic uncertainty may pressure our customers to reduce their IT and cybersecurity spending. Worsening economic conditions, including inflation, recession, pandemic, or other changes in economic conditions, may cause lower IT spending and adversely affect our results of operations. If demand for computing power, PCs, servers, and other computing devices declines, or consumer or business spending for those products declines, our results of operations could be adversely affected. Our product distribution system relies on our partner and network. The impact of economic conditions on our partners, such as the bankruptcy of one of our partners could adversely affect our financial condition and results of operations. Challenging economic conditions also may impair the ability of our customers to pay for products and services they have purchased. As a result, allowances for doubtful accounts and write-offs of accounts receivable may increase. Global financial conditions continue to be marked by significant volatility, rising interest rates, inflationary pressures, and tightening credit markets. These factors may negatively affect customer budgets, delay technology investments, and reduce demand for our cybersecurity products and services. Market instability could also restrict our access to capital, increase borrowing costs, and limit our liquidity or operational flexibility. In addition, periods of financial stress often coincide with heightened cybersecurity risks, as organizations with constrained resources may defer security upgrades or reduce cyber defense spending. Sustained volatility or an extended economic downturn could materially and adversely impact our business operations, financial performance, and long-term growth prospects. Inflation and geo-political events increase the risk that we are unable to achieve and maintain profitable operations. A disruption or failure of our systems, operations, or supply chain because of a major earthquake, weather event, cyberattack, terrorist attack, pandemic, or other catastrophic event could cause delays in completing sales, providing services, or performing other critical functions. A catastrophic event that results in the destruction or disruption of any of our critical business or systems, or the infrastructure or systems they rely on, such as power grids, could harm our ability to conduct normal business operations or adversely affect our results of operations. Providing our customers with more services and solutions in the cloud puts a premium on the resilience of our systems and strength of our business continuity management plans and magnifies the potential negative consequences of prolonged service outages. Abrupt political change, terrorist activity, and armed conflict, such as the ongoing conflict in Ukraine, pose economic and other risks, which may negatively impact our ability to sell to and collect from customers, increase our operating costs, or otherwise disrupt our operations in markets both directly and indirectly impacted by such events. These conditions also may add uncertainty to the timing and budget for technology investment decisions by our customers and may cause supply chain disruptions for hardware manufacturers. Geopolitical change may result in changing regulatory systems and requirements and market interventions that could impact our operating strategies, access to national, regional, and global markets, hiring, and profitability. Geopolitical instability may lead to sanctions and impact our ability to do business in some markets or with some public-sector customers. Changes in geopolitical conditions also increase the security risks described elsewhere in these risk factors. The occurrence of regional epidemics or a global pandemic, such as COVID-19, could adversely affect our business, operations, financial condition, and results of operations. The extent to which global pandemics impact our business going forward will depend on factors such as the duration and scope of the pandemic; governmental, business, and individuals’ actions in response to the pandemic; and the impact on economic activity, including the possibility of recession or financial market instability. Measures to contain a global pandemic may intensify other risks described in these Risk Factors. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with development of a new business enterprise. Our accumulated deficit as of September 30, 2025, was $20. We cannot assure our current stockholders or future investors that that any of our new products and services currently under development will be successfully commercialized, and the extent of our future losses and the timing of any possible profitability, if ever achieved, are highly uncertain. If we are unable to achieve profitability, we may, at any time, be unable to continue our operations. Our ability to continue as a going concern may depend upon our ability to raise additional capital and such capital may not be available on acceptable terms, or at all. We currently believe that our available cash will allow us to fund our operations through at least December 2026. Nevertheless, we may need to raise additional capital to fund operating losses, support future expansion, develop new or enhanced products and services, hire employees, respond to competitive pressures, acquire technologies, or respond to unanticipated events or requirements before then. Our management’s plans include attempting to improve our profitability and our ability to generate sufficient cash flow from operations to meet our operating needs on a timely basis, obtaining additional working capital funds through equity and debt financing arrangements, and restructuring on-going operations to eliminate inefficiencies and reduce our expenses. However, we are not assured that these plans and arrangements will be sufficient to fund our ongoing capital expenditures, working capital, and other requirements. The outcome of these actions cannot be predicted at this time. There can be no assurance that any additional financings will be available to us on satisfactory terms and conditions, if at all. If adequate funds are not available on acceptable terms, we may be unable to develop or enhance our products and services, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, any of which could have a material adverse effect on our business, financial condition and operating results. If we raise additional funds through the issuance of equity securities, or convertible debt, the percentage ownership of our stockholders will be reduced, and holders may experience dilution in net book value per share. The capital markets have been unpredictable for unprofitable companies such as ours. The amount of capital that we may be able to raise depends on variables that are beyond our control. As a result, we may not be able to secure financing on terms acceptable to us, or at all. Even if we are able to consummate a financing arrangement, the amount raised may not be sufficient to meet our future needs. If adequate funds are not available on acceptable terms, or at all, our business, including our results of operations, financial condition and our continued viability will be materially adversely affected. Our future issuances of new equity will dilute the ownership percentage of our existing stockholders. The extent of such dilution will depend on the number of shares issued. Neither the amount of funds that may be received in such equity financing, nor the price per share of our equity securities issued are known at this time. We will continue to incur increased costs as a result of being a reporting company and, given our limited capital resources, such additional costs may have an adverse impact on our profitability. We are a Securities Exchange Act of 1934 (the “Exchange Act”) reporting company, meaning that we report certain required material financial information with the Securities and Exchange Commission (“SEC”). The rules and regulations under the Exchange Act require reporting companies to provide periodic reports with interactive data files, which require that we engage legal, accounting and auditing professionals, and XBRL (eXtensible Business Reporting Language) and EDGAR (Electronic Data Gathering, Analysis, and Retrieval) service providers. The engagement of such services can be costly, and we may continue to incur additional financial losses, which may adversely affect our ability to continue as a going concern. In addition, the Sarbanes Oxley Act of 2002, as well as a variety of new related and unrelated rules implemented by the SEC, have required changes in corporate governance practices and generally increased the disclosure requirements of public companies. For example, as a result of being a reporting company, we are required to file periodic and current reports and other information with the SEC, and we are adopting and revising policies regarding disclosure controls and procedures, including internal controls over financial reporting. The additional costs we continue to incur in connection with being a reporting company (expected to be approximately seven to eight hundred thousand dollars per year) will continue to further stretch our limited capital resources. Due to our limited resources, we have to allocate resources away from other productive uses in order to continue to comply with our obligations as an SEC reporting company. Further, there is no guarantee that we will have sufficient resources to continue to meet our reporting and filing obligations with the SEC as they come due. We may apply working capital and future funding to uses that ultimately do not improve our operating results or increase the market price of our securities. In general, we have complete discretion over the use of our working capital and any new investment capital we may obtain in the future that has no dedicated use of proceeds. Because of the number and variety of factors that could determine our use of funds, our ultimate expenditure of funds (and their uses) may vary substantially from our current intended operating plan for such funds. We intend to use existing working capital and future funding to support the development of our products and services, the expansion of our marketing, or the support of operations to educate the end users of the software we sell. We will also use capital for market and network expansion, acquisitions, and general working capital purposes. However, we do not have more specific plans for the use and expenditure of our capital. Our management has broad discretion to use any or all of our available capital reserves. Our capital could be applied in ways that do not improve our operating results or otherwise increase the market value of a stockholder’s shares. Risks Related to our Business and Results of Operations We depend significantly upon the continued involvement of our present management and on our ability to attract and retain talented employees. Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. The loss of the services of any of our key personnel, the inability to attract or retain qualified personnel, any failure to have in place and execute an effective succession plan for key executives or delays in hiring required personnel, particularly in engineering, sales and marketing, may seriously harm our business, financial condition and results of operations. From time to time, we experience turnover in our management-level personnel. None of our key employees has an employment agreement for a specific term, and any of our employees may terminate their employment at any time. Our ability to continue to attract and retain highly skilled personnel will be critical to our future success. Competition for highly skilled personnel is frequently intense, especially for qualified sales, support and engineering employees in cybersecurity software and services and especially in the locations where we have a substantial presence and need for highly skilled personnel, such as software engineers and advanced cybersecurity engineers. We may not be successful in attracting, assimilating or retaining qualified personnel to fulfill our current or future needs. In addition, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited or divulged proprietary or other confidential information. Changes in immigration laws, including changes to the rules regarding H1-B visas, may also harm our ability to attract personnel from other countries. Our inability to hire properly qualified and effective sales, support and engineering employees could harm our growth and our ability to effectively support growth. We rely on third-party software for certain essential financial and operational services. Failure, outages or disruption in services, systems and infrastructure supplied by third parties could negatively affect our business, financial condition and financial results. We currently incorporate, and will in the future incorporate, technology that we license from third parties, including software, into our solutions. We cannot be certain that our licensors will continue to be available to us or in the market in general. Some of our agreements with our licensors may be terminated by them for convenience or otherwise provide for a limited term. If we are unable to continue to license technology or if we are unable to continue our license agreements with our third-party licensors or enter into new licenses on commercially reasonable terms, our ability to develop and sell solutions and services containing or dependent on that technology would be limited, and our business could be harmed. Additionally, if we are unable to license technology from third parties, we may be forced to acquire or develop alternative technology, which we may be unable to do in a commercially feasible manner or at all, and may require us to use alternative technology of lower quality or performance standards. This could limit or delay our ability to offer new or competitive solutions and increase our costs. 16 We previously identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting. If not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common stock. Maintaining effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce reliable financial statements. Our disclosure controls and procedures and internal controls over financial reporting are currently ineffective and have in the past been subject to material weaknesses. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. We cannot assure you that additional material weaknesses will not arise in the future. The development of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements and cause us to fail to meet our reporting and financial obligations, which in turn could have a material adverse effect on our financial condition and the trading price of our common stock, and/or result in litigation against us or our management. If our estimates, assumptions, or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our results of operations could be adversely affected. If we do not effectively manage our growth, our business resources and systems may become strained, and we may be unable to increase revenue growth. Rapid expansion can strain our infrastructure, challenge internal controls, and limit management’s ability to maintain operational discipline and quality standards. Inadequate integration of new customers, employees, or technologies could disrupt service and software delivery. Additionally, failing to scale our systems or workforce in line with growth may prevent us from meeting demand, containing costs, or achieving strategic objectives. Such challenges could materially and adversely affect our revenue growth, operating results, and long-term competitiveness. Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense. Increased market awareness of our capabilities and products and increased lead generation are essential to our continued growth and our success in all our markets, particularly the market for sales to large businesses, service providers and government organizations. While we have increased our investments in sales and marketing, it is not clear that these investments will continue to result in increased revenue. If our investments in additional sales personnel or our marketing programs are not successful in continuing to create market awareness of our company and products or increasing lead generation, in growing billings for our broad product suite or if we experience turnover and disruption in our sales and marketing teams, we may not be able to achieve sustained growth, and our business, financial condition and results of operations may be adversely affected. If we do not effectively expand and train our direct sales force, we may be unable to add new customers or retain and increase sales to our existing customers, and our business will be adversely affected. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining enough sales personnel, particularly in international markets. There is significant competition for sales personnel with the skills and technical knowledge that we require. New hires require significant training and may take significant time before they achieve full productivity, and this delay is accentuated by our long sales cycles. Our recent hires and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. In addition, a large percentage of our sales force is new to our company and selling our solutions, and therefore this team may be less effective than our more seasoned sales personnel. Furthermore, hiring sales personnel in new countries, or expanding our existing presence, requires upfront and ongoing expenditures that we may not recover if the sales personnel fail to achieve full productivity. We cannot predict whether, or to what extent, our sales will increase as we expand our sales force or how long it will take for sales personnel to become productive. Our future revenue and operating results will depend significantly on our ability to retain clients and customers and the ability to add new clients and customers. Any decline in our retention rates or failure to add new clients and customers will harm our business prospects and operating results. Competitive pressures, evolving customer expectations, pricing dynamics, and changes in technology preferences could negatively affect our retention rates and sales performance. If we fail to maintain strong client relationships, effectively demonstrate value, or expand our customer base, our growth opportunities and recurring revenue streams may decline. Our growth depends in part on the success of our strategic relationships with third parties. Our growth depends in part on the strength and success of our strategic relationships with third parties, including technology providers, resellers, and service partners. If these partners fail to meet performance expectations, modify their business objectives, or terminate agreements, our ability to deliver products and expand into new markets could be hindered. Dependence on third parties also limits our control over key aspects of service delivery, pricing, and customer experience. Any disruptions, misalignments, or loss of these relationships could negatively affect our revenue growth, market reach, and competitive position. 17 If we experience a decline in billing, delays and/or defaults in payments, we could be unable to recover all expenditures, and our operating margins may decline. We may experience slowing growth or a decrease in billings, revenue, operating margin and free cash flow for a number of reasons, including a slowdown in pipeline growth or for demand for our products or services generally, a shift in demand from products to services, decrease in services revenue growth, increased competition, execution challenges including sales execution challenges and lack of optimal sales productivity, worldwide or regional economic challenges based on inflation or possible stagflation, a regional recession or a recession in the global economy, changing interest rates, the war in Ukraine, a decrease in the growth of our overall market or softness in demand in certain geographies or industry verticals, such as the service provider industry, changes in our strategic opportunities, execution risks, lower sales productivity and our failure for any reason to continue to capitalize on sales and growth opportunities due to other risks identified in the risk factors described in this periodic report. Our expenses as a percentage of total revenue may be higher than expected if our revenue is lower than expected. If our investments in sales and marketing and other functional areas do not result in expected billings and revenue growth, we may experience margin declines. In addition, we may not be able to sustain our historical profitability levels in future periods if we fail to increase billings, revenue or deferred revenue, and do not appropriately manage our cost structure, free cash flow, or encounter unanticipated liabilities. As a result, any failure by us to maintain profitability and margins and continue our billings, revenue and free cash flow growth could cause the price of our common stock to materially decline. We face intense competition, especially from larger, well-established companies, and we may lack sufficient financial or other resources to maintain or improve our competitive position. We may lose market share to our competitors, which could adversely affect our business, financial condition, and results of operations. The market for network security products is intensely competitive and dynamic, and we expect competition to continue to intensify. We face many competitors across the different cybersecurity markets. Our competitors include companies such as Check Point, Cisco, CrowdStrike, F5 Networks, HPE, Huawei, Illumio, Juniper, Microsoft, Netskope, Palo Alto Networks, SonicWALL, Sophos, and zScaler. Some of our existing and potential competitors enjoy competitive advantages such as: greater name recognition and/or longer operating histories; larger sales and marketing budgets and resources; broader distribution and established relationships with distribution partners and end-customers; access to larger customer bases; greater customer support resources; greater expertise in certain single point solutions; greater resources to make acquisitions; stronger U.S. government relationships; lower labor and development costs; and substantially greater financial, technical and other resources. In addition, certain of our larger competitors have broader product offerings, and leverage their relationships based on other products or incorporate functionality into existing products in a manner that discourages customers from purchasing our products. These larger competitors often have broader product lines and market focus and are in a better position to withstand any significant reduction in capital spending by end-customers in these markets. Therefore, these competitors will not be as susceptible to downturns in a particular market. Conditions in our markets could change rapidly and significantly because of technological advancements or continuing market consolidation. For example, certain of our competitors are focusing on delivering security services from the cloud which include cloud-based security providers, such as CrowdStrike and Zscaler. In addition, current or potential competitors may be acquired by third parties with greater available resources, and new competitors may arise pursuant to acquisitions of network security companies or divisions. Customers may accept these bundled products and services rather than separately purchasing our products and services. As our customers refresh the security products bought in prior years, they may seek to consolidate vendors, which may result in current customers choosing to purchase products from our competitors on an ongoing basis. Due to budget constraints or economic downturns, organizations may be more willing to incrementally add solutions to their existing network security infrastructure from competitors than to replace it with our solutions. 18 We have limited experience with some of our pricing models, particularly for our newer products and solutions as well as bundled sales of our products and solutions, and we may not accurately predict the long-term rate of paying customer adoption or renewal, or the impact these will have on our revenue or results of operations. We have limited experience with some of our pricing models, especially for newer or bundled offerings, and may not accurately predict their long-term performance or customer adoption. Changes in customer usage, market expectations, or competitive dynamics could lead to revenue fluctuations or lower-than-expected renewals. Inflexible billing systems, evolving consumption patterns, or misaligned pricing structures may also impact our ability to forecast growth or maintain profitability. If we fail to optimize or correctly anticipate the financial impact of our pricing strategies, our revenue stability and operating results could be materially affected. Competitive pricing pressure may reduce our gross profits and adversely affect our financial results. The cybersecurity market is highly competitive, and pricing pressure from both established and emerging competitors may reduce our gross profit margins. Many providers are lowering prices to gain market share or appeal to budget-conscious customers, which can erode profitability across the industry. As customers increasingly evaluate offerings based on cost and perceived value, we may be required to adjust our pricing or offer additional incentives to remain competitive. If we cannot effectively differentiate our solutions or maintain pricing discipline while preserving quality, our revenue, gross margins, and overall financial results could be adversely affected. Our largest revenue stream is providing consulting services. If we are unable to attract and retain qualified personnel, our business could be harmed. Our consulting services represent a significant source of revenue, and our success depends on attracting, developing, and retaining highly qualified professionals. The cybersecurity industry faces a well-documented shortage of skilled talent, driving intense competition for experienced consultants. If we cannot hire or retain personnel with the necessary technical expertise or industry certifications, we may be unable to deliver projects on time, maintain service quality, or meet client expectations. High turnover, increased labor costs, or resource constraints could also reduce our consulting capacity and profitability. Any inability to sustain a skilled workforce may adversely affect our growth and financial results. If we do not accurately predict, prepare for, and respond promptly to rapidly evolving technological and market developments and successfully manage product introductions and transitions to meet changing needs in the cybersecurity technology market, our competitive position, financial results, and prospects will be harmed. The cybersecurity landscape evolves rapidly, driven by emerging threats, regulatory shifts, and advancements such as AI, zero trust architectures, and post-quantum security. Our success depends on accurately anticipating these developments, aligning our solutions with market needs, and managing timely product launches and transitions. Failure to predict or respond effectively to new technologies or changing customer requirements could result in outdated offerings, reduced competitiveness, or missed growth opportunities. If we do not continually innovate and adapt to these market dynamics, our competitive position, financial performance, and long-term prospects could be materially harmed. 19 Delays in product development or failure to introduce new and improved offerings could harm our revenues and competitive position. Our ability to maintain growth and competitiveness depends on timely product development and continual innovation. The cybersecurity industry evolves rapidly, and meeting customer expectations requires ongoing enhancements in performance, features, and reliability. Delays in product development schedules, resource constraints, or technical challenges could limit our ability to introduce new or improved offerings on time. Ineffective management of product transitions or innovation pipelines may also lead to reduced customer confidence and missed growth opportunities. Collectively, these factors could materially and adversely affect our revenues, reputation, and overall financial performance. Failures, defects, or vulnerabilities in our complex products and services could harm our reputation, reduce sales, and expose us to legal or financial liability. Our success depends on the market’s confidence in our ability to provide effective network security protection. Despite our efforts and processes to prevent breaches of our internal networks, systems and websites, whether in our premises, cloud providers or colocations, we are still vulnerable to computer viruses, break-ins, phishing attacks, ransomware attacks, attempts to overload our servers with denial-of-service, vulnerabilities in vendor hardware and software that we leverage, advanced persistent threats from sophisticated actors and other cyber-attacks and similar disruptions from unauthorized access to our internal networks, systems or websites, whether in our premises, cloud providers or colocations. Our security measures may also be breached due to employee error, malfeasance or otherwise, which breaches may be more difficult to detect than outsider threats, and the existing programs and trainings we have in place to prevent such insider threats may not be effective or sufficient. Third parties may also attempt to fraudulently induce our employees to transfer funds or disclose information in order to gain access to our networks and confidential information. Third parties may also send our customers or others malware or malicious emails that falsely indicate that we are the source, potentially causing lost confidence in us and reputational harm. We cannot guarantee that the measures we have taken to protect our networks, systems and websites, whether in our premises, cloud providers or colocations, will provide adequate security. Moreover, because we provide network security products, we may be a more attractive target for attacks by computer hackers and any security breaches and other security incidents involving us may result in more harm to our reputation and brand than companies that do not sell network security solutions. Hackers and malicious parties may be able to develop and deploy viruses, worms, ransomware and other malicious software programs that attack our products and customers, that impersonate our update servers in an effort to access customer networks and negatively impact customers, or otherwise exploit any security vulnerabilities of our products, or attempt to fraudulently induce our employees, customers or others to disclose passwords or other sensitive information or unwittingly provide access to our internal networks, systems or data. Moreover, the threat landscape continues to evolve as a result of new technologies, including AI, and malicious parties may use AI to help attack our solutions, systems, and our customers. 20 Although we take numerous measures and implement multiple layers of security to protect our networks, we cannot guarantee that our security products, processes and services will secure against all threats. Further, we cannot be sure that third parties have not been, or will not in the future be, successful in improperly accessing our systems and our customers’ systems, which could negatively impact us and our customers. An actual breach could significantly harm us and our customers, and an actual or perceived breach, or any other actual or perceived data security incident, threat or vulnerability, that involves our supply chains, networks, systems or websites and/or our customers’ supply chains, networks, systems or websites could adversely affect the market perception of our products and services and investor confidence in our company. We could also be subject to liability and litigation and reputational harm, and our channel partners and end-customers may be harmed, lose confidence in us and decrease or cease using our products and services. Any breach of our internal networks, systems or websites could have an adverse effect on our business, operating results and stock price. Claims, litigation, government investigations, and other proceedings may adversely affect our business and results of operations. We may become subject to a variety of claims and lawsuits. These claims may arise from a wide variety of business practices and initiatives, including new product releases, significant business transactions, warranty or product claims, employment practices, and regulation. As we continue to expand our business and offerings, we may experience new and novel legal claims. Adverse outcomes in some or all these claims may result in significant monetary damages or injunctive relief that could adversely affect our ability to conduct our business. Litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future. An adverse impact to our financial condition and results of operations could occur for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable. The success of our business depends in part on our ability to protect and enforce our intellectual property rights. Protecting our intellectual property rights and combating unlicensed copying and use of our software, source code, and other intellectual property is difficult. Similarly, the absence of harmonized international patent laws makes it more difficult to ensure consistent respect for patent rights. Changes in the law may continue to weaken our ability to prevent the use of patented technology. Our increasing engagement with open source software will also cause us to license our intellectual property rights broadly in certain situations. If we are unable to protect our intellectual property, our results of operations could be adversely affected. Claims by others that we infringe their proprietary technology or other rights, or other lawsuits asserted against us, could result in significant costs and substantially harm our business, financial condition, results of operations and prospects. From time to time, others may claim we infringe their intellectual property rights, including current copyright infringement and other claims arising from AI training and output. To resolve these claims, we may enter into royalty-bearing data access or licensing agreements on terms that are less favorable than currently available, stop selling or redesign affected products or services, or pay damages to satisfy indemnification commitments with our customers. Adverse outcomes could also include monetary damages or injunctive relief that may limit or prevent importing, marketing, and selling our products or services that have infringing technologies. We may be required to pay significant amounts to settle claims related to the use of technology and intellectual property rights and to procure intellectual property rights as part of our strategy to manage this risk, and may continue to do so, which could adversely affect our results of operations. 21 We are subject to changing laws and regulations, of which failure to comply could subject us to fines and penalties. We are subject to a wide range of laws, regulations, and legal requirements in the U.S. and globally, including those that may apply to our products and online services offerings, and those that impose requirements related to user privacy, telecommunications, data storage and protection, digital accessibility, advertising, and online safety. Laws in several jurisdictions, including EU Member State laws under the European Electronic Communications Code, increasingly define certain of our services as regulated services. This trend may continue with our offerings becoming subject to additional data protection, security, digital safety, law enforcement surveillance, and other obligations. Regulators and private litigants may assert that our collection, use, and management of customer data and other information is inconsistent with their laws and regulations, including laws that apply to the tracking of users via technology such as cookies. In addition, laws requiring us to retrieve and produce customer data in response to compulsory legal demands from law enforcement and governmental authorities are expanding and the requests we are experiencing are increasing in volume and complexity. New, existing, and evolving laws and regulations, or interpretations or applications of existing laws and regulations in a manner inconsistent with our interpretations of such laws and regulations or our practices, may result in modification of our products and services, altered business models and operations, increased costs, reputational damage, and civil or criminal liability. Failure to comply with laws and regulations applicable to government contracting, or to meet the unique requirements and constraints of government customers, could harm our reputation and ability to secure or maintain public sector business. Sales to U.S. and foreign federal, state and local government organizations are subject to several risks. Because of public sector budgetary cycles and laws or regulations governing public procurements, such sales often require significant upfront time and expense without any assurance of winning a sale. Government demand, sales and payment for our products and services may be negatively impacted by numerous factors and requirements unique to selling to government agencies, such as: policies, laws and regulations have in the past, and may in the future, require us to obtain and maintain certain security and other certifications in order to sell our products and services into certain government organizations, and such certifications may be costly and time-consuming to obtain and maintain; funding authorizations and requirements unique to government agencies, with funding or purchasing reductions or delays adversely affecting public sector demand for our products; and geopolitical matters, including tariff and trade disputes, government shutdowns, impact of the war in Ukraine, tensions between China and Taiwan and trade protectionism and other political dynamics that may adversely affect our ability to sell in certain locations or obtain the requisite permits and clearances required for certain purchases by government organizations of our products and services. In addition, if we do not have certain certifications, this may restrict our ability to sell to certain customers until we have obtained certain certifications, and we may not obtain the certifications in a timely manner or at all. For example, certain of our competitors may have decided to become certified under the U.S. Federal Risk and Authorization Management Program (“FedRAMP”), and until the time that we also certify under FedRAMP, we risk losing deals to certified competitors for deals where FedRAMP certification is a requirement. The rules and regulations applicable to sales to government organizations may also negatively impact sales to other organizations. For example, government organizations may have contractual or other legal rights to terminate contracts with our distributors and resellers for convenience or due to a default, and any such termination may adversely impact our future results of operations. If the distributor receives a significant portion of its revenue from sales to government organizations, the financial health of the distributor could be substantially harmed, which could negatively affect our future sales to such distributor. Governments routinely investigate, review and audit government vendors’ administrative and other processes, and any unfavorable investigation, audit, other review or unfavorable determination related to any government clearance or certification could result in the government’s refusing to continue buying our products and services, a limitation and reduction of government purchases of our products and services, a reduction of revenue or fines, or civil or criminal liability if the investigation, audit or other review uncovers improper, illegal or otherwise concerning activities. Any such penalties could adversely impact our results of operations in a material way. Further, any refusal to grant certain certifications or clearances by one government agency, or any decision by one government agency that our products do not meet certain standards, may reduce business opportunities and cause reputational harm and cause concern with other government agencies, governments and businesses and cause them to not buy our products and services and/or lead to a decrease in demand for our products generally.S. markets could negatively affect our business, financial condition, and financial results. Expanding internationally and selling outside the United States may depend on our ability to comply with evolving export control laws and government-imposed restrictions on the sale or use of cybersecurity products. U.S. and foreign regulations increasingly limit the export of technology, software, and services involving advanced computing, encryption, or cybersecurity tools to certain countries or entities. New or expanded governmental restrictions—such as U.S. export controls on cybersecurity and artificial intelligence–related systems—could delay shipments, restrict market access, or require costly licensing and compliance procedures. These laws are complex and may change unpredictably in response to geopolitical tensions. Cyberattacks and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position. Threat actors, including individual and groups of hackers and sophisticated organizations, including nation-states, state-sponsored organizations, or cybercriminal groups, continuously undertake attacks that pose threats to our customers and our internal infrastructure. Inadequate account security or organizational security practices, including those of companies we have acquired or those of the third parties we utilize, have resulted and may result in unauthorized access to our systems and data, including customer systems and data. Employees or third parties may intentionally compromise our or our users’ security or systems or reveal confidential information, and laws in foreign jurisdictions may compel actions by such parties against our interests and could limit our recourse. Cyberthreats are constantly evolving and becoming increasingly sophisticated and complex, increasing the difficulty of detecting and successfully defending against them. It may be difficult to determine the best way to investigate, mitigate, contain, and remediate the harm caused by a cyber incident. Such efforts may not be successful, and we may make errors or fail to take necessary actions. It is possible that threat actors may gain undetected access to other networks and systems after establishing a foothold on an internal system. In addition, actions taken to remediate an incident could result in outages, data losses, and disruptions of our services. Cyber incidents and attacks, individually or in the aggregate, could adversely affect our financial condition, results of operations, competitive position, and reputation, or expose us to legal or regulatory risk. 23 ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 1C. recognizes the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data. Managing Material Risks & Integrated Overall Risk Management SideChannel, Inc. has strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making processes at every level. Our risk management team works closely with our IT department to continuously evaluate and address cybersecurity risks in alignment with our business objectives and operational needs. has relationships with a range of external experts, including cybersecurity assessors, consultants, and auditors in evaluating and testing our risk management systems. These partnerships enable us to leverage specialized knowledge and insights as needed, to ensure our cybersecurity strategies and processes remain at the forefront of industry best practices. implements stringent processes to oversee and manage these risks. We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing monitoring to ensure compliance with our cybersecurity standards. The monitoring includes quarterly assessments by our Chief Information Security Officer (“CISO”) and on an ongoing basis by our security engineers. This approach is designed to mitigate risks related to data breaches or other security incidents originating from third parties. Risks from Cybersecurity Threats We have not encountered cybersecurity challenges that have materially impaired our operations or financial standing. Governance The Board of Directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats. The Board has established robust oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity threats because we recognize the significance of these threats to our operational integrity and stakeholder confidence. Board of Directors Oversight The Audit Committee is central to the Board’s oversight of cybersecurity risks and bears the primary responsibility for this domain. The Audit Committee is composed of board members with diverse expertise including, risk management, technology, and finance, equipping them to oversee cybersecurity risks effectively. 24 Management’s Role Managing Risk The CISO and the Chief Executive Officer (“CEO”) play a pivotal role in informing the Audit Committee on cybersecurity risks. They provide comprehensive briefings to the Audit Committee on a regular basis, with a minimum frequency of once per year. These briefings encompass a broad range of topics, including: In addition to our scheduled meetings, the Audit Committee, CISO and CEO maintain an ongoing dialogue regarding emerging or potential cybersecurity risks. Together, they receive updates on any significant developments in the cybersecurity domain, ensuring the Board’s oversight is proactive and responsive. The Audit Committee actively participates in strategic decisions related to cybersecurity, offering guidance and approval for major initiatives. This involvement ensures that cybersecurity considerations are integrated into the broader strategic objectives of SideChannel, Inc. The Audit Committee conducts an annual review of the company’s cybersecurity posture and the effectiveness of its risk management strategies. This review helps in identifying areas for improvement and ensuring the alignment of cybersecurity efforts with the overall risk management framework. Risk Management Personnel Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with the CISO, Mr. Eric Gauthier. With over 20 years of experience in the field of cybersecurity, Mr. His background includes extensive experience as an enterprise CISO and is well-recognized within the industry. His in-depth knowledge and experience are instrumental in developing and executing our cybersecurity strategies. Our CISO oversees our governance programs, tests our compliance with standards, remediates known risks, and leads our employee training program. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. The CISO implements and oversees processes for the regular monitoring of our information systems. This includes the deployment of advanced security measures and regular system audits to identify potential vulnerabilities. In the event of a cybersecurity incident, the CISO is equipped with a well-defined incident response plan. This plan includes immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future incidents. This ensures that the highest levels of management are kept abreast of the cybersecurity posture and potential risks facing SideChannel, Inc. Furthermore, significant cybersecurity matters, and strategic risk management decisions are escalated to the Board of Directors, ensuring that they have comprehensive oversight and can provide guidance on critical cybersecurity issues. .

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Risk Factors - SDCH

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$SDCH Risk Factor changes from 00/12/12/24/2024 to 00/12/18/25/2025

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TRADE SMARTER

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