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SideChannel Announces Preliminary Full-Year Fiscal 2022 Revenue Growth
Press Release | 10/20/2022
Signs 6 New Accounts with Combined Annual Revenue Value of $1.3 Million During September Quarter
WORCESTER, MA / ACCESSWIRE / October 20, 2022 / In advance of participating in the LD Micro Main Event XV next week, SideChannel (OTCQB:SDCH), a provider of cybersecurity services and technology for emerging and middle market companies, today announced preliminary revenue of $4.6 to $4.8 million for the fiscal year ended September 30, 2022, a 64% to 71% year-over-year increase from the company's revenue of $2.8 million in Fiscal Year 2021.
The company also announced it secured 6 new clients in the quarter ended September 30, 2022 with combined annual revenue value of $1.3 million. Additional renewal contracts were signed with existing customers. The Company expects to recognize the revenue associated with each new or renewed agreement within 12 months of the signature date, along with related incremental engineering, products and services revenue.
"SideChannel is on an exciting growth trajectory since our business combination that brought the company public in July," said SideChannel Chief Executive Officer and Founder Brian Haugli. "We are winning exciting new recurring revenue customer agreements with well-known middle-market names across diverse industries. For example, our wins include engagements with names such as Handshake, Veza, Kiava, Riot Blockchain and Lightcast. Additionally, we are typically generating substantial incremental revenue on the engineering and services associated with these agreements, further increasing the value of our new customer engagements even beyond the initial contracted services."
SideChannel has also expanded its sales force from one position to five during 2022, reflecting the large and growing sales funnel of middle market customer opportunities for its differentiated vCISO and cybersecurity services.
"Our unique approach is designed specifically to meet critical business needs of high-growth middle-market companies, often well-known and innovative names in their respective industries," said Haugli. "SideChannel's approach provides highly experienced professionals and thought-leaders in our profession under a services agreement that aligns to their particular budget and organizational needs. We also able to provide the additional external software and services needed to implement appropriate security and encryption protocols within our clients, generating additional recurring revenue and growth opportunities as we deliver the solutions our customers need."
For more information about the Company, visit sidechannel.com.
# # # #
About SideChannel
SideChannel (OTCQB:SDCH) is committed to creating top-tier cybersecurity programs for mid-market companies to help them protect their assets. SideChannel employs what it believes to be skilled and experienced talent to harden these companies' defenses against cybercrime, in its many forms. SideChannel's team of C-suite level information security officers possess a combined experience of over 400 years in the industry. To date, SideChannel has created more than 50 multi-layered cybersecurity programs for its clients. Learn more at sidechannel.com.
Forward-Looking Statements
This press release may contain forward-looking statements, including information about management's view of SideChannel's future expectations, plans and prospects, subject to the safe harbor provisions under The Private Securities Litigation Reform Act of 1995 (the "Act"). In particular, when used in the preceding discussion, the words "believes", "hopes", "expects", "intends", "plans", "anticipates", or "may", and similar conditional expressions are intended to identify forward-looking statements within the meaning of the Act and are subject to the safe harbor created by the Act and otherwise. Any statements made in this news release other than those of historical fact, about an action, event or development, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause the results of SideChannel to be materially different than those expressed or implied in such statements. These risk factors include, but are not limited to, our ability to integrate the operations of the acquired company into our company; that we have incurred net losses since inception, our need for additional funding, the substantial doubt about our ability to continue as a going concern, and the terms of any future funding we raise; that COVID-19 has materially adversely affected our operations and may continue to have a material adverse impact on our operating results in the future; our dependence on current management and our ability to attract and retain qualified employees; competition for our products; our ability to develop new products, improve current products and innovate; unpredictability in our operating results; our ability to retain existing licensees and add new licensees; our ability to manage our growth; our ability to protect our intellectual property (IP), enforce our IP rights and defend against claims that we infringed on the IP of others; and other risk factors included from time to time in documents we file with the Securities and Exchange Commission, including, but not limited to, our Forms 10-K, 10-Q and 8-K. These reports are available at www.sec.gov. Other unknown or unpredictable factors also could have material adverse effects on SideChannel's future results. Further, factors that we do not presently deem material as of the date of this release may become material in the future. The forward-looking statements included in this press release are made only as of the date hereof. SideChannel cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, SideChannel undertakes no obligation to update these forward-looking statements after the date of this release, except as required by law, nor any obligation to update or correct information prepared by third parties.
Investor Contact:
Matt Kreps
Darrow Associates Investor Relations
214-597-8200
mkreps@darrowir.com
Media Contact:
Jamie Szwiec
STiR-communications
954-647-0052
jamie@stir-communications.com
SOURCE: SideChannel, Inc.
SideChannel Announces Preliminary Full-Year Fiscal 2022 Revenue Growth
Press Release | 10/20/2022
Signs 6 New Accounts with Combined Annual Revenue Value of $1.3 Million During September Quarter
WORCESTER, MA / ACCESSWIRE / October 20, 2022 / In advance of participating in the LD Micro Main Event XV next week, SideChannel (OTCQB:SDCH), a provider of cybersecurity services and technology for emerging and middle market companies, today announced preliminary revenue of $4.6 to $4.8 million for the fiscal year ended September 30, 2022, a 64% to 71% year-over-year increase from the company's revenue of $2.8 million in Fiscal Year 2021.
The company also announced it secured 6 new clients in the quarter ended September 30, 2022 with combined annual revenue value of $1.3 million. Additional renewal contracts were signed with existing customers. The Company expects to recognize the revenue associated with each new or renewed agreement within 12 months of the signature date, along with related incremental engineering, products and services revenue.
"SideChannel is on an exciting growth trajectory since our business combination that brought the company public in July," said SideChannel Chief Executive Officer and Founder Brian Haugli. "We are winning exciting new recurring revenue customer agreements with well-known middle-market names across diverse industries. For example, our wins include engagements with names such as Handshake, Veza, Kiava, Riot Blockchain and Lightcast. Additionally, we are typically generating substantial incremental revenue on the engineering and services associated with these agreements, further increasing the value of our new customer engagements even beyond the initial contracted services."
SideChannel has also expanded its sales force from one position to five during 2022, reflecting the large and growing sales funnel of middle market customer opportunities for its differentiated vCISO and cybersecurity services.
"Our unique approach is designed specifically to meet critical business needs of high-growth middle-market companies, often well-known and innovative names in their respective industries," said Haugli. "SideChannel's approach provides highly experienced professionals and thought-leaders in our profession under a services agreement that aligns to their particular budget and organizational needs. We also able to provide the additional external software and services needed to implement appropriate security and encryption protocols within our clients, generating additional recurring revenue and growth opportunities as we deliver the solutions our customers need."
For more information about the Company, visit sidechannel.com.
# # # #
About SideChannel
SideChannel (OTCQB:SDCH) is committed to creating top-tier cybersecurity programs for mid-market companies to help them protect their assets. SideChannel employs what it believes to be skilled and experienced talent to harden these companies' defenses against cybercrime, in its many forms. SideChannel's team of C-suite level information security officers possess a combined experience of over 400 years in the industry. To date, SideChannel has created more than 50 multi-layered cybersecurity programs for its clients. Learn more at sidechannel.com.
Forward-Looking Statements
This press release may contain forward-looking statements, including information about management's view of SideChannel's future expectations, plans and prospects, subject to the safe harbor provisions under The Private Securities Litigation Reform Act of 1995 (the "Act"). In particular, when used in the preceding discussion, the words "believes", "hopes", "expects", "intends", "plans", "anticipates", or "may", and similar conditional expressions are intended to identify forward-looking statements within the meaning of the Act and are subject to the safe harbor created by the Act and otherwise. Any statements made in this news release other than those of historical fact, about an action, event or development, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause the results of SideChannel to be materially different than those expressed or implied in such statements. These risk factors include, but are not limited to, our ability to integrate the operations of the acquired company into our company; that we have incurred net losses since inception, our need for additional funding, the substantial doubt about our ability to continue as a going concern, and the terms of any future funding we raise; that COVID-19 has materially adversely affected our operations and may continue to have a material adverse impact on our operating results in the future; our dependence on current management and our ability to attract and retain qualified employees; competition for our products; our ability to develop new products, improve current products and innovate; unpredictability in our operating results; our ability to retain existing licensees and add new licensees; our ability to manage our growth; our ability to protect our intellectual property (IP), enforce our IP rights and defend against claims that we infringed on the IP of others; and other risk factors included from time to time in documents we file with the Securities and Exchange Commission, including, but not limited to, our Forms 10-K, 10-Q and 8-K. These reports are available at www.sec.gov. Other unknown or unpredictable factors also could have material adverse effects on SideChannel's future results. Further, factors that we do not presently deem material as of the date of this release may become material in the future. The forward-looking statements included in this press release are made only as of the date hereof. SideChannel cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, SideChannel undertakes no obligation to update these forward-looking statements after the date of this release, except as required by law, nor any obligation to update or correct information prepared by third parties.
Investor Contact:
Matt Kreps
Darrow Associates Investor Relations
214-597-8200
mkreps@darrowir.com
Media Contact:
Jamie Szwiec
STiR-communications
954-647-0052
jamie@stir-communications.com
SOURCE: SideChannel, Inc.
Blog
Two questions for SaaS companies before hiring a CISO or vCISO
by: Miguel San Mateo
10.17.22
This year, I attended SaaStr, a conference in the SF Bay Area annually attended by founders and executives. The event provides founders and executives ample opportunities to co-mingle amongst other SaaS executives and potential investors.
One consistent theme emerged from my conversations with leadership of a few international SaaS companies; based in the U.S. and abroad. No longer could their companies rely on the best efforts of a non-specialized team, nor handle the associated risk. They knew they needed to augment their capabilities, but weren’t sure how.
The most common questions posed were:
At what point should I consider adding a CISO to my Executive Team?
When we do need experienced security leadership, do I need to go straight to a full-time CISO, or would a virtual/fractional CISO fill the need?
Here’s What I Advise
Q: At what point should I consider adding a CISO to my Executive Team?
A: For a SaaS company, the need for an information security program–led by a CISO–depends on two primary drivers:
The type of data the company has, or has access to while conducting business;
The company’s contractual obligations require it to demonstrate a certain level of security maturity before it can provide service.
The above attributes are illustrative points to consider. At the end of the day, cyber risk is just like any other business risk. The right answer is different for every company and depends on an individual company’s risk appetite.
If your company handles confidential, financial data, patient health information or controlled unclassified information, then you may want to consider the risk of damage to your company if that information found its way outside of your company. Most companies have at least one type of the above-named types of data.
Depending on your industry, your company may need to comply with state and federal regulations that govern how this kind of information is treated.
In healthcare, the Health Insurance Portability and Accountability Act protects sensitive patient health information from being disclosed without the patient’s consent or knowledge. E-commerce businesses in the State of California must comply with the California Consumer Privacy Act, a state statute intended to enhance privacy rights and consumer protection for residents of California.
Hiring a CISO is like a company engaging an attorney for a legal advice, or an accountant for financial help. Each company must decide when the risk is too great for them to go any further without professional subject matter expertise in the domain in question.
Q: When we do need experienced security leadership, do I need to go straight to a full-time CISO, or would a virtual/fractional CISO fill the need?
A: The answer here is every consultant’s favorite; it depends. On what? The growth stage of and complexity of your company.
Some companies are at a point in their maturity where a full-time CISO is necessary. For others, an experienced security leader able to execute effectively while remaining a cost-effective solution, is the best fit.
Two More Things to Consider Before Hiring a vCISO or CISO
How much risk are you comfortable with?
In today’s business environment, experienced security talent is hard to come by. A company could hire a more cost-effective resource; a smart person with drive who aspires to be a CISO but lacks the real-life experience. This comes with its own pros and cons, and it’s really a matter of level of comfort, and what level of risk the company is willing to assume.
Conversely, company leadership must understand if an experienced security practitioner—who’s been a CISO elsewhere—can provide the strategic leadership and governance needed on a fractional basis. If so, can they simultaneously lead to the Company’s risk tolerance? If so, could the cost savings then be applied to other areas of need such as hiring on other members of the security team, or engaging security vendors with much needed technology and services while spending a similar amount to what an FTE could have cost the Company?
How Much Risk Are You Exposed To?
Overall, SaaS companies are more in need of security expertise than ever before, as the inherent global nature of their services expose them to a higher level of security risk. We provide experienced security leaders with the experience and background to support your business objectives, through our vCISO service. Our vCISOs are available to perform the work of a full-time resource in on a fractional basis to satisfy your company’s growing cybersecurity and privacy needs.
Why a SideChannel vCISO?
Our principal consultants possess a combined 400 years of experience among them. They’ve led cybersecurity programs—through both good and bad times—in places like USPS, Equifax, and the San Francisco Police Department. Some are published authors of books cybersecurity students study, while others actively teach. We experienced and trusted professionals, eager to help your business achieve.
Our vCISO service is a cost-effective solution that provides a cybersecurity program, tailor-made for your business. Reach out below to learn how the vCISO program can protect your businesses revenue, data, business relationships and reputation
OR......I look at this as a HUGE opportunity to buy and average down for huge profits.
#jmho
Is anyone going to Chicago????
SideChannel to Present at October Investor Conferences
Press Release | 10/04/2022
WORCESTER, MA / ACCESSWIRE / October 4, 2022 / SideChannel (OTCQB:SDCH), a provider of cybersecurity services and technology for emerging and middle market companies, today announced that management will participate at the following investor conference events during October 2022.
Event: Windy City Rooundup 2022
Date: Thursday, October 13, 2022
Presentation: 2:00 p.m. Central Time
Location: Swissotel, Chicago
Event: LD Micro Main Event XV
Date: Wednesday, October 26, 2022
Presentation: 9:30 a.m. Pacific Time
Live stream: https://me22.mysequire.com/
Location: Luxe Sunset Boulevard Hotel, Los Angeles
Management will host individual investor meetings during both events. To arrange a meeting with SideChannel, please contact your conference representative. Investors may also contact SideChannel investor relations at mkreps@darrowir.com to arrange an in-person meeting.
For more information, visit sidechannel.com/.
About SideChannel
SideChannel (OTCQB:SDCH) is committed to creating top-tier cybersecurity programs for mid-market companies to help them protect their assets. SideChannel employs what it believes to be skilled and experienced talent to harden these companies' defenses against cybercrime, in its many forms. SideChannel's team of C-suite level information security officers possess a combined experience of over 400 years in the industry. To date, SideChannel has created more than 50 multi-layered cybersecurity programs for its clients. Learn more at sidechannel.com.
Investor Contact:
Matt Kreps
Darrow Associates Investor Relations
214-597-8200
mkreps@darrowir.com
SOURCE: SideChannel, Inc.
10.01.22
I am often asked if hiring a vCISO is the solution to addressing a company’s cybersecurity concerns. Before answering that complex question, I want to offer a short story to draw comparisons.
The story begins with an organization that wants to establish a new philharmonic orchestra. They go out and hire a conductor. This conductor has a long and prestigious resume, including past jobs as a conductor for other orchestras. Does this experienced, talented conductor equate to a fully functioning orchestra? Of course not. An orchestra requires musicians, each playing their own role. Those musicians need instruments to play. Decisions need to be made about the musical selections. Rehearsal times and concert schedules need to be established. In sum, the orchestra is composed of people, processes, and technology (instruments). The conductor’s job is to bring those components together.
So, back to the original question if hiring a vCISO will solve a company’s cybersecurity needs. I urge you to think about the vCISO like the conductor of an orchestra. Like the conductor, the vCISO should be a seasoned professional in their field. Past experiences evaluating, maturing, and operationalizing a cyber program are all essential and valuable in building a program. However, additional people, processes, and technology are all important components in every cyber program.
The team needed within a cybersecurity program cannot be the vCISO alone. An effective cybersecurity program needs engineers to design and implement various security controls. Technical project managers are needed to oversee the implementation. Analysts are needed to monitor diagnostic tools to identify ‘indicators of compromise’. These people can certainly be internal resources, but they could also be outsourced.
The processes within a security program consist of the policies and procedures a company follows to maintain a high level of security control. For example, what are the password requirements for each company information system? What is the process for evaluating a third-party vendor’s security posture before licensing their services? How does an organization identify, prioritize, and mitigate risk?
The technology aspects of a security program are the tools utilized across the organization that protect the computers, network, and cloud services. Like the musicians in the orchestra that select their instruments, there are many security tools to choose from. Not every tool is needed for every organization, and they vary in quality and effectiveness.
These people, processes, and technology all require time, effort, and funding. They also require support of the executive leadership team to communicate cybersecurity as a critical function within the company. With this commitment from leadership, coupled with the experience of a tenured vCISO, an organization has the support, funding, and vision to embark on the beginning a successful cybersecurity journey.
Allow us to conduct your cybersecurity orchestra. Our vCISO service offers gap analysis, tool selection, documentation, policy creation, staff mentorship and so much more.
Find out more by booking an intro call.
Get Started
Book a Call
Joe is EVP at SideChannel. He brings more than 20 years experience, most recently from financial SaaS company, Billtrust and energy manufacturing company, Enersys
Great page for Enclave on website. Obviously this answers all those questions and more.
https://sidechannel.com/product/enclave/
The Government definitely wants their Quantum Computers……
IonQ Inc., College Park, Maryland, has been awarded a $13,414,043 firm-fixed-price contract for a contract deliverable of a Trapped Ion Quantum Computer. This contract provides for the delivery and installation of a quantum computer to be able to create quantum algorithms for applications in the Department of Defense. Work will be performed in College Park, Maryland, and is expected to be completed by Sept. 28, 2025. This award is the result of a competitive acquisition, offers were solicited electronically via an open broad agency announcement and two offers were received. Fiscal 2022 and research, development, test and evaluation funds in the amount of $11,829,455 are being obligated at time of award. Air Force Research Laboratory, Rome, New York, is the contracting activity (FA8750-22-C-1022).
It's way way to early to make a determination as to how the future will be as SideChannel. But we do know for certain that we have a very impressive group now. I will sit happily and watch this one develop. I've done my research on these guys and feel very comfortable with where we are and where we are headed. I have averaged down from the old prices and days of the mdlg scheme. I'm sitting in a pretty good spot for sure now. If we see some revenue building and contracts happening then the share price and value of this company should rise. I see an upward trend happening anytime between now and early next year. Tom Wilkinson just bought shares....thats got to tell ya something????
OTC DISCLOSURE & NEWS SERVICE
60+ Companies to Present at the 2nd Annual MicroCap Rodeo - Windy City Roundup Conference on October 12th - 13th, 2022 in Chicago
Press Release | 09/27/2022
RALEIGH, NC / ACCESSWIRE / September 27, 2022 / The 2nd Annual MicroCap Rodeo Conference is going on the road and will take place at the Swissotel in Chicago on October 12th - 13th, 2022, where 60+ SmallCap, MicroCap and NanoCap public companies will be presenting to a global investor audience.
The conference begins on Tuesday, October 12th, 2022, with company presentations beginning at 9:00 am Central Time. In addition to the live presentations, they will be shared via webcast. 1x1 Meetings are being held on Wednesday and Thursday all day during the conference as well.
Join us for a full two days of presentations. A preliminary agenda is located here: https://microcaprodeo.com/agenda
If you would like to attend and participate in the 2nd Annual MicroCap Rodeo: Windy City Roundup Conference, please register here and book 1x1 meetings with presenting companies: https://microcaprodeo.com/signup
Full event website: https://microcaprodeo.com/
On Wednesday October 12th and Wednesday October 13th, the following issuers will be presenting their companies.
Organization Ticker
1847 Holdings LLC EFSH
374Water SCWO
Alliance Entertainment Holding Corporation ADRA
AMMO, Inc. POWW
ARHT Media ART.V
Aspira Women's Health AWH
Assertio Holdings, Inc. ASRT
Assure Holdings IONM
AudioEye AEYE
Ballantyne Strong Inc BTN
BM Technologies BMTX
Build-A-Bear BBW
Cardiol Therapeutics, Inc. CRDL
CEMATRIX Corporation CVX.V
Commercial Vehicle Group CVGI
CorpHousing Group, Inc. CHG
Decisionpoint Systems, Inc. DPSI
Edible Garden EDBL
Electromed, Inc. ELMD
Eton Pharmaceuticals ETON
Flux Power Holdings FLUX
FLYHT Aerospace Solutions Ltd. FLY.V
Galaxy Next Generation, INC GAXY
Genasys Inc. GNSS
Guardforce AI GFAI
HeartSciences HSCS
Heritage Global Inc. HGBL
Hudson Global HSON
HyreCar Inc. HYRE
iCAD ICAD
Intellicheck, Inc. IDN
Inuvo INUV
Issuer Direct Corporation ISDR
Lantern Pharma LTRN
Limbach Holdings, Inc. LMB
LogicMark LGMK
Milestone Scientific MLSS
MISTRAS Group, Inc. MG
Moving iMage Technologies, Inc. MITQ
Myomo MYO
Nemaura Medical, Inc. NMRD
Ocuphire Pharma OCUP
omniQ OMQS
Permex Petroleum Corporation CSE:OIL. OTCQB:OILCF
PHX Minerals PHX
Power Nickel PNPN.V
Real Good Foods RGF
Reliance Global Group, Inc. RELI
SANUWAVE Health, Inc. SNWV
SideChannel, Inc. SDCH
Sidus Space SIDU
Star Equity Holdings STRR
Stran & Company, Inc. STRN
Strata Skin Sciences SSKN
Streamline Health Solutions, Inc. STRM
Superior Drilling Products, Inc. SDPI
SurgePays, Inc. SURG
The Planting Hope Company MYLK
USIO USIO
Yield10 Bioscience, Inc. YTEN
Please contact Angie Wright via email or at 919-228-6240 if you are interested in attending, please register here and then select companies you are interested in meeting with in a 1x1 setting.
We'd also like to give a special thanks to our sponsors. We look forward to seeing you at the conference.
About the MicroCap Rodeo Conferences
The second-annual, live in-person MicroCap Rodeo is back. Join us as we go on the road and participate in the Windy City Roundup 2022 in Chicago, Illinois. Over two days in October, investors can harness top stocks for their portfolios. They'll meet with executive management teams from approximately 60-plus microcap companies across a wide variety of industries and gain an understanding into the key value drivers and potential trends for 2023. Complementing the interactive, in-depth 25-minute one-on-one meeting format will be four tracks of company presentations.
SOURCE: MicroCap Rodeo
View source version on accesswire.com:
https://www.accesswire.com/717535/60-Companies-to-Present-at-the-2nd-Annual-MicroCap-Rodeo--Windy-City-Roundup-Conference-on-October-12th--13th-2022-in-Chicago
09.19.22
In 2016, I experienced my first major cybersecurity incident. SFMTA, one of the largely-independent departments within the City and County of San Francisco left an RDP server open and it was compromised by Iranian hackers.
Once inside the network perimeter, they moved laterally, eventually finding their way to a domain controller and using it to push a ransomware client to every endpoint within MTA. Payment processors cut off MTA, forcing us to cut MTA off from the rest of the city network.
The decision to quarantine MTA was difficult, but necessary. It cost the MTA a few days of fares and the ability to communicate efficiently. But that decision saved the City of San Francisco from the fate of the City of Atlanta; who suffered a citywide breach in 2018 (caused by ransomware) that crippled Atlanta for months and cost it more than $17M dollars and years of police dashcam video.
Both of these breaches were possible because of an outdated paradigm. Secure perimeters and VPNs no longer suffice; organizations that continue relying on them will continue to suffer.
This isn’t an Earth-shattering assertion. Anyone who’s managed or used corporate IT infrastructure has experienced the frustration of trying (and often failing) to log into the VPN client, often with a shared password, in order to access critical corporate infrastructure. It’s slow. It’s inconvenient, and it’s often really insecure.
It’s time to move on to the next generation of networking. There are a number of names for this methodology, including software-defined networking, microsegmentation and zero trust, but the basic idea is simple: let machines and people who should have access to resources have that access while keeping bad actors out.
There have been a number of attempts at deploying this methodology over the years. Most of them, very expensive and very complex, with high upfront capital and installation costs and the requirement for full-time network engineers to update and maintain the infrastructure once it’s deployed.
That’s why we’ve created Enclave. We used the best open-source zero-trust networking framework and built an extremely easy-to-use deployment and support service around it. For less than the price of a network engineer, most organizations can deploy a proven, robust, best-in-class zero trust solution that will be managed by a trusted security partner. And, best of all, it can be deployed in weeks rather than months.
Network segmentation is a core security methodology that most leaders have known they need to deploy for years. It’s just been too hard. Now, SideChannel has found a way to solve this problem. Share your email below, so we can reach out. Let’s talk about securing your network.
See How Enclave Can Secure Your Network
More good news....our board members are buying shares.
https://app.quotemedia.com/data/downloadFiling?webmasterId=102691&ref=116954007&type=HTML&symbol=SDCH&companyName=SideChannel+Inc&formType=4&formDescription=Statement+of+changes+in+beneficial+ownership+of+securities&dateFiled=2022-09-20&CK=1022505
Excellent
We are already thinking about Enclave’s role in a post-quantum world. When our data security needs inevitably shift, and new vulnerabilities present, we’ll be ready. The underlying tech is sound, stress tested and is built with security in mind. There’s really not much more we could ask for. H/t to Ryan and Nate for their contribution to the community. Thank you for building something so great and sharing it with the world so we can all be safer, in community and connected to each other.
From the Blog on SideChannel website….love it.
A Few Words about Nebula, the tech behind Enclave
Enclave, Microsegmentation, Networking, Product News, Zero Trust
09.19.22
“What is the easiest way to securely connect tens of thousands of computers, hosted at multiple cloud service providers in dozens of locations around the globe?”
We think it’s Nebula; which is why we chose it to be the foundation for Enclave. A few years ago Ryan Huber and Nate Brown–then security architects at Slack–, pondered that very question and two years ago they shared their answer with the world.
What is Nebula? In their own words
Nebula is a mutually authenticated peer-to-peer software defined network built on the Noise Protocol Framework.
It uses certificates to assert a node’s IP address, name, and membership within user-defined groups.
Nebula’s user-defined groups allow for provider agnostic traffic filtering between nodes. Discovery nodes allow individual peers to find each other and optionally use UDP hole punching to establish connections from behind most firewalls or NATs.
Users can move data between nodes in any number of cloud service providers, data centers, and endpoints, without needing to maintain a particular addressing scheme.
Nebula uses Elliptic-curve Diffie-Hellman (ECDH) key exchange and AES-256-GCM in its default configuration. Nebula can be configured to CHACHA-20 if desired.
Why build Enclave, with Nebula?
Our motivations for building Enclave are covered in another post but in short we chose Nebula for its stability, scalability and inclusion of elements important to security; like identity and encryption. In our quest to simplify cybersecurity for businesses of all sizes we realized the opportunity Nebula presented to bring microsegmentation to the masses.
As great as it is, we knew it needed a bit of polish to make it more approachable to someone with not a lot of time to tinker. So we set out to build a radically simple experience that enables even the most novice among us to complete the objective; which is successfully segment the network.
The Bureau of Labor Statistics expects computer network architect positions in the U.S. to grow five percent between 2019 and 2029. That’s a lot of opportunities to support todays’ cybersecurity newbies to develop into the cybersecurity professionals of tomorrow.
The deceptively simple click & drag interface is the first element you’ll notice. Behind its simple frame is an extremely powerful protocol capable of equally supporting organizations with 3 or 30000 connections with equal deference.
Support is the second element. Nebula is a powerful tool for enabling connection, the open source community around it is a valuable resource when figuring out how to create new things with it; but the process, while fun, is time intensive. We knew we needed to remove work from the end user’s plate; not add more tasks however enjoyable they might be. So we built a very short onboarding experience, with a dedicated support and service team into Enclave. We’ve deployed Enclave in as little as 15 minutes, and though environments vary greatly, we’ve built an experience we’d be happy to maintain; so we include in most subscription tiers and will maintain it for you.
And there’s much more in store. Nebula is community reviewed and approved. It’s used and is constantly improved by experts. We’ll continue developing feature sets on it, as new needs emerge and as we hear from the you, our community, about what would make it perfect for you.
We are already thinking about Enclave’s role in a post-quantum world. When our data security needs inevitably shift, and new vulnerabilities present, we’ll be ready. The underlying tech is sound, stress tested and is built with security in mind. There’s really not much more we could ask for. H/t to Ryan and Nate for their contribution to the community. Thank you for building something so great and sharing it with the world so we can all be safer, in community and connected to each other.
See Enclave in Action
I consider this a great press release. Congratulations to Brian and the team for quickly adding the Enclave package to its customers.
WORCESTER, MA – September 19, 2022 – SideChannel (OTCQB:SDCH), a provider of cybersecurity services and technology for emerging and middle market companies, today announced the launch of Enclave™, a microsegmentation software platform designed to offer small and midsize businesses (SMBs) a cost-effective solution to simplify and maintain a segmented network with minimal IT administration and maintenance.
A comprehensive cloud and network security solution, Enclave enables IT personnel to easily segment their company’s network, quickly organize individuals and machines to each individual’s workload level, then implement security controls across all segments. The platform sets the foundation for a Zero Trust network security model while shrinking the attack surface area exposed to intruders. Enclave simultaneously empowers IT to contain breaches faster, decrease outages, reduce latency, and strengthen the organizations’ overall security defense.
The platform was developed internally by SideChannel and its team of former Chief Security Information Officers (CISO) with a combined experience of over 400 years leading cybersecurity initiatives for enterprise organizations and government agencies. Enclave was strategically designed and purposefully built to serve the growing security needs of SMBs, a traditionally underserved market that is more prone to cyberattacks but limited by smaller budgets, inadequate IT security staffing, and lack of cybersecurity awareness among top executives.
“Small and mid-market companies are incredibly challenged by a lack of cost-effective means to comfortably and securely handle network management,” said one of the lead developers behind Enclave, SideChannel Executive Vice President David Chasteen, former CISO of GoFundMe and the San Francisco Police Department. “These companies want to focus on their business and their customers; not worry about who is accessing what server, or if the encryption installed is sufficient. We built Enclave to provide these companies an affordable and effective segmentation solution that significantly reduces the amount of effort required, through a simple and intuitive interface.”
Unlike enterprises and large-scale businesses, SMBs often lack the IT security staff and resources needed to effectively implement a Zero Trust security framework and microsegmentation to protect the organization’s data and assets. Meanwhile, reports show cyberattacks on SMBs have increased in recent years as organizations’ network attack surface has grown exponentially with remote and in-office workers increasingly relying on cloud environments, mobile devices, software applications, and third-party suppliers to conduct business.
Enclave’s introduction to the market represents SideChannel’s first product release, expanding upon its cybersecurity services in providing middle market companies with highly experienced virtual CISOs at a potentially lower cost than hiring a full-time CISO or building an in-house information security team. Launched in 2017, SideChannel has continued to expand its service offering, workforce, and customer base. To date, the company has attracted over 20 vCISOs to serve more than 50 clients across industries, including fintech, biotech, healthcare, manufacturing, legal, defense, and technology services.
“We are thrilled to add the Enclave product and its powerful capabilities to SideChannel’s diverse vCISO delivery platform as we continue to expand our capabilities in the middle market,” said SideChannel Chief Executive Officer and Founder Brian Haugli. “We believe every company, regardless of size, deserves the highest level of cybersecurity services and best-in-class technology solutions with terms and options designed specifically to meet their needs in a manner that works for their budgets.”
For more information about Enclave, visit sidechannel.com/enclave.
# # # #
About SideChannel
SideChannel (OTCQB:SDCH) is committed to creating top-tier cybersecurity programs for mid-market companies to help them protect their assets. SideChannel employs what it believes to be skilled and experienced talent to harden these companies’ defenses against cybercrime, in its many forms. SideChannel’s team of C-suite level information security officers possess a combined experience of over 400 years in the industry. To date, SideChannel has created more than 50 multi-layered cybersecurity programs for its clients. Learn more at sidechannel.com.
Forward-Looking Statements
This press release may contain forward-looking statements, including information about management’s view of SideChannel’s future expectations, plans and prospects, subject to the safe harbor provisions under The Private Securities Litigation Reform Act of 1995 (the “Act”). In particular, when used in the preceding discussion, the words “believes”, “hopes”, “expects”, “intends”, “plans”, “anticipates”, or “may”, and similar conditional expressions are intended to identify forward-looking statements within the meaning of the Act and are subject to the safe harbor created by the Act and otherwise. Any statements made in this news release other than those of historical fact, about an action, event or development, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause the results of SideChannel to be materially different than those expressed or implied in such statements. These risk factors include, but are not limited to, our ability to integrate the operations of the acquired company into our company; that we have incurred net losses since inception, our need for additional funding, the substantial doubt about our ability to continue as a going concern, and the terms of any future funding we raise; that COVID-19 has materially adversely affected our operations and may continue to have a material adverse impact on our operating results in the future; our dependence on current management and our ability to attract and retain qualified employees; competition for our products; our ability to develop new products, improve current products and innovate; unpredictability in our operating results; our ability to retain existing licensees and add new licensees; our ability to manage our growth; our ability to protect our intellectual property (IP), enforce our IP rights and defend against claims that we infringed on the IP of others; and other risk factors included from time to time in documents we file with the Securities and Exchange Commission, including, but not limited to, our Forms 10-K, 10-Q and 8-K. These reports are available at www.sec.gov. Other unknown or unpredictable factors also could have material adverse effects on SideChannel’s future results. Further, factors that we do not presently deem material as of the date of this release may become material in the future. The forward-looking statements included in this press release are made only as of the date hereof. SideChannel cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, SideChannel undertakes no obligation to update these forward-looking statements after the date of this release, except as required by law, nor any obligation to update or correct information prepared by third parties.
Investor Contact:
Matt Kreps
Darrow Associates Investor Relations
214-597-8200
mkreps@darrowir.com
Media Contact:
Great Market for SideChannel. I'm sure they are working hard on securing some of these school districts in need.
https://www.linkedin.com/posts/brianhaugli_ransomware-cybersecurity-identitytheft-activity-6976170471218180097-JHkg?utm_source=share&utm_medium=member_android
It is definitely a good thing when the CEO of the Company takes the time to address questions and concerns that can be spoken of on a public forum. I give Brian credit for his continued transparency. Something that we have asked for all along. I enjoy following him on Facebook and LinkedIn. He is a highly respected cyber guy. I look forward to watching this baby grow.
Thanks Brian for the input. Appreciate your continued support and hope that you can take us to the next level.
From the filing….
“Two of SCS’s shareholders are shareholders of RealCISO Inc. (“RealCISO”). SCS is a reseller of the RealCISO software. SCS receives revenue from its customers for the use of RealCISO software and pays licensing fees to RealCISO for such use. On September 22, 2020 SideChannel assigned to RealCISO Inc. certain contracts and intellectual property. SideChannel paid $54,600 to RealCISO and $20,900 to Bema Technologies for development services for RealCISO during the year ended September 30, 2021. “
It appears we are at the infancy stage. I expect Brian knows how to expand and create huge revenue. We have huge potential to grow grow grow.
Haugli added, “During the last six months, we filled three new sales and marketing roles to expand our reach and communication with prospective clients and expect to have five people on this team by the end of the year. Prior to these additions, we had only one person dedicated full time to new client acquisition.”
Filing…..
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
July 1, 2022
Date of Report (Date of Earliest Event Reported)
SideChannel, Inc.
(Exact name of registrant as specified in its charter)
Delaware 000-28745 86-0837077
(State of incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
146 Main Street, Suite 406, Worcester, MA 01608
(Address of principal executive offices) (Zip Code)
(508) 925-0114
(Registrant’s telephone number, including area code)
6836 Bee Cave Road, Bldg. 1, S#279, Austin, Texas 78746
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
? Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
? Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
? Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
? Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ?
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ?
EXPLANATORY NOTE
This Form 8-K/A (this “Amendment”) amends the Current Report on form 8-K of SideChannel, Inc. (the “Company”) as filed with the Securities and Exchange Commission on July 6, 2022 (the “Original Form 8-K”) that reported Cipherloc Corporation’s acquisition of SideChannel, Inc., a Massachusetts corporation (“SCS”) on July 1, 2022 (the “Acquisition”). Under the authority granted by Item 9.01 of Form 8-K, the Company did not file audited historical financial statements of SCS and unaudited pro forma financial information when the Original Form 8-K was filed.
Since filing the Original Form 8-K, SideChannel, Inc. the Massachusetts corporation and a subsidiary of the registrant, has initiated changing its name to SCS, Inc. and Cipherloc Corporation, the Delaware parent company of the subsidiary has changed its name to SideChannel, Inc. This Amendment will refer to the Combined Company as SideChannel, Inc. (the “Company” or “SideChannel”). SideChannel is the registrant filing this Amendment.
This Amendment will refer to the Massachusetts subsidiary as SCS, Inc. (“SCS”). Historical financial statements for SCS on a standalone basis are provided in Exhibit 99.2
Cipherloc Corporation (“Cipherloc”) will be referenced to identify historical financial information included in the pro forma financial statements provided in Exhibit 99.3 and as needed to describe the Acquisition in financial statement notes.
This Amendment is being filed solely to amend and supplement the Original Form 8-K to include audited historical financial statements of SCS, unaudited interim historical financial statements of SCS, and unaudited pro forma financial information for the combined businesses in accordance with the requirements of Item 9.01 of Form 8-K. This Amendment effects no other changes to the Original Form 8-K. The financial statements and unaudited pro forma financial information filed hereto should be read in conjunction with the Original Form 8-K and with the audited and unaudited financial statements and information included in the Company’s Form 10-K annual report filed with the SEC December 21, 2021 and our Form 10-Q quarterly reports respectively filed with the SEC February 14, 2022, May 13, 2022, and August 15, 2022.
2
Item 9.01 Financial Statements, Pro Forma Financials and Exhibits
The Financial Accounting Standards Board (“FASB”) issues authoritative literature in the Accounting Standards Codification (“ASC”). ASC 805 Business Combinations (“ASC 805”) provides guidance for accounting for mergers and acquisitions. The standard defines a business combination, including criteria for both the transaction to qualify as a business combination and determining whether an entity is a business, and then provides details how to account for the transaction. Applying ASC 805 to the Acquisition, the Company determined that SCS will be the accounting acquirer for financial reporting purposes.
(a) Financial Statements of SCS, Inc. (Business Acquired)
In accordance with Item 9.01(a), the following are attached to this Form 8-K/A as Exhibit 99.2 for The Former SideChannel.
? Audited Balance Sheets as of September 30, 2021 and September 30, 2020
? Audited Statements of Operations for the years ended September 30, 2021 and September 30, 2020
? Audited Statements of Stockholders’ Equity for the years ended September 30, 2021 and 2020
? Audited Statement of Cash Flows for the years ended September 30, 2021 and September 30, 2020
? Notes to the financial statements for the years ended September 30, 2021 and 2020
? Unaudited Condensed Balance Sheet as of June 30, 2022
? Unaudited Condensed Statements of Operations for the nine months ended June 30, 2022
? Unaudited Condensed Statement of Stockholders’ Equity for the nine months ended June 30, 2022
? Unaudited Condensed Statement of Cash Flows for the nine months ended June 30, 2022
? Notes to the Unaudited Financial Statements for the nine months ended June 30, 2022
3
(b) Pro Forma Financial Information of SideChannel, Inc (Combined Cipherloc Corporation and SCS, Inc.)
In accordance with Item 9.01(b), Unaudited pro forma condensed combined financial statements, the following are attached to this Form 8-K/A as Exhibit 99.3.
? Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2022
? Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended September 30, 2021
? Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended June 30, 2022
? Notes to the Pro Forma Balance Sheet and Income Statement
(c) Exhibits
Exhibit
Number Exhibit Description
3.1 Certificate of Designation of Series A Preferred Stock*
3.2 Certificate of Amendment filed with the Delaware Secretary of State on July 5, 2022*
+10.1 Brian Haugli Executive Employment Agreement*
10.2 Independent Contractor Agreement by and between the Company and Sammy Davis dated July 1, 2022*
23.1 Consent of Independent Registered Public Accounting Firm
99.1 Press release dated July 5, 2022*
99.2 Audited and Unaudited Condensed Financial Statements for The Former SideChannel
99.3 Unaudited Condensed Combined Financial Statements
99.4 Press release dated September 12, 2022
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
+ Indicates a management contract, or any compensatory plan, contract or arrangement
* Previously filed with Form 8-K filed July 6, 2022
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: September 12, 2022 SideChannel, Inc.
By: /s/ Ryan Polk
Ryan Polk
Chief Financial Officer
5
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of SideChannel, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of SCS, Inc., (“SCS”) formerly SideChannelSec, LLC, as of September 30, 2021 and 2020, and the related statements of operations, stockholders’ equity, and cash flows for the years ended September 30, 2021 and 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of SCS as of September 30, 2021 and 2020, and the results of its operations and its cash flows for the years ended September 30, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of SCS management. Our responsibility is to express an opinion on the SCS financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to SCS in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. SCS is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the SCS internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
RBSM LLP
[Firm’s Signature]
We have served as SCS, Inc.’s auditor since 2022.
Las Vegas, NV
September 12, 2022
PCAOB ID Number 587
Exhibit 99.2
SCS, INC.
AUDITED BALANCE SHEETS
September 30, 2021 September 30, 2020
ASSETS
Current assets
Cash and cash equivalents $ 347,682 $ 491,210
Accounts receivable, net 178,113 175,461
Unbilled revenue 306,677 68,193
Total current assets 832,472 734,864
Fixed assets 880 1,320
Total assets $ 833,352 $ 736,184
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 211,865 $ 225,869
Deferred revenue 194,186 296,085
Total current liabilities 406,051 521.954
Total liabilities 406,051 521,954
Commitments and contingencies
Stockholders’ equity
Common stock, $0.01 par value, 1,000 shares authorized; 1,000 and 1,000 shares issued and outstanding as of September 30, 2021, and 2020, respectively 10 10
Additional paid-in capital 23,055 23,055
Retained earnings 404,236 191,165
Total stockholders’ equity 427,301 214,230
Total liabilities and stockholders’ equity $ 833,352 $ 736,184
1
SCS, INC.
AUDITED STATEMENTS OF OPERATIONS
For the Year Ended
September 30,
2021 2020
Revenues $ 2,798,560 $ 1,248,948
Cost of revenues 1,536,445 623,598
Gross profit 1,262,115 625,350
Operating expenses:
General and administrative 656,521 203,914
Sales and marketing 95,597 118,063
Research and development — —
Total operating expenses 752,118 321,977
Operating income 509,997 303,373
Other expenses (income):
Miscellaneous income (2,623 ) (566 )
Total other (income) expense (2,623 ) (566 )
Net income $ 512,620 $ 303,939
2
SCS, INC.
AUDITED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 2021, AND 2020
Common Stock Additional
Shares Amount
Paid-in Capital
Accumulated
Deficit Stockholders’
Equity
Balance at September 30, 2019 1,000 $ 10 $ 32,698 $ (22,532 ) $ 10,177
Equity contributions — — 1,218 — 1,218
Equity distributions — — (10,861 ) (90,243 ) (101,104 )
Net income — — — 303,939 303,939
Balance at September 30, 2020 1,000 $ 10 $ 23,055 $ 191,165 $ 214,230
Equity distributions — — — (209,549 ) (209,549 )
Redemption (90,000 ) (90,000 )
Net income — — — 512,620 512,620
Balance at September 30, 2021 1,000 $ 10 $ 23,055 $ 404,236 $ 427,301
3
SCS, INC.
AUDITED STATEMENTS OF CASH FLOWS
For the Year Ended
September 30,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 512,620 $ 303,939
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation 440 440
Changes in operating assets and liabilities:
Accounts receivable (2,652 ) (170,221 )
Unbilled revenue (238,484 ) (51,350 )
Prepaid and other current assets — 7,525
Accounts payable and accrued liabilities (14,004 ) 175,450
Deferred revenue (101,899 ) 263,685
Net cash provided by operating activities 156,021 529,468
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets — —
Net cash used in investing activities — —
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption (90,000 ) —
Equity contributions 1,218
Equity distributions (209,549 ) (101,104 )
Net cash used in financing activities (299,549 ) (99,886 )
(DECREASE) INCREASE IN CASH (143,528 ) 429,582
CASH, BEGINNING OF PERIOD 491,210 61,268
CASH, END OF PERIOD $ 347,682 $ 491,210
Income tax paid $ — $ —
Interest paid $ — $ —
4
SCS, Inc.
Footnotes to the Audited Financial Statements
NOTE 1 – DESCRIPTION OF BUSINESS
SideChannelSec, LLC, A Massachusetts Limited Liability Company, was organized on September 14, 2017. SideChannelSec, LLC converted to a Massachusetts corporation on December 29, 2021 and changed its name to SideChannel, Inc. On December 29, 2021, SideChannelSec, LLC converted (the “Conversion”) from a limited liability company into a corporation (the “Corporation”). SideChannel, Inc., was formed in the state of Massachusetts in connection with the corporate restructuring that occurred on December 29, 2021, or the Restructuring. In accordance with the terms of the operating agreement of SideChannelSEC LLC, or the LLC Operating Agreement, and on the effective date of the Restructuring; the membership units of SideChannelSec LLC, that were issued and outstanding immediately prior to the effective date of the Restructuring were converted into common share of SideChannel, Inc.
On July 1, 2022, SideChannel, Inc., the Massachusetts corporation, was acquired by Cipherloc Corporation. SideChannel, Inc., the Massachusetts corporation, has initiated changing its name to SCS, Inc. (“SCS”). The audited financial statements and these corresponding notes have been prepared for SCS.
SCS determined that the Restructuring lacked economic substance and was therefore accounted for in a manner consistent with a common control transaction. Similarly, as there was no change in fair value between shareholders, individually or as a class, we determined that the exchange of shares occurring in the Restructuring should be accounted for as a modification of the equity securities and presented as a reclassification of the components of equity.
SCS was founded with the belief that small and mid-sized organizations deserved the expertise of an experienced chief information security officer (CISO). SCS provides chief information security officer services and ancillary security and privacy solutions to companies that chose to outsource these capabilities rather than insourcing.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
SCS prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Significant accounting policies are as follows:
Use of Estimates and Assumptions. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net revenues and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.
Cash. SCS considers all highly liquid investments with a maturity at the time of purchase of three months or less to be cash equivalents. At September 30, 2021 and 2020, SCS’s cash includes cash on hand and cash in the bank. The balance of such accounts, at times, may exceed federally insured limits, as guaranteed by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC insures these deposits up to $250,000. As of September 30, 2021 and 2020, $97,682 and $241,210, respectively, of the SCS cash balance was uninsured.
5
Liquidity and Capital Resources. SCS had total equity of $427,301 as of September 30, 2021. SCS expects to continue to generate operating income. As of September 30, 2021, SCS had $347,682 in cash. SCS believes that its existing cash balances and cash flow from operations are sufficient to fund its operations for the next 12 months.
Receivables. SCS bills customers and collects monies within thirty days of invoice date. There are little to no delinquencies or bad debt. SCS had accounts receivable of $178,113 at September 30, 2021, and $175,461 at September 30, 2020. None of these receivables are used as collateral.
Fixed Assets. SCS capitalizes furniture and equipment with a cost in excess of $2,000 and depreciates over twenty-four months. SCS capitalizes autos and depreciates over thirty-six months. SCS had net fixed assets of $880 at September 30, 2021.
Long-Lived Assets. Long-lived assets are evaluated for impairment whenever events or changes in our 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 undiscounted future cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value. During the years ended September 30, 2020 and 2021, SCS recorded no impairment loss.
Liabilities. SCS hires independent contractors to provide chief information security officer (“CISO”) services on behalf of its clients. The contractors are paid the month following the month when the services are delivered. As such, amounts due to contractors are accrued at month end for the costs incurred during the month. The amount of accrued liabilities at September 30, 2021 was $211,865 and $225,869 at September 30, 2020.
Revenue recognition. SCS recognizes revenues in accordance with the provisions of Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” and a series of amendments, issued by the Financial Accounting Standards Board (“FASB”).
Central to SCS’s revenue recognition guidance is a five-step revenue recognition model that requires the reporting entity to:
1. Identify the contract,
2. Identify the performance obligations of the contract,
3. Determine the transaction price of the contract,
4. Allocate the transaction price to the performance obligations, and
5. Recognize revenue.
SCS bills customers monthly in accordance with the customer contracts or agreements. From time to time, SCS bills customer in advance and treats these advance billings as deferred revenue.
Nature of Products and Services
Revenue is allocated generally to CISO, Risk management and other professional services which are recognized ratably over the contractual support period or in proportion to the time incurred at the agreed upon billing rate.
6
Contract Balances
Timing of revenue recognition may differ from the timing of invoicing to customers. SCS records a contract asset or receivable when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to invoicing.
Deferred revenue is comprised mainly of unearned revenue related to CISO, Risk management and other professional services. Deferred revenue also includes contracts for professional services to be performed in the future which are recognized as revenue when SCS delivers the related service pursuant to the terms of the customer arrangement.
Deferred revenue includes invoiced revenue allocated to remaining performance obligations that has not yet been recognized and will be recognized as revenue in future periods. Deferred revenue was $194,186 at September 30, 2021, and $296,085 at September 30, 2020. The deferred revenue is expected to be earned within 12 months of the balance sheet date,
Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 90 days. In instances where the timing of revenue recognition differs from the timing of invoicing, SCS has determined its contracts generally do not include a significant financing component. The primary purpose of SCS’s invoicing terms is to provide customers with simplified and predictable ways of purchasing its products and services, not to receive financing from our customers or to provide customers with financing.
Significant Judgments
SCS’s contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
Assets Recognized from Costs to Obtain a Contract with a Customer
SCS recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. SCS has determined that its sales commission program meets the requirements for cost capitalization. Total capitalized costs to obtain a contract were immaterial during the periods presented. SCS applies a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less.
Recently Issued Accounting Pronouncements Not Yet Adopted. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The main objective of the standard is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this standard replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The update is effective for SCS beginning January 1, 2023 with early adoption permitted. SCS is still evaluating the impact of the adoption of this standard.
7
NOTE 3 – INCOME TAXES
From SCS’s inception to December 29, 2021, SCS was not subject to federal and state income taxes since it was operating as a Limited Liability Company (LLC). Effective with the conversion to a corporation, the stockholders of SCS elected to be taxed as a Subchapter C corporation under the provisions of Subchapter C of the Internal Revenue Code. Federal income taxes were the responsibility of SCS’s stockholders during the audited periods, as were certain state income taxes. Therefore, no provision or liability for income taxes is reflected in the financial statements.
SCS has adopted the provisions related to accounting for uncertainty in income taxes, which defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Management has considered its tax positions and believes that all of the positions taken by SCS in its federal and state tax returns are more likely than not to be sustained upon examination.
SCS is subject to tax examinations by federal and state tax authorities for years after 2018.
SideChannelSec, LLC converted to a Massachusetts corporation on December 29, 2021. Upon this conversion SCS will be taxed as a corporation. SCS utilizes the asset and liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carryforwards and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that the value of such assets will be realized.
NOTE 4 – DEBT
Pursuant to a Membership Interest Redemption Agreement, dated November 3, 2021 by and between SCS and Akash Desai (“Desai Redemption Agreement”), SCS promises to pay Mr. Desai $100,000, without interest, in exchange for Mr. Desai’s right, title, and interest in SCS. Mr. Desai was paid $50,000 in November 2021 and the remaining $50,000 is due on or before December 31, 2023.
NOTE 5 - STOCKHOLDERS’ EQUITY
Effective December 29, 2021 SCS is authorized to issue 1,000 shares of common stock with a $0.01 per share par value.
Five individuals own 100% of SCS’s 1,000 shares of issued common stock with one individual owning 71% and a second individual owning 11%. The remaining three shareholders each own 6% of the common stock. SCS does not have any convertible debt or issued preferred stock.
SideChannel LLC redeemed units from Taylor Lehmann in exchange for $90,000 as stated in a Membership Interest Redemption Agreement executed on November 20, 2020. Mr. Lehmann received a total of $90,000 in redemption payments between November 23, 2020 and December 21, 2020.
SideChannel LLC made profit sharing distributions of $209,549 during the fiscal year ended September 30, 2021 and $101,104 during the year ended September 30, 2020 in accordance with its partnership agreements.
8
NOTE 6 – CONTINGENCIES AND COMMITMENTS
SCS does not have any contingencies and commitments other than what is disclosed in Note 4 – Debt.
SCS may be subject to legal proceedings, claims and liabilities which arise in the ordinary course of business. When appropriate, SCS accrues for losses associated with legal claims when such losses are probable and can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. Legal fees are charged to expense as they are incurred.
NOTE 7 – RELATED PARTY TRANSACTIONS
Two of SCS’s shareholders are shareholders of RealCISO Inc. (“RealCISO”). SCS is a reseller of the RealCISO software. SCS receives revenue from its customers for the use of RealCISO software and pays licensing fees to RealCISO for such use. On September 22, 2020 SideChannel assigned to RealCISO Inc. certain contracts and intellectual property. SideChannel paid $54,600 to RealCISO and $20,900 to Bema Technologies for development services for RealCISO during the year ended September 30, 2021.
NOTE 8 – SUBSEQUENT EVENTS
On November 3, 2021 SideChannel LLC entered into a Membership Interest Redemption Agreement with Akash Desai, formerly a member of SideChannel LLC (see Note 4).
Pursuant to the Articles of Organization, dated December 28, 2021 (“Articles of Organization”), SideChannel, Inc. became a Massachusetts corporation, formed on December 29, 2021, whose business is to provide cybersecurity consulting and services. On December 29, 2021, SideChannel LLC was converted to a corporation from a Massachusetts limited liability company, which was comprised of five members, the same of whom were then the respective shareholders of 100 percent of new corporation’s shares. SideChannel, Inc., the Massachusetts corporation, has initiated changing its name to SCS, Inc. (“SCS”).
On July 1, 2022 (the “Closing Date”), Cipherloc Corporation completed its acquisition of all of the outstanding equity securities of SCS, in exchange for shares of Cipherloc Corporations equity securities (the “Acquisition”), pursuant to an Equity Securities Purchase Agreement, dated May 16, 2022 (the “Purchase Agreement”).
Pursuant to the Purchase Agreement, on the Closing Date, the former shareholders of SCS (the “Sellers”) exchanged all of their equity securities in SCS for a total of 59,900,000 shares of Cipherloc Corporation’s common stock (the “First Tranche Shares”), and 100 shares of Cipherloc Corporation’s newly designated Series A Preferred Stock, $0.001 par value (the “Series A Preferred Stock”). The Sellers are entitled to receive up to an additional 59,900,000 shares of Cipherloc Corporation’s common stock (the “Second Tranche Shares” and together with the First Tranche Shares and the Series A Preferred Stock, the “Shares”) at such time that the operations of SCS, as a subsidiary of the combined entity, achieves at least $5.5 million in revenue (the “Milestone”) for any twelve-month period occurring after the Closing Date and before the 48-month anniversary of the execution of the Purchase Agreement.
On the Closing Date, the Sellers acquired approximately 40.4% of Cipherloc Corporation’s outstanding common stock. If SCS achieves the Milestone, and the Sellers are issued the Second Tranche Shares, and assuming that there is no other change in the number of shares outstanding prior to the issuance of the Second Tranche Shares, the Sellers will hold a total of approximately 57.5% of Cipherloc Corporation’s outstanding common stock. The number of the Second Tranche Shares may be reduced or increased, based upon whether the Subsidiary’s working capital as of the Closing Date was less than or more than zero. The number of the Second Tranche Shares may also be subject to adjustment based upon any successful indemnification claims made pursuant to the Purchase Agreement.
The Shares are subject to a Lock-Up/Leak-Out Agreement, pursuant to which, subject to certain exceptions, the Sellers may not directly or indirectly offer to sell, or otherwise transfer, any of the Shares for twenty-four months after the Closing Date without the prior written consent of Cipherloc Corporation. Notwithstanding the foregoing, pursuant to the Lock-Up/Leak-Out Agreement, each of the Sellers may sell up to 20% of their Shares beginning twelve months after the Closing Date, and the remaining 80% of their shares of Common Stock beginning twenty-four months after the Closing Date.
9
SCS, INC.
CONDENSED BALANCE SHEET
June 30, 2022
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents $ 428,904
Accounts receivable, net 535,648
Unbilled revenue 12,600
Total current assets 977,152
Fixed assets 880
Total assets $ 978,032
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 317,714
Deferred revenue 143,002
Total current liabilities 460,716
Promissory note payable 50,000
Total liabilities 510,716
Commitments and contingencies
Stockholders’ equity
Common stock, $0.01 par value, 1,000 shares authorized; 1,000 shares issued and outstanding as of June 30, 2022 10
Additional paid-in capital 23,055
Retained earnings 444,251
Total stockholders’ equity 467,316
Total liabilities and stockholders’ equity $ 978,032
10
SCS, INC.
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
Nine Months Ended June 30, 2022
Revenues $ 3,558,629
Cost of revenues 1,796,409
Gross profit 1,762,220
Operating expenses
General and administrative 845,489
Selling and marketing 130,027
Research and development —
Total operating expenses 975,516
Operating income 786,704
Other income (expense)
Miscellaneous income 9,197
Interest expense —
Net income before income tax expense 795,901
Income taxes (195,000 )
Net income $ 600,901
11
SCS, INC.
CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Common Stock Additional
For the Nine Months Ended June 30,2022 Shares Amount
Paid-in
Capital
Accumulated
Earnings
Stockholders’
Equity
Balance at September 30, 2021 1,000 $ 10 $ 23,055 $ 404,236 $ 427,301
Equity redemptions — — — (100,000 ) (100,000 )
Equity distributions — — — (460,886 ) (460,886 )
Net income — — — 600,901 600,901
Balance at June 30, 2022 1,000 $ 10 $ 23,055 $ 444,251 $ 467,316
12
SCS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
June 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 600,901
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation —
Changes in operating assets and liabilities:
Accounts receivable (357,534 )
Unbilled revenue 294,077
Accounts payable and accrued liabilities 105,848
Deferred revenue (51,184 )
Net cash provided by operating activities 592,108
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets —
Net cash used in investing activities —
CASH FLOWS FROM FINANCING ACTIVITIES:
Equity redemptions (50,000 )
Equity distributions (460,886 )
Net cash used in financing activities (510,886 )
INCREASE IN CASH 81,222
CASH, BEGINNING OF PERIOD 347,682
CASH, END OF PERIOD $ 428,904
Income tax paid
$ —
Interest paid $ —
NON CASH INVESTING AND FINANCING ACTIVITIES
Redemption with promissory note payable $ 50,000
13
SCS, INC.
Notes to the Unaudited Interim Financial Statements
NOTE 1 - DESCRIPTION OF BUSINESS
SideChannelSec, LLC, A Massachusetts Limited Liability Company, was organized on September 14, 2017. SideChannelSec, LLC converted to a Massachusetts corporation on December 29, 2021 and changed its name to SideChannel, Inc. On December 29, 2021, SideChannelSec, LLC converted (the “Conversion”) from a limited liability company into a corporation (the “Corporation”). SideChannel, Inc., was formed in the state of Massachusetts in connection with the corporate restructuring that occurred on December 29, 2021, or the Restructuring. In accordance with the terms of the operating agreement of SideChannelSEC LLC, or the LLC Operating Agreement, and on the effective date of the Restructuring; the membership units of SideChannelSec LLC, that were issued and outstanding immediately prior to the effective date of the Restructuring were converted into common share of SideChannel, Inc.
On July 1, 2022, SideChannel, Inc., the Massachusetts corporation, was acquired by Cipherloc Corporation. SideChannel, Inc., the Massachusetts corporation, has initiated changing its name to SCS, Inc. (“SCS”). The unaudited interim financial statements and these corresponding notes have been prepared for SCS, Inc,
SCS determined that the Restructuring lacked economic substance and was therefore accounted for in a manner consistent with a common control transaction. Similarly, as there was no change in fair value between shareholders, individually or as a class, we determined that the exchange of shares occurring in the Restructuring should be accounted for as a modification of the equity securities and presented as a reclassification of the components of equity.
SCS was founded with the belief that small and mid-sized organizations deserved the expertise of an experienced chief information security officer (CISO). SCS provides chief information security officer services and ancillary security and privacy solutions to companies that chose to outsource these capabilities rather than insourcing.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
SCS prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Significant accounting policies are as follows:
Use of Estimates and Assumptions. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net revenues and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.
Cash. SCS considers all highly liquid investments with a maturity at the time of purchase of three months or less to be cash equivalents. At June 30, 2022, SCS’s cash includes cash on hand and cash in the bank. The balance of such accounts, at times, may exceed federally insured limits, as guaranteed by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC insures these deposits up to $250,000. As of June 30, 2022 $178,904 of SCS’s cash balance was uninsured.
Liquidity and Capital Resources. SCS had total equity of $467,316 as of June 30, 2022. SCS expects to continue to generate operating income. As of June 30, 2022, SCS had $428,904 in cash. SCS believes that its existing cash balances and cash flow from operations are sufficient to fund its operations for the next 12 months.
14
Receivables. SCS bills customers and collects monies within thirty days of invoice date. There are little to no delinquencies or bad debt. SCS had accounts receivable of $535,648 at June 30, 2022. None of these receivables are used as collateral.
Fixed Assets. SCS capitalizes furniture and equipment with a cost in excess of $2,000 and depreciates over twenty-four months. SCS capitalizes autos and depreciates over thirty-six months. SCS had net fixed assets of $880 at June 30, 2022.
Long-Lived Assets. Long-lived assets are evaluated for impairment whenever events or changes in our 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 undiscounted future cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value. During the nine months ended June 30, 2022, SCS recorded no impairment loss.
Liabilities. SCS hires independent contractors to provide chief information security officer (“CISO”) services on behalf of its clients. Prior to May 31, 2022, the contractors were paid the month following the month when the services are delivered. As such, amounts due to contractors are accrued at month end for the costs incurred during the month. Beginning on May 31, 2022 and for June 30, 2002 the majority of the contractors were paid at the end of the month that they provided services.
Revenue recognition. SCS recognizes revenues in accordance with the provisions of Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” and a series of amendments, issued by the Financial Accounting Standards Board (“FASB”).
Central to SCS’s revenue recognition guidance is a five-step revenue recognition model that requires the reporting entity to:
1. Identify the contract,
2. Identify the performance obligations of the contract,
3. Determine the transaction price of the contract,
4. Allocate the transaction price to the performance obligations, and
5. Recognize revenue.
SCS bills customers monthly in accordance with the customer contracts or agreements. From time to time, SCS bills customer in advance and treats these advance billings as deferred revenue.
Nature of Products and Services
Revenue is allocated generally to CISO, risk management and other professional services which are recognized ratably over the contractual support period or in proportion to the time incurred at the agreed upon billing rate.
Contract Balances
Timing of revenue recognition may differ from the timing of invoicing to customers. SCS records a contract asset or receivable when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to invoicing.
Deferred revenue is comprised mainly of unearned revenue related to CISO, risk management and other professional services. Deferred revenue also includes contracts for professional services to be performed in the future which are recognized as revenue when SCS delivers the related service pursuant to the terms of the customer arrangement.
15
Deferred revenue includes invoiced revenue allocated to remaining performance obligations that has not yet been recognized and will be recognized as revenue in future periods. Deferred revenue was $143,002 at June 30, 2022. The deferred revenue is expected to be earned within 12 months of the balance sheet date,
Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 90 days. In instances where the timing of revenue recognition differs from the timing of invoicing, SCS has determined its contracts generally do not include a significant financing component. The primary purpose of SCS’s invoicing terms is to provide customers with simplified and predictable ways of purchasing its products and services, not to receive financing from our customers or to provide customers with financing.
Significant Judgments
SCS’s contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
Assets Recognized from Costs to Obtain a Contract with a Customer
SCS recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. SCS has determined that its sales commission program meets the requirements for cost capitalization. Total capitalized costs to obtain a contract were immaterial during the periods presented. SCS applies a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less.
Recently Issued Accounting Pronouncements Not Yet Adopted. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The main objective of the standard is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this standard replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The update is effective for SCS beginning January 1, 2023 with early adoption permitted. SCS is still evaluating the impact of the adoption of this standard.
NOTE 3 – INCOME TAXES
From SCS’s inception to December 29, 2021, SCS was not subject to federal and state income taxes since it was operating as a Limited Liability Company (LLC). Effective with the conversion to a corporation, the stockholders of SCS elected to be taxed as a C corporation under the provisions of Subchapter C of the Internal Revenue Code. Federal income taxes were the responsibility of SCS’s stockholders for the period from October 1, 2021 through December 29, 2021, as were certain state income taxes. Therefore, no provision or liability for income taxes is reflected in the financial statements during that period. Beginning December 30, 2021 through June 30, 2022 SCS was responsible for federal income taxes.
16
Provision for Income Taxes and Effective Tax Rate
The provision for income taxes for the nine months ended June 30, 2022 consisted of the following:
Federal:
Current $ 136,000
Deferred (-)
Total 136,000
State:
Current 59,000
Deferred -
Total 59,000
Provision for income taxes $ 195,000
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (21% in 2022) to income before provision for income taxes for 2022, is as follows:
Computed expected tax $ 136,000
State taxes, net of federal effect 59,000
Research and development credit, net -
Other -
Provision for income taxes $ 195,000
Effective tax rate 29.31 %
SCS’s provision for tax expense (benefit) amount computed by applying the statutory federal income tax rate of 21% in 2021 to income before taxes differs from the effective tax rate, due to the state income tax rate of 8.31%.
Deferred Tax Assets and Liabilities
As of June 30, 2022, the there was no significant component of SCS’s deferred tax assets and liabilities and the net carrying amount of deferred tax assets was $0.
SCS recognized $195,000 of income tax expense for the nine months ended June 30, 2022.
17
NOTE 4 – DEBT
Pursuant to a Membership Interest Redemption Agreement, dated November 3, 2021 by and between SCS and Akash Desai (“Desai Redemption Agreement”), SCS promises to pay Mr. Desai $100,000, without interest, in exchange for Mr. Desai’s right, title, and interest in SCS. Mr. Desai was paid $50,000 in November 2021 and the remaining $50,000 is due on or before December 31, 2023.
NOTE 5 - STOCKHOLDERS’ EQUITY
Effective December 29, 2021 SCS is authorized to issue 1,000 shares of common stock with a $0.01 per share par value.
On July 1, 2022 Cipherloc Corporation, a Delaware corporation, purchased 100% of the SideChannel, Inc. common stock outstanding. Following the business combination, Cipherloc Corporation changed its name to SideChannel, Inc.
NOTE 6 – CONTINGENCIES AND COMMITMENTS
SCS does not have any contingencies and commitments other than what is disclosed in Note 4 – Debt.
SCS may be subject to legal proceedings, claims and liabilities which arise in the ordinary course of business. When appropriate, SCS accrues for losses associated with legal claims when such losses are probable and can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. Legal fees are charged to expense as they are incurred.
NOTE 7 – RELATED PARTY TRANSACTIONS
Two of SCS’s shareholders are shareholders of RealCISO Inc. (“RealCISO”). SCS is a reseller of the RealCISO software. SCS receives revenue from its customers for the use of RealCISO software and pays licensing fees to RealCISO for such use. On September 22, 2020 SideChannel assigned to RealCISO Inc. certain contracts and intellectual property. SideChannel paid $70,750 to RealCISO for development services for RealCISO during the nine-months ended June 30, 2022.
NOTE 8 – SUBSEQUENT EVENTS
On July 1, 2022 (the “Closing Date”), Cipherloc Corporation completed its acquisition of all of the outstanding equity securities of SCS, in exchange for shares of Cipherloc Corporations equity securities (the “Acquisition”), pursuant to an Equity Securities Purchase Agreement, dated May 16, 2022 (the “Purchase Agreement”).
Pursuant to the Purchase Agreement, on the Closing Date, the former shareholders of SCS (the “Sellers”) exchanged all of their equity securities in SCS for a total of 59,900,000 shares of Cipherloc Corporation’s common stock (the “First Tranche Shares”), and 100 shares of Cipherloc Corporation’s newly designated Series A Preferred Stock, $0.001 par value (the “Series A Preferred Stock”). The Sellers are entitled to receive up to an additional 59,900,000 shares of Cipherloc Corporation’s common stock (the “Second Tranche Shares” and together with the First Tranche Shares and the Series A Preferred Stock, the “Shares”) at such time that the operations of SCS, as a subsidiary of the combined entity, achieves at least $5.5 million in revenue (the “Milestone”) for any twelve-month period occurring after the Closing Date and before the 48-month anniversary of the execution of the Purchase Agreement.
On the Closing Date, the Sellers acquired approximately 40.4% of Cipherloc Corporation’s outstanding common stock. If SCS achieves the Milestone, and the Sellers are issued the Second Tranche Shares, and assuming that there is no other change in the number of shares outstanding prior to the issuance of the Second Tranche Shares, the Sellers will hold a total of approximately 57.5% of Cipherloc Corporation’s outstanding common stock. The number of the Second Tranche Shares may be reduced or increased, based upon whether the Subsidiary’s working capital as of the Closing Date was less than or more than zero. The number of the Second Tranche Shares may also be subject to adjustment based upon any successful indemnification claims made pursuant to the Purchase Agreement.
The Shares are subject to a Lock-Up/Leak-Out Agreement, pursuant to which, subject to certain exceptions, the Sellers may not directly or indirectly offer to sell, or otherwise transfer, any of the Shares for twenty-four months after the Closing Date without the prior written consent of Cipherloc Corporation. Notwithstanding the foregoing, pursuant to the Lock-Up/Leak-Out Agreement, each of the Sellers may sell up to 20% of their Shares beginning twelve months after the Closing Date, and the remaining 80% of their shares of Common Stock beginning twenty-four months after the Closing Date.
18
Exhibit 99.3
SIDECHANNEL, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2022
(UNAUDITED)
SCS, Inc. Historical Cipherloc
Corporation
Historical
Pro Forma
Adjustments Ref.
Note Pro forma
Combined
ASSETS
Current assets
Cash and cash equivalents $ 428,904 $ 3,588,912 $ — $ 4,017,816
Accounts receivable, net 535,648 — — 535,648
Unbilled revenue 12,600 — — 12,600
Deferred costs — 180,000 — 180,000
Other assets — 28,187 — 28,187
Total current assets 977,152 3,797,099 — 4,774,251
Fixed assets, net 880 — — 880
Deferred costs — 375,000 — 375,000
In process research and development — — 4,970,000 a 4,970,000
Goodwill — — 1,054,682 b 1,054,682
Total assets $ 978,032 $ 4,172,099 $ 6,024,682 $ 11,174,813
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 317,714 $ 786,723 $ — $ 1,104,437
Deferred revenue 143,002 — — 143,002
Total current liabilities 460,716 786,723 — 1,247,439
Promissory note payable 50,000 — — 50,000
Total liabilities 510,716 786,723 — 1,297,439
Commitments and contingencies
Stockholders’ equity
Series A Preferred stock, $0.001 par value, 100 shares issued and outstanding at June 30, 2022 — — — —
Common Stock
Cipherloc Corporation, $0.001 par value, 681,000,000 shares authorized; 148,345,832 shares outstanding; as of June 30, 2022 101,860 46,486 c 148,346
SCS, Inc. $0.01 par value, 1,000 shares authorized; 1,000 shares issued and outstanding as of June 30, 2022 10 (10 ) c
Additional Paid-In Capital
Cipherloc Corporation 78,237,430 (68,952,653 ) d 9,284,777
SCS, Inc. 23,055 — 6,038,226 e 6,061,281
Treasury stock — (590,000 ) 590,000 f —
Retained earnings
Cipherloc Corporation (74,363,914 ) 74,363,914 f —
SCS, Inc. 444,251 (6,061,281 ) e (5,617,030 )
Total stockholders’ equity 467,316 3,385,376 6,024,682 9,877,374
Total liabilities and stockholders’ equity $ 978,032 $ 4,172,099 $ 6,024,682 $ 11,174,813
1
SIDECHANNEL, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2021
(UNAUDITED)
SCS, Inc. Historical Cipherloc Corporation Historical Cipherloc Corporation Pro Forma Adjustments
Ref. Note
SCS, Inc. Pro Forma Adjustments
Ref. Note
Pro Forma Combined
Revenues $ 2,798,560 $ 15,417 $ — $ — $ 2,813,977
Cost of revenues 1,536,445 — — — 1,536,445
Gross profit 1,262,115 15,417 — — 1,277,532
Operating expenses
General and administrative 656,521 2,597,881 — — 3,254,402
Selling and marketing 95,597 96,125 — — 191,722
Research and development — 616,746 — — 616,746
Total operating expenses 752,118 3,310,752 — — 4,062,870
Operating income (loss) 509,997 (3,295,335 ) — — (2,785,338 )
Other income (expense)
Miscellaneous income 2,623 191,052 — — 193,675
Net income (loss) before taxes $ 512,620 $ (3,104,283 ) $ — $ — $ (2,591,663 )
Income tax expense — — — — —
Net income (loss) $ 512,620 $ (3,104,283 ) $ — — $ (2,591,663 )
Net income (loss) per common share – basic and diluted $ 0.01 $ (0.04 ) $ (0.02 )
Weighted average common shares outstanding – basic and diluted 59,900,000 54,864,945 114,764,945
2
SIDECHANNEL, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 2022
(UNAUDITED)
SCS,
Inc.
Historical
Cipherloc
Corporation
Historical
Cipherloc
Corporation
Pro Forma
Adjustments
Ref.
Note
SCS,
Inc. Pro
Forma
Adjustments
Ref.
Note
Pro Forma
Combined
Revenues $ 3,558,629 $ 449 $ — $ — $ 3,559,078
Cost of revenues 1,796,409 — — — 1,796,409
Gross profit 1,762,220 449 — — 1,762,669
Operating expenses
General and administrative 845,489 2,183,340 (479,075 ) g (108,655 ) g 2,441,099
Contingent consideration — — — 6,061,281 e 6,061,281
Selling and marketing 130,027 188,316 — — 318,343
Research and development — 461,816 — — 461,816
Total operating expenses 975,516 2,833,472 (479,075 ) 5,952,626 9,282,539
Operating income (loss) 786,704 (2,833,023 ) 479,075 5,952,626 (7,519,870 )
Other income (expense)
Miscellaneous income 9,197 — — — 9,197
Net income (loss) before taxes $ 795,901 $ (2,833,023 ) $ 479,075 $ 5,952,626 $ (7,512,673 )
Income tax expense (195,000 ) — — — (195,000 )
Net income (loss) $ 600,901 $ (2,833,023 ) $ 479,075 (5,952,626 ) $ (7,705,673 )
Net income (loss) per common share – basic and diluted $ 0.01 $ (0.03 ) $ (0.05 )
Weighted average common shares outstanding – basic and diluted 59,900,000 85,240,812 145,140,812
3
SIDECHANNEL, INC.
Notes to the Unaudited Proforma Financial Statements
NOTE 1 - DESCRIPTION OF TRANSACTION
On July 1, 2022 (the “Closing Date”), Cipherloc Corporation (“Cipherloc”) completed its acquisition of all of the outstanding equity securities of SCS, Inc. (“SCS”), in exchange for shares of Cipherloc’s equity securities (the “Acquisition”), pursuant to an Equity Securities Purchase Agreement, dated May 16, 2022 (the “Purchase Agreement”).
Pursuant to the Purchase Agreement, on the Closing Date, the former shareholders of SCS (the “Sellers”) exchanged all of their equity securities SCS for a total of 59,900,000 shares of Cipherloc’s common stock (the “First Tranche Shares”), and 100 shares of Cipherloc’s newly designated Series A Preferred Stock, $0.001 par value (the “Series A Preferred Stock”). The Sellers are entitled to receive up to an additional 59,900,000 shares of Cipherloc’s common stock (the “Second Tranche Shares” and together with the First Tranche Shares and the Series A Preferred Stock, the “Shares”) at such time that the operations of SCS, as a subsidiary of the combined entity, achieves at least $5.5 million in revenue (the “Milestone”) for any twelve-month period occurring after the Closing Date and before the 48-month anniversary of the execution of the Purchase Agreement.
On the Closing Date, the Sellers acquired approximately 40.4% of Cipherloc’s outstanding common stock. If SCS achieves the Milestone, and the Sellers are issued the Second Tranche Shares, and assuming that there is no other change in the number of shares outstanding prior to the issuance of the Second Tranche Shares, the Sellers will hold a total of approximately 57.5% of Cipherloc Corporation’s outstanding common stock. The number of the Second Tranche Shares may be reduced or increased, based upon whether SCS’s working capital as of the Closing Date was less than or more than zero. The number of the Second Tranche Shares may also be subject to adjustment based upon any successful indemnification claims made pursuant to the Purchase Agreement.
The Shares are subject to a Lock-Up/Leak-Out Agreement, pursuant to which, subject to certain exceptions, the Sellers may not directly or indirectly offer to sell, or otherwise transfer, any of the Shares for twenty-four months after the Closing Date without the prior written consent of Cipherloc. Notwithstanding the foregoing, pursuant to the Lock-Up/Leak-Out Agreement, each of the Sellers may sell up to 20% of their Shares beginning twelve months after the Closing Date, and the remaining 80% of their shares of Common Stock beginning twenty-four months after the Closing Date.
On July 5, 2022 Cipherloc changed its name to SideChannel, Inc. (the “Company” or “SideChannel” or the “Combined Company”).
NOTE 2 – BASIS OF PRENSENTATION
The unaudited pro forma combined financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the SEC, and present the pro forma financial position and results of operations of the Combined Company after the effect of the Purchase Agreement.
The Company has concluded the Purchase Agreement represents a business combination pursuant to FASB Codification Topic 805, Business Combinations. Based on the terms of the Purchase Agreement, SCS, Inc. is deemed to be the acquiring company for accounting purposes and the transaction has been accounted for as a reverse acquisition under the guidance of ASC 805. Accordingly, assets and liabilities of SCS, Inc. have been recorded as of the Purchase Agreement closing date at their respective carrying value and assets and liabilities of Cipherloc Corporation have been recorded as of the Purchase Agreement closing date at their estimated fair value. The Company has completed an external valuation analysis of the fair market value of the assets acquired and the liabilities to be assumed. Using the estimated total consideration for the transaction, the Company has estimated the allocations to such assets and liabilities. This preliminary purchase price allocation has been used to prepare pro forma adjustments in the unaudited pro forma condensed combined balance sheets.
4
NOTE 3 – PRELIMINARY PRO FORMA PURCHASE PRICE ALLOCATION
The following table presents the preliminary allocation of the $9.4 million consideration for the transaction as of the acquisition date as follows:
Preliminary Pro forma Purchase Price Allocation
Amount ($)
FV of deemed issuance of SideChannel’s stock – Common stock 125,281
FV of deemed issuance of SideChannel’s stock - APIC 9,284,777
Total Purchase Price 9,410,058
Net assets (liabilities) of Cipherloc Corporation:
Cash and cash equivalents 3,588,912
Other assets 583,187
Other liabilities (786,723 )
IP R&D acquired 4,970,000
Goodwill 1,054,682
Total Purchase Price 9,410,058
NOTE 4 – PRO FORMA ADJUSTMENTS
Management has made significant estimates and assumption in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented. The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma consolidated financial information:
(a) The fair value of in process research and development has been determined to be $4,970,000 as of June 30, 2022.
(b) Goodwill of $1,054,682 is being recognized related to the closing the of the Purchase Agreement. In accordance with ASC 805, the Purchase Agreement will be accounted for as a reverse merger in which SCS. will be treated as the accounting acquirer and Cipherloc will be treated as the accounting acquiree. The relevant portion of ASC 805 provides that in a reverse acquisition, goodwill should be recorded for and attributed to any difference between the total consideration deemed to be transferred by the accounting acquirer and the total net assets of the accounting acquiree. For purposes of the goodwill analysis under ASC 805, the total “consideration” transferred by SideChannel, as the accounting acquirer in the Purchase Agreement, and as outlined in note 1, is primarily based on the market value of the number of SCS shares that would have to be issued to Cipherloc, as the accounting acquiree in the Purchase Agreement, that would result in SideChannel owning approximate 40% of the outstanding Combined Company Shares after the Closing of the Purchase Agreement. Based on the market value of the Shares on June 30, 2022, and along with other components of the consideration, this would result in pro forma total consideration being transferred to the Company of approximately $9.4 million. Further, the pro forma total net assets of Cipherloc to be transferred to SCS as the accounting acquirer, would be approximately $3.4 million. The difference between the $9.4 million of consideration and the $3.4 million of net assets yields in progress research and development of approximately $4.9 million and goodwill of approximately $1.1 million. In addition to the cash being transferred, Cipherloc is delivering an OTC listed legal entity in good standing that will provide the Combined Company with ready access to significant capital sources in the future to fund its growth plans. The value of this listing is a contribution factor to the goodwill but is difficult to quantify and may be difficult to support in any subsequent goodwill impairment testing.
5
Accounting Standard Codification Topic 350 provides the Combined Company’s recorded goodwill is not to be amortized and is to be tested at least annually for impairment. Impairment of goodwill is the condition that exists when the carrying amount of the Combined Company unit that includes goodwill exceeds its fair value. A goodwill impairment loss is to be recognized for the amount that the carrying amount including goodwill, exceeds its fair value, limited to the total amount of goodwill. The pro forma goodwill of the Combined Company is highly sensitive to change in Cipherloc Corporation’s assets and liabilities between the date of presentation of the “Unaudited Pro Forma Financial information” included in form 8-K/A and the date the complete valuation of Cipherloc Corporation assets and liabilities is performed, as well as fluctuations in the market price of the shares. The volatility of the trading price of the Combined Company’s common stock could also have a material impact on the pro forma goodwill and the fair value of the Combined Company. The impairment analysis is intended to be performed in conjunction with audits of the Combined Company’s annual financial statements.
(c) Common Stock on a combined basis should reflect the par value of the 148,345,832 shares outstanding following the business combination which is $148,346.
(d) A $9,410,058 fair value of Cipherloc was determined by adding $460,224 for the value of restricted stock units at July 1, 2022 to the market capitalization on July 1, 2022 of 88,445,832 shares outstanding and a closing share price of $0.1012. It was further determined that $9,284,777 of the total Cipherloc fair value should be reported as additional paid-in capital.
(e) The Company deems it highly probable that SCS will achieve the revenue milestone which triggers contingent consideration of common stock being issued to the Sellers. This issuance is being recorded as a $6,061,281 increase in additional paid in capital and $6,061,281 of transaction expense. The historical $23,055 balance of adjusted paid in capital for SCS is removed from the pro forma balance sheet.
(f) Treasury stock and Cipherloc’s accumulated deficit are removed from the pro forma balance sheet.
(g) All costs incurred in connection with the acquisition have been removed from general and administrative expenses in the pro forma statement of operations. Cipherloc incurred $479,055 of transaction expenses and SCS incurred $108,655 of transaction expenses.
NOTE 5 – Loss per share
For the purposes of the Pro Forma Statements, loss per share has been calculated using the weighted average number of Cipherloc Corporation Shares which would have been outstanding for the nine-month ended June 30, 2022 after giving effect to the Purchase Agreement as of it had occurred on October 1, 2021. The following information on pro forma basic and diluted weighted average common shares outstanding:
Nine Months Ended June 30, 2022
Cipherloc Corporation actual weighted average common shares outstanding-basic and diluted 85,240,812
Cipherloc Corporation shares to be issued to SideChannel, Inc. upon closing of the transaction 59,900,000
Total weighted average common shares outstanding basic and diluted 145,140,812
6
Exhibit 99.4
FOR IMMEDIATE RELEASE
SideChannel, Inc. Reports Acquiree Pre-acquisition Financial Results for the Nine Months Ended June 30, 2022
WORCESTER, MA – September 12, 2022 – On July 1, 2022, SideChannel, Inc. a provider of cybersecurity services and technology to middle market companies, was acquired by Cipherloc Corporation. The combined entity changed its name to SideChannel, Inc. (“SideChannel” or “Company”), and its ticker symbol to SDCH (OTCQB:SDCH). The acquiree is now named SCS, Inc. (“SCS”) and for accounting purposes, is a subsidiary of the Company.
Today the Company announced it has filed a Form 8-K/A with the Securities and Exchange Commission (“SEC”) to provide financial information required in connection with the Form 8-K filed on July 6, 2022 announcing the acquisition. The Form 8-K/A includes audited financial statements of SCS, the acquiree, for the fiscal years ended September 30, 2021 and September 30, 2020, unaudited financial statements of the acquired company for the nine-months ended June 30, 2022 along with combined pro forma financial statements as of June 30, 2022 and September 30, 2021.
Prior to the business combination, SCS reported operating income of $0.9 million (excluding acquisition expenses of $0.1 million) on revenue of $3.6 million for the nine months ended June 30, 2022. Also prior to the combination, SCS operating income grew to $0.5 million on revenue of $2.8 million for the fiscal year ended September 30, 2021 from $0.3 million on revenue of $1.2 million for the prior fiscal year.
“SideChannel’s innovative cybersecurity service model delivered by a growing team of experienced chief information security officers and security engineers provides a unique opportunity for middle-market companies to benefit from some of the most experienced professionals in the industry on terms and costs designed specifically to fit their operating budgets,” said Brian Haugli, Chief Executive Officer. “Our growing lists of clients, projects, and products validate the importance and relevance of our solutions in providing industry leading cybersecurity services and solutions to this diverse but underserved market.”
Haugli added, “During the last six months, we filled three new sales and marketing roles to expand our reach and communication with prospective clients and expect to have five people on this team by the end of the year. Prior to these additions, we had only one person dedicated full time to new client acquisition.”
The financial information in the Form 8-K/A should be read together with the audited and unaudited financial statements and information included in the Company’s Form 10-K annual report filed with the SEC December 21, 2021 and our Form 10-Q quarterly reports filed with the SEC on February 14, 2022, May 13, 2022, and August 15, 2022, respectively.
The stand-alone financial statements for SCS, the acquiree, are included in this announcement.
SCS, INC.
BALANCE SHEETS
June 30,
2022
September 30, 2021 September 30, 2020
(UNAUDITED) (AUDITED) (AUDITED)
ASSETS
Current assets
Cash and cash equivalents $ 428,904 $ 347,682 $ 491,210
Accounts receivable, net 535,648 178,113 175,461
Unbilled revenue 12,600 306,677 68,193
Total current assets 977,152 832,472 734,864
Fixed assets 880 880 1,320
Total assets $ 978,032 $ 833,352 $ 736,184
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 317,714 $ 211,865 $ 225,869
Deferred revenue 143,002 194,186 296,085
Total current liabilities 460,716 406,051 521,954
Promissory note payable 50,000 — —
Total liabilities 510,716 406,051 521,954
Stockholders’ equity
Common stock 10 10 10
Additional paid-in capital 23,055 23,055 23,055
Retained earnings 444,251 404,236 191,165
Total stockholders’ equity 467,316 427,301 214,230
Total liabilities and stockholders’ equity $ 978,032 $ 833,352 $ 736,184
SCS, INC.
STATEMENTS OF OPERATIONS
For the Nine Months Ended
June 30,
For the Year Ended
September 30,
2022 2021 2020
(UNAUDITED) (AUDITED) (AUDITED)
Revenues $ 3,558,629 $ 2,798,560 $ 1,248,948
Cost of revenues 1,796,409 1,536,445 623,598
Gross profit 1,762,220 1,262,115 625,350
Operating expenses:
General and administrative 845,489 656,521 203,914
Sales and marketing 130,027 95,597 118,063
Research and development — — —
Total operating expenses 975,516 752,118 321,977
Operating income 786,704 509,997 303,373
Other expenses (income):
Miscellaneous income (9,197 ) (2,623 ) (566 )
Net income before income tax 795,901 512,620 303,939
Income taxes (195,000 ) — —
Net income $ 600,901 $ 512,620 $ 303,939
Note: Acquisition expenses $ 108,655 — —
About SideChannel
SideChannel is committed to creating top-tier cybersecurity programs for mid-market companies to help them protect their assets. SideChannel employs what it believes to be skilled and experienced talent to harden these companies’ defenses against cybercrime, in its many forms. SideChannel’s team of C-suite level information security officers possess a combined experience of over 400 years in the industry. To date, SideChannel has created more than 50 multi-layered cybersecurity programs for its clients. Learn more at sidechannel.com.
Forward-Looking Statements
This press release may contain forward-looking statements, including information about management’s view of SideChannel’s future expectations, plans and prospects, subject to the safe harbor provisions under The Private Securities Litigation Reform Act of 1995 (the “Act”). In particular, when used in the preceding discussion, the words “believes”, “hopes”, “expects”, “intends”, “plans”, “anticipates”, or “may”, and similar conditional expressions are intended to identify forward-looking statements within the meaning of the Act and are subject to the safe harbor created by the Act and otherwise. Any statements made in this news release other than those of historical fact, about an action, event or development, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause the results of SideChannel to be materially different than those expressed or implied in such statements. These risk factors include, but are not limited to, our ability to integrate the operations of the acquired company into our company; that we have incurred net losses since inception, our need for additional funding, the substantial doubt about our ability to continue as a going concern, and the terms of any future funding we raise; that COVID-19 has materially adversely affected our operations and may continue to have a material adverse impact on our operating results in the future; our dependence on current management and our ability to attract and retain qualified employees; competition for our products; our ability to develop new products, improve current products and innovate; unpredictability in our operating results; our ability to retain existing licensees and add new licensees; our ability to manage our growth; our ability to protect our intellectual property (IP), enforce our IP rights and defend against claims that we infringed on the IP of others; and other risk factors included from time to time in documents we file with the Securities and Exchange Commission, including, but not limited to, our Forms 10-K, 10-Q and 8-K. These reports are available at www.sec.gov. Other unknown or unpredictable factors also could have material adverse effects on SideChannel’s future results. Further, factors that we do not presently deem material as of the date of this release may become material in the future. The forward-looking statements included in this press release are made only as of the date hereof. SideChannel cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, SideChannel undertakes no obligation to update these forward-looking statements after the date of this release, except as required by law, nor any obligation to update or correct information prepared by third parties.
Investor Contact:
Matt Kreps
Darrow Associates Investor Relations
214-597-8200
mkreps@darrowir.com
https://app.quotemedia.com/data/downloadFiling?webmasterId=102691&ref=116941959&type=HTML&symbol=SDCH&companyName=SideChannel+Inc&formType=8-K%2FA&formDescription=%5BAmend%5DCurrent+report+pursuant+to+Section+13+or+15%28d%29&dateFiled=2022-09-12&CK=1022505
SideChannel, Inc. Reports Acquiree Pre-acquisition Financial Results for the Nine Months Ended June 30, 2022
Press Release | 09/12/2022
WORCESTER, MA /ACCESSWIRE / September 12, 2022 / On July 1, 2022, SideChannel, Inc. a provider of cybersecurity services and technology to middle market companies, was acquired by Cipherloc Corporation. The combined entity changed its name to SideChannel, Inc. ("SideChannel" or "Company"), and its ticker symbol to SDCH (OTCQB:SDCH). The acquiree is now named SCS, Inc. ("SCS") and for accounting purposes, is a subsidiary of the Company.
Today the Company announced it has filed a Form 8-K/A with the Securities and Exchange Commission ("SEC") to provide financial information required in connection with the Form 8-K filed on July 6, 2022 announcing the acquisition. The Form 8-K/A includes audited financial statements of SCS, the acquiree, for the fiscal years ended September 30, 2021 and September 30, 2020, unaudited financial statements of the acquired company for the nine-months ended June 30, 2022 along with combined pro forma financial statements as of June 30, 2022 and September 30, 2021.
Prior to the business combination, SCS reported operating income of $0.9 million(excluding acquisition expenses of $0.1 million)on revenue of $3.6 million for the nine months ended June 30, 2022. Also prior to the combination, SCS operating income grew to $0.5 million on revenue of $2.8 million for the fiscal year ended September 30, 2021 from $0.3 million on revenue of $1.2 million for the prior fiscal year.
"SideChannel's innovative cybersecurity service model delivered by a growing team of experienced chief information security officers and security engineers provides a unique opportunity for middle-market companies to benefit from some of the most experienced professionals in the industry on terms and costs designed specifically to fit their operating budgets," said Brian Haugli, Chief Executive Officer. "Our growing lists of clients, projects, and products validate the importance and relevance of our solutions in providing industry leading cybersecurity services and solutions to this diverse but underserved market."
Haugli added, "During the last six months, we filled three new sales and marketing roles to expand our reach and communication with prospective clients and expect to have five people on this team by the end of the year. Prior to these additions, we had only one person dedicated full time to new client acquisition."
The financial information in the Form 8-K/A should be read together with the audited and unaudited financial statements and information included in the Company's Form 10-K annual report filed with the SEC December 21, 2021 and our Form 10-Q quarterly reports filed with the SEC on February 14, 2022, May 13, 2022, and August 15, 2022, respectively.
The stand-alone financial statements for SCS, the acquiree, are included in this announcement.
SCS, INC.
BALANCE SHEETS
June 30,
2022
September 30, 2021 September 30, 2020
(UNAUDITED) (AUDITED) (AUDITED)
ASSETS
Current assets
Cash and cash equivalents
$ 428,904 $ 347,682 $ 491,210
Accounts receivable, net
535,648 178,113 175,461
Unbilled revenue
12,600 306,677 68,193
Total current assets
977,152 832,472 734,864
Fixed assets
880 880 1,320
Total assets
$ 978,032 $ 833,352 $ 736,184
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities
$ 317,714 $ 211,865 $ 225,869
Deferred revenue
143,002 194,186 296,085
Total current liabilities
460,716 406,051 521,954
Promissory note payable
50,000 - -
Total liabilities
510,716 406,051 521,954
Stockholders' equity
Common stock
10 10 10
Additional paid-in capital
23,055 23,055 23,055
Retained earnings
444,251 404,236 191,165
Total stockholders' equity
467,316 427,301 214,230
Total liabilities and stockholders' equity
$ 978,032 $ 833,352 $ 736,184
SCS, INC.
STATEMENTS OF OPERATIONS
For the Nine Months Ended
June 30,
For the Year Ended
September 30,
2022 2021 2020
(UNAUDITED) (AUDITED) (AUDITED)
Revenues $ 3,558,629 $ 2,798,560 $ 1,248,948
Cost of revenues 1,796,409 1,536,445 623,598
Gross profit 1,762,220 1,262,115 625,350
Operating expenses:
General and administrative 845,489 656,521 203,914
Sales and marketing 130,027 95,597 118,063
Research and development - - -
Total operating expenses 975,516 752,118 321,977
Operating income 786,704 509,997 303,373
Other expenses (income):
Miscellaneous income (9,197 ) (2,623 ) (566 )
Net income before income tax
795,901 512,620 303,939
Income taxes
(195,000 ) - -
Net income $ 600,901 $ 512,620 $ 303,939
Note: Acquisition expenses $ 108,655 - -
About SideChannel
SideChannel is committed to creating top-tier cybersecurity programs for mid-market companies to help them protect their assets. SideChannel employs what it believes to be skilled and experienced talent to harden these companies' defenses against cybercrime, in its many forms. SideChannel's team of C-suite level information security officers possess a combined experience of over 400 years in the industry. To date, SideChannel has created more than 50 multi-layered cybersecurity programs for its clients. Learn more at sidechannel.com.
Forward-Looking Statements
This press release may contain forward-looking statements, including information about management's view of SideChannel's future expectations, plans and prospects, subject to the safe harbor provisions under The Private Securities Litigation Reform Act of 1995 (the "Act"). In particular, when used in the preceding discussion, the words "believes", "hopes", "expects", "intends", "plans", "anticipates", or "may", and similar conditional expressions are intended to identify forward-looking statements within the meaning of the Act and are subject to the safe harbor created by the Act and otherwise. Any statements made in this news release other than those of historical fact, about an action, event or development, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause the results of SideChannel to be materially different than those expressed or implied in such statements. These risk factors include, but are not limited to, our ability to integrate the operations of the acquired company into our company; that we have incurred net losses since inception, our need for additional funding, the substantial doubt about our ability to continue as a going concern, and the terms of any future funding we raise; that COVID-19 has materially adversely affected our operations and may continue to have a material adverse impact on our operating results in the future; our dependence on current management and our ability to attract and retain qualified employees; competition for our products; our ability to develop new products, improve current products and innovate; unpredictability in our operating results; our ability to retain existing licensees and add new licensees; our ability to manage our growth; our ability to protect our intellectual property (IP), enforce our IP rights and defend against claims that we infringed on the IP of others; and other risk factors included from time to time in documents we file with the Securities and Exchange Commission, including, but not limited to, our Forms 10-K, 10-Q and 8-K. These reports are available at www.sec.gov. Other unknown or unpredictable factors also could have material adverse effects on SideChannel's future results. Further, factors that we do not presently deem material as of the date of this release may become material in the future. The forward-looking statements included in this press release are made only as of the date hereof. SideChannel cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, SideChannel undertakes no obligation to update these forward-looking statements after the date of this release, except as required by law, nor any obligation to update or correct information prepared by third parties.
Investor Contact:
Matt Kreps
Darrow Associates Investor Relations
214-597-8200
mkreps@darrowir.com
SOURCE: SideChannel, Inc.
View source version on accesswire.com:
https://www.accesswire.com/715469/SideChannel-Inc-Reports-Acquiree-Pre-acquisition-Financial-Results-for-the-Nine-Months-Ended-June-30-2022