SideChannel Inc (SDCH)

[tedpeele]

Here's my latest take:

I've spoken to Dr Carlson and found him to be friendly. I haven't spoken to Mr. DeLaGarza, but I have listened to several audios and watched several videos and he seems genuine and trustworthy.

Cyberdin appears to be legit. The white paper is on the website. I reached out to Cyberdin for confirmation but did not receive a reply.


Two cybersecurity experts were negative and both said the tech is old tech and both said it doesn't solve a problem anyone has and both literally called it 'snake oil'. They were 2 different people. I was not able to get a very good/clear explanation from either of them though, so it is difficult to know how much of their response was valid and how much was biased. A third, a friend of mine, was more open and interested, but wondered if the data is on their servers, saying that would make sales very difficult to achieve (as few companies - esp the govt. would want Cipherloc to have that kind of access). Some quotes in prior interviews appear to imply that the data isn't on Ciperloc servers, and clock-em reports that he was directly told they aren't via Dr. Carlson.


As mentioned above, the CEO comes across in interviews as credible. And the background story makes some real sense: A long history in the same field (medical software/data), led to a quest for better encryption, which led to Cipherloc. Secrecy while in development makes sense too, as does a relatively long period of development.

But the CEO was involved with an unpleasant lawsuit a few years back. It isn't clear to me his level of guilt, if any. One concern to me is that the CEO carried along to his next company (this one) the CPA that had only recently been found guilty of profiting from misrepresenting herself in a stock certificate fraud. And, the filings under that CPA included very unusual language regarding an anti-rs, which appeared to be very unfriendly to retail shareholders. Thankfully the split was fine for shareholders in the end. But, added together, the combination makes one wonder.

Most recently the 10k reported a change in the conversion of preferred shares (9 million owned by the CEO, 1m by a Trust fund), from 1 to 1.5 common to a 1 to 30 conversion. The effect was a devastating ownership loss to common shareholders by over 90% at the point of any future full conversion. The sudden change was not explained. One proposed reason was to give clear majority ownership in order to be able to avoid a hostile takeover, but my understanding is that the voting rights for the preferred shares already provided that protection. The good news is that the 10Q just recently filed reversed this, citing a reconsideration. Without an explanation one can only speculate what the reasoning was for the original change and for its reversal. While the reversal is welcome news for common shareholders in the absence of a more complete explanation this entire issue remains somewhat unsettling for me.



The $1m in revenue that never came is not a good thing. Why record it when the technology apparently wasn't ready? The restatement will correct it, but its existence is troublesome. They did record a decent portion of it as revenues this quarter, but I'm not sure delivery of any of it has occurred yet.

Other revenues have been zero for over 9 months. That's a real concern, especially given the impression that the tech was ready for sale, and had been demoed to over 1000 companies.

The lack of retail volume in the stock is hard to explain if the level of exposure has been as high as claimed.


There have been some pretty big missed projections:
Increased revenues stated in Aug, 2014. The reality? No revenues since then.

Pilot with Intnl bank expected to begin by June, 2015. Never happened.


The agreement with Hemp was opportunistic IMO a way to jump on the marijuana hype bandwagon. That can be viewed as good or bad, depending on one's personal perspective, but normally not what I would expect from a credible medical software company..


I reached out to the company via both phone and email but didn't here back.


SO, MY LATEST TAKE:
There are enough red flags that logically I have some real concerns. That's where it would be helpful to have a better dialogue with the company. The 'story' here though is so enticing that I'm willing to take a small gamble and see what happens, but that's all at this point.

This may be stickied if a moderator wants to.