Financial Analysis

NOTE 14 COMMITMENTS AND CONTINGENCIES Litigation We are currently not involved in any litigation that we believe could have a material adverse effect on its financial condition or results of operations. Recently Settled Litigation In April 2021, Eric Marquez, the former Secretary/Treasurer and Chief Financial Officer of Cipherloc Corporation, and certain other plaintiffs, filed a lawsuit against Cipherloc Corporation and Michael De La Garza, Cipherlocs former Chief Executive Officer and President, in the 20 th Judicial District for Hays County, Texas (Cause No. 20-0818). We executed a settlement agreement with the plaintiffs on December 13, 2024, resulting in the dismissal of the lawsuit with prejudice on January 2, 2025. The settlement agreement requires the Company to issue the plaintiffs a combined 356,400 shares of common stock and pay a total of $ 95 thousand in cash in six equal, quarterly installments of approximately $ 16 thousand each, beginning by January 1, 2025, and ending by April 1, 2026. The expenses associated with this settlement were included in our results for the fiscal year ended September 30, 2024. Four payments totaling approximately $ 63 thousand have been made and 356,400 shares of common stock have been issued as of September 30, 2025. …

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NOTE 8 DEBT SideChannel did not have debt at September 30, 2025. …

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The following table presents revenue reviewed by the CODM for the twelve months ended September 30, 2025 and 2024: SCHEDULE OF DISAGGREGATED REVENUE 2025 2024 Twelve Months Ended (in thousands) September 30, 2025 2024 vCISO services $ 4,083 $ 4,798 Cybersecurity software and services 3,268 2,602 Total $ 7,351 $ 7,400

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NOTE 13 STOCK-BASED COMPENSATION As of September 30, 2025, we had 15.3 million unvested RSUs granted under the 2021 Omnibus Equity Compensation Plan (the 2021 Equity Incentive Plan) approved by stockholders on September 13, 2021. The stockholder approval of the 2021 Equity Incentive Plan included a reserve of 8.0 million shares for awards. The 2021 Equity Incentive Plan also allows for an annual increase in the reserve up to an amount approximately equal to five percent ( 5 %) of the fully diluted outstanding shares at the end of the prior calendar year. On June 29, 2022, the Board of Directors authorized an 8,186,106 increase in the shares reserved for the 2021 Equity Incentive Plan. On February 15, 2024, the Board of Directors authorized an increase of 13,599,334 in the shares reserved for the 2021 Equity Incentive Plan. On February 3, 2025, the Board of Directors authorized an increase of 14,196,898 in the shares reserved for the 2021 Equity Incentive Plan. Awards granted under the 2021 Equity Incentive Plan in lieu of compensation are exempt from counting against the reserve. SCHEDULE OF COMMON STOCK SHARES RESERVED FOR EQUITY GRANTS 2021 Omnibus Equity Incentive Plan Reserve (In thousands) Initial Reserve at September 13, 2021 8,000 Non-exempt awards (36,280 ) Forfeitures 3,983 Annual reserve increases 35,982 Reserve at September 30, 2025 11,685 Reserve percent of outstanding shares at September 30, 2025 5.1 % We typically have granted RSUs and stock options with a 3 -ye …

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NOTE 15 - INCOME TAXES We began filing consolidated federal and state income tax returns beginning for the tax year ended September 30, 2023. We have 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. We have considered our tax positions and believe that all the positions taken by us in our federal and state tax returns are more likely than not to be sustained upon examination. We utilize 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. …

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NOTE 6 - LEASES On December 10, 2021, we entered into a lease for approximately 500 square feet of office space at 146 Main Street in Worcester, Massachusetts, with the option to renew annually. The annual renewal date is January 1 st . Our current lease payment is $ 986 per month. The lease allows for a two percent ( 2 %) increase effective at the beginning of each renewal period. We anticipate the lease payment to be $1,006 per month during calendar year 2026. Operating lease payments are included in cash outflows from operating activities on our consolidated statements of cash flows. Operating lease expenses were $ 12 thousand and $ 12 thousand for the fiscal years ended September 30, 2025 and 2024, respectively. We have made an accounting policy election not to apply the recognition requirements of ASC Topic 842 (Leases) to short-term leases (leases with a term of one year or less at the commencement date of the lease). Lease expense for short-term lease payments is recognized on a straight-line basis over the lease term. We do not have any long-term operating leases or financing leases as of September 30, 2025. We expect to pay approximately $ 12 thousand over the next twelve (12) months for the Worcester lease .

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Recent Accounting Announcements The Financial Accounting Standards Board (FASB) issues Accounting Standards Updates (ASU) to amend the authoritative literature in the ASC. There have been several ASUs to date that amend the original text of the ASCs. Other than those discussed below, we believe those ASUs issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us, or (iv) are not expected to have a significant impact on us. Accounting Pronouncements Adopted In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which provides guidance to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the guidance enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements. The purpose of the guidance is to enable investors to better understand an entitys overall performance and assess potential future cash flows. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. For us, annual reporting requirements were effective for our fiscal year 2025 beginning on Octob …

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NOTE 12 RELATED PARTY TRANSACTIONS Brian Haugli, our Chief Executive Officer and our stockholder in the Company, is also a principal shareholder of RealCISO Inc. (RealCISO). In September 2020, SideChannel assigned to RealCISO Inc. certain contracts and intellectual property. We are a reseller of the RealCISO software. We receive revenue from our customers for the use of RealCISO software and pays licensing fees to RealCISO for such use. For fiscal years 2025, and 2024, SideChannel paid $ 75 thousand and $ 30 thousand to RealCISO for licenses, respectively. We also invoiced $ 34 thousand and $ 122 thousand from RealCISO for software development services that we provided RealCISO during fiscal years 2025 and 2024, respectively. On October 13, 2023, the Association of the US Army (AUSA) signed an agreement for a cybersecurity risk assessment for approximately $ 24 thousand. On February 15, 2024, the President of AUSA, Retired U.S. Army General Robert Brown, joined our Board. On July 8, 2024, AUSA signed an agreement for recurring vCISO Services which generated approximately $ 9 thousand of revenue in fiscal year 2024 and $ 54 thousand of annual revenue in fiscal year 2025 for the Company before terminating in March 2025. SideChannel reserved booth space at the AUSA Global Force Symposium held in March 2025 and paid $ 8 thousand to AUSA for this event. No other related party transactions occurred during the years ending September 30, 2025, and September 30, 2024. …

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NOTE 10 REVENUE FROM CONTRACTS WITH CLIENTS Deferred revenue is comprised of payments received from our clients and customers for products or services in advance of receiving the product or service and primarily occurs for annual software and service contracts including Enclave. The deferred revenue is expected to be earned within 12 months of the balance sheet date. SCHEDULE OF CHANGES IN DEFERRED REVENUE (In thousands) Balance at September 30, 2023 $ 280 Deferral of revenue 1,258 Recognition of revenue (1,023 ) Balance at September 30, 2024 $ 515 Deferral of revenue 1,776 Recognition of revenue ( 1,490 ) Balance at September 30, 2025 $ 801 …

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NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Use of Estimates The accompanying consolidated financial statements include our accounts and those of our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Certain of our accounts, including goodwill, identifiable intangibles, and deferred tax assets and liabilities, including related valuation allowances, are based upon estimates. References to fiscal year 2025 and fiscal year 2024 used throughout this report shall mean the current fiscal year ending September 30, 2025, and the prior fiscal year ended September 30, 2024, respectively. Reclassifications Certain prior year amounts have been reclassified to be comparable with the current years presentation or adjusted due to rounding and have had no impact on net income or stockholders equity. Segment Information The Company operates as a single reportable segment focused on cybersecurity solutions, which consists of two primary revenue-generating categories: 1) vCISO Services and 2) Cybersecu …

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NOTE 9 STOCKHOLDERS EQUITY Common Stock As of September 30, 2025 and 2024, we had 231,229,054 and 225,975,331 shares of common stock outstanding, respectively, and were authorized to issue 681,000,000 shares of common stock at a par value of $ 0.001 . Common Stock Issued for Cash No common shares were issued for cash in fiscal year 2025 or fiscal year 2024. Common Stock Issued for Business Combinations No shares were issued for business combinations in fiscal year 2025 or fiscal year 2024. Common Stock Issued for Services No shares were issued for services in fiscal year 2025. Until March 31, 2024, our Board of Directors elected to have each of its members receive one-half of such members quarterly compensation in the form of shares of the Companys common stock instead of cash. We also use stock as a form of compensation for independent contractors who provide professional services to us in sales, marketing, or administration. During fiscal year 2024, the fair market value of stock issued for services totaled $ 20 thousand for 437,643 shares of common stock. Common Stock Issued Under Equity Incentive Plan We issued 4,897,323 shares of common stock for 6,398,717 restricted stock units (RSUs) that vested during the year ended September 30, 2025. The number of RSUs sold by these employees to fund payroll taxes for the year September 30, 2025, was 1,501,394 . We issued 4,411,949 shares of common stock for 6,537,045 restricted stock units (RSUs) that vested during the year ended S …

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NOTE 16 - SUBSEQUENT EVENTS On December 8, 2025, Anna Seacat was appointed to our Board. The Board considers Ms. Seacat to be independent under the independent director requirements of the Nasdaq Stock Market LLC. On December 9, 2025, Deborah MacConnel, a current Member of the Board of Directors (Board) of SideChannel, Inc., (the Company), and the Chairwoman of the Board informed the Company of her upcoming retirement from the Board of Directors. Ms. MacConnel will remain a member of the Board and the Chairwoman until the Companys next Annual Stockholders Meeting (Annual Meeting), at which time Ms. MacConnel will not stand for re-election as a Member of the Board. Ms. MacConnels departure is not the result of any disagreement with the Companys management, the Companys Board or the Company on any matter related to its operations, policies or practices. In recognition of Ms. MacConnels tenure and contributions to the Company during her service as a member of the Board, the Company will provide her with the vesting of 333,667 restricted stock units (RSUs), which were awarded to her on December 23, 2024, and are scheduled to vest on March 1, 2026. The remaining 333,667 RSUs from the December 23, 2024, award will be forfeited by Ms. MacConnel. The Company has evaluated events through December 18, 2025, the filing date of this Annual Report on Form 10-K and determined that there have been no additional subsequent events that occurred that would require adjustments to our disclosure …

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