SideChannel Reports 7% Revenue Decline, Operating Loss Increases in Latest Quarter

SideChannel, Inc. reported a decrease in revenue for the three months ended December 31, 2025, totaling $1.774 million, down 7.0% from $1.908 million in the same period of the previous year. The decline was primarily attributed to a significant drop in revenue from its virtual Chief Information Security Officer (vCISO) services, which fell by 29.2% to $845,000. In contrast, revenue from Cybersecurity Software and Services increased by 29.9% to $929,000, reflecting a strategic shift as some vCISO clients transitioned to lower-revenue generating software services. The company's gross profit for the quarter was $909,000, resulting in a gross margin of 51.2%, an improvement from 45.8% in the prior year, largely due to the higher margin contribution from its proprietary software product, Enclave.

Operating expenses rose to $1.309 million, a 21.2% increase compared to $1.080 million in the prior year. This increase was driven by higher selling and marketing expenses, which surged by 71.2% to $457,000, reflecting increased personnel costs and marketing initiatives. General and administrative expenses also saw a slight increase, while research and development expenses rose by 14.4%. The company reported an operating loss of $400,000, compared to a loss of $206,000 in the same quarter of the previous year, leading to a net loss of $396,000, or $(0.09) per share, compared to a net loss of $195,000, or $(0.04) per share, in the prior year.

As of December 31, 2025, SideChannel's total assets decreased to $2.978 million from $3.465 million at the end of the previous fiscal quarter. The decline in cash and cash equivalents was notable, dropping to $495,000 from $1.065 million. The company’s current liabilities also decreased to $1.131 million, down from $1.322 million, primarily due to a reduction in accounts payable and accrued liabilities. The accumulated deficit increased to $21.131 million, reflecting ongoing operational losses.

In terms of strategic developments, SideChannel continues to focus on expanding its cybersecurity offerings, particularly through the promotion of its Enclave software, which aims to simplify cybersecurity tasks for clients. The company is also implementing a cost-reduction program expected to save approximately $930,000 annually, which includes personnel reductions and renegotiation of vendor contracts. Management believes these measures will enhance liquidity and operational efficiency moving forward.

Looking ahead, SideChannel anticipates continued challenges in client retention and revenue generation, particularly in its vCISO services. However, the company is optimistic about the growth potential of its Cybersecurity Software and Services, especially as it seeks to enhance its product offerings with new technologies. Management is actively pursuing additional equity and debt financing to bolster its financial position and support its strategic initiatives.