SideChannel Reports Q3 Revenue Decline and Continued Net Losses

SideChannel, Inc. reported its financial results for the third quarter and nine months ended June 30, 2025, revealing a modest increase in revenue but continued net losses. The company generated $1.776 million in revenue for the quarter, a decrease of 3.8% from $1.846 million in the same period last year. For the nine-month period, total revenue reached $5.578 million, reflecting a slight increase of 1.3% compared to $5.509 million in the prior year. The increase in revenue was primarily driven by a 22.8% rise in Cybersecurity Software and Services, which offset a 10.1% decline in vCISO Services revenue.

The company's gross profit for the quarter was $835,902, resulting in a gross margin of 47.0%, down from 48.9% in the previous year. For the nine-month period, gross profit was $2.650 million, maintaining a gross margin of 47.5%. The decline in gross margin was attributed to lower employee utilization and an increase in low-margin third-party software and services, although this was partially mitigated by higher revenue from the Enclave software product.

Operating expenses for the quarter increased by 4.5% to $1.103 million, driven by a significant rise in selling and marketing expenses, which surged by 76.6% to $242,137. In contrast, general and administrative expenses decreased by 8.1% to $715,778. For the nine-month period, total operating expenses decreased by 3.1% to $3.185 million, with general and administrative expenses down 13.1% to $2.030 million. Despite these efforts, the company reported a net loss of $261,000 for the quarter and $510,000 for the nine months, compared to losses of $146,000 and $645,000, respectively, in the prior year.

Operationally, SideChannel's customer base and engagement metrics reflect ongoing challenges. The company noted that new client acquisition for vCISO Services has not kept pace with client churn, leading to a decline in revenue from this segment. The company continues to focus on increasing the adoption of its Enclave software and expanding its vCISO Services client base. As of June 30, 2025, SideChannel had 231,229,054 shares outstanding, up from 225,975,331 shares a year earlier, indicating ongoing equity-based compensation activities.

Looking ahead, SideChannel remains optimistic about its growth strategy, which includes enhancing its cybersecurity offerings and expanding its market presence. The company believes that its existing cash reserves, along with anticipated cash flows from operations, will be sufficient to meet its working capital and operational needs for the next 12 months. However, the company acknowledges that market conditions and operational success will significantly impact its future performance and liquidity.