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 UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 WASHINGTON,
D.C. 20549

 FORM

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

 EXCHANGE
ACT OF 1934

 For
the Fiscal Year Ended September 30, 2023

 OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

 EXCHANGE
ACT OF 1934

 For
the transition period from ____ to ____

 Commission
File Number: 000-28745

 SideChannel,
Inc.

 (Exact
name of registrant as specified in its charter)

 Delaware

 86-0837077

 State
 or other jurisdiction of

 incorporation
 or organization)

 I.R.S.
 Employer

 Identification
 No.

Main Street, Suite 405, Worcester, MA 01608

 (Address
of principal executive offices) (Zip Code)

 (508) 925-0114

 (Registrant's
telephone number, including area code)

 Securities
registered pursuant to Section 12(b) of the Act:

 Title
 of each class

 Trading
 Symbol(s)

 Name
 of each exchange on which registered

 N/A

 N/A

 N/A

 Securities
registered pursuant to Section 12(g) of the Act:

Stock, par value $0.001

 (Title
of Class)

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
 No

by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes No

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller
reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 Large
 accelerated filer

 Accelerated
 filer

 Non-accelerated
 filer

 Small
 reporting company

 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.

by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.

 If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

 On
March 31, 2023, the last business day of the registrant's most recently completed second fiscal quarter, the aggregate market value
of the common equity held by non-affiliates of the registrant was approximately $ 7.8 million based upon the closing price of the common
stock on that date on the OTCQB Venture Market of approximately $0.08.

 As
of December 22, 2023, there were 214,117,267 shares of the issuer's common stock, par value $0.001
per share, outstanding.

 Documents
Incorporated by Reference: Portions of the Registrant's Definitive Proxy Statement to be filed for its 2024 Annual Meeting of Stockholders
are incorporated by reference into Part II, Item 5 and Part III of this Annual Report on Form 10-K.

 SIDECHANNEL,
INC.

 FORM
10-K ANNUAL REPORT

 FOR
THE FISCAL YEAR ENDED SEPTEMBER 30, 2023

 TABLE
OF CONTENTS

 PART
 I

 ITEM
 1.

 BUSINESS

 ITEM
 1A.

 RISK
 FACTORS

 ITEM
 1B.

 UNRESOLVED
 STAFF COMMENTS

 ITEM
 1C.

 CYBERSECURITY

 ITEM
 2.

 PROPERTIES

 ITEM
 3.

 LEGAL
 PROCEEDINGS

 ITEM
 4.

 MINE
 SAFETY DISCLOSURES

 PART
 II

 ITEM
 5.

 MARKET
 FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 ITEM
 6.

 [Reserved]

 ITEM
 7.

 MANAGEMENT'S
 DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 ITEM
 7A.

 QUANTITATIVE
 AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 ITEM
 8.

 FINANCIAL
 STATEMENTS

 ITEM
 9.

 CHANGES
 IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 ITEM
 9A.

 CONTROLS
 AND PROCEDURES

 ITEM
 9B.

 OTHER
 INFORMATION

 ITEM
 9C.

 DISCLOSURE
 REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 PART
 III

 ITEM
 10.

 DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

 ITEM
 11.

 EXECUTIVE COMPENSATION

 ITEM
 12.

 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 ITEM
 13.

 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 ITEM
 14.

 PRINCIPAL ACCOUNTANT FEES AND SERVICES

 PART
 IV

 ITEM
 15.

 EXHIBITS
 AND FINANCIAL STATEMENT SCHEDULES

 SIGNATURES

 Except
as otherwise required by the context, references to "SideChannel," "SideChannel, Inc.," the "Company,"
"we," "us" and "our" are to (i) Cipherloc Corporation, a Texas corporation, and its subsidiaries,
for all periods prior to September 30, 2021, and to (ii) Cipherloc Corporation, a Delaware corporation, and its subsidiaries, for all
periods after September 30, 2021, the date of the completion of the merger of the Texas corporation into the Delaware corporation, and
to (iii) SideChannel, Inc., a Delaware corporation and its subsidiaries, for all periods after July 5, 2022, the date of the name change
of Cipherloc Corporation's name to SideChannel, Inc.

 Forward-Looking
Statements

 From
time to time, we may provide information, whether orally or in writing, including certain statements in this Annual Report on Form 10-K,
which are deemed to be "forward-looking." These forward-looking statements and other information, express our opinions, expectations,
beliefs, plans, objectives, assumptions or projections regarding future events or future results based upon information that is currently
available.

 The
words "believe," "plan," "expect," "intend," "anticipate," "estimate,"
"may," "will," "should" and similar expressions are intended to identify forward-looking statements.
Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions.
Forward-looking statements include all matters that are not historical facts. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed,
estimated, expected or intended or using other similar expressions. We do not intend to update these forward-looking statements, except
as required by law.

 Such
forward-looking statements are by their very nature subject to many important factors that could cause actual results to differ materially
from those contemplated by the forward-looking statements contained in this Annual Report on Form 10-K, any exhibits to this Annual Report
on Form 10-K and other public statements we make. Such factors are discussed in the "Risk Factors" sections of this Annual
Report on Form 10-K. However, forward-looking statements appear throughout this document, including in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of this Annual Report on Form 10-K. Unless otherwise
indicated or the context requires otherwise, the words "we," "us," "our," the "Company"
and "SideChannel" refer to SideChannel, Inc. and its wholly owned subsidiaries.

 PART
I

 ITEM
1. BUSINESS

 Reverse
Merger

 On
July 1, 2022 (the "Closing Date"), the Company, then known as Cipherloc Corporation, a Delaware corporation, completed its
acquisition ("Business Combination") of all the outstanding equity securities of SideChannel, Inc., a Massachusetts corporation,
pursuant to an Equity Securities Purchase Agreement dated May 16, 2022 (the "Purchase Agreement"). On September 9, 2022,
SideChannel, Inc., the acquired Massachusetts corporation and a subsidiary of the registrant, changed its name to SCS, Inc. (the "Subsidiary"
or "SCS") and Cipherloc Corporation, the Delaware parent company of SCS, changed its name to SideChannel, Inc.

 The
transaction was accounted for as a reverse acquisition merger, in accordance with accounting principles generally accepted in the United
States of America ("GAAP"). Under this method of accounting, SCS was deemed to be the accounting acquirer for financial reporting
purposes. This determination was primarily based on the facts that, immediately following the Business Combination: (1) the majority
of the Board of Directors of the combined company will be composed of directors designated by the Sellers under the terms of the Purchase
Agreement; and (2) existing members of SCS management constituted the management of the combined company. Because SCS has been determined
to be the accounting acquirer in the Business Combination, but not the legal acquirer, the transaction is deemed a reverse acquisition
under the guidance of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")
Topic 805, Business Combinations. As a result, the historical financial statements of SideChannel are the historical financial statements
of the combined company.

 Following
the closing of the Business Combination, SCS became a wholly owned subsidiary of the Company. As used herein, the words "the Company"
refers to SideChannel, Inc., together with its subsidiaries.

Overview & Strategy

 The
Company is a provider of cybersecurity services and technology to companies; national, state and local municipalities; and
non-profits. The Company's website is www.sidechannel.com.

 Our
mission is to make cybersecurity easy and accessible for mid-market and emerging companies, a market that we believe is currently underserved.
We believe that our cybersecurity offerings will reduce risks for our customers through identifying and developing cybersecurity, privacy,
and risk management solutions. We anticipate that our target customers will continue to need cost-effective security solutions beginning
with but not limited to what we refer to as virtual Chief Information Security Officer services ("vCISO" or "vCISO
Services").

 We have developed a new software product, Enclave, that we believe offers companies of all sizes the means to simplify
several crucial cybersecurity infrastructure procedures, including encryption, microsegmentation and access control.
Enclave is a modern network segmentation platform that combines access control, asset inventory, encryption and zero trust network
access to create a microsegmentation solution that prioritizes both IT and cybersecurity's highest-level needs.
Enclave is purpose-built to:

 Simultaneously secure and
 segment networks

 Limit
the damage a bad actor can do by decreasing the digital square footage they can explore

 Easily
implement access controls for employees, support staff, and third-party vendors while never disrupting current operations

 Our
strategy focuses on growth from the following three areas:

 1.

 Securing
 new vCISO clients

 2.

 Adding
 new Cybersecurity Software and Services offerings such as Enclave

 3.

 Increasing
 adoption of Cybersecurity Software and Services offerings at vCISO clients, including Enclave

 vCISO
engagements typically include a fixed monthly subscription fee with durations longer than twelve (12) months. Rates for vCISO time
and material projects range from $350 to $425 per hour. Each of our vCISOs is generally embedded into the C-suite executive teams of
two (2) to four (4) of our clients. We augment our vCISO offering with a full range of other cybersecurity services through a team
of security engineers combined with a network of third-party service providers and value-added resellers ("VARs").
Commercial relationships with VARs provide SideChannel with additional internal capabilities to mitigate cybersecurity risks. We
earn a commission on software engagements we generate through VARs.

 We
have implemented an account management organization responsible for delivering services and software to our clients. Our vCISOs
and the security and privacy engineers that support them are part of our account management organization. As this team delivers vCISO
Services for our clients, we often identify projects to implement and maintain programs that reduce cybersecurity risks that expand
our scope of work and increase our revenue generating potential. Similarly, as this team delivers a new cybersecurity service or installs
cybersecurity software at a client, we often learn about opportunities to improve the protection of our clients' digital assets
through additional service and software engagements.

 Our
vCISO engagements provide our clients with the C-suite cybersecurity leadership needed to effectively mitigate cybersecurity risks
and support ongoing operation of critical business functions. This strategic cybersecurity leadership will often result in
additional statements of work for SideChannel to deliver the Cybersecurity Software and Services needed to address gaps in our
clients' cybersecurity framework. We track revenue and other key performance indicators using the vCISO Services category and
Cybersecurity Software and Services category. Detail on the revenue performance of these categories is discussed in
"Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of this
Annual Report on Form 10-K.

 We
currently provide Cybersecurity Software and Services and intend to increase our delivery of more tech-enabled services to address the
needs of our customers, including:

 Additional
 Virtual Chief Information Security Officers

 Zero
 trust

 Third-party
 risk management

 Due
 diligence

 Privacy

 Threat
 intelligence, and

 Managed
 end-point security solutions

 We
believe that our current and prospective customers in the mid-market will favor our approach, as it
provides them with an efficient way to work with a single vendor to manage and oversee their cybersecurity programs. We also believe
that our approach will reduce our customers' overall security costs and streamline their ability to increase their sales,
reduce regulatory risks, and monitor their risk posture.

 We
believe that we provide a full range of cybersecurity solutions through our employees, our network of subcontractors, and
our array of partnerships with third-party service providers and software companies. We work with our clients to help them select the
right cybersecurity tools, products, and solutions. We believe that our use of a combination of employees and subcontractors allows us
to cost effectively grow our client base and broaden the subject matter expertise of our service delivery teams while maintaining the agility needed to
move directly into implementation of projects, which we believe reduces the risk to our customers. Our subcontractors also provide us
with sales leads and referrals and may resell our services to their own client base.

 Enclave,
A SideChannel Proprietary Software Product

 We
are developing products and services around our unique insight into mid-market and emerging companies. During September 2022, SideChannel
announced a proprietary product, Enclave, which simplifies a particularly important cybersecurity task called "microsegmentation."
Industry standard cybersecurity and risk management frameworks, such as National Institute of Standards and Technology Cybersecurity
Framework ("NIST CSF") and Center for Internet Security Controls ("CIS"), prioritize inventory of assets and
access control as top requirements for a sustainable and compliant cybersecurity program. CIS version 8 controls call for organizations
to:

 Control
 1 - "Establish and maintain an accurate, detailed, and up-to-date inventory of all enterprise assets with the potential to
 store or process data."

 Control
 2 - "Actively manage (inventory, track, and correct) all software (operating systems and applications) on the network so that
 only authorized software is installed and can execute, and that unauthorized and unmanaged software is found and prevented from installation
 or execution."

 Control
 3 - "Configure data access control lists based on a user's need to know. Apply data access control lists, also known
 as access permissions, to local and remote file systems, databases, and applications."

 We
built Enclave to address these extremely critical cybersecurity controls along with many others. Enclave seamlessly combines access
control, microsegmentation, encryption and other secure networking concepts to create a comprehensive solution. Through software it
allows Information Technology (IT) to easily segment the enterprise network, place the right staff in those segments and direct
traffic. Unlike open, traditional models, Enclave allows for near-limitless micro-segmented networks to operate insulated from one
another.

 Further
information about Enclave is available at

 Company
History

 The
Company was incorporated in the State of Texas on June 22, 1953, as American Mortgage Company. During 1996, the Company acquired the
operations of Eden Systems, Inc. ("Eden"), making it a wholly owned subsidiary. Eden was engaged in water treatment and the
retailing of cleaning products. Eden's operations were sold on October 1, 1997. On May 16, 1996, the Company changed its name to
National Scientific Corporation. From September 30, 1997, through the year ended September 30, 2001, the company aimed its efforts in
the research and development of semiconductor proprietary technology and processes and in raising capital to fund its operations and
research. Effective August 27, 2014, the Company changed its name to "Cipherloc Corporation." The Company became a Delaware
corporation on September 30, 2021.

Combination Between Cipherloc Corporation and SideChannel, Inc. (now known as SCS, Inc.)

 As
part of the Business Combination, the former stockholders of SCS (the "Sellers") exchanged all of their equity
securities in SCS for a total of 59,900,000 shares of the Company's common stock (the "First Tranche Shares"), and
100 shares of the Company's newly designated Series A Preferred Stock, $0.001 par value (the "Series A Preferred
Stock"). The In addition the Sellers were entitled to receive up to an additional 59,900,000 shares of the Company'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 Company, achieved 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. The number of the Second Tranche Shares could have been reduced or
increased, based upon whether SCS working capital as of the Closing Date is less than or more than zero ("Closing Working
Capital Adjustment"). The number of the Second Tranche Shares was also subject to adjustment based upon any successful
indemnification claims made by the parties pursuant to the Purchase Agreement. The Closing Working Capital Adjustment increased the Second Tranche Shares by 2,116,618 shares of common stock. The
100 shares of Series A Preferred Stock were converted to common stock on May 4, 2023.

 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 the Company. 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 (12) months after the Closing Date, and the remaining 80% of their shares of Common Stock beginning
twenty-four (24) months after the Closing Date.

 Research
and Development

 Since Enclave is a proprietary software product, we classify all of our software development activities to be research
and development. The success of our software product, Enclave,
depends on our ability to provide our customers with reliable, innovative features and benefits that are delivered before, or at least
no later than, our competitors. At September 30, 2023, we employed a total of three (3) software engineers engaged in product development.
In addition, when the demands of product development exceed the capacity or knowledge of our in-house staff, we retain temporary third-party
consultants to assist us.

 Our
research and development expenditures for the fiscal years ended September 30, 2023 and September 30, 2022 were $669,000 and $178,000,
respectively. These costs were incurred to develop Enclave which is a product acquired in the Business Combination.

 Competition

 The
cybersecurity software and services market is highly competitive, subject to rapid change, and significantly affected by new
product introductions and other activities of market participants.

 Some
of our competitors have greater financial, technical, sales, marketing, and other resources than we do. Because of these and other factors,
competitive conditions in the markets we operate in are likely to continue to intensify in the future, as participants compete for market
share. Increased competition could result in price reductions for our products and services, possibly reducing our net revenue and profit
margins and resulting in a loss of our market share, any of which would likely harm our business.

 We
believe that our future results depend largely upon our ability to serve our clients and customers with the products and services described
earlier better than our competitors, and by offering new services and product enhancements, whether such product and service offerings
are developed internally or through acquisition. We also believe that we must provide product and service offerings that compete favorably
against those of our competitors with respect to ease of use, reliability, performance, range of useful features, reputation and price.

 We
anticipate that we will face increasing pricing pressures from our competitors in the future. Since there are low barriers to entry into
the cybersecurity services and software markets, we believe competition in these
markets will persist and intensify in the future.

 Our chief services competitors include companies such as Optiv, NCC, Coalfire, PwC, EY, Deloitte, and GuidePoint.
Our primary software competitors are companies such as Perimeter 81, Zscaler, Palo Alto, and Illumio.

 Intellectual
Property

 Protective
Measures

 We
believe that our intellectual property is an important and vital asset, which enables us to develop, market, and sell our products and
services and enhance our competitive position. Our intellectual property includes our proprietary business and technical know-how, inventions,
works of authorship, and confidential information. To protect our intellectual property, we rely primarily upon legal rights in trade
secrets, patents, copyrights, and trademarks, in addition to our policies and procedures, security practices, contracts, and relevant
operational measures.

 We
protect the confidentiality of our proprietary information by entering into non-disclosure agreements with our employees, contractors,
and other entities with which we do business. In addition, our license agreements related to our software and proprietary information
include confidentiality terms. These agreements are generally non-transferable. We also employ access controls and associated security
measures to protect our facilities, equipment, and networks.

 Patents,
Copyrights, Trademarks, and Licenses

 Our
products, particularly our software and related documentation, are protected under domestic and international copyright laws and other
laws related to the protection of intellectual property and proprietary rights. Currently, we have six patents filed with the U.S. Patent
and Trademark Office. We employ procedures to label copyrightable works with the appropriate proprietary rights notices, and we actively
enforce our rights in the United States and abroad. However, these measures may not provide us with adequate protection from infringement,
and our intellectual property rights may be challenged.

 Our
SideChannel and Enclave logos are registered trademarks with the U.S. Patent and Trademark Office. In the United States, we can maintain
our trademark rights and renew trademark registrations for as long as the trademarks are in use.

 Government
Regulation

 Export
Control Regulations. We expect that all of our products will be subject to U.S. export control laws and applicable foreign government
import, export and/or use requirements. The level of such control generally depends on the nature of the products in question. Often,
the level of export control is impacted by the nature of the software and cybersecurity incorporated into our products. In those countries
where such controls apply, the export of our products may require an export license or authorization. However, even if a transaction
qualifies for a license exception or the equivalent, it may still be subject to corresponding reporting requirements. For the export
of some of our products, we may be subject to various post-shipment reporting requirements. Minimal U.S. export restrictions apply to
all our products, whether or not they perform cybersecurity functions. If we become a Department of Defense contractor in the future,
certain registration requirements may be triggered by our sales. In addition, certain of our products and related services may be subject
to the International Traffic in Arms Regulations (ITAR) if our software or services are specifically designed or modified for defense
purposes. If we become engaged in manufacturing or exporting ITAR-controlled goods and services (even if we do not export such items),
we will be required to register with the U.S. State Department.

 To
date, Export Control Regulations have had no material impact on our business.

 Enhancements
to our existing products may be subject to review under the Export Administration Act to determine what export classification they will
receive. In addition, any new products that we release in the future will also be subject to such review before we can export them. The
U.S. Congress continues to discuss the correct level of export control in possible anti-terrorism legislation. Such export regulations
may be modified at any time. Modifications to these export regulations could reduce or eliminate our ability to export some or all of
our products from the United States in the future, which could put us at a disadvantage in competing with companies located outside of
the U.S. Modifications to U.S. export regulations could restrict us from exporting our existing and future products. Any such modifications
to export regulations may put us at a competitive disadvantage with respect to selling our products internationally.

 Privacy
Laws. We may be subject to various international, federal and state regulations regarding the treatment and protection of personally
identifying and other regulated information. Applicable laws may include U.S. federal laws and implementing regulations, such as the
GLBA and HIPAA, as well as state and international laws and regulations, including the California Consumer Privacy Act (CCPA) and the
European Union General Data Protection Regulation (GDPR). Some of these laws have requirements on the transmittal of data from one jurisdiction
to another. In the event our systems are compromised, many of these privacy laws require that we provide notices to our customers whose
personally identifiable data may have been compromised. Additionally, if we transfer data in violation of these laws, we could be subjected
to substantial fines. To mitigate the risk of having such data compromised, we use cybersecurity, software and other security procedures
to protect our databases.

 Personnel

 As
of September 30, 2023, we had 23 full-time employees. We also have approximately 11 independent contractors that provide services to
us. We anticipate that we will need to increase our staffing in the foreseeable future.

 ITEM
1A. RISK FACTORS

 Our
business, financial condition and results of operations and the market price for our common stock are subject to numerous risks, many
of which are driven by factors that we cannot control or predict. An investment in our common stock involves a high degree of risk. You
should carefully consider the following information about these risks, together with the other information contained in this Annual Report
on Form 10-K, including the information regarding "Forward-Looking Statements" earlier in this Form 10-K immediately prior
to Part I, Item 1 and "Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations,"
before investing in our common stock. If any of the events anticipated by the risks described below occur, our results of operations
and financial condition could be adversely affected, which could result in a decline in the market price of our common stock, causing
you to lose all or part of your investment. Additional risks that we do not yet know of, or that we currently think are immaterial, may
also affect our business and results of operations.

 Summary
of Risk Factors:

 The
following list provides a summary of risk factors discussed in further detail below:

 Risks
Related to Our Financial Position and Need for Capital, including:

 We
 have incurred net losses and may never achieve profitability.

 Our
 ability to continue as a going concern may depend upon our ability to raise additional capital
 and such capital may not be available on acceptable terms, or at all.

 If
 we can raise additional funding, we may be required to do so on terms that are dilutive to
 our stockholders.

 Risks
Related to Our Business and Results of Operations, including:

 We
 depend significantly upon the continued involvement of our present management and on our
 ability to attract and retain talented employees.

 Our
 products and services face significant competition in our markets.

 We
face intense competition in our market, especially from larger, well-established companies, and we may lack sufficient financial or other
resources to maintain or improve our competitive position. If we are unable to develop new and enhanced products and services, or if
we are unable to continually improve the performance, features, and reliability of our existing products and services, our competitive
position would weaken, and our business and operating results could be adversely affected.

 Our
 operating results may vary significantly from period to period and have been unpredictable,
 which has and might continue to cause the market price of our common stock to be volatile.

 Our
 future revenue and operating results will depend significantly on our ability to retain clients
 and customers and the ability to add new clients and customers.

 A
 network or data security incident may allow unauthorized access to our or our end users'
 network or data, harm our reputation, create additional liability and adversely impact our
 financial results.

 Our
 services, products, systems, and website and the related data may be subject to
 intentional disruption that could materially harm our reputation and future sales.

 Our
 products are complex and operate in a wide variety of environments, systems and configurations,
 which could result in failures of our products to function as designed.

 Outages
 or problems with systems and infrastructure supplied by third-parties could negatively affect
 our business, financial condition and financial results.

 Current
 global financial conditions have been characterized by increased volatility, which could
 negatively impact our business, prospects, liquidity and financial condition.

 If
 we experience delays and/or defaults in payments, we could be unable to recover all expenditures.

 Risks
Related to Our Industry, including:

 We
 face intense competition.

 Delays
 in product development schedules may adversely affect our revenues.

 If
 we do not accurately predict, prepare for, and respond promptly to rapidly evolving technological
 and market developments, our competitive position, financial results and prospects will be
 harmed.

 Actual, possible, or perceived defects or vulnerabilities in our products or services could harm our
 reputation and divert resources.

 Risks
Related to Our Intellectual Property, including:

 Our
 proprietary rights may be difficult to enforce.

 If
 our end users experience data losses, our brand, reputation and business could be harmed.

 Claims
 by others that we infringe their proprietary technology could harm our business.

 We
 rely on the availability of third-party licenses.

 Our
 use of open-source software could negatively affect us.

 Risks
Related to Cyberattacks, including:

 Cyberattacks
 and security vulnerabilities could lead to reduced revenue, increased costs, liability claims,
 or harm to our reputation or competitive position.

 Security
 of our information technology may be threatened.

 Security
 of our products, services, devices, and customers' data may be breached.

 Development
 and deployment of defensive measures are ongoing.

 Disclosure
 and misuse of personal data could result in liability and harm our reputation.

 Risks
Related to Our Common Stock, including:

 The
 market price for our common stock has been volatile and our common stock is thinly traded.

 Substantial
 sales of our common stock, or the perception that such sales might occur, could depress the
 market price of our common stock.

 Holders
 of our common stock have a risk of potential dilution.

 The
 anti-dilutive rights of certain warrants could result in significant dilution to our existing
 stockholders.

 Our
 common stock is subject to restrictions on sales by broker-dealers and penny stock rules.

 Our
 common stock is not listed on a national exchange.

 Risks
Related to Regulations and Our Compliance with Such Regulations, including:

 We
 previously identified material weaknesses in our disclosure controls and procedures and internal
 control over financial reporting, which have not yet been remediated by us.

 We
 are subject to changing laws and regulations.

 Risks
Related to Our Contractual Agreements, including:

 The
 accounting treatment of the proposed exchange offer of our issued warrants could have a material adverse impact
 on our financial statements and reduce our net income.

 The
 purchase agreement related to our 2021 private placement includes customary covenants that
 we must comply with, or we may suffer potential monetary and other penalties.

 General
Risk Factors, including:

 Our
 charter allows us to issue "blank check" preferred stock and establish its terms,
 conditions, rights, powers and preferences without stockholder approval.

 We
 will continue to incur increased costs as a result of being a reporting company and, given
 our limited capital resources, such additional costs may have an adverse impact on our profitability.

 Failure
 to adequately manage our planned aggressive growth strategy may harm our business or increase
 our risk of failure.

 We
 may apply working capital and future funding to uses that ultimately do not improve our operating
 results or increase the market price of our securities.

 Our
 websites may encounter technical problems and service interruptions.

 We
 have never paid or declared any dividends on our common stock.

 Risks
Related to Our Financial Position and Need for Capital

 We
have incurred net losses and may never achieve profitability.

 Our
likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered
in connection with development of a new business enterprise. Our accumulated deficit as of September 30, 2023, was $18.9 million primarily driven by $11.9 million of one-time charges related to the Business Combination, which closed on July 1,
2022 and the $4.9 million of intangible asset impairment charge during the year ended September 30, 2023.

 We
cannot assure you that that any of our new products and services currently under development will be successfully commercialized, and
the extent of our future losses and the timing of any possible profitability, if ever achieved, are highly uncertain. If we are unable
to achieve profitability, we may be unable to continue our operations.

 Our
ability to continue as a going concern may depend upon our ability to raise additional capital and such capital may not be available
on acceptable terms, or at all.

 We
currently believe that our available cash will allow us to fund our operations through at least December 2024. Nevertheless, we may
need to raise additional capital to fund operating losses, support future expansion, develop new or enhanced products and services,
hire employees, respond to competitive pressures, acquire technologies, or respond to unanticipated events or requirements before
then. Our management's plans include attempting to improve our profitability and our ability to generate sufficient cash flow
from operations to meet our operating needs on a timely basis, obtaining additional working capital funds through equity and debt
financing arrangements, and restructuring on-going operations to eliminate inefficiencies and reduce our expenses. However, we are not assured that these plans and arrangements will be sufficient to fund our ongoing capital expenditures, working capital, and other
requirements. The outcome of these actions cannot be predicted at this time. There can be no assurance that any additional
financings will be available to us on satisfactory terms and conditions, if at all. If adequate funds are not available on
acceptable terms, we may be unable to develop or enhance our products and services, take advantage of future opportunities or
respond to competitive pressures or unanticipated requirements, any of which could have a material adverse effect on our business,
financial condition and operating results. If we raise additional funds through the issuance of equity securities, or convertible
debt, the percentage ownership of our stockholders will be reduced, and holders may experience dilution in net book value per
share.

 The
amount of capital we may need depends on many factors, including the progress, timing, scope and market acceptance of our product development
programs; the time and cost required to obtain any necessary regulatory approvals; our ability to enter into and maintain collaborative,
licensing and other commercial relationships; and our ability to secure commitment of time and resources from third-parties to the development
and commercialization of our products.

 The
capital markets have been unpredictable for unprofitable companies such as ours. The amount of capital that we may be able to raise depends
on variables that are beyond our control. As a result, we may not be able to secure financing on terms acceptable to us, or at all. Even
if we are able to consummate a financing arrangement, the amount raised may not be sufficient to meet our future needs. If adequate funds
are not available on acceptable terms, or at all, our business, including our results of operations, financial condition and our continued
viability will be materially adversely affected.

 If
we can raise additional funding, we may be required to do so on terms that are dilutive to our stockholders.

 Our
future issuances of new equity may dilute the ownership percentage of our existing stockholders. The extent of such dilution will depend
on the number of shares issued. Neither the amount of funds that may be received in such an equity financing, nor the price per share
of our equity securities issued are known at this time.

 Risks
Related to Our Business and Results of Operations

 Inflation and geo-political events increase the risk that we are unable to achieve and maintain profitable operations.

 Inflation may cause our costs to increase, which we may not be able to pass onto customers. Inflation may also impact
our customers' profitability and the budgets they have available to spend on cybersecurity and other products we offer. The wars in Ukraine
and the Middle East and tensions between China and the US could have impacts on many variables that impact our business or our customers'
businesses.

 We
depend significantly upon the continued involvement of our present management and on our ability to attract and retain talented employees.

 Our
success depends significantly upon our present management, who are involved in our strategic planning and operations. Our business requires
that we successfully attract and retain talented employees and contractors. The competition for individuals with expertise in our industry
is intense, and we cannot assure that such individuals will be available to us on acceptable terms, or at all.

 If
we are less successful in our recruiting efforts, or if we are unable to retain key existing employees, our ability to develop and deliver
successful products and services will be adversely affected. Effective succession planning is also important to our long-term success.
Our failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning
and execution.

 Our
products and services face significant competition in our markets, and if they do not compete successfully, our business will suffer.

 Our
current and proposed products and services face, and will continue to face, intense competition from larger and smaller companies,
as well as from academic and research institutions. We compete in an industry that is characterized by: (i) rapid technological
change, (ii) evolving industry standards, (iii) emerging competition, and (iv) new service and product introductions. Our
competitors have existing products and technologies that will compete with our products and technologies and may develop and
commercialize additional products and technologies that will compete with our products and technologies. Some of these new products
and services may have functionality that ours do not have. Because many competing companies and institutions have greater financial
resources than us, they may be able to: (i) provide broader services and product lines, and (ii) fully develop and deploy new products faster than we can with their larger and broader resources. Our competitors also generally have
greater development capabilities than we do and have greater experience in undertaking testing of products, obtaining regulatory
approvals, and manufacturing and marketing their products. They also have greater name recognition and better access to customers,
clients, licensees, and resellers than we do. Our chief services competitors include companies such as Optiv, NCC, Coalfire, PwC,
EY, Deloitte, and GuidePoint. Our primary product competitors for Enclave are companies such as Perimeter 81, Zscaler, Palo Alto,
and Illumio.

 If
we are unable to develop new and enhanced products and services, or if we are unable to continually improve the performance, features,
and reliability of our existing products and services, our competitive position would weaken, and our business and operating results
could be adversely affected.

 Our
future success depends on our ability to effectively respond to evolving threats to consumers and potential customers, as well as competitive
technological developments and industry changes, by developing or introducing new and enhanced products and services on a timely basis.
In the past, Cipherloc has incurred significant research and development expenses. As a result of the Business Combination, we expect
to continue to incur research and development expenses as we strive to remain competitive and as we focus on organic growth through
internal innovation. If we are unable to anticipate or react to competitive challenges or if existing or new competitors gain market
share in any of our markets, our competitive position would weaken, and we could experience a decline in our revenues and net income, which could adversely affect our business and operating results. Additionally, we must continually address the challenges of
dynamic and accelerating market trends, increasingly sophisticated cyber-attacks and intrusions and competitive developments. Customers
may require features and capabilities that our current products do not have. Our failure to develop new products and improve our existing
products to satisfy customer preferences and needs and effectively compete with other market offerings in a timely and cost-effective
manner will harm our ability to retain our customers (if any) and the ability of our licensees or resellers to retain their customers,
and to create or increase demand for our products, which may adversely impact our operating results. The development and introduction
of our new or enhanced products will involve a significant commitment of time and resources and will be subject to a number of risks
and challenges, including but not limited to:

 Lengthy
 development cycles;

 Evolving
 industry and regulatory standards and technological developments by our competitors and customers
 (if any) and the customers of our licensees and resellers;

 Rapidly
 changing customer preferences and needs;

 Evolving
 platforms, operating systems, and hardware products, such as mobile devices, and related
 product and service interoperability challenges;

 Entering
 into new or unproven markets; and

 Executing
 new product and service strategies.

 If
we are not successful in managing these risks and challenges, or if our new or improved products and services are not technologically
competitive in the market, or do not achieve market acceptance, our business and operating results would be adversely affected, our market
share would decline, and our margins would contract.

 Our
operating results may vary significantly from period to period and have been unpredictable, which has and might continue to cause the
market price of our common stock to be volatile.

 Our
operating results, in particular, our revenues, gross margins, operating margins, and operating expenses, have historically varied significantly
from period to period, and we expect such variation to continue as a result of a number of factors, many of which are outside of our
control and may be difficult to predict, including:

 our
 ability to attract and retain customers (if any) and/or the ability of our licensees and
 resellers to retain customers or sell products and services;

 the
 budgeting cycles, seasonal buying patterns, and purchasing practices of potential customers
 and customers of our licensees and resellers;

 price
 competition;

 the
 timing and success of our new product and service introductions by us or our competitors
 or any other change in the competitive landscape of our industry, including consolidation
 among our competitors, licensees, resellers, clients, or customers, and strategic relationships
 entered into by and between our competitors;

 in the mix of our services, products, and support;

 in the growth rate of the cybersecurity technology market;

 the
 timing and costs related to the development or acquisition of technologies or businesses
 or strategic partnerships;

 lack
 of synergy, or the inability to realize expected synergies, resulting from any acquisitions
 or strategic partnerships;

 our
 inability to execute, complete or integrate efficiently any acquisitions that we have or
 may hereafter undertake;

 increased
 expenses, unforeseen liabilities, or write-downs and any impact on our operating results
 from any acquisitions we may consummate;

 our
 ability to create sizeable and productive distribution channels for our proprietary software;

 decisions
 by potential customers, or the customers of our licensees and resellers, to purchase cybersecurity
 solutions from larger, more established cybersecurity software and service vendors, or from
 their sales channel partners;

 timing
 of revenue recognition from the delivery of existing and future statements of work;

 Insolvency
 or credit difficulties confronting customers (if any), our licensees and resellers, or the
 customers of our licensees and resellers, which could adversely affect their ability to purchase
 or pay for our products and services and offerings;

 the
 cost and potential outcomes of any litigation, which could have a material adverse effect
 on our business;

 seasonality
 or cyclical fluctuations in our markets due to holiday schedules, industry events, or customer
 funding policies that may impact our ability to secure new clients or deliver services to
 existing clients;

 future
 accounting pronouncements or changes in our accounting policies, including the potential
 impact of the adoption and implementation of the Financial Accounting Standards Board's
 new standard regarding revenue recognition; and

 general
 macroeconomic conditions including interest rates, inflation and increasing labor costs, in some or all regions in which we operate.

 Any
one of the factors above, or the cumulative effect of some of the factors referred to above, may result in significant fluctuations in
our operating results including our revenue and net income. This variability and unpredictability could result in our failure to meet
our revenue, margin, or other operating result expectations, or those of securities analysts or investors for a particular period. If
we fail to meet or exceed such expectations for these or any other reasons, the market price of our common stock could decline substantially,
and we could face costly lawsuits, including securities class action suits.

 We
face intense competition in our market, especially from larger, well-established companies, and we may lack sufficient financial or other
resources to maintain or improve our competitive position.

 The
market for cybersecurity technologies is intensely competitive, and we expect competition to increase in the future from established
competitors and new market entrants. Our main competitors fall into three categories:

 large
 companies that incorporate security or encryption features in their services and products,
 such as Google's Cloud Platform, Amazon's AWS services, and Microsoft's
 Azure, or those that have acquired, or may acquire, cybersecurity services, products, or technologies
 and have the technical and financial resources to bring competitive solutions to the market;

 independent
 security vendors, such as Optiv and Coalfire, that offer cybersecurity products; and

 small
 and large companies that offer cybersecurity services and technologies that compete with our services and products.

 Many
of our existing competitors have, and some of our potential competitors may have, substantial competitive advantages such as:

 greater
 name recognition and longer operating histories;

 larger
 sales and marketing budgets and resources;

 broader
 distribution and established relationships with distributors and customers (if any), or the
 customers of our licensees and resellers;

 greater
 customer support resources;

 greater
 resources to make strategic acquisitions or enter strategic partnerships; and

 greater
 financial, technical, and other resources.

 In
addition, some of our larger competitors have substantially broader and more diverse product and service offerings, which may make them
less susceptible to downturns in a particular market and allow them to leverage their relationships based on other services and products
or incorporate functionality into existing services and products to gain business in a manner that discourages users from purchasing
our services, products and subscriptions, including through selling at zero or negative margins, offering concessions, product bundling,
or closed technology platforms. Many of our smaller competitors that specialize in providing protection from a single type of security
threat are often able to deliver these specialized cybersecurity or security products to the market more quickly than we can.

 Organizations
that use legacy products and services may believe that these products and services are sufficient to meet their security needs, or that
our platform only serves the needs of a portion of the cybersecurity technology market. Accordingly, many organizations have invested
substantial personnel and financial resources to design and operate their networks and have established deep relationships with other
providers of cybersecurity services and products. As a result, these organizations may prefer to purchase from their existing suppliers
rather than add or switch to a new supplier such as us, regardless of product performance, features, or greater services offerings, or
may be more willing to incrementally add solutions to their cybersecurity infrastructure from existing suppliers than to replace it wholesale
with our solutions.

 Conditions
in our market could change rapidly and significantly because of technological advancements, partnering or acquisitions by our competitors,
or continuing market consolidation. New start-up companies that innovate and large competitors that are making significant investments
in research and development may invent similar or superior services, products, and technologies that compete with our services and products.
Some of our competitors have made or could make acquisitions of businesses that may allow them to offer more directly competitive and
comprehensive solutions than they had previously offered and adapt more quickly to innovative technologies and changing needs. Our current
and potential competitors may also establish cooperative relationships among themselves or with third-parties that may further enhance
their resources and reduce their expenses. These competitive pressures in our market or our failure to compete effectively may result
in price reductions, fewer orders, reduced revenue and gross margins, and loss of market share. Any failure to meet and address these
factors could materially harm our business and operating results.

 Our
future revenue and operating results will depend significantly on our ability to retain clients and customers and the ability to add
new clients and customers. Any decline in our retention rates or failure to add new clients and customers will harm our business prospects
and operating results.

 We
anticipate that our future revenue and operating results will depend significantly on our ability to retain clients and customers and
our ability add new clients and customers. In addition, we may not be able to predict or anticipate accurately future trends in retention
or effectively respond to such trends. Our retention rates may decline or fluctuate due to a variety of factors, including the following:

 our
 clients' and customers' levels of satisfaction or dissatisfaction with our products
 and services;

 the
 quality, breadth, and prices of our products and services;

 our
 general reputation and events impacting that reputation;

 the
 products and services and related pricing offered by our competitors;

 disruption
 by new services or changes in law or regulations that impact the need for or efficacy of
 our products and services;

 our
 customer service activities and responsiveness to any customer issues;

 customer
 dissatisfaction if they do not receive the full benefit of our services due to their failure
 to provide all relevant data;

 customer
 dissatisfaction with the methods or sufficiency of our remediation services; and

 in target customers' planned spending levels as a result of general economic conditions
 or other factors such as inflation.

 If
we do not retain our existing clients and customers, or add new clients and customers, we may not generate revenue and/or our revenue
may grow more slowly than expected, or decline, and our operating results and gross margins will be negatively impacted. In addition,
our business and operating results may be harmed if we are unable to increase our retention rates or if they decline.

 We
also must continually add new clients and customers, both to replace those who cancel or elect not to renew their agreements with us
and to grow our business beyond our current level. If we are unable to attract new clients and customers in numbers greater than number
that cancel or elect not to renew their agreements with us, our client base will decrease, and our business, operating results, and financial
condition would be adversely affected.

 A
network or data security incident may allow unauthorized access to our or our end users' network or data, harm our reputation,
create additional liability and adversely impact our financial results.

 Increasingly,
companies are subject to a wide variety of attacks on their networks on an ongoing basis. In addition to traditional computer "hackers"
malicious code (such as viruses and worms), phishing attempts, employee theft or misuse, and denial of service attacks, sophisticated
nation-state and nation-state supported actors engage in intrusions and attacks (including advanced persistent threat intrusions) and
add to the risks to internal networks, cloud deployed enterprise and customer-facing environments and the information they store and
process. Despite significant efforts to create security barriers to such threats, it is virtually impossible for us to entirely mitigate
these risks. We, and our third-party software and service providers, may face security threats and attacks from a variety of sources.
Our data, corporate systems, third-party systems and security measures and/or those of our licensees, resellers, clients, customers,
software providers, independent contractors, employees, end users may be breached due to the actions of outside parties, employee error,
malfeasance, a combination of these, or otherwise, and, as a result, an unauthorized party may obtain access to our or our customers'
data. Furthermore, as a provider of cybersecurity technologies, we may be a more attractive target for such attacks. A breach in our
data security or an attack against our service availability, or that of our third-party service providers, could impact our networks
or networks secured by our services, products and subscriptions, creating system disruptions or slowdowns and exploiting security vulnerabilities
of our services, products, and the information stored on our networks or those of our third-party service providers could be accessed,
publicly disclosed, altered, lost, or stolen, which could subject us to liability and cause us financial harm. Any actual or perceived
breach of network security in our systems or networks, or any other actual or perceived data security incident we or our third-party
service providers suffer, could result in damage to our reputation, negative publicity, loss of channel partners, licensees, resellers,
clients, customers, and sales, loss of competitive advantages over our competitors, increased costs to remedy any problems and otherwise
respond to any incident, regulatory investigations and enforcement actions, costly litigation, and other liability. In addition, we may
incur significant costs and operational consequences of investigating, remediating, eliminating, and putting in place additional tools
and devices designed to prevent actual or perceived security incidents, as well as the costs to comply with any notification obligations
resulting from any security incidents. Any of these negative outcomes could adversely impact the market perception of our services, products
and customer and investor confidence in our company and, moreover, could seriously harm our business or operating results.

 It
is essential to our business strategy that our technology and network infrastructure remain secure and are perceived by any clients and
customers we have, and others, to be secure. Despite security measures, however, any network infrastructure may be vulnerable to cyber-attacks
by hackers and other security threats. We may face cyber-attacks that attempt to penetrate our network security, sabotage or otherwise
disable our research, products and services, misappropriate our proprietary information, or that of our licensees and resellers, or their
or our customers and partners, which may include personally identifiable information, or cause interruptions of our internal systems
and services. Any cyber-attacks could negatively affect our reputation, damage our network infrastructure and our ability to deploy our
products and services, harm our business relationships, and expose us to financial liability.

 Our
services, products, systems, and website and the data on these sources may be subject to intentional disruption that could materially
harm our reputation and future sales.

 Despite
our precautions and ongoing investments to protect against security risks, data protection breaches, cyber-attacks, and other intentional
disruptions of our products and services, we expect to be an ongoing target of attacks specifically designed to impede the performance
and availability of our offerings and harm our reputation as a company. Similarly, experienced computer programmers or other sophisticated
individuals or entities, including malicious hackers, state-sponsored organizations, and insider threats including actions by employees
and third-party service providers, may attempt to penetrate our network security or the security of our systems and websites and misappropriate
proprietary information or cause interruptions of our services. This risk has increased as more
individuals are working from home and utilize home networks for the transmission of sensitive information. Such attempts are increasing
in number and in technical sophistication, and if successful could expose us and the affected parties, to risk of loss or misuse of proprietary
or confidential information or disruptions of our business operations. While we engage in a number of measures aimed to protect against
security breaches and to minimize problems if a data breach were to occur, our information technology systems and infrastructure may
be vulnerable to damage, compromise, disruption, and shutdown due to attacks or breaches by hackers or due to other circumstances, such
as error or malfeasance by employees or third-party service providers or technology malfunction. The occurrence of any of these events,
as well as a failure to promptly remedy these events should they occur, could compromise our systems, and the information stored in our
systems could be accessed, publicly disclosed, lost, stolen, or damaged. Any such circumstance could adversely affect our ability to
attract and maintain licensees and resellers, and/or for us or our licensees and resellers to retain customers, as well as strategic
partners, cause us to suffer negative publicity, and subject us to legal claims and liabilities or regulatory penalties. In addition,
unauthorized parties might alter information in our databases, which would adversely affect both the reliability of that information
and our ability to market and perform our services. Techniques used to obtain unauthorized access or to sabotage systems change frequently,
are constantly evolving and generally are difficult to recognize and react to effectively. We may be unable to anticipate these techniques
or to implement adequate preventive or reactive measures. Several recent, highly publicized data security breaches at other companies
have heightened consumer awareness of this issue and may embolden individuals or groups to target our systems or those of our licensees,
resellers, or strategic partners, or our or their customers.

 Our
products are complex and operate in a wide variety of environments, systems and configurations, which could result in failures of our
products to function as designed and negatively impact our brand recognition and reputation.

we offer very complex products, errors, defects, disruptions, or other performance problems with our products may and have occurred.
For example, we may experience disruptions, outages, and other performance problems due to a variety of factors, including infrastructure
changes, human or software errors, capacity constraints due to an overwhelming number of users accessing our websites simultaneously,
fraud, or security attacks. In some instances, we may not be able to identify the cause or causes of these performance problems within
an acceptable period of time. Interruptions in our products could impact our revenues or cause licensees, resellers, clients, and customers
to cease doing business with us. Our operations are dependent upon our ability to protect our technology infrastructure against damage
from business continuity events that could have a significant disruptive effect on our operations. We could potentially lose end user/customer
data or experience material adverse interruptions to our operations or delivery of products and services to our clients in a disaster
recovery scenario. Further, our business would be harmed if any of these types of events caused our licensees, resellers, or customers,
or our licensees' and resellers' customers or potential customers, to believe that our products are unreliable. We believe
that our brand recognition and reputation are critical to retaining existing licensees, resellers, clients and customers, and attracting
new licensees, resellers, clients, and customers. Furthermore, negative publicity, whether or not justified, relating to events or activities
attributed to us, our employees, our strategic partners, our affiliates, or others associated with any of these parties, may tarnish
our reputation and reduce the value of our brands. Damage to our reputation may reduce demand for our products and have an adverse effect
on our business, operating results, and financial condition. Moreover, any attempts to rebuild our reputation and restore the value of
our brands after such an event may be costly and time consuming, and such efforts may not ultimately be successful.

 If
our products and services do not work properly, our business, financial condition and financial results could be negatively affected,
and we could experience negative publicity, declining sales, and legal liability.

 We
produce complex products that incorporate leading-edge technology that must operate in a wide variety of technology environments. Software
may contain defects or "bugs" that can interfere with expected operations in these varying technological environments. There
can be no assurance that our testing programs will be adequate to detect all defects prior to the product being introduced, which might
decrease customer satisfaction with our products and services. The product reengineering cost to remedy a product defect could be material
to our operating results. Our inability to cure a product defect could result in the temporary or permanent withdrawal of a product or
service, negative publicity, damage to our reputation, failure to achieve market acceptance, lost revenue and increased expense, any
of which could have a material adverse effect on our business, financial condition and financial results.

 Outages
or problems with systems and infrastructure supplied by third-parties could negatively affect our business, financial condition and financial
results.

 Our
business relies on third-party suppliers of the telecommunications infrastructure. We, our clients and customers and our licensees and
resellers, and their customers, will use various communications service suppliers and the global internet to provide network access between
our data centers and our customers and end-users of our services. If those suppliers do not enable us to provide our clients and customers,
or our licensees' and resellers' customers with reliable, real-time access to our systems (to the extent required), we may
be unable to gain or retain clients, customers, licensees and resellers. These suppliers periodically experience outages or other operational
problems as a result of internal system failures or external third-party actions. Supplier outages or other problems could materially
adversely affect our business, financial results and financial condition.

 Current
global financial conditions have been characterized by increased volatility, which could negatively impact our business, prospects, liquidity
and financial condition.

 Current
global financial conditions and recent market events have been characterized by increased volatility, and the resulting tightening of
the credit and capital markets has reduced the amount of available liquidity and overall economic activity. We cannot guarantee that
debt or equity financing, or the ability to generate cash from operations, will be available or sufficient to meet or satisfy our initiatives,
objectives or requirements. Our inability to access sufficient amounts of capital on terms acceptable to us for our operations will negatively
impact our business, prospects, liquidity and financial condition.

 If
we experience delays and/or defaults in payments, we could be unable to recover all expenditures.

of the nature of our contracts, at times we will commit resources to projects prior to receiving payments from the counterparty in amounts
sufficient to cover our expenditures on projects as they are incurred. Delays in payments may require us to make a working capital investment.
Defaults by any of our clients, customers, licensees, and resellers could have a significant adverse effect on our revenues, profitability
and cash flow. Our clients, customers, licensees, and resellers may in the future default on their obligations to us or them due to bankruptcy,
lack of liquidity, operational failure or other reasons deriving from the current general economic environment. If a client, customer,
or licensee defaults on its obligations to us or our licensee, or a licensee or reseller defaults in its payments to us, it could have
a material adverse effect on our business, financial condition, results of operations or cash flows.

 Risks
Related to Our Industry

 We
face intense competition.

 We
expect to experience intense competition across all markets for our products and services. Our competitors that are focused on narrower
product lines may be more effective in devoting technical, marketing, and financial resources to compete with us. In addition, barriers
to entry in our businesses generally are low, and products and services, once developed, can be distributed broadly and quickly at a
relatively low cost. Open-source software vendors are devoting considerable efforts to developing software that mimics the features and
functionality of our current and anticipated products. These competitive pressures may result in decreased sales volumes, price reductions,
and/or increased operating costs, such as for marketing and sales incentives, resulting in lower revenue, gross margins, and operating
income.

 Delays
in product development schedules may adversely affect our revenues.

 The
development of cybersecurity products and services is a complex and time-consuming process. New products and services can require long
development and testing periods. Future revenues may include the sale of new products and services that may not yet be developed. Significant
delays in product development, including quality assurance testing or significant problems in creating new products and services, could
adversely affect our revenue recognition from new products and services. Revenue in certain reporting periods could be lower than anticipated
because product development problems could cause the loss of a competitive sale transaction, a delay in invoicing a client, customer,
licensee, or reseller or the renegotiation of terms to retain a sale transaction.

 If
we do not accurately predict, prepare for, and respond promptly to rapidly evolving technological and market developments and successfully
manage product introductions and transitions to meet changing needs in the cybersecurity technology market, our competitive position,
financial results, and prospects will be harmed.

 The
cybersecurity technologies market has grown quickly and is expected to continue to evolve rapidly. Moreover, many of our potential licensees
and resellers and their customers operate in markets characterized by rapidly changing technologies and business plans, which require
them to add numerous network access points and adapt increasingly complex enterprise networks, incorporating a variety of hardware, software
applications, operating systems, and networking protocols. If we fail to accurately predict potential changing needs and emerging technological
trends in the cybersecurity technology industry, including in the areas of mobility, virtualization, and cloud computing, our business
could be harmed. If we experience unanticipated delays in the availability of new services, products, platform features, and subscriptions,
or fail to meet expectations for such availability, our competitive position, financial results, and business prospects will be harmed.

 Additionally,
we must commit significant resources to developing new products and services before knowing whether our investments will result in services,
products, subscriptions, and features that the market will accept. The success of new platform features depends on several factors, including
appropriate new product definition, differentiation of new services, products, subscriptions, and platform features from those of our
competitors, and market acceptance of these products, services and platform features. Moreover, successful new product introduction and
transition depends on a number of factors including, our ability to manage the risks associated with new product production ramp-up issues,
the availability of application software for new products, and the risk that new products may have quality or other defects or deficiencies,
especially in the early stages of introduction. We cannot assure you that we will successfully identify opportunities for new products
and services, develop and bring new products and subscriptions to market in a timely manner, or achieve market acceptance of our products
and subscriptions, or that products, subscriptions, and technologies developed by others will not render our products, subscriptions,
or technologies obsolete or noncompetitive.

 Actual, possible, or perceived defects or vulnerabilities in our products or services, the failure of our products or services to detect or prevent
a security breach or the misuse of our products could harm our reputation and divert resources.

our products and services are complex, they may contain defects or errors that are not detected until after their commercial release
and deployment. Defects or vulnerabilities may impede or block network traffic, cause our products or services to be vulnerable to electronic
break-ins or cause them to fail to help secure networks. We are also susceptible to errors, defects, vulnerabilities, or attacks that
may arise at, or be inserted into our products, which are out of our control. Different users deploy and use cybersecurity products in
different ways, and certain deployments and usages may subject our products to adverse conditions that may negatively impact the effectiveness
and useful lifetime of our products. Our networks and products, including any cloud-based technology we utilize, could be targeted by
attacks specifically designed to disrupt our business and harm our reputation. Our products may not prevent all security threats. Because
the techniques used by computer hackers to access or sabotage networks change frequently and generally are not recognized until launched
against a target, we may be unable to anticipate these techniques. An actual, possible, or perceived security breach or infection of the
network of one of the users of our products, regardless of whether the breach is attributable to the failure of our products or services
to prevent the security breach, could adversely affect the market's perception of our security products and services and, in some
instances, subject us to potential liability that is not contractually limited. We may not be able to correct any security flaws or vulnerabilities
promptly, or at all. Our products may also be misused by potential end users or third-parties who obtain access to our products. For
example, our products could be used to censor private access to certain information on the internet. Such use of our products for censorship
could result in negative press coverage and negatively affect our reputation, even if we take reasonable measures to prevent any improper
shipment of our products or if our products are being used improperly or provided by an unauthorized third-party.

 Any
actual, possible, or perceived defects, errors or vulnerabilities in our products and services, or misuse of our products and services,
could result in:

 the
 expenditure of significant financial and development resources in efforts to analyze, correct,
 eliminate or work around errors or defects or to address and eliminate vulnerabilities;

 the
 loss of potential clients, customers, licensees, resellers, or distribution partners;

 delayed
 or lost revenue;

 delay
 or failure to attain market acceptance;

 negative
publicity and harm to our reputation; and

 litigation,
 regulatory inquiries, or investigations that may be costly and harm our reputation and, in
 some instances, subject us to potential liability that is not contractually limited.

 Risks
Related to Our Intellectual Property

 Our
proprietary rights may be difficult to enforce, which could enable others to copy or use aspects of our products without compensating
us.

 We
rely primarily on patent, trademark, copyright and trade secrets laws and confidentiality procedures and contractual provisions to protect
our technology. The claims eventually allowed on any patents issued in the future may not be sufficiently broad to protect our technology
or products. Any issued patents may be challenged, invalidated or circumvented, and any rights granted under these patents may not actually
provide adequate offensive scope, defensive protection or competitive advantages to us. Patent applications in the United States are
typically not published until at least 18 months after filing, or, in some cases, not at all, and publications of discoveries in industry-related
literature lag behind actual discoveries. We cannot be certain that we were the first to make the inventions claimed in our pending patent
applications, or that we were the first to file for patent protection. Additionally, the process of obtaining patent protection is expensive
and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely
manner. In addition, recent changes to the patent laws in the United States, including but not limited to "adversary proceedings,"
"first to file," and "post-grant review" provisions, may bring into question the validity of certain software
patents and may make it more difficult and costly to prosecute patent applications. As a result, we may not be able to obtain adequate
patent protection or effectively enforce our issued patents.

 Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information
that we regard as proprietary. We generally enter into confidentiality or non-solicitation agreements with our employees, consultants,
and vendors, as the case may be, and generally limit access to and distribution of our proprietary information. However, we cannot guarantee
that the steps taken by us will prevent misappropriation of our technology. Policing unauthorized use of our technology or products is
difficult. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as the laws of
the United States, and many foreign countries do not enforce these laws as diligently as government agencies and private parties in the
United States. From time to time, legal action by us may be necessary to enforce our patents and other intellectual property rights,
to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of
infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and could negatively affect
our business, operating results and financial condition. If we are unable to protect our proprietary rights (including aspects of our
software and products protected other than by patent rights), we may find ourselves at a competitive disadvantage to others who need
not incur the additional expense, time and effort required to create the innovative products that would compete with our products.

 If
our end users experience data losses, our brand, reputation and business could be harmed.

 A
breach of our end users' network security and systems, or other events that cause the loss or public disclosure of, or access by
third-parties to, our end users' files or data, could have serious negative consequences for our business, including reduced demand
for our services, an unwillingness of our clients and customers, and our licensees and resellers or their customers to use our products
or services, harm to our brand and reputation. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage
systems change frequently, often are not recognized until launched against a target, and may originate from less regulated or remote
areas around the world. As a result, our end users may be unable to proactively prevent these techniques, implement adequate preventative
or remedial measures, or enforce the laws and regulations that govern such activities. If our end users experience any data loss, data
disruption, or any data corruption or inaccuracies, whether caused by security breaches or otherwise, our brand, reputation and business
could be harmed.

 Our
insurance may not be available now or in the future on acceptable terms, or at all. In addition, our policy may not cover claims against
us for loss of data or other indirect or consequential damages. Defending a suit based on any data loss or system disruption, regardless
of its merit, could be costly and divert our management's attention.

 Claims
by others that we infringe their proprietary technology or other litigation matters could harm our business.

 Patent
and other intellectual property disputes are common in the cybersecurity and technology industries. Third-parties may in the future assert
claims of infringement of intellectual property rights against us. They may also assert such claims against our licensees, resellers,
end users or distribution partners whom we may have to indemnify against claims that our products infringe the intellectual property
rights of third-parties. As the number of products and competitors in our market increases and overlaps in service and functionality
occur, infringement claims may increase. Any claim of infringement by a third-party, even those without merit, could cause us to incur
substantial costs defending against the claim and could distract our management from our business. In addition, litigation may involve
patent holding companies, non-practicing entities, or other adverse patent owners who have no relevant product revenue and against whom
our own patents may therefore provide little or no deterrence to such plaintiffs we will counter-claim for infringement and invalidation
of their patent(s).

 Although
third-parties may offer a license to their technology, the terms of any offered license may not be acceptable, and the failure to obtain
a license or the costs associated with any license could cause our business, financial condition and results of operations to be materially
and adversely affected. In addition, some licenses may be non-exclusive and, therefore, our competitors may have access to the same technology
licensed to us. Alternatively, we may be required to develop non-infringing technology, which could require significant time, effort,
and expense, and may ultimately not be successful. Furthermore, a successful claimant could secure a judgment, or we may agree to a settlement
that prevents us from distributing certain products or performing certain services or that requires us to pay substantial damages (including
treble damages if we are found to have willfully infringed such claimant's patents), royalties or other fees. Any of these events
could seriously harm our business, financial condition and results of operations.

 We
may be subject to lawsuits claiming patent infringement. We may also be subject to other litigation in addition to patent infringement
claims, such as employment-related litigation and disputes, as well as general commercial litigation, and could become subject to other
forms of litigation and disputes, including stockholder litigation. If we are unsuccessful in defending any such claims, our operating
results and financial condition and results may be materially and adversely affected. For example, we may be required to pay substantial
damages and could be prevented from selling certain of our products. Litigation, with or without merit, could negatively impact our business,
reputation and sales in a material adverse fashion.

 We
rely on the availability of third-party licenses and our inability to maintain those licenses could harm our business.

 Many
of our products or products under development include software or other intellectual property licensed from third-parties. It may be
necessary in the future to renew licenses relating to various aspects of these products or to seek new licenses for existing or new products.
Licensors may claim we owe them additional license fees for past and future use of their software and other intellectual property or
that we cannot utilize such software or intellectual property in our products going forward. There can be no assurance that the necessary
licenses would be available on acceptable terms, if at all.

 The
inability to obtain certain licenses or other rights or to obtain such licenses or rights on favorable terms or for reasonable pricing,
or the need to engage in litigation regarding these matters, could result in delays in product releases until equivalent technology can
be identified, licensed or developed, if at all, and integrated into our products. Further such events may result in significant license
fees and have a material adverse effect on our business, operating results, and financial condition. Moreover, the inclusion in our products
or software or other intellectual property licensed from third-parties on a non-exclusive basis or the inclusion in our products of opensource
software may limit our ability to differentiate our products from those of our competitors. Not differentiating our products from those
of our competitors may adversely affect our results of operations, including reducing our revenue and net income.

 We
also rely on technologies licensed from third-parties in order to operate functions of our business. If any of these third-parties allege
that we have not properly paid for such licenses or that we have improperly used the technologies under such licenses, we may need to
pay additional fees or obtain new licenses, and such licenses may not be available on terms acceptable to us or at all or may be costly.
In any such case, or if we were required to redesign our internal operations to function with new technologies, our business, results
of operations and financial condition could be harmed.

 Our
use of open-source software in our products could negatively affect our ability to sell our products and subject us to possible litigation.

 Our
current products, and/or those under development, contain software modules licensed to or used by us from third-party authors under "open-source" licenses. Some open-source licenses contain requirements that we make available applicable source code for modifications
or derivative works we create based upon the type of open-source software we use. If we combine our proprietary software with open-source
software in a certain manner, we could be required to release the source code of our proprietary software to the public under certain
open-source licenses. This would allow our competitors to create similar products with lower development effort and time, and ultimately
could result in a loss of product sales for us.

 Although
we monitor our use of open-source software to avoid subjecting our products and subscriptions to conditions we do not intend, the terms
of many open-source licenses have not been interpreted by United States courts, and there is a risk that these licenses could be construed
in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our products. From time to time,
there have been claims against companies that distribute or use open-source software in their products, asserting that open-source software
infringes the claimants' intellectual property rights. We could be subject to suits by parties claiming infringement of intellectual
property rights in what we believe to be licensed open-source software. If we are held to have breached the terms of an open-source software
license, we could be required to seek licenses from third-parties to continue offering our products on terms that are not economically
feasible, to reengineer our products, to discontinue the sale of our products if reengineering could not be accomplished on a timely
basis, or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, operating
results, financial condition and ability to differentiate our products and services.

 In
addition to risks related to license requirements, usage of open-source software can lead to greater risks than use of third-party commercial
software, as open-source licensors generally do not provide warranties or assurance of title or controls on origin of the software. In
addition, many of the risks associated with usage of open-source software, such as the lack of warranties or assurances of title, cannot
be eliminated, and could, if not properly addressed, negatively affect our business. We have established processes to help alleviate
these risks, including a review process for screening requests from our development organizations for the use of open-source software,
but we cannot be sure that our processes for controlling our use of open-source software in our products will be effective.

 Cyberattacks
and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive
position.

 Security
of our information technology may be threatened.

 Threats
to IT security can take a variety of forms. Individual and groups of hackers and sophisticated organizations, including state-sponsored
organizations or nation-states, continuously undertake attacks that pose threats to our customers and our IT. These actors may use a
wide variety of methods, which may include developing and deploying malicious software or exploiting vulnerabilities or intentionally
designed processes in hardware, software, or other infrastructure in order to attack our products and services or gain access to our
networks and datacenters, using social engineering techniques to induce our employees, users, partners, or customers to disclose passwords
or other sensitive information or take other actions to gain access to our data or our users' or customers' data, or acting
in a coordinated manner to launch distributed denial of service or other coordinated attacks. Nation-state and state-sponsored actors
can deploy significant resources to plan and carry out attacks. Nation-state attacks against us, our customers, or our partners may intensify
during periods of intense diplomatic or armed conflict, such as the ongoing conflict in Ukraine. Inadequate account security or organizational
security practices may also result in unauthorized access to confidential data. For example, system administrators may fail to timely
remove employee account access when no longer appropriate. Employees or third-parties may intentionally compromise our or our users'
security or systems or reveal confidential information. Malicious actors may employ the IT supply chain to introduce malware through
software updates or compromised supplier accounts or hardware.

 Cyberthreats
are constantly evolving and becoming increasingly sophisticated and complex, increasing the difficulty of detecting and successfully
defending against them. We may have no current capability to detect certain vulnerabilities or new attack methods, which may allow them
to persist in the environment over long periods of time. Cyberthreats can have cascading impacts that unfold with increasing speed across
our internal networks and systems and those of our partners and customers. Breaches of our facilities, network, or data security could
disrupt the security of our systems and business applications, impair our ability to provide services to our customers and protect the
privacy of their data, result in product development delays, compromise confidential or technical business information harming our reputation
or competitive position, result in theft or misuse of our intellectual property or other assets, subject us to ransomware attacks, require
us to allocate more resources to improve technologies or remediate the impacts of attacks, or otherwise adversely affect our business.
We are also subject to supply chain cyberattacks where malware can be introduced to a software provider's customers, including
us, through software updates.

 In
addition, our internal IT environment continues to evolve. Often, we are early adopters of new devices and technologies. We embrace new
ways of sharing data and communicating internally and with partners and customers using methods such as social networking and other consumer-oriented
technologies. Increasing use of generative AI models in our internal systems may create new attack methods for adversaries. Our business
policies and internal security controls may not keep pace with these changes as new threats emerge, or emerging cybersecurity regulations
in jurisdictions worldwide.

 Security
of our products, services, devices, and customers' data may be breached.

 The
security of our products and services is important in our customers' decisions to purchase or use our products or services. Security
threats are a significant challenge to companies like us whose business is providing technology products and services to others. Threats
to our own IT infrastructure can also affect our customers. Customers using our cloud-based services rely on the security of our infrastructure,
including hardware and other elements provided by third-parties, to ensure the reliability of our services and the protection of their
data. Adversaries tend to focus their efforts on the most popular operating systems, programs, and services, including many of ours,
and we expect that to continue. In addition, adversaries can attack our customers' cloud environments, sometimes exploiting previously
unknown vulnerabilities, Vulnerabilities in these or any product could persist if the attackers exploited the vulnerabilities with the
installation of additional malware, to further compromise customers' systems. Customers using our products will continue to get
attacked as they move through their digital transformation projects. Inadequate account security practices may also result in unauthorized
access, and user activity may result in ransomware or other malicious software impacting a customer's use of our products or services.
We are increasingly incorporating open-source software into our products. There may be vulnerabilities in open-source software
that may make our products susceptible to cyberattacks.

 Our
customers operate complex IT systems with third-party hardware and software from multiple vendors that may include systems acquired over
many years. They expect our products and services to support all these systems and products, including those that no longer incorporate
the strongest current security advances or standards. As a result, we may not be able to discontinue support in our services for a product,
service, standard, or feature solely because a more secure alternative is available. Failure to utilize the most current security advances
and standards can increase our customers' vulnerability to attack. Further, customers of widely varied size and technical sophistication
use our technology, and consequently may still have limited capabilities and resources to help them adopt and implement state of the
art cybersecurity practices and technologies. In addition, we must account for this wide variation of technical sophistication when defining
default settings for our products and services, including security default settings, as these settings may limit or otherwise impact
other aspects of IT operations and some customers may have limited capability to review and reset these defaults.

 Cyberattacks
may adversely impact our customers even if our product services are not directly compromised. We are committed to notifying our customers
whose systems have been impacted as we become aware and have actionable information for customers to help protect themselves. We are
also committed to providing guidance and support on detection, tracking, and remediation. We may not be able to detect the existence
or extent of these attacks for all of our customers or have information on how to detect or track an attack, when we may have no or limited
visibility into our customers' computing environments.

 Development
and deployment of defensive measures are ongoing.

 To
defend against security threats to our internal IT systems, our cloud-based services, and our customers' systems, we must continuously
engineer more secure products and services, enhance security, threat detection, and reliability features, improve the deployment of software
updates to address security vulnerabilities in our own products as well as those provided by others, develop mitigation technologies
that help to secure customers from attacks even when software updates are not deployed, maintain the digital security infrastructure
that protects the integrity of our network, products, and services, and provide security tools such as firewalls, anti-virus software,
and advanced security and information about the need to deploy security measures and the impact of doing so. Customers in certain industries
such as financial services, health care, and government may have enhanced or specialized requirements to which we must engineer our products
and services.

 The
cost of measures to protect products and customer-facing services could reduce our operating margins. If we fail to do these things well,
actual or perceived security vulnerabilities in our products and services, data corruption issues, or reduced performance could harm
our reputation and lead customers to reduce or delay future purchases of products or subscriptions to services, or to use competing products
or services. Customers may also spend more on protecting their existing computer systems from attack, which could delay adoption of additional
products or services. Customers, and third-parties granted access to their systems, may fail to update their systems, continue to run
software or operating systems we no longer support, or may fail timely to install or enable security patches, or may otherwise fail to
adopt adequate security practices. Any of these could adversely affect our reputation and revenue. Actual or perceived vulnerabilities
may lead to claims against us. Our license agreements typically contain provisions that eliminate or limit our exposure to liability,
but there is no assurance these provisions will withstand legal challenges. At times, to achieve commercial objectives, we may enter
into agreements with larger liability exposure to customers.

 Our
products operate in conjunction with and are dependent on products and components across a broad ecosystem of third-parties. If there
is a security vulnerability in one of these components, and if there is a security exploit targeting it, we could face increased costs,
liability claims, reduced revenue, or harm to our reputation or competitive position.

 Disclosure
and misuse of personal data could result in liability and harm our reputation.

 As
we continue to grow the number, breadth, and scale of our cloud-based offerings, we store and process increasingly large amounts of personal
data of our customers and users. The continued occurrence of high-profile data breaches provides evidence of an external environment
increasingly hostile to information security. Despite our efforts to improve the security controls across our business groups and geographies,
it is possible our security controls over personal data, our training of employees and third-parties on data security, and other practices
we follow may not prevent the improper disclosure or misuse of customer or user data we or our vendors store and manage. In addition,
third-parties who have limited access to our customer or user data may use this data in unauthorized ways. Improper disclosure or misuse
could harm our reputation, lead to legal exposure to customers or users, or subject us to liability under laws that protect personal
data, resulting in increased costs or loss of revenue. Our software products and services also enable our customers and users to store
and process personal data on-premises or, increasingly, in a cloud-based environment we host. Government authorities can sometimes require
us to produce customer or user data in response to valid legal orders. In the U.S. and elsewhere, we advocate for transparency concerning
these requests and appropriate limitations on government authority to compel disclosure. Despite our efforts to protect customer and
user data, perceptions that the collection, use, and retention of personal information is not satisfactorily protected could inhibit
sales of our products or services and could limit adoption of our cloud-based solutions by consumers, businesses, and government entities.
Additional security measures we may take to address customer or user concerns, or constraints on our flexibility to determine where and
how to operate datacenters in response to customer or user expectations or governmental rules or actions, may cause higher operating
expenses or hinder growth of our products and services.

 Risks
Related to Our Common Stock

 Historically,
the market price for our common stock has been volatile, and you may not be able to sell our stock at a favorable price, or at all.

 You
should consider an investment in our common stock to be risky, and you should invest in our common stock and securities convertible into
our common stock only if you can withstand a complete loss and wide fluctuations in the market value of your investment. Some factors
that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this "Risk Factors"
section and elsewhere are:

 sale
 of our common stock by our stockholders, executives, and directors;

 volatility
 in price and level of trading volumes of our shares of common stock;

 our
 ability to obtain financings to conduct and complete research and development activities
 and other business activities;

 the
 timing and success of introductions of new products and services by us or our competitors
 or any other change in the competitive dynamics of our industry, including consolidation
 among competitors;

 Our
 ability to attract new customers, clients, licensees, and resellers;

 in the development status of our products and services;

 in our capital structure, future issuances of securities, and sales of large blocks of common
 stock by our stockholders;

 our
 cash position;

 announcements
 and events surrounding financing efforts, including debt and equity securities;

 our
 inability to enter into new markets or develop new products and services;

 reputational
 issues;

 announcements
 of acquisitions, partnerships, collaborations, joint ventures, new products and services,
 capital commitments, or other events by us or our competitors;

 in industry conditions or perceptions;

 our
 ability to attract analyst to initiate research coverage and once obtained, having such analysts
 issue research reports, recommendations and any changes in recommendations, price targets,
 and withdrawals of coverage;

 departures
 and additions of key personnel;

 disputes
 and litigations related to intellectual properties, proprietary rights, and contractual obligations;

in applicable laws, rules, regulations, or accounting practices and other dynamics; and

 other
 events or factors, many of which may be out of our control.

 In
addition, if the market for stock of companies in our industry or industries related to our industry, or the stock market in general,
experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business,
financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose
us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

 Substantial
sales of our common stock, or the perception that such sales might occur, could depress the market price of our common stock.

 We
cannot predict whether future issuances of our common stock, or resale of shares in the open market, will decrease the market price of
our common stock. The consequence of any such issuances or resale of our common stock on our market price may be increased as a result
of the fact that our common stock is thinly, or infrequently, traded. The exercise of any outstanding options, or the vesting of any
restricted stock, that we may grant to directors, executive officers and other employees in the future, or the issuance of common stock
in connection with acquisitions and other issuances of our common stock, may decrease the market price of our common stock.

 Holders
of our common stock have a risk of potential dilution if we issue additional shares of common stock in the future.

 The
exercise of outstanding options and warrants to purchase our common stock will dilute existing stockholders' ownership
percentage. On November 7, 2023, we offered to exchange certain outstanding warrants for shares of common stock and new warrants. We closed the November 7 Offer to Exchange on December 26, 2023, resulting
in the issuance of 7,270,958 shares of common stock and 17,415,437 new warrants. On September 13, 2021, our stockholders approved an employee stock option
plan authorized by our Board of Directors under which we may issue equity awards that may increase the number of outstanding shares of common stock. In the future, we may grant additional stock options, warrants, preferred stock or
convertible securities. The exercise or conversion of stock options, warrants, preferred stock, or convertible securities will
dilute the ownership percentage of our then existing stockholders. The dilutive effect of the exercise or conversion of these
securities may adversely affect our ability to obtain additional capital. The holders of these securities may be expected to
exercise or convert their securities when we are able to obtain additional equity capital on terms more favorable than these
securities.

 The
anti-dilutive rights of certain warrants could result in significant dilution to our existing stockholders and/or require us to issue
a substantially greater number of shares, which may adversely affect the market price of our common stock.

 The
warrants to purchase 55,549,615 shares of our common stock issued to investors in a private placement transaction that closed on April
16, 2021, contain anti-dilution rights such that if we issue, or are deemed to have issued, common stock or common stock equivalents at
a price less than the then exercise price of those warrants, the exercise price of those warrants will automatically be reduced to such
lower value, and the number of shares of common stock issuable upon exercise thereafter will be adjusted proportionately, so that the
aggregate exercise price payable upon exercise of such warrants is the same prior to and after such reduction in exercise price. As a
result, the effect of the anti-dilution right may cause significant dilution to our other stockholders.

 The warrants to purchase 8,332,439
shares of our common stock issuable upon exercise of warrants issued to the placement agent in the private placement include a weighted
average anti-dilution right in the event we issue any shares of common stock or equivalents with a value less than the then exercise
price. As a result, the effect of the anti-dilution right may cause significant dilution to our other stockholders. The triggering of
the anti-dilution rights in the warrants issued in the private placement may result in such securities being exercisable for a significant
number of additional shares of common stock and/or exercisable for a reduced exercise price. As a result, the number of shares issuable
could prove to be significantly greater than they are currently and could result in substantial dilution to our other stockholders. As
of September 30, 2023, no anti-dilution triggers have occurred.

 On
August 22, 2023, the Company commenced a Tender Offer for the 69,281,020 Warrants subject to our Offer to Exchange consisting
of (i) warrants to purchase an aggregate of 5,398,966 Shares issued to certain designees of Paulson Investment Company, LLC ("Paulson")
in 2018 with a ten-year term and with an exercise price of $1.00 ("2018 Paulson Warrants"), (ii) warrants to purchase an
aggregate of 8,332,439 Shares that were issued to certain designees of Paulson in 2021 with a ten-year term and that had an exercise
price of $0.18 ("2021 Paulson Warrants"); and (iii) warrants to purchase an aggregate of 55,549,615 Shares issued to certain
investors in 2021 with a five-year term and with an exercise price of $0.36 ("2021 Investor Warrants"). The 2018 Paulson Warrants and the 2021 Paulson Warrants are collectively
referred to as the "Paulson Warrants." Under the Offer to Exchange, the holders of the Paulson Warrants were entitled to receive
one (1) share of Common Stock for each four (4) Paulson Warrants exchanged ("Paulson Exchange Ratio"), and (ii) the holders
of the Investor Warrants were entitled to receive one (1) share of Common Stock for each six (6) Investor Warrants exchanged ("Investor
Exchange Ratio"). This Offer to Exchange was withdrawn by the Company on November 1, 2023 after deciding that the 24,008,341 warrants
that had been validly tendered into and not validly withdrawn, represented 42.3% of the warrant subject to the Offer to Exchange, were
insufficient to close the Offer to Exchange.

A new Tender Offer ("Offer to Exchange") was filed on November 7, 2023. The November 7, 2023 Tender Offer contained two
material differences from the Tender Offer filed on August 22, 2023:

 The
November 7, 2023, Offer to Exchange excluded the 2018 and 2021 Paulson Warrants (the Paulson Warrants"); and

 The
 November 7, 2023, Offer to Exchange offered the 2021 Investor Warrant holders one (1) additional Warrant for every 2.5 Warrants
 exchanged from the 2021 Investor Warrants. The New Warrant includes the following features: $0.18 exercise price; a five (5) year
 exercise term; a cashless exercise option; and an automatic conversion at $0.36. The New Warrant excludes the anti-dilution rights
 in the 2021 Investor Warrants.

 The
55,549,615 2021 Investor Warrants were subject to the November 7, 2023, Offer to Exchange. We closed the November 7 Offer to Exchange on December 26, 2023, resulting
in the issuance of 7,270,958 shares of common stock and 17,415,437 new warrants in exchange for 43,538,501 2021 Investor Warrants.

 Our
common shares are thinly traded, and in the future may continue to be thinly traded, and you may be unable to sell your shares at or
near ask prices or at all, if you need to sell your shares to raise money or otherwise desire to liquidate such shares.

 We
cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors,
including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and
others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons,
they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of
our shares until such time as we become more seasoned and viable. As a consequence, there may be periods of several days or more when
trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer that has a large and steady volume of trading
activity that will generally support continuous sales without an adverse effect on its share price. We cannot give you any assurance
that a broader or more active public trading market for our common stock will develop or be sustained, or that even current trading levels
will be sustained. You may be unable to sell your common stock at or above your purchase price, if at all, which may result in substantial
losses to you. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may
disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously
in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer
that could better absorb those sales without adverse impact on its share price. As a consequence of this enhanced risk, more risk-averse
investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined
to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.

 A
significant number of our shares have been registered for resale, and their sale or potential sale may depress the market price of our
common stock.

 As
of September 30, 2023, we had 213,854,781 shares of common stock outstanding and total warrants issued for 69,281,020 shares of common
stock. If all 69,281,020 warrants are exercised in full for cash, then they would represent 24.5% of the total shares outstanding. Sales
of a significant number of shares of our common stock in the public market, or the potential or expectation of such sales, could harm
the market price of our common stock. As large numbers of our common stock are sold, it would increase the supply of our common stock,
which would thereby cause a decrease in its price.

 Future
sales and issuances of our securities could result in additional dilution of the percentage ownership of our stockholders and could cause
our share price to fall.

 We
expect that we will need significant additional capital in the future to continue our planned operations, including research and development,
increased marketing, hiring new personnel, commercializing our products, and continuing activities as an operating public company. To
the extent that we raise additional capital by issuing equity securities, our existing stockholders may experience substantial dilution.
We may sell common stock, convertible securities or other equity securities in one or more transactions, at prices and in a manner that
we determine from time to time, in our discretion. If we sell common stock, convertible securities or other equity securities in more
than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our
existing stockholders, and new investors could gain rights superior to our existing stockholders.

 Our
common stock is subject to restrictions on sales by broker-dealers and penny stock rules, which may be detrimental to investors.

 Our
common stock is subject to Rules 15g-1 through 15g-9 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
which impose certain sales practice requirements on broker-dealers who sell our common stock to persons other than established customers
and "accredited investors" (as defined in Rule 501(a) of the Securities Act of 1933, as amended (the "Securities Act")).
For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and receive the
purchaser's written consent to the transaction prior to the sale. This rule adversely affects the ability of broker-dealers to
sell our common stock and holders of our common stock to sell their shares of our common stock.

 Additionally,
our common stock is subject to SEC regulations applicable to "penny stocks." Penny stocks include any non-Nasdaq equity security
that has a market price of less than $5.00 per share, subject to certain exceptions. The regulations require that, prior to any non-exempt
buy/sell transaction in a penny stock, a disclosure schedule proscribed by the SEC relating to the penny stock market must be delivered
by a broker-dealer to the purchaser of such penny stock. This disclosure must include the amount of commissions payable and the current
price quotations for our common stock. The regulations also require that monthly statements be sent to holders of a penny stock that
disclose recent price information for the penny stock and information regarding the limited market for penny stocks. These requirements
adversely affect the market liquidity of our common stock.

our common stock is quoted on the OTCQB instead of a national exchange, our investors may have difficulty selling their stock or may
experience negative volatility on the market price of our common stock.

 Our
common stock is quoted on the OTCQB Market, operated by the OTC Markets Group. The OTCQB is often highly illiquid, in part because it
does not have a national quotation system by which potential investors can follow the market price of shares, except through information
received and generated by a limited number of broker-dealers that make markets in particular stocks. There is a greater chance of volatility
for securities that trade on the OTCQB, as compared to a national exchange or quotation system. This volatility may be caused by a variety
of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and
ask quotations, lower trading volume, and market conditions. Investors in our common stock may experience high fluctuations in the market
price and volume of the trading market for our securities. These fluctuations, when they occur, have a negative effect on the market
price for our securities. Accordingly, our stockholders may not be able to realize a fair price for their shares when they determine
to sell them or may have to hold them for a substantial period of time until the liquidity of the market for our common stock improves.

 Risks
Related to Regulations and Our Compliance with Such Regulations

 We
previously identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting. If
not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial
reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations,
each of which could have a material adverse effect on our financial condition and the trading price of our common stock.

 Maintaining
effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce
reliable financial statements. Our disclosure controls and procedures and internal controls over financial reporting are currently ineffective
and have in the past been subject to material weaknesses. A material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company's annual
or interim financial statements will not be prevented or detected on a timely basis. A control deficiency exists when the design or operation
of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect
misstatements on a timely basis.

 We
cannot assure you that additional material weaknesses will not arise in the future. The development of new material weaknesses in our
internal control over financial reporting, could result in material misstatements in our financial statements and cause us to fail to
meet our reporting and financial obligations, which in turn could have a material adverse effect on our financial condition and the trading
price of our common stock, and/or result in litigation against us or our management.

 We
are subject to changing laws and regulations.

 U.S.
government agencies continue to implement extensive requirements on our industry. These regulations have both positive and negative impacts,
with much remaining uncertainty as to how various provisions will ultimately affect our customers, clients, licensees, resellers, end
users, and our business. As to prospective legislation and regulation concerning collection, transmission, storage and use of personal
data, we cannot determine what effect additional state or federal governmental legislation, regulations, or administrative orders would
have on our business in the future. New legislation or regulation may require the reformulation of our business to meet new standards,
require us to cease operations, impose stricter qualification and/or registration standards, impose additional record keeping, or require
expanded consumer protection measures (such as heightened notification procedures and data subject access rights).

 Our
failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us
to lose potential customers, clients, licensees, resellers and/or for licensees and resellers to lose potential customers in the public
sector or negatively impact our ability to contract with the public sector.

 Our
business is subject to regulation by various federal, state, regional, local and foreign governmental agencies, including agencies responsible
for monitoring and enforcing employment and labor laws, workplace safety, product safety, product labeling, environmental laws, consumer
protection laws, anti-bribery laws, data privacy laws, import and export controls, federal securities laws and tax laws and regulations.
In certain jurisdictions, these regulatory requirements may be more stringent than in the United States. Noncompliance with applicable
regulations or requirements could subject us to investigations, sanctions, enforcement actions, disgorgement of profits, fines, damages
and civil and criminal penalties or injunctions. If any governmental sanctions are imposed, or if we do not prevail in any possible civil
or criminal litigation, our business, operating results and financial condition could be adversely affected. In addition, responding
to any legal action will likely result in a significant diversion of our management's attention and resources and an increase in
professional fees and expenses. Enforcement actions and sanctions could harm our business, operating results and financial condition.

 Additionally,
we may be subject to other laws and regulations throughout the world governing data handling, protection and privacy. For example, in
June of 2018, California passed the California Consumer Privacy Act, or the "CCPA," which provides new data privacy rights
for consumers and new operational requirements for companies, became effective in 2021, and in March 2022, Virginia passed a consumer
data protection law, the "VCDPA," which includes similar rights as set forth in the CCPA. Fines for noncompliance may be
up to $7,500 per violation. Additionally, many other states have passed differing privacy and data protection laws in recent years. Significantly,
several bills are being worked on in the Senate and the House dealing with these issues, and while it is uncertain that any of them will
reach the floor of either chamber, if they do so they will likely impose substantial additional burdens on companies. The costs of compliance
with, and other burdens imposed by, the CCPA, the VCDPA and other state or foreign laws, may limit the use and adoption of our products
and services and would have an adverse impact on our business. These laws and regulations impose added costs on our business, and failure
to comply with these or other applicable regulations and requirements, including non-compliance in the past, could lead to claims for
damages from our channel partners, penalties, termination of contracts, loss of exclusive rights in our intellectual property and temporary
suspension or permanent debarment from government contracting. Any such damages, penalties, disruptions, or limitations in our ability
to do business with the public sector could have an adverse effect on our business and operating results.

 Governmental
restrictions on the sale of our products and services in non-U.S. markets could negatively affect our business, financial condition, and
financial results.

 Exports
of software products and services using cybersecurity technology such as ours are generally restricted by the U.S. government. In addition,
some countries impose restrictions on the use of cybersecurity products and services such as ours. The cost of compliance with U.S. and
other export laws, or our failure to obtain governmental approvals to offer our products and services in non-U.S. markets, could affect
our ability to sell our products and services and could impair our international expansion. We face a variety of other legal and compliance
risks. If we or our distributors fail to comply with applicable law and regulations, we may become subject to penalties, fines or restrictions
that could materially adversely affect our business, financial condition and financial results.

 Risks
Related to Our Contractual Agreements

 The
accounting treatment of the recently issued warrants could have a material adverse impact on our financial statements and reduce our
net income.

 The
warrants we issued in the 2021 private placement described in Part II, Item 8, Financial Statements, Note 8, contain various provisions
including, but not limited to, various price reset and anti-dilution provisions. We cannot predict the financial impact of the issuance
of the warrants on our financial statements, specifically our balance sheet. We also cannot predict the financial impact of the various
provisions included in the warrant agreements.

 The
purchase agreement related to our 2021 private placement includes customary covenants that we must comply with, or we may suffer potential
monetary and other penalties.

 The
securities purchase agreement we entered into in connection with the recent private placement contains certain customary covenants. If
we do not comply with these covenants, we will be in breach of our obligations under the securities purchase agreement, which may lead
to exercise by the investors of the remedies available to them under the securities purchase agreement, which may cause a material impact
upon our financial condition.

 General
Risk Factors

 Our
charter allows us to issue "blank check" preferred stock and establish its terms, conditions, rights, powers and preferences
without stockholder approval.

 Pursuant
to our certificate of incorporation, our Board of Directors has the authority to issue up to 10 million shares of " blank check "
preferred stock and to determine the price, rights, preferences, privileges, and restrictions, including voting rights, of those shares
without any additional vote or action by our stockholders. Because our Board of Directors is able to designate the terms, conditions,
rights, powers, and preferences of the preferred stock without the vote of a majority of our stockholders, our stockholders will have
no control over what designations and preferences our preferred stock will have. The issuance of shares of preferred stock, or the rights
associated therewith, could cause substantial dilution to our existing stockholders. Additionally, the dilutive effect of any preferred
stock that we may issue may be exacerbated given the fact that such preferred stock may have voting rights, liquidation and/or other
rights or preferences that could provide the preferred stockholders with substantial voting control over us and/or give those holders
the power to prevent or cause a change in our control. As a result, the issuance of shares of preferred stock may cause the value of
our common stock to decrease.

 We
will continue to incur increased costs as a result of being a reporting company and, given our limited capital resources, such additional
costs may have an adverse impact on our profitability.

 We
are a reporting company to the Securities and Exchange Commission, or SEC. The rules and regulations under the Exchange Act require
reporting companies to provide periodic reports with interactive data files, which require that we engage legal, accounting and
Retrieval) service providers. The engagement of such services can be costly, and we may continue to incur additional financial
losses, which may adversely affect our ability to continue as a going concern. In addition, the Sarbanes Oxley Act of 2002, as well
as a variety of new related and unrelated rules implemented by the SEC, have required changes in corporate governance practices and
generally increased the disclosure requirements of public companies. For example, as a result of being a reporting company, we are
required to file periodic and current reports and other information with the SEC, and we are adopting and revising policies
regarding disclosure controls and procedures, including internal controls over financial reporting.

 The
additional costs we continue to incur in connection with being a reporting company (expected to be approximately seven to eight hundred
thousand dollars per year) will continue to further stretch our limited capital resources. Due to our limited resources, we have to allocate
resources away from other productive uses in order to continue to comply with our obligations as an SEC reporting company. Further, there
is no guarantee that we will have sufficient resources to continue to meet our reporting and filing obligations with the SEC as they
come due.

 If
securities or industry analysts do not initiate research coverage on us and, if initiated, fail to publish research or reports, or publish
unfavorable research or reports, about our business, our stock price and trading volume may decline.

 The
trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us,
our business, our markets, and our competitors. We do not currently have any securities or industry analysts that have initiated research
coverage on our business. If and when any securities or industry analysts initiate research coverage on our business, we will not control
these analysts. If securities analysts do not cover our common stock, the lack of research or other coverage may adversely affect the
market price and decrease the trading volume of our common stock. Furthermore, if one or more of the analysts who do cover us downgrade
our stock, or if those analysts issue other unfavorable commentary about us or our business, our stock price would likely decline. If
one or more of these analysts cease coverage of us or fails to regularly publish reports on us, we could lose visibility in the market,
and interest in our stock could decrease, which in turn could cause our stock price or trading volume to decline and may also impair
our ability to expand our business and attract new clients and customers to purchase our cybersecurity products and services.

 Market
and economic conditions may negatively impact our business, financial condition, and share price.

 Concerns
over increasing inflation, increasing energy costs, geopolitical issues, unstable global credit markets and financial conditions, and
volatile oil prices have in the past led to periods of significant economic instability, diminished liquidity and credit availability,
declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower
global economic growth going forward, increased unemployment rates, and increased credit defaults. Our general business strategy may
be adversely affected by any such economic downturns, volatile business environments, and continued unstable or unpredictable economic
and market conditions. If these conditions continue to deteriorate, or do not improve once they occur, it may make any necessary debt
or equity financing needed by us more difficult to complete, more costly, if possible, at all, and more dilutive. Failure to secure any
necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial
performance, and share price, and could require us to delay or abandon development or commercialization plans.

 Failure
to adequately manage our planned aggressive growth strategy may harm our business or increase our risk of failure.

 For
the foreseeable future, we intend to pursue an aggressive growth strategy for the expansion of our operations through increased product
development and marketing. Our ability to rapidly expand our operations will depend upon many factors, including our ability to work
in a regulated environment, market value-added products effectively to mid-market and emerging companies and organizations, establish
and maintain strategic relationships with suppliers, acquire companies or establish joint ventures to add new features, services or products
to our offerings, and obtain adequate capital resources on acceptable terms. Any restrictions on our ability to expand may have a materially
adverse effect on our business, results of operations, and financial condition. Accordingly, we may be unable to achieve our targets
for sales growth, and our operations may not be successful or achieve anticipated operating results.

 Additionally,
our growth may place a significant strain on our managerial, administrative, operational, and financial resources. Our future success
will depend, in part, upon the ability of our management to manage growth effectively. This will require us to, among other things:

 implement
 additional management information systems;

 further
 develop our operating, administrative, legal, financial, and accounting systems and controls;

 hire
 additional personnel;

 develop
 additional levels of management within our company;

 locate
additional office space; and

 maintain
 close coordination among our engineering, operations, legal, finance, sales and marketing,
 and client service and support organizations.

 As
a result, we may lack the resources to deploy our services on a timely and cost-effective basis. Failure to accomplish any of these requirements
could impair our ability to deliver our products and services in a timely fashion or attract and retain new licensees and resellers.

 If
we do not successfully implement any acquisition strategies, our operating results and prospects could be harmed.

 We
face intense competition within our industry for acquisitions of businesses, technologies and assets. In the future, such competition
may become more intense. As such, even if we are able to identify an acquisition target that we would like to acquire, we may not be
able to complete the acquisition on commercially reasonable terms, or at all, because of such competition. Furthermore, if we enter into
negotiations that are not ultimately consummated, those negotiations will result in diversion of management time and significant out-of-pocket
costs. Even if we are able to complete such acquisitions, we may additionally expend significant amounts of cash or incur substantial
debt to finance them, which indebtedness could result in restrictions on our business and use of available cash. In addition, we may
finance or otherwise complete acquisitions by issuing equity or convertible debt securities, which could result in dilution of our existing
stockholders. If we fail to evaluate and execute acquisitions successfully, we may not be able to realize their benefits. If we are unable
to successfully address any of these risks, our business, financial condition, and operating results could be harmed.

 If
we make any acquisitions, they may disrupt or have a negative impact on our business.

 If
we make acquisitions in the future, funding permitting, which may not be available on favorable terms, if at all, we could have difficulty
integrating the acquired company's assets, personnel and operations with our own. We do not anticipate that any further acquisitions
or mergers we may enter into in the future would result in a change of control of the Company. In addition, the key personnel of the
acquired business may not be willing to work for us. We cannot predict the effect any expansion may have on our core business. Regardless
of whether we are successful in closing an acquisition, the negotiations could disrupt our ongoing business, distract our management and
employees and increase our expenses. In addition to the risks described above, acquisitions are accompanied by a number of inherent risks,
including, without limitation, the following:

 the
 difficulty of integrating acquired products, services or operations;

 the
 potential disruption of the ongoing businesses and distraction of our management and the
 management of any acquired companies;

 difficulties
 in maintaining uniform standards, controls, procedures and policies;

 the
 potential impairment of relationships with employees, licensees, resellers, clients, and
 customers as a result of any integration of new management personnel;

 the
 potential inability or failure to achieve additional sales and enhance our client, customer,
 licensee, and reseller base through cross-marketing of the products to new and existing clients,
 customers, licensees and resellers;

 the
 effect of any government regulations which we are unfamiliar with that relate to the business
 acquired;

 potential
 unknown liabilities associated with acquired businesses or product lines, or the need to
 spend significant amounts to retool, reposition or modify the marketing and sales of acquired
 products or operations, or the defense of any litigation, whether or not successful, resulting
 from actions of the acquired company prior to our acquisition; and

 potential
 expenses under the labor, environmental and other laws of various jurisdictions.

 Our
business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems
encountered in connection with an acquisition, many of which cannot be presently identified. These risks and problems could disrupt our
ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations, including
reducing our revenue and net income.

 We
may apply working capital and future funding to uses that ultimately do not improve our operating results or increase the market price
of our securities.

 In
general, we have complete discretion over the use of our working capital and any new investment capital we may obtain in the future that
has no dedicated use of proceeds. Because of the number and variety of factors that could determine our use of funds, our ultimate expenditure
of funds (and their uses) may vary substantially from our current intended operating plan for such funds.

 We
intend to use existing working capital and future funding to support the development of our products and services, the expansion of our
marketing, or the support of operations to educate the end users of the software we sell. We will also use capital for market and network
expansion, acquisitions, and general working capital purposes. However, we do not have more specific plans for the use and expenditure
of our capital. Our management has broad discretion to use any or all of our available capital reserves. Our capital could be applied
in ways that do not improve our operating results or otherwise increase the market value of a stockholder's shares.

 Our
websites may encounter technical problems and service interruptions.

 Our
websites may in the future experience slower response times or interruptions as a result of increased traffic or other reasons. These
delays and interruptions resulting from failure to maintain Internet service connections to our site could frustrate visitors and reduce
our future web site traffic, which could have a material adverse effect on our business including a reduction in our sales and net income.

 The
sale of shares of our common stock by our directors and officers may adversely affect the market price for our common stock.

 Sales
of significant amounts of shares of common stock by our officers and directors, or the prospect of such sales, could adversely affect
the market price of our common stock. Our management's stock ownership may discourage a potential acquirer from making a tender
offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing
a premium over our stock's market price.

 Stockholders
may be diluted significantly through our efforts to obtain financing and satisfy obligations through the issuance of additional shares
of our common stock.

 Whenever
possible, our Board of Directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that
the non-cash consideration will consist of restricted shares of our common stock, or when shares are issued to our officers, directors
and applicable consultants as compensation. Our Board of Directors has authority, without action or vote of the stockholders, to issue
all or part of the authorized but unissued shares of our common stock. In addition, we may attempt to raise capital by selling shares
of our common stock, possibly at a discount to market. These actions will result in dilution of the ownership interests of existing stockholders,
which may further dilute our common stock book value, and that dilution may be material. Such issuances may also serve to enhance existing
management's ability to maintain control of us because the shares may be issued to parties or entities committed to supporting
existing management.

 If
we do not effectively manage our growth, our business resources and systems may become strained, and we may be unable to increase revenue
growth.

 We
plan to grow aggressively and, if successful, our future growth may provide challenges to our organization, requiring us to expand our
personnel and our operations. Future growth may strain our infrastructure, operations and other managerial and operating resources. If
our business resources become strained, our earnings may be adversely affected, and we may be unable to increase revenue growth. Further,
we may undertake contractual commitments that exceed our labor resources, which could also adversely affect our earnings and our ability
to increase revenue growth.

 Our
growth depends in part on the success of our strategic relationships with third-parties.

 In
order to grow our business, we anticipate that we will need to continue to depend on our relationships with third-parties, including
our technology providers. Identifying such third-parties, and negotiating and documenting relationships with them, requires significant
time and resources. Our competitors may be effective in providing incentives to third-parties to favor their products or services over
utilization of our products and services. In addition, acquisitions of our business partners by our competitors could result in a decrease
in the number of our current and potential clients, customers, licensees, resellers, and end users. If we are unsuccessful in establishing
or maintaining our relationships with third-parties, our ability to compete in the marketplace or to grow our revenue could be impaired
and our results of operations may suffer. Even if we are successful, we cannot assure you that these relationships will result in increased
use of our products or increased revenue.

 Claims,
litigation, government investigations, and other proceedings may adversely affect our business and results of operations.

 As
a company offering a wide range of products and services, we are regularly subject to actual and threatened claims, litigation, reviews,
investigations, and other proceedings, including proceedings relating to goods and services offered by us and by third-parties, and other
matters. Any of these types of proceedings, including currently pending proceedings as discussed herein, may have an adverse effect on
us because of legal costs, disruption of our operations, diversion of management resources, negative publicity, and other factors. The
outcomes of these matters are inherently unpredictable and subject to significant uncertainties. Determining legal reserves and possible
losses from such matters involves judgment and may not reflect the full range of uncertainties and unpredictable outcomes. Until the
final resolution of such matters, we may be exposed to losses in excess of the amount recorded, and such amounts could be material. Should
any of our estimates and assumptions change or prove to have been incorrect, it could have a material effect on our business, consolidated
financial position, results of operations, or cash flows. In addition, it is possible that a resolution of one or more such proceedings,
including as a result of a settlement, could require us to make substantial future payments, prevent us from offering certain products
or services, require us to change our business practices in a manner materially adverse to our business, requiring development of non-infringing
or otherwise altered products or technologies, damaging our reputation, or otherwise having a material adverse effect on our operations.

 We
have never paid or declared any dividends on our common stock.

 We
have never paid or declared any dividends on our common stock or preferred stock; however, prior to December 29, 2021, we operated as
a limited liability company ("LLC") and made distributions of profits to our members. There were equity distributions to
LLC members of $461,000 in 2022 and zero ($0) in 2023.

 We
do not anticipate paying, in the near future, dividends or distributions on our common stock. Any future dividends on our common stock
will be declared at the discretion of our Board of Directors and will depend on, among other things, our earnings, our financial requirements
for future operations and growth, and other facts as we may then deem appropriate. Since we do not anticipate paying cash dividends on
our common stock, return on your investment, if any, will depend solely on an increase, if any, in the market value of our common stock.

 ITEM
1B. UNRESOLVED STAFF COMMENTS

 This disclosure is not required as the Company is not an accelerated filer, large accelerated filer, nor a well-known
seasoned issuer.

 ITEM
1C. CYBERSECURITY

 Risk
management and strategy

 SideChannel,
Inc. recognizes the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information
systems and protect the confidentiality, integrity, and availability of our data.

 Managing
Material Risks & Integrated Overall Risk Management

 SideChannel,
Inc. has strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide
culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making
processes at every level. Our risk management team works closely with our IT department to continuously evaluate and address cybersecurity
risks in alignment with our business objectives and operational needs.

 Engage
Third-parties on Risk Management

 Recognizing
the complexity and evolving nature of cybersecurity threats, SideChannel, Inc. engages with a range of external experts, including cybersecurity
assessors, consultants, and auditors in evaluating and testing our risk management systems. These partnerships enable us to leverage
specialized knowledge and insights, ensuring our cybersecurity strategies and processes remain at the forefront of industry best practices.
Our collaboration with these third-parties includes regular audits, threat assessments, and consultation on security enhancements.

 Oversee
Third-party Risk

we are aware of the risks associated with third-party service providers, SideChannel, Inc. implements stringent processes to oversee
and manage these risks. We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing
monitoring to ensure compliance with our cybersecurity standards. The monitoring includes quarterly assessments by our Chief Information
Security Officer ("CISO") and on an ongoing basis by our security engineers. This approach is designed to mitigate risks
related to data breaches or other security incidents originating from third-parties.

 Risks
from Cybersecurity Threats

 We
have not encountered cybersecurity challenges that have materially impaired our operations or financial standing.

 Governance

 The
Board of Directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats. The Board has established
robust oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity threats because we recognize
the significance of these threats to our operational integrity and stakeholder confidence,

 Board
of Directors Oversight

 The
Audit Committee is central to the Board's oversight of cybersecurity risks and bears the primary responsibility for this domain.
The Audit Committee is composed of board members with diverse expertise including, risk management, technology, and finance, equipping
them to oversee cybersecurity risks effectively.

 Management's
Role Managing Risk

 The
CISO and the Chief Executive Officer ("CEO") play a pivotal role in informing the Audit Committee on cybersecurity risks.
They provide comprehensive briefings to the Audit Committee on a regular basis, with a minimum frequency of once per year. These briefings
encompass a broad range of topics, including:

 Current
 cybersecurity landscape and emerging threats;

 Status
 of ongoing cybersecurity initiatives and strategies;

 Incident
reports and learnings from any cybersecurity events; and

 Compliance
 with regulatory requirements and industry standards.

 In
addition to our scheduled meetings, the Audit Committee, CISO and CEO maintain an ongoing dialogue regarding emerging or potential cybersecurity
risks. Together, they receive updates on any significant developments in the cybersecurity domain, ensuring the Board's oversight
is proactive and responsive. The Audit Committee actively participates in strategic decisions related to cybersecurity, offering guidance
and approval for major initiatives. This involvement ensures that cybersecurity considerations are integrated into the broader strategic
objectives of SideChannel, Inc. The Audit Committee conducts an annual review of the company's cybersecurity posture and the effectiveness
of its risk management strategies. This review helps in identifying areas for improvement and ensuring the alignment of cybersecurity
efforts with the overall risk management framework.

 Risk
Management Personnel

 Primary
responsibility for assessing, monitoring and managing our cybersecurity risks rests with the CISO, Mr. Bill Roberts. With over 25 years
of experience in the field of cybersecurity, Mr. Roberts brings a wealth of expertise to his role. His background includes extensive
experience as an enterprise CISO and is well-recognized within the industry. His in-depth knowledge and experience are instrumental in
developing and executing our cybersecurity strategies. Our CISO oversees our governance programs, tests our compliance with standards,
remediates known risks, and leads our employee training program.

 Monitor
Cybersecurity Incidents

 The
CISO is continually informed about the latest developments in cybersecurity, including potential threats and innovative risk management
techniques. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity
incidents. The CISO implements and oversees processes for the regular monitoring of our information systems. This includes the deployment
of advanced security measures and regular system audits to identify potential vulnerabilities. In the event of a cybersecurity incident,
the CISO is equipped with a well-defined incident response plan. This plan includes immediate actions to mitigate the impact and long-term
strategies for remediation and prevention of future incidents.

 Reporting
to Board of Directors

 The
CISO, in his capacity, regularly informs the Chief Financial Officer (CFO) and Chief Executive Officer (CEO) of all aspects related to
cybersecurity risks and incidents. This ensures that the highest levels of management are kept abreast of the cybersecurity posture and
potential risks facing SideChannel, Inc. Furthermore, significant cybersecurity matters, and strategic risk management decisions are
escalated to the Board of Directors, ensuring that they have comprehensive oversight and can provide guidance on critical cybersecurity
issues.

 ITEM
2. PROPERTIES

 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 for three (3) twelve (12) month periods through December 2025. The annual renewal
date is January 1 st. Our current lease payment
is $948 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 $967 per month during calendar year 2024.

 ITEM
3. LEGAL PROCEEDINGS

 As of the filing date of this Annual Report on Form 10-K, there are no material pending legal proceedings. From time
to time, we may be involved in ordinary routine litigation incidental to our business, to which we are a party or which our property is
the subject. In addition, none of our officers, directors, affiliates or 5% stockholders (or any associates thereof) is a party adverse
to us, or has a material interest adverse to us, in any material proceeding.

 Currently
Pending Litigation

 In
April 2021, Eric Marquez, the former Secretary/Treasurer and Chief Financial Officer of the Company, and certain other plaintiffs, filed
a lawsuit against Cipherloc Corporation, our predecessor, and Michael De La Garza, Cipherloc's former Chief Executive Officer and President, in the
20 th Judicial District for Hays County, Texas (Case No. 20-0818). The lawsuit alleges causes of action for fraud against Mr.
De La Garza (for misrepresentations allegedly made by Mr. De La Garza); breach of contract, for alleged breaches of Mr. Marquez's
alleged oral employment agreement, which Mr. Marquez claims required Cipherloc pay him cash and shares of stock; unjust enrichment; quantum
meruit; and rescission of certain stock purchases made by certain of the plaintiffs, as well as declaratory relief and fraud. Damages
sought exceed $1,000,000. The Company believes Cipherloc made all required payments and delivered the stock to the plaintiffs. The case
is currently being defended by the Company. The Company believes it has meritorious defenses to the allegations, and the Company intends
to continue to vigorously defend against the litigation.

 ITEM
4. MINE SAFETY DISCLOSURES

 Not
applicable.

 PART
II

 ITEM
5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 Our
common stock is traded on the over-the-counter market and is quoted on the OTCQB Venture Market run by OTC Markets Group under the symbol
"SDCH."

 The
OTC Markets Group is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides
information on current "bids" and "asks," as well as volume information. The trading of securities on the OTC
Markets is often sporadic and investors may have difficulty buying and selling our shares or obtaining market quotations for them, which
may have a negative effect on the market price of our common stock.

 The
following table sets forth, for the periods indicated the high and low closing bid quotations for our common stock. These quotations
represent inter-dealer quotations, without adjustment for retail markup, markdown, or commission and may not represent actual transactions.

 Low

 High

 Fiscal Year
 2022

 First Quarter (October 1, 2021 to December 31, 2021)

 $
 0.07

 $
 0.19

 Second Quarter (January 1, 2022 to March 31, 2022)

 $
 0.08

 $
 0.14

 Third Quarter (April 1, 2022 to June 30, 2022)

 $
 0.07

 $
 0.10

 Fourth Quarter (July 1, 2022 to September 30, 2022)

 $
 0.08

 $
 0.16

 Fiscal Year
 2023

 First Quarter (October 1, 2022 to December 31, 2022)

 $
 0.09

 $
 0.14

 Second Quarter (January 1, 2023 to March 31, 2023)

 $
 0.04

 $
 0.12

 Third Quarter (April 1, 2023 to June 30, 2023)

 $
 0.04

 $
 0.11

 Fourth Quarter (July 1, 2023 to September 30, 2023)

 $
 0.05

 $
 0.10

 Fiscal Year
 2024

 First Quarter (October 1, 2023 to December 31, 2023) (1)

 $
 0.03

 $
 0.07

 (1) Through December 18, 2023

 As
of September 30, 2023, there were 213,854,781 shares of our common stock issued and outstanding, and there were approximately 3,100 record
holders of our common stock.

 Also
as of September 30, 2023, there were zero (0) shares of Series A Preferred Stock issued and outstanding.

 Dividends

 We
have never declared any dividends on our common stock; however, prior to December 29, 2021, we operated as a limited liability company
("LLC") and made distributions of profits to LLC members. There were equity distributions to LLC members of $461,000
when we operated as an LLC during fiscal year 2022.

 Our
Board of Directors does not intend to declare dividends in the foreseeable future. The declaration, payment, and amount of any
future dividends will be made at the discretion our Board of Directors, and will depend upon, among other things, the results of our
operations, cash flows and financial condition, operating and capital requirements, and such other factors as our Board of Directors
consider relevant at that time. We currently expect to use all available funds to finance the future development and expansion of
our business, and we do not anticipate paying dividends on our common stock in the foreseeable future.

 Transfer
Agent

 The
Transfer Agent and Registrar for our common stock is Computershare Limited located in Canton, Massachusetts.

 Recent
Sales of Unregistered Securities

 Except
as previously disclosed in Form 8-K dated May 9, 2023, respecting the issuance of 62,016,618 shares of common stock in the Business Combination,
and as previously disclosed in the Form 8-K dated June 15, 2023, respecting the issuance of 100 shares of common stock upon the conversion
of the outstanding 100 shares of Series A Preferred Stock, there have been no sales of unregistered securities during the year ended
September 30, 2023.

 Please
refer to the information contained in Item 1. Business under the caption "Business Combination Between Cipherloc Corporation and
SideChannel, Inc. (now known as SCS, Inc.)" of this Form 10-K with respect to shares of our equity securities issued during the
twelve-month period ended September 30, 2022.

 ITEM
6. RESERVED

 ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 This
Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying
consolidated financial statements and the notes thereto. In addition, please refer to the discussion of our business and markets contained
in Part 1, Item 1 of this Annual Report on Form 10-K.

 Overview

 Our

 Our
mission is to make cybersecurity simple and accessible for mid-market and emerging companies, a market that we believe is currently underserved.
We believe that our cybersecurity offerings will identify and develop cybersecurity, privacy, and risk management solutions for our customers.
We anticipate that our target customers will continue to need cost-effective security solutions. We intend to provide more tech-enabled
services to address the needs of our customers, including virtual Chief Information Security Officer (vCISO), zero trust, third-party
risk management, due diligence, privacy, threat intelligence, and managed end-point security solutions.

 Our
growth strategy focuses on these three initiatives:

 1.
Securing new vCISO clients

 2.
Adding new Cybersecurity Software and Services offerings

 3.
Increasing adoption of Cybersecurity Software, including Enclave and Services offerings at vCISO clients

 We internally report our revenue using two categories.
The first, "vCISO Services," captures the revenue the Chief Information Security Officer services that we provide to our clients
on a "virtual" or outsourced basis, thus the acronym "vCISO." Services delivered by SideChannel through our team
of vCISOs include assessing the cybersecurity risk profile, implementing policies and programs to mitigate risks, and managing the day-to-day
tasks to ensure compliance with the adopted cybersecurity framework. Most of our clients use our vCISO services.

 vCISO engagements typically include a fixed monthly
subscription fee with durations longer than twelve (12) months. Hourly rates for vCISO time and material projects range from $350 to $425.
Each of our vCISOs is generally embedded into the C-suite executive teams of two (2) to four (4) of our clients.

 Our second revenue category encompasses an array of Cybersecurity Software and Services that our clients deem necessary
to protect their digital assets. These augment our vCISO offering and include a full range of other cybersecurity products and services
delivered through a team of security engineers along with a network of third-party service providers and value-added resellers
("VARs"). Commercial relationships with third-party service providers and VARs provide SideChannel with additional internal
capabilities to mitigate cybersecurity risks. We earn licensing revenue from software contracts and commissions from third-party service
provider partnerships which are included in this revenue category.

 During
September 2022 we announced a proprietary product called Enclave which simplifies important cybersecurity tasks called
"asset inventory" and "microsegmentation." Enclave seamlessly combines access control, microsegmentation,
encryption and other secure networking concepts to create a comprehensive solution. It allows Information Technology to easily
segment the enterprise network, place the right staff in those segments and direct traffic.

 The following revenue metrics are for the twelve months ended September 30, 2023, versus the same period in 2022. These summary metrics are accompanied by a table that reflects the revenue by category in fiscal years 2023 and 2022.

 Total revenue grew by $1.8 million or 37.2%.

 vCISO Services category revenue grew by $1.3 million or 42.4%.

 Cybersecurity Software and Services category revenue grew by $0.5 million or 27.9%.

 2023

 2022

 % of Total

 % of Total

 $ Change

 % Change

 vCISO Services

 $
 4,383

 66.7
 %

 $
 3,077

 64.3
 %

 $
 1,306

 42.4
 %

 Cybersecurity Software
 & Services

 2,189

 33.3
 %

 1,712

 35.7
 %

 27.9
 %

 Total

 $
 6,572

 $
 4,789

 $
 1,783

 37.2
 %

 The
growth in vCISO Services reflects both growth in clients served and an increase in revenue per client.
Cybersecurity Software & Services revenue grew from 2022 to 2023 primarily because of an increase in the use of these services
by existing Cybersecurity Software and Services clients and secondarily because of an expansion of the services and software
offered.

 We
also monitor new and retained revenue. The revenue earned from clients during our first twelve months of working with them is classified
as new; while the revenue earned with clients after our first twelve months of working with them is classified as retained. The following
table provides details on our new and retained revenue for fiscal years 2023 and 2022:

 2023

 2022

 % of Total

 % of Total

 $ Change

 % Change

 vCISO

 New

 $
 2,512

 57.3
 %

 $
 1,923

 62.5
 %

 $

 30.6
 %

 Retained

 1,871

 42.7
 %

 1,154

 37.5
 %

 62.1
 %

 Total

 $
 4,383

 $
 3,077

 $
 1,306

 42.4
 %

 Cybersecurity Software &
 Services

 New

 $

 30.1
 %

 $

 47.5
 %

 $
 (154
)

 (18.9
)%

 Retained

 1,530

 69.9
 %

 52.5
 %

 70.2
 %

 Total

 $
 2,189

 $
 1,712

 $

 27.9
 %

 Total Revenue

 New

 $
 3,171

 48.3
 %

 $
 2,736

 57.1
 %

 $

 15.9
 %

 Retained

 3,401

 51.7
 %

 2,053

 42.9
 %

 1,348

 65.7
 %

 Total

 $
 6,572

 $
 4,789

 $
 1,783

 37.2
 %

 Further,
we consider revenue retention a key performance indicator. Revenue retention is calculated by dividing retained revenue by the prior
year total revenue. The following table shows the revenue retention for fiscal years 2023 and 2022 by revenue category.

 2023

 2022

 vCISO Services

 60.8
 %

 74.2
 %

 Cybersecurity Software & Services

 89.4
 %

 80.7
 %

 Total

 71.0
 %

 76.5
 %

 Results
of Operations

 Fiscal
Year Ended September 30, 2023, Compared to Fiscal Year Ended September 30, 2022

 Revenue.
 Our revenue was $6.6 million for the year ended September 30, 2023, compared to $4.8 million in the prior year, an increase of $1.8
million or 37.2%. We believe this increase reflects the factors previously discussed in the Overview section above.

 Gross
Margins. Gross margins increased to 50.7% in fiscal year 2023 from 48.5% in fiscal year 2022, which we attribute to better utilization
of our service delivery team.

 General
and Administrative Expenses. Our general and administrative expenses were $3.6 million for the year ended September 30, 2023, compared
to $1.5 million for the prior year, an increase of $2.1 or 142.5%. The increase in general and administrative expenses primarily resulted
from increased staff and related costs including equity-based compensation; higher professional fees and insurance related to the listed
nature of the Company. To a lesser extent there were increases in amortization and travel-related costs.

 Sales
and Marketing Expenses. Our sales and marketing expenses were $1.3 million for the year ended September 30, 2023, compared to $367,000
for the prior year, an increase of $970,000 or 264.3% resulting from our increase in sales and marketing staff and the related costs
combined with a higher spend on third-party marketing services.

 Research
and Development Expenses. Our research and development expenses were $669,000 for the year ended September 30, 2023, compared to
$178,000 for the prior year, an increase of $491,000 or 275.8%. These costs arose as a result of the Business Combination and are driven
by personnel expenses and costs incurred from independent contractors related to the development of Enclave.

 Goodwill Impairment.
The goodwill impairment was zero ($0) for the year ended September 30, 2023. We recorded a $5.7 million goodwill impairment charge during
the year ended September 30, 2022. The goodwill was related to the acquisition that occurred on July 1, 2022.

 Intangible
Asset Impairment. The intangible asset impairment was $4.9 million for the year ended September 30, 2023, and zero ($0) for the
prior year. We recorded a finite-lived intangible asset of $4.9 million as a result of acquiring Enclave in the Business
Combination. Our impairment testing indicated the full value of this finite-lived intangible asset should be impaired as of
September 30, 2023. Incurring impairment neither indicates a decrease in our emphasis on Enclave as a key initiative nor does it
suggest a lack of market interest in the product.

 Acquisition
Costs. Acquisition costs were $214,000 for the year ended September 30, 2023, which are attributed to an increase in the Second
Tranche shares due to the Closing Working Capital Adjustment from the Business Combination. The costs totaling $6.2 million in the prior year were driven by the Business Combination.

 Other Income.
Other Income was $29,000 and $13,000 for fiscal years 2023 and 2022 respectively, which reflect interest income from the cash on deposit
at our bank.

 Income
Tax Expense (Benefit). We recorded an income tax benefit of $379,000 for the year ended September 30, 2023, compared to an
income tax expense of $195,000 for the year ended September 30, 2022. The fiscal year 2022 expense was an estimate of federal and
state income tax liability for SCS which was accounted for as a liability on our September 30, 2022, balance sheet. The actual amount of federal and state income taxes due by SCS of $27,000. The net of these two amounts
is a $168,000 tax benefit that we recognized in the current fiscal year. In addition, a deferred state tax liability was recognized for
a book versus tax basis difference upon the Business Combination. During the year ended September 30, 2023, this deferred tax liability
was reduced to zero resulting in a deferred income tax benefit of $211,000.

 Liquidity
and Capital Resources

 Cash Flows

 During fiscal year 2023, we incurred a net loss of
$7.0 million and used $1.9 million of cash in operations. Our primary source of liquidity and capital resources has been the $3.6 million
in cash received from Cipherloc in the Business Combination in the prior fiscal year. We had an accumulated deficit of $11.9 million as
of September 30, 2022. Three (3) non-recurring expenses totaling $16.8 million are included in our accumulated deficit. The non-recurring
expenses are $6.2 million for the acquisition costs, including $6.1 million related to the contingent consideration from the Business Combination, $5.7 million impairment of goodwill recorded as a result of the Business Combination, and $4.9 million impairment of intangible assets.

 Our accumulated deficit at September 30, 2023 was
$18.9 million.

 The following table summarizes, for the periods indicated,
selected items in our Statements of Cash Flows ($000's):

 Year Ended September 30,

 2023

 2022

 Net cash (used in) provided by:

 Operating activities

 $
 (1,945
)

 $
 (396
)

 Investing activities

 $
 (32
)

 $
 3,589

 Financing activities

 $
 —

 $
 (511
)

 Operating Activities. Net cash used
in operations for the year ended September 30, 2023, was $1.9 million as compared to $396,000 for the year ended September 30, 2022.
During fiscal year 2023, we recorded intangible asset impairment of $4.9 million and non-cash charges of $805,000 for amortization and
stock compensation expense. Our net accounts receivable grew by $222,000 compared to one year ago due to increased sales activity
and we experienced a $547,000 decrease in accounts payable and accrued liabilities primarily due to adjustments made to tax liabilities. These uses of cash were offset by a $150,000 increase in our deferred revenue balance.

 Investing Activities. We used $32,000
on the purchase of fixed assets during the twelve months ended September 30, 2023.

 Financing Activities. During the year
ended September 30, 2023, there was no cash provided by or used in financing activities.

 As of September 30, 2023, we had $1.1 million
in cash and our working capital was $1.5 million. We believe that our existing cash balances are sufficient to fund our operations
through at least December 31, 2024.

 Total
operating expenses during fiscal year 2023 were $5.6 million excluding $214,000 of acquisition costs and intangible asset
impairment of $4.9 million. Since May, 2023 through the date of this report, we have eliminated approximately $1.2
million of annual operating expenses which have enabled us to lower our breakeven revenue point and allowed us to expect a lower amount
of total operating expenses for fiscal year 2024 than we incurred during 2023. The operating expense reductions are being achieved
by staff reductions in all areas of the business and the elimination of non-essential third-party supplier relationships.

 We
anticipate total operating expenses to range between $3.7 million and $4.3 million in the next fiscal year with cash flow from operations
ranging between negative $300,000 and positive $100,000, which, if negative, will be funded with our existing cash balances. W e intend
to manage our business such that our current cash reserves will allow us to reach positive cash flow from our operations, but we cannot
assure if and when positive cash flow will be achieved. We don't currently have any credit facilities available to us; however,
we have had discussions with several lenders about establishing a line of credit secured by our accounts receivable.

 Critical
Accounting Estimates

 The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to long-lived
assets, goodwill, identifiable intangibles and deferred income tax valuation allowances. We base our estimates on historical experience
and on appropriate and customary assumptions that we believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Some
of these accounting estimates and assumptions are particularly sensitive because of their significance to our consolidated financial
statements and because of the possibility that future events affecting them may differ markedly from what had been assumed when the financial
statements were prepared.

 Goodwill,
Intangible and Long-Lived Assets

 We
account for goodwill and intangible assets in accordance with Accounting Standards Codification ("ASC") Topic 350 (Intangibles-
Goodwill and Other). Finite-lived intangible assets are amortized over their estimated useful economic life and are carried at cost less
accumulated amortization. Goodwill is assessed for impairment at least annually in the fourth quarter, on a reporting unit basis, or
more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. As a part of the goodwill
impairment assessment, we have the option to perform a qualitative assessment to determine whether it is more-likely-than-not that the
fair value of a reporting unit is less than its carrying amount. If, as a result of our qualitative assessment, we determine this is
the case, we are required to perform a goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill
impairment loss to be recognized. The test is discussed below. If, as a result of our qualitative assessment, we determine that it is
more-likely-than-not that the fair value of the reporting unit is greater than its carrying amounts, the goodwill impairment test is
not required.

 The
quantitative goodwill impairment test, used to identify both the existence of impairment and the amount of impairment loss, compares
the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying
amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value,
an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting
unit. The goodwill impairment assessment is based upon the income approach, which estimates the fair value of our reporting units based
upon a discounted cash flow approach. This fair value is then reconciled to our market capitalization at year end with an appropriate
control premium. The determination of the fair value of our reporting units requires management to make significant estimates and assumptions
including the selection of control premiums, discount rates, terminal growth rates, forecasts of revenue and expense growth rates, income
tax rates, changes in working capital, depreciation, amortization and capital expenditures. Changes in assumptions concerning future
financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting unit or the
amount of the goodwill impairment charge. At September 30, 2023 and 2022, goodwill was $1.4 million.
In 2022, we evaluated the initial goodwill recorded from the Business Combination of $7.1 million and determined that the carrying value
exceeded the fair value and recorded $5.7 million impairment of goodwill during the year ended September 30, 2022. The fair value of the goodwill at September 30, 2023, as determined by our impairment analysis, is in excess of the
carrying value; thus, we have incurred no impairment of goodwill in fiscal year 2023.

 We
did not record indefinite-lived intangible assets in the fiscal years ended September 30, 2023, and 2022.

 Long-lived
assets, which consist of finite-lived intangible assets and property and equipment, are assessed for impairment whenever events or
changes in 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 estimated undiscounted cash
flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value. The
cash flow estimates used to determine the impairment, if any, contain management's best estimates using appropriate
assumptions and projections at that time. We have a finite-lived intangible asset of $4.9 million and we have less than $30,000 in
property and equipment. At September 30, 2023 and 2022, finite-lived intangibles and long-lived assets were zero ($0) and $4.9
million, respectively. The intangible impairment was $4.9 million for the year ended September 30, 2023 and zero ($0) for the prior
year. We recorded a finite-lived intangible asset of $4.9 million as a result of acquiring Enclave through the Business Combination.
The difficulty of projecting the amount and timing of future revenues caused us to conclude a full impairment of the asset was
appropriate. Incurring
impairment neither indicates a decrease in our emphasis on Enclave as a key initiative nor does it suggest a lack of market interest
in the product.

 Off-Balance
Sheet Arrangements

 We
did not have during the periods presented, nor do we currently have, any off-balance sheet arrangements as defined under applicable SEC
rules.

 ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 The
Company is not required to provide the information required by this Item as it is a "smaller reporting company," as defined
in Rule 229.10(f)(1) of Regulation S-K promulgated by the SEC.

 ITEM
8. FINANCIAL STATEMENTS

 SIDECHANNEL,
INC.

 TABLE
 OF CONTENTS

 Page

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID Number 587)

 FINANCIAL
 STATEMENTS:

 Balance Sheets as of September 30, 2023 and 2022

 Statements of Operations for the years ended September 30, 2023 and 2022

 Statements of Stockholders' Equity for the years ended September 30, 2023 and 2022

 Statements of Cash Flows for the years ended September 30, 2023 and 2022

 NOTES TO FINANCIAL STATEMENTS

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 To
the Board of Directors and

 Stockholders
of SideChannel, Inc.

 Opinion
on the Financial Statements

 We
have audited the accompanying consolidated balance sheets of SideChannel, Inc., (the Company) as of September 30, 2023 and 2022, and
the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash flows for each of the
years in the two-year period ended September 30, 2023, and the related notes (collectively referred to as the consolidated financial
statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
the Company as of September 30, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year
period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

 Basis
for Opinion

 These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company's consolidated financial statements based on our audits. 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 the Company 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 audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
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 Company's 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.

 Critical
Audit Matters

 The
critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 We
determined that there are no critical audit matters.

 /s/
 RBSM LLP

 We have
 served as the Company's auditor since 2021.

 Las
 Vegas, Nevada

 December
 27, 2023

 RBSM
 LLP (PCAOB ID Number 587)

 SIDECHANNEL, INC.

 CONSOLIDATED
BALANCE SHEETS

 (In
thousands, except share and per share data)

 30, 2023

 30, 2022

 ASSETS

 Current assets

 Cash

 $
 1,053

 $
 3,030

 Accounts receivable, net

 Deferred costs

 Prepaid
 expenses and other current assets

 Total current assets

 2,448

 4,142

 Fixed assets, net

 —

 Goodwill

 1,356

 1,356

 Intangible assets

 —

 4,940

 costs

 Total
 assets

 $
 3,984

 $
 10,768

 LIABILITIES & STOCKHOLDERS'
 EQUITY

 Current liabilities

 Accounts payable and accrued
 liabilities

 $

 $

 Deferred revenue

 Promissory note payable

 Income taxes payable

 Total
 current liabilities

 1,161

 tax liability

 —

 Total
 liabilities

 1,372

 Commitments and contingencies

 -

 -

 Series A convertible preferred stock, $ 0.001 par value, 10,000,000 shares
 authorized; 0 and 100 shares issued and outstanding as of September 30, 2023 and 2022, respectively

 —

 —

 Common stock, $ 0.001 par value, 681,000,000 shares authorized; 213,854,781
 and 148,724,056 shares issued and outstanding as of September 30, 2023 and 2022, respectively

 Additional paid-in capital

 21,755

 21,180

 Accumulated deficit

 ( 18,939
)

 ( 11,933
)

 Total
 stockholders' equity

 3,030

 9,396

 Total
 liabilities and stockholders' equity

 $
 3,984

 $
 10,768

 SIDECHANNEL, INC.

 CONSOLIDATED
STATEMENTS OF OPERATIONS

 (In
thousands, except share and per share data)

 (Unaudited)

 2023

 2022

 Twelve Months
 Ended

 30,

 2023

 2022

 Revenues

 $
 6,572

 $
 4,789

 Cost of revenues

 3,240

 2,468

 Gross
 profit

 3,332

 2,321

 Operating expenses

 General and administrative

 3,586

 $
 1,482

 Selling and marketing

 1,337

 Research and development

 Goodwill impairment

 —

 5,702

 Intangible asset impairment

 4,940

 —

 Acquisition
 costs

 6,186

 Total
 operating expenses

 10,746

 13,915

 Operating loss

 ( 7,414
)

 ( 11,594
)

 Other income, net

 Net loss before income tax expense

 $
 ( 7,385
)

 $
 ( 11,581
)

 Income tax expense (benefit)

 ( 379
)

 Net loss after income
 tax expense (benefit)

 $
 ( 7,006
)

 $
 ( 11,776
)

 Net loss per
 common share – basic and diluted

 $
 ( 0.04
)

 $
 ( 0.14
)

 Weighted average common
 shares outstanding – basic and diluted

 175,274,762

 81,997,953

 SIDECHANNEL,
INC.

 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY

 (In
thousands, except preferred shares)

 (Unaudited)

 Par Value

 Par Value

 Additional
 Paid-in-Capital

 Accumulated
 Earnings / (Deficit)

 Stockholders'
 Equity

 For
 the Twelve Months Ended September 30, 2023 and 2022

 Par Value

 Par Value

 Additional
 Paid-in-Capital

 Accumulated
 Earnings / (Deficit)

 Stockholders'
 Equity

 at September 30, 2021

 $
 —

 59,900

 $

 $

 $

 $

 Equity
 redemptions

 —

 —

 —

 —

 —

 ( 100
)

 ( 100
)

 Equity
 distributions

 —

 —

 —

 —

 —

 ( 461
)

 ( 461
)

 issued for services

 —

 —

 —

 issued for vesting of RSUs

 —

 —

 —

 —

 Acquisition
 costs – contingent consideration

 —

 —

 —

 —

 6,061

 —

 6,061

 Cipherloc
 Business Combination

 —

 —

 88,445

 15,024

 15,172

 Net
 loss

 —

 —

 —

 —

 —

 ( 11,776
)

 ( 11,776
)

 at September 30, 2022

 $
 —

 148,724

 $

 $
 21,180

 $
 ( 11,933
)

 $
 9,396

 $
 —

 148,724

 $

 $
 21,180

 $
 ( 11,933
)

 $
 9,396

 issued for services

 —

 —

 —

 —

 Stock-based
 compensation expense

 —

 —

 2,343

 —

 Conversion
 of Preferred to Common

 ( 100
)

 —

 —

 —

 —

 —

 —

 Combination – Contingent Consideration

 62,017

 Net
 loss

 —

 —

 —

 —

 —

 ( 7,006
)

 ( 7,006
)

 at September 30, 2023

 —

 $
 —

 213,855

 $

 $
 21,755

 $
 ( 18,939
)

 $
 3,030

 —

 $
 —

 213,855

 $

 $
 21,755

 $
 ( 18,939
)

 $
 3,030

 SIDECHANNEL, INC.

 CONSOLIDATED
STATEMENTS OF CASH FLOWS

 (In
thousands, unaudited)

 2023

 2022

 Year
 Ended September 30,

 2023

 2022

 CASH FLOWS FROM OPERATING ACTIVITIES:

 Net loss

 $
 ( 7,006
)

 $
 ( 11,776
)

 Adjustments to reconcile net loss to
 net cash flows used in operating activities:

 Depreciation and Amortization

 Stock-based compensation

 Provision for doubtful accounts

 Business combination related costs

 6,061

 Goodwill impairment

 —

 5,702

 Intangible asset impairment

 4,940

 —

 Changes in operating assets and liabilities:

 Accounts receivable

 ( 225
)

 ( 461
)

 Unbilled revenue

 —

 —

 Prepaid expenses and other assets

 ( 61
)

 Accounts payable and accrued liabilities

 ( 547
)

 ( 18
)

 Deferred revenue

 ( 65
)

 Net cash used in operating activities

 ( 1,945
)

 ( 396
)

 CASH FLOWS FROM INVESTING ACTIVITIES:

 Cash and cash equivalents acquired in connection
 with the Business Combination

 3,589

 Purchase of fixed assets

 ( 32
)

 —

 Net cash provided by (used in) investing
 activities

 ( 32
)

 3,589

 CASH FLOWS FROM FINANCING ACTIVITIES:

 Equity redemption

 —

 ( 50
)

 Equity distribution

 —

 ( 461
)

 Net cash used in financing
 activities

 —

 ( 511
)

 (DECREASE) INCREASE IN CASH

 ( 1,977
)

 2,682

 CASH, BEGINNING OF PERIOD

 3,030

 CASH, END OF PERIOD

 $
 1,053

 $
 3,030

 NON-CASH INVESTING AND FINANCING ACTIVITIES:

 Shares issued for services

 $

 $

 Equity redemption with notes payable

 $
 —

 $

 Stock-based compensation included in accounts
 payable and accrued liabilities

 $

 $
 —

 Assets acquired and liabilities assumed

 $
 —

 $
 11,583

 SIDECHANNEL,
INC.

 NOTES
TO FINANCIAL STATEMENTS

 FOR
THE YEARS ENDED SEPTEMBER 30, 2023, AND 2022

 NOTE
1 – DESCRIPTION OF BUSINESS

 Our
mission is to make cybersecurity simple and accessible for mid-market and emerging companies, a market that we believe is currently
underserved. We believe that our cybersecurity product and service offerings provide cybersecurity and privacy risk management solutions for our customers. We anticipate that our target customers will continue to need cost-effective security
solutions. We intend to provide more tech-enabled services to address the needs of our customers, including virtual Chief
Information Security Officer (vCISO), zero trust, third-party risk management, due diligence, privacy, threat intelligence, and
managed end-point security solutions.

 Our
growth strategy focuses on these three initiatives:

 1.
Securing new vCISO clients

 2.
Adding new Cybersecurity Software and Services offerings

 3.
Increasing adoption of Cybersecurity Software, including Enclave and Services offerings, at vCISO clients

 vCISO
engagements typically contain a monthly subscription and rates for vCISO time and material projects ranging from $ 350
to $ 425
per hour. Each of our vCISOs is generally embedded into the C-suite executive teams of two (2) to four (4) of our clients. We
augment our vCISO offering with a full range of other cybersecurity products and services through a team of security engineer employees
combined with a network of third-party service providers and value-added resellers.

 On July 1, 2022 (the "Closing Date") the
Company, then known as Cipherloc Corporation, a Delaware corporation, completed its acquisition ("Business Combination") of
all the outstanding equity securities of SideChannel, Inc., a Massachusetts corporation pursuant to an Equity Securities Purchase Agreement
dated May 16, 2022 (the "Purchase Agreement"). On September 9, 2022, SideChannel, Inc. the acquired Massachusetts corporation
and a subsidiary of the registrant, changed its name to SCS, Inc. (the "Subsidiary" or "SCS") and Cipherloc Corporation,
the Delaware parent company of the subsidiary has changed its name to SideChannel, Inc.

 The transaction was accounted for as
a reverse acquisition ("reverse merger") in accordance with GAAP. Under this method of accounting, SCS was deemed to be the accounting acquirer for financial
reporting purposes. This determination was primarily based on the facts that, immediately following the Business Combination: (1)
the majority of the Board of Directors of the combined company will be composed of directors designated by the Sellers under the
terms of the Purchase Agreement; and (2) existing members of SCS management constituted the management of the combined company.
Because SCS has been determined to be the accounting acquirer in the Business Combination, but not the legal acquirer, the
transaction is deemed a reverse acquisition under the guidance of the Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 805, Business Combinations. As a result, the historical financial
statements of SideChannel are the historical financial statements of the combined company.

 Following the closing of the Business
Combination, SCS, Inc. became a wholly owned subsidiary of the Company. As used herein, the words "the Company" refers
to, for periods following the Business Combination, SideChannel, Inc., together with its subsidiaries.

 Our
headquarters are located at 146 Main Street, Suite 405, Worcester, MA, 01608. Our website is www.sidechannel.com.

 NOTE
2 – 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.

 Reclassifications

 Certain
prior year amounts have been reclassified to be comparable with the current year's presentation.

Combinations

 Acquired
businesses are accounted for using the purchase method of accounting, which requires that the purchase price be allocated to the net
assets acquired at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired
is recorded as goodwill. Fair values of intangible assets are estimated by valuation models prepared by our management and third-party
advisors. The assets purchased and liabilities assumed have been reflected in our consolidated balance sheets, and the operating results
are included in the consolidated statements of operations and consolidated statements of cash flows from the date of acquisition. Any
change in the fair value of acquisition-related contingent consideration subsequent to the acquisition date, including changes from events
after the acquisition date, will be recognized in the consolidated statement of operations in the period of the estimated fair value
change. Acquisition-related transaction costs, including legal and accounting fees and other external costs directly related to the acquisition,
are recognized separately from the acquisition and expensed as incurred in general and administrative expense in the consolidated statements
of operations.

 Cash
and Cash Equivalents

 We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. We
did not have any cash equivalents as of September 30, 2023, and 2022. As of September 30, 2023, and 2022, our cash included cash on hand
and cash in the bank. We maintain our cash in accounts held by highly reputable financial institutions which, 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, 2023, approximately $ 0.8 million of our cash balance was uninsured. We have not experienced any losses on cash.

 Accounts
Receivable

 Trade
accounts receivable are recorded at the invoiced amount and do not bear interest. We grant credit to customers and generally require
no collateral. We do not have any significant off-balance sheet credit exposure related to our customers. We had one (1) customer with
an accounts receivable balance that exceeded 10% of accounts receivable at September 30, 2023. Cash flows from accounts receivable are
recorded in operating cash flows.

 Fair
Value of Financial Instruments

 Our
financial instruments consisted primarily of cash, accounts receivable, accounts payable and accrued expenses, and embedded
conversion features in stock warrants. The carrying amounts of such financial instruments approximate their respective estimated
fair value due to the short-term maturities and approximate market interest rates of these instruments.

 Fair
value is focused on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Within the measurement of fair value, the use of market-based information is prioritized
over entity specific information and a three-level hierarchy for fair value measurements is used based on the nature of inputs used in
the valuation of an asset or liability as of the measurement date.

 The
three-level hierarchy for fair value measurements is defined as follows:

 Level
 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;

 Level
 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs
 that are observable for the asset or liability other than quoted prices, either directly or indirectly, including inputs in markets
 that are not considered to be active;

 Level
 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 The
fair values of the warrants issued by the Company as part of the acquisition price were determined using level 2 measurements and are
discussed in further detail in Note 3.

 Goodwill,
Intangible, and Long-Lived Assets

 We
account for goodwill and intangible assets in accordance with Accounting Standards Codification ("ASC") Topic 350 (Intangibles
– Goodwill and Other). Finite-lived intangible assets are amortized over their estimated useful economic life and are carried at
cost less accumulated amortization. Goodwill is assessed for impairment annually during the fourth quarter on a reporting
unit basis, or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. Goodwill is
considered to be impaired if the fair value of a reporting unit is less than its carrying amount. As a part of the goodwill impairment
assessment, we have the option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value
of a reporting unit is less than its carrying amount. If, as a result of our qualitative assessment, we determine that it is more-likely-than-not
that the fair value of the reporting unit is greater than its carrying amount, a quantitative goodwill impairment test is not required.
However, if, as a result of our qualitative assessment, we determine it is more-likely-than-not that the fair value of a reporting unit
is less than its carrying amount, or, if we choose not to perform a qualitative assessment, we are required to perform a quantitative
goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized.

 The
quantitative goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the
fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying
amount of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to
the total amount of goodwill allocated to that reporting unit. The goodwill impairment assessment is based upon the income approach,
which estimates the fair value of our reporting units based upon a discounted cash flow approach. This fair value is then reconciled
to our market capitalization at year end with an appropriate control premium. The determination of the fair value of our reporting units
requires management to make significant estimates and assumptions including the selection of control premiums, discount rates, terminal
growth rates, forecasts of revenue and expense growth rates, income tax rates, changes in working capital, depreciation, amortization,
and capital expenditures. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant
impact on either the fair value of the reporting unit or the amount of the goodwill impairment charge. The goodwill was evaluated at
the acquisition date of July 1, 2022, and the fair value of the goodwill was determined to be less than the carrying amount of the goodwill
by $ 5.702 thousands. As a result, an impairment charge was recorded on the acquisition date of $ 5.7 million was recorded, and the net carrying
amount of goodwill was $ 1.4 million as of September 30, 2022.

 The
goodwill was evaluated at the balance sheet date of September 30, 2023. For fiscal year 2023, we recorded no impairment of goodwill.
For fiscal year 2022, we incurred $ 5.7
million of goodwill impairment.

 None
of the goodwill associated with the Business Combination is deductible for income tax purposes.

 We
did not record indefinite-lived intangible assets in the fiscal years ended September 30, 2023, and 2022.

 Long-lived
assets, which consist of finite-lived intangible assets and property and equipment, are assessed for impairment whenever events or changes
in 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 estimated undiscounted cash flows to the recorded
value of the asset. If impairment is indicated, the asset is written down to its estimated fair value. The cash flow estimates used to
determine the impairment, if any, contain management's best estimates using appropriate assumptions and projections at that time.

 We
recorded $ 4.9 million
of finite-lived intangible assets in the form of Acquired In Process Research & Development ("AIPR&D") as a
result of acquiring Enclave in the Business Combination as of September 30, 2022. Under ASC 805, AIPR&D are initially recognized
at fair value and classified as finite-lived assets until the successful completion or abandonment of the associated research
and development efforts. During the development period, these assets will not be amortized as charges to earnings; instead, these
assets will be tested for impairment on an annual basis or more frequently if impairment indicators are identified. An impairment
loss is measured based on the excess of the carrying amount over the asset's fair value. Our impairment testing as of
September 30, 2023, indicated the full value of this finite-lived intangible asset should be impaired. The difficulty of projecting
the amount and timing of future revenues caused us to conclude a full impairment of the asset was appropriate. Incurring
impairment neither indicates a decrease in our emphasis on Enclave as a key initiative nor does it suggest a lack of market interest
in the product. The Company did not record any finite-lived intangible asset impairment for the year ended September 30, 2022.

Recognition

 We
recognize revenue in accordance with the guidance in ASC Topic 606 (Revenue from Contracts with Customers). We recognize revenue for
the sale of products or services when our performance obligations under the terms of a contract with a customer are satisfied and control
of the product or service has been transferred to the customer. Generally, this occurs when we deliver a product or perform a service.
In certain cases, recognition of revenue is deferred until the product or service is received by the customer or at some other point
in the future when we have determined that we have satisfied our performance obligations under the contract. Our contracts with customers
may include a combination of products and services, which are generally capable of being distinct and accounted for as separate performance
obligations.

recognition guidance is a five-step revenue recognition model that requires reporting entities 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.

is recorded in an amount that reflects the consideration we expect to receive in exchange for those products or services. We do not have
any material variable consideration arrangements, or any material payment terms with our customers other than standard payment terms
which generally range from net 15 to net 90 days.

 Nature
of Products and Services

 We
identify, develop, and deploy cybersecurity and privacy risk management solutions for our clients and customers in North America. We
categorize our products and services as either vCISO Services or Cybersecurity Software and Services. In addition to Enclave, our
proprietary software product, we also sell third-party software and services through a network of strategic partnerships.

 Types
of Contracts with Customers

 Our
contracts with customers are generally structured as annual subscription agreements or project specific statements of work. Our annual
subscription agreements include a minimum number of service hours purchased during the subscription time period. Payment terms and any other customer-specific acceptance criteria are also specified
in the contracts and statements of work.

 Contract
Balances

 We
record accounts receivable at the time of invoicing. Accounts receivable, net of the allowance for doubtful accounts, is included in
current assets on our balance sheet. To the extent that we do not recognize revenue at the same time as we invoice, we record a liability
for deferred revenue. In certain instances, we also receive customer deposits in advance of invoicing and recording of accounts receivable.
Deferred revenue and customer deposits are included in current liabilities on our consolidated balance sheets.

 We maintain an allowance for doubtful accounts ("allowance") equal to 3 % of the ending quarterly accounts
receivable balance. The allowance is rounded up to the nearest $10,000.

 Costs
to Obtain a Contract with a Customer

 The
only costs we incur associated with obtaining contracts with customers are marketing costs incurred with third-party service providers
and sales commissions that we pay to our employees, contractors, or third-party sales representatives. Commissions are calculated based
on set percentages of the revenue value of each product or service sold. Commissions are considered earned by our internal sales personnel
at the time we recognize revenue for a particular transaction. Commissions are considered earned by third-party sales representatives
at the time that revenue is recognized for a particular transaction. We record commission expense in our consolidated statements of operations
at the time the commission is earned. Commissions earned but not yet paid are included in current liabilities on our balance sheets.

 See
Note 4 for further information about our revenue from contracts with customers.

 Leases

 We
account for leases in accordance with ASC Topic 842 (Leases). We determine if an arrangement is a lease at inception. A lease contract
is within scope if the contract has an identified asset (property, plant, or equipment) and grants the lessee the right to control the
use of the asset during the lease term. The identified asset may be either explicitly or implicitly specified in the contract. In addition,
the supplier must not have any practical ability to substitute a different asset and would not economically benefit from doing so for
the lease contract to be in scope. The lessee's right to control the use of the asset during the term of the lease must include
the ability to obtain substantially all of the economic benefits from the use of the asset as well as decision-making authority over
how the asset will be used. Leases are classified as either operating leases or finance leases based on the guidance in ASC Topic 842.
Operating leases are included in operating lease ROU assets and operating lease liabilities in our consolidated balance sheets. Finance
leases are included in property and equipment and financing lease liabilities. We do not currently have any financing leases.

 Operating
lease payments are included in cash outflows from operating activities on our consolidated statements of cash flows.

 We
have made an accounting policy election not to apply the recognition requirements of ASC Topic 842 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.

 Following
the guidance of ASC Topic 842, we are not required to record ROU assets and operating lease liabilities.

 See
Note 7 for further disclosures regarding our leases.

 Research
and Development and Software Development Costs

 We expense all research and development costs, including patent and software development costs. Our research and development costs
incurred for the year ended September 30, 2023, were $ 669,000.

 Stock-Based
Compensation

 We
account for stock-based compensation in accordance with ASC Topic 718 (Compensation – Stock Compensation) which requires that employee
share-based equity awards be accounted for under the fair value method and requires the use of an option pricing model for estimating
fair value of awards, which is then amortized to expense over the service periods. See further disclosures related to our stock-based
compensation plans in Note 8.

 Legal

 We are subject to legal proceedings, claims, and liabilities which arise in the ordinary course of business, and we accrue 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.

 Income
Taxes

 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.

 We use the two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained
on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the
largest amount, which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating
and estimating our tax positions and tax benefits, which may require periodic adjustments. We did no t record
any liabilities for uncertain tax positions during the years ended September 30, 2023, or 2022.

 Net Loss Per Common Share

 Basic
loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding
during the reporting period. The weighted average number of shares is calculated by taking the number of shares outstanding and weighting
them by the amount of time that they were outstanding. Diluted earnings per share reflects the potential dilution that could occur if
stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of
common stock that could share in our earnings.

 Diluted
loss per share is the same as basic loss per share during periods where net losses are incurred since the inclusion of the potential
common stock equivalents would be anti-dilutive as a result of the net loss. During the year ended September 30, 2023, 69,281,020 warrants
and 8,636,973 restricted stock units were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive.
At September 30, 2022, anti-dilutive warrants and restricted stock units outstanding were 87,628,920 and 4,309,262, respectively.

 Segment

 We manage our operations as a single operating segment for the purposes of assessing performance and making operating decisions.
Our focus is on the research, development, and commercialization of our technology.

 Warrants

 We evaluate warrants in accordance with Topic 480 of the FASB ASC and Topic 815 of the FASB ASC. The result of this accounting
treatment is that the fair value of the embedded derivative, if required to be bifurcated, is marked-to-market at each balance sheet
date and recorded as a liability. The change in fair value is recorded in the Statement of Operations as a component of other income
or expense. Upon exercise of a warrant, it is marked to fair value at the exercise date and then that fair value is reclassified to equity.

 Recent
Accounting Announcements

 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
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This
guidance removes certain exceptions to the general principles in Topic 740 and enhances and simplifies various aspects of the income
tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a
business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. This standard
is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2021. We adopted it on
October 1, 2022, without material impact on our financial statements.

 Accounting
Pronouncements Not Yet Adopted

 In
June 2016, the FASB issued amendments to the guidance for accounting for credit losses. In November 2019, the FASB deferred the effective
date of these amendments for certain companies, including smaller reporting companies. As a result of the deferral, the amendments are
effective for us for reporting periods beginning after September 30, 2023. The amendments replace the incurred loss impairment methodology
under current GAAP with a methodology that reflects expected credit losses and requires the use of a forward-looking expected credit
loss model for accounts receivables, loans, and other financial instruments. The amendments require a modified retrospective approach
through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is
effective. We plan to adopt the amendments when they become effective for us on October 1, 2023. The adoption of this standard is not
expected to have a material impact on the Company's consolidated financial statements.

 NOTE
3 – REVERSE MERGER BETWEEN CIPHERLOC CORPORATION AND SIDECHANNEL, INC. (now known as SCS, Inc.)

 Overview of the Business Combination

 On
July 1, 2022 (the "Closing Date") the Company, then known as Cipherloc Corporation, a Delaware corporation, completed its
acquisition ("Business Combination") of all the outstanding equity securities of SideChannel, Inc., a Massachusetts corporation
pursuant to an Equity Securities Purchase Agreement dated May 16, 2022 (the "Purchase Agreement"). On September 9, 2022,
SideChannel, Inc. the acquired Massachusetts corporation and a subsidiary of the registrant, changed its name to SCS, Inc. (the "Subsidiary"
or "SCS") and Cipherloc Corporation, the Delaware parent company of the subsidiary has changed its name to SideChannel, Inc.

 The
transaction was accounted for as a reverse acquisition ("reverse merger") in accordance with GAAP. Under this method of accounting, SCS was deemed to be the accounting acquirer
for financial reporting purposes. This determination was primarily based on the facts that, immediately following the Business Combination:
(1) the majority of the Board of Directors of the combined company will be composed of directors designated by the Sellers under the
terms of the Purchase Agreement; and (2) existing members of SCS management constituted the management of the combined company. Because
SCS has been determined to be the accounting acquirer in the Business Combination, but not the legal acquirer, the transaction is deemed
a reverse acquisition under the guidance of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification
("ASC") Topic 805, Business Combinations. As a result, the historical financial statements of SideChannel are the historical
financial statements of the combined company.

 Following
the closing of the Business Combination, SCS, Inc. became a wholly owned subsidiary of the Company. As used herein, the words
"the Company" refers to, for periods following the Business Combination, SideChannel, Inc., together with its
subsidiaries.

 Summary
of the Business Combination Terms

 Pursuant
to the Purchase Agreement, on the Closing Date, the former shareholders of the Subsidiary (the "Sellers") exchanged all of
their equity securities in the Subsidiary for a total of 59,900,000 shares of the Company's common stock (the "First Tranche
Shares"), and 100 shares of the Company's newly designated Series A Preferred Stock, $ 0.001 par value (the "Series
A Preferred Stock"). The Sellers were entitled to receive up to an additional 59,900,000 shares of the Company'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 the Subsidiary, as a subsidiary of the Company, achieved 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.
The Second Tranche shares were valued using the closing price on July 1, 2022 of $ 0.10 per share which resulted in a fair value of $ 6.1
million.

 The
number of the Second Tranche Shares could have been 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 was also subject to adjustment based upon
any successful indemnification claims made by the Company pursuant to the Purchase Agreement.

 As
previously disclosed in Form 8-K dated May 9, 2023, a total of 62,016,618 shares of common stock were issued for the Second Tranche and
Closing Working Capital Adjustment.

 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 the Company. 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. The Company is currently performing a formal valuation of the acquisition, including an analysis of any
purchase price adjustments, and a review of the assets and liabilities acquired to determine appropriate fair values.

 Reverse
Merger Accounting

 The
Business Combination was accounted for as a reverse merger involving only the exchange of equity. SCS is the accounting acquirer and
Cipherloc is the legal acquirer. In order to account for the acquisition, management closed the books of Cipherloc on the Closing Date,
closed all equity accounts to additional paid in capital and merged the balance sheets as of the Closing Date. SCS maintained its historical
financial statements, only consolidating Cipherloc's assets, liabilities, and equity as of the Closing Date.

the transaction was between two operating companies, the consideration for Cipherloc assumed by SCS to effectuate the Business Combination
was fair valued at approximately $ 15.2 million composed of $ 9.0 million in market capitalization of Cipherloc on July 1, 2022 ( 88.4 million
shares outstanding and a per share price of $ 0.101 plus $ 6.2 million for the fair value of warrants outstanding on July 2, 2022).

 Cipherloc
consolidated SCS as of the closing date of the agreement, and the results of operations of Cipherloc include those of SCS. The historical
financial statements of Cipherloc before the Business Combination have been replaced with the historical financial statements of SCS before
the Business Combination in all future filings with the SEC.

 On
July 5, 2022, Cipherloc amended and restated its articles of incorporation with the office of the Secretary of State of Delaware to change
the Company's name to SideChannel, Inc.

 The
Company valued Cipherloc's equity to determine the consideration paid and the purchase price allocation.

 Consideration
Paid

 The
consideration paid was determined as follows:

OF CONSIDERATION PAID

 Shares outstanding

 88,445,832

 Closing
 stock price on July 1, 2022

 $
 0.10

 Market capitalization on
 July 1, 2022

 $
 8,949,834

 Fair
 value of warrants vested at July 1, 2022

 $
 6,222,412

 Total
 fair value of Cipherloc at July 1, 2022

 $
 15,172,246

 The
Company utilized the following assumptions in its Black-Scholes warrant valuation model to calculate the estimated fair value of
the financing warrants as of July 1, 2022:

 Exercise
 prices: $ 0.18 to $ 1.20 ($ 0.56 weighted average)

 Expected
 life in years: 1 to 8.5 years ( 3.7 weighted average)

 Annualized
 volatility: 168.3 %

 Risk
 free rate: 2.9 % to 3.0 %

 Annual
 Rate of dividends: 0 %

 The
Company's objective in estimating expected volatility is to ascertain the assumption about expected volatility that marketplace
participants would likely use in determining an exchange price for an option. The Company estimates expected volatility by considering
its historical volatility and also considers, based on available information, how the expected volatility of its share price may differ
from historical volatility. The Company believes the implied volatility can be useful in estimating expected volatility because it is
generally reflective of both historical volatility and expectations of how future volatility will differ from historical volatility.
The Company has made a good faith effort to estimate volatility utilized which will result in the best estimate of expected volatility.
As of July 1, 2022, the volatility rate used was 168.3 %.

 Purchase
Price Allocation

 The
acquisition purchase price is allocated based on the fair values of the assets acquired and liabilities assumed, which are based on management
estimates and third-party appraisals. The Company engaged a valuation expert to provide guidance to management which was considered and
in part relied upon in completing its purchase price allocation. The excess of the purchase price over the aggregate estimated fair value
of net assets acquired was allocated to goodwill.

 The
following table summarizes the allocation of the purchase price of the assets and liabilities acquired related to the acquisition as
of the closing date (in thousands):

 SUMMARY
OF ALLOCATION OF THE PURCHASE PRICE OF THE ASSETS AND LIABILITIES ACQUIRED RELATED TO THE ACQUISITION

 Cash

 $

 3,589

 Prepaid
 expenses and deferred costs

 Intangible
 assets (AIPR&D)

 4,940

 Goodwill

 7,058

 Accounts
 payable and accrued liabilities

 ( 612

)

 Tax Liability

 ( 211

)

 Accrued
 compensation

 ( 175

)

 Consideration

 $

 15,172

Costs

 On
July 23, 2021, Cipherloc entered into a financial advisory and consulting agreement with Paulson Investment Company, LLC ("Paulson").
The agreement with Paulson remains in place after the Business Combination. Pursuant to the agreement, Paulson will provide the following
services at the Company's request: (a) familiarize itself with the Company's business, assets, and financial condition; (b)
assist the Company in developing strategic and financial objectives; (c) assist the Company in increasing its exposure in the software
industry; (d) assist the Company in increasing its profile in the investment and financial community through introductions to analysts
and potential investors, participation in investment conferences and exploitation of reasonably available media opportunities; (e)
identify potentially attractive merger and acquisition opportunities; (f) review possible innovative financing opportunities and (g)
render other financial advisory services as may be reasonably requested. The term of the agreement is four years from the date of the
agreement, unless terminated earlier by either party as provided therein. As compensation for these services, the Company issued
to Paulson 4,000,000 shares of the Company's common stock and agreed to reimburse Paulson for all reasonable and documented expenses
incurred by Paulson in connection with providing such services. The fair value of the shares issued was $ 720,000, which Cipherloc recognized
as deferred costs which are amortized at a rate of $ 45,000 per quarter. The unamortized balance of the deferred cost was $ 555,000 at
June 30, 2022. During the years ended September 30, 2023, and September 30, 2022, the Company expensed $ 180,000 and $ 45,000 in amortization
expenses respectively. The unamortized balance of the deferred costs was $ 330,000 at September 30, 2023.

 Intangible
Assets

 The
estimated fair values of the identifiable intangible assets acquired were calculated using an income valuation approach which requires
a forecast of expected future cash flows either through the use of relief-from-royalty method or multi-period excess earnings methods
("MPEEM"). The estimated useful lives are based on the Company's experience and expectations as to the duration of
the time the Company expects to realize benefits of the assets.

 The
estimated fair values of the identifiable intangible assets acquired, estimated useful lives and related valuation methodology are as
follows as of September 30, 2022:

OF ESTIMATED FAIR VALUES OF THE IDENTIFIABLE INTANGIBLE ASSETS ACQUIRED, ESTIMATED USEFUL LIVES

 Intangible
 Assets:

 Preliminary
 Fair Value (in thousands)

 Estimated
 Life in Years

 Discount
 Rate

 Valuation
 Method

 AIPR&D

 $
 4,940

 5 - 15

 22.75
 %

 Income (MPEEM)

 We
conducted a fair value analysis of the intangible assets acquired as of September 30, 2023 and concluded that the full carrying
value of this asset should be impaired. Our balance sheet as of September 30, 2023 reflects this conclusion. Incurring impairment neither indicates a decrease in our emphasis on Enclave as a key initiative nor does it suggest a lack of market interest in the product.

Tax Liability

 As
part of the Business Combination, we acquired federal tax net operating loss carryforwards of approximately $ 35 million. In
addition, the intangible asset acquired, AIPR&D, has no basis for tax and resulted in a temporary difference of $ 4.9 million. These
two items were offset and resulted in a deferred tax asset of approximately $ 7.0 million, which was fully reserved.

 For
state tax purposes, there were only limited state net operating loss carryforwards; consequently, the temporary difference from the
intangible asset acquired resulted in a state deferred tax liability of $ 211,000
at September 30, 2022. At September 30, 2023, there were additional state net operating loss carryforwards to offset
the temporary difference from the intangible asset acquired, resulting in a state deferred tax liability of zero ($ 0).

 Unaudited
Pro Forma Operating Results

 The
following presents the unaudited proforma combined results of operations of Cipherloc with SCS for the year ended September 30, 2022 as if the entities were combined on October 1, 2020.

OF UNAUDITED PROFORMA OPERATIONS RESULTS

 (In thousands,
 except per share data)

 For
 the Year Ended

September 30, 2022

 Revenues

 $
 4,789

 Cost of revenues

 2,467

 Gross profit

 2,322

 Operating expenses (a)

 4,860

 Operating income (loss)

 ( 2,538
)

 Other income and (expenses)

 Net income (loss) before
 income taxes

 ( 2,525
)

 Income taxes

 Net income (loss)

 $
 ( 2,720
)

 Basic loss per share (b)

 $
 ( 0.03
)

 (a)

 All
costs incurred in connection with the acquisition have been removed from operating expenses in the proforma statement of operations.
In fiscal year 2022, Cipherloc incurred $479,000
of transaction expenses and
SCS incurred $ 109,000
of transaction expenses.

 (b)

 Pro
forma weighted average shares outstanding are 82.0
million
for the year ended September 30, 2022.

 NOTE
4 – REVENUE

 Customer
Concentration

 No
one customer accounted for more than ten percent ( 10 %) of our revenues during the years ended September 30, 2023, and 2022.

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 we deliver the related
service pursuant to the terms of the customer arrangement.

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 $ 280,000 at September 30, 2023, and $ 130,000 at September 30, 2022. The deferred revenue
is expected to be earned within 12 months of the balance sheet date.

 Changes
in deferred revenue were as follows:

OF CHANGES IN DEFERRED REVENUE

 Year
 Ended September 30, 2023

 Balance on September
 30, 2022

 $

 Revenue deferred

 Revenue recognized

 ( 403
)

 at September 30, 2023

 $

 Year
 Ended September 30, 2022

 Balance on September 30,
 2021

 $

 Revenue deferred

 Revenue recognized

 ( 171
)

 at September 30, 2022

 $

 Software
License Agreements

 During
the year ended September 30, 2022, we recognized a minimal amount in licensing revenue from a licensing agreement between Castle
Shield Holdings LLC ("Castle Shield") and Cipherloc. We and Castle Shield mutually agreed to terminate this agreement
on October 14, 2022.

 We
announced Enclave in September 2022 which is a proprietary software product developed to provide network microsegmentation capabilities,
also referred to as zero trust network access ("ZTNA").

 NOTE
5 – DEBT

 Pursuant
to a Membership Interest Redemption Agreement, dated November 3, 2021, by and between us and Akash Desai ("Desai Redemption
Agreement"), we promised to pay Mr. Desai $ 100,000, without interest, in exchange for Mr. Desai's right, title,
and interest in us. Mr. Desai was paid $ 50,000 at the execution of the Desai Redemption Agreement and the remaining $ 50,000
is due on or before December 31, 2023.

 The
implied interest on the note payable component of the Desai Redemption Agreement was deemed insignificant.

 NOTE
6 – RELATED PARTY TRANSACTIONS

 Brian
Haugli, our Chief Executive Officer and our stockholder in the Company, is also a principal shareholder of RealCISO Inc.
("RealCISO"). On September 22, 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 the years ended September 30, 2023, and 2022,
SideChannel paid $ 26,000
and $ 98,000
to RealCISO for licenses, respectively.

 We
also received $ 63,000 from RealCISO for software development services that we began providing Real CISO during fiscal year 2023.

 No
other related party transactions occurred during the years ending September 30, 2023, and September 30, 2022.

 NOTE
7 – 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.

 Currently
Pending 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, Cipherloc's former Chief Executive Officer and President, in the
20 th Judicial District for Hays County, Texas (Cause No. 20-0818). The lawsuit alleges causes of action for fraud against
Mr. De La Garza (for misrepresentations allegedly made by Mr. De La Garza); breach of contract, for alleged breaches of Mr. Marquez's
alleged oral employment agreement, which Mr. Marquez claims required Cipherloc pay him cash and shares of stock; unjust enrichment; quantum
meruit; and rescission of certain stock purchases made by certain of the plaintiffs, as well as declaratory relief and fraud. Damages
sought exceed $ 1,000,000. We believe we have made all required payments and delivered the stock to the plaintiffs. The case
is currently being defended by us. We believe we have meritorious defenses to the allegations, and we intend
to continue to vigorously defend against the litigation.

 Leases

 In
December 2021, we and our landlord for our leased office space in Worcester, Massachusetts, entered into a lease agreement. The lease became
effective on January 1, 2022 and has a one-year term. The initial monthly rent was $ 930 and increased to $ 948 on January 1, 2023 a 2 %
increase, per the lease agreement. The lease automatically renews for a one-year term, unless either party to the lease agreement notifies
the other of the intent to terminate the lease in writing at least 60 days prior to the expiration of the current term. The landlord
of the property leased at 146 Main Street in Worcester, Massachusetts, is not an affiliate of ours.

 This
lease has been accounted for as a month-to-month lease, and no right of use asset or lease liability has been recorded at September 30,
2023.

 Cash
Flow Impact of Leases

 We are not carrying any assets or liabilities associated with leases for the fiscal years 2023 or 2022. We lease an office at 146 Main Street in Worcester, Massachusetts, for which we expect to pay approximately $ 12,000
over the next twelve (12) months.

 NOTE
8 - STOCKHOLDERS' EQUITY

 Effective
December 29, 2021, SCS was authorized to issue 1,000
shares of common stock with a $ 0.01
per share par value. The 1,000
shares of common stock were exchanged for 59,900,000
shares of Cipherloc common stock and 100
shares of Series A Preferred stock as a result of the Business Combination. The financial statements have been adjusted
retroactively to reflect the Cipherloc shares received as being outstanding the outstanding
shares of SCS as of September 30, 2020.

 SCS
did not have any convertible debt or issued preferred stock.

 As
explained in Note 5, in December 2021, while it was SideChannelSec LLC, the Company promised to pay Mr. Desai $ 50,000, without interest,
in exchange for Mr. Desai's right, title, and interest in the Company.

 SideChannel
LLC made profit sharing distributions of $ 461,000 during the fiscal year ended September 30, 2022, in accordance with its partnership
agreements. We ceased operations as an LLC on December 29, 2021, and since then have had zero ($ 0) equity distributions.

Stock

 As
of September 30, 2023, and 2022, we had 213,854,781 and 148,724,056 shares of common stock outstanding, respectively, and was
authorized to issue 681,000,000 shares of common stock at a par value of $ 0.001.

Stock Issued for Cash

 We did not issue shares of common stock for cash during the years ended September 30, 2023, and September 30, 2022.

Stock Issued for Business Combinations

 On
July 1, 2022, we issued a total of 59,900,000 shares of common stock related to the Business Combination detailed in Note 3 of
this Form 10-K.

 On May 4, 2023, we
issued a total of 62,016,618 shares of common stock for the Second Tranche ( 59,900,000 shares) and Closing Working Capital
Adjustment ( 2,116,618 shares).

Stock Issued for Services

 Our
Board of Directors have elected to have each of its members receive one-half of such member's quarterly compensation in the form
of shares of the Company's 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 2023, the fair market value of stock
issued for services totaled $ 66,000 for 770,978 shares of common stock compared to $ 43,000 for 280,557 shares of common stock in fiscal
year 2022.

Stock Issued for Legal Settlement

 On
June 6, 2022, Cipherloc entered into a mediated settlement agreement with Robert LeBlanc. Pursuant to that agreement, Cipherloc had issued
a total of 200,000 shares of the Company's common stock to Mr. LeBlanc.

 No
shares were issued for legal settlement during fiscal year 2023.

Stock and Restricted Stock Units Issued to Directors and Officers

 As
of this filing, we are granting equity compensation awards to employees, directors, and contractors using the 2021 Omnibus Equity
Compensation Plan ("Equity Incentive Plan") approved by stockholders on September 13, 2021. The approval on September 13,
2021, included a reserve of 8.0 million shares for awards. The 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 Equity Incentive Program. Awards
granted under the Equity Incentive Plan in lieu of compensation are exempt from counting against the reserve.

 SCHEDULE OF STOCK OPTIONS

 2021 Omnibus Equity Incentive
 Plan Reserve

 (In
 thousands)

 Initial Reserve at September 13, 2021

 8,000

 Non-exempt Awards

 ( 13,735
)

 Forfeitures

 1,038

 Annual Reserve Increases

 8,186

 Reserve at September 30, 2023

 3,489

 Reserve percent of outstanding shares at September 30, 2023

 1.6
 %

 We have granted and intend to continue granting restricted stock units ("RSU's") to directors, employees, and
contractors with service-based vesting conditions. The restricted stock units vest over a 3-year service period. The following table
summarizes the activity of our restricted stock units granted under our Equity Incentive Plan.

 SCHEDULE OF RESTRICTED STOCK UNITS VESTING

 Outstanding Equity Compensation Grants

 (In thousands)

 Number
of RSU's

 RSU Grants
 Acquired at July 1, 2022

 3,731

 Granted

 Vested

 ( 198
)

 Canceled/Forfeited

 ( 180
)

 Outstanding Grants at September 30, 2022

 4,309

 Granted

 8,174

 Vested

 ( 2,988
)

 Canceled/Forfeited

 ( 858
)

 Outstanding Grants at September 30, 2023

 8,637

 The
weighted average grant-date fair value of all awards granted during the year ended September 30, 2023, was $ 0.10 per share.

 The
unamortized stock compensation expense at September 30, 2023, is $ 694,000 and the remaining weighted average term to vesting is 2.3 years.

Stock

 As
of September 30, 2023, and 2022, we had zero ( 0) and 100 shares of preferred stock outstanding, respectively. The shares of Series
A Preferred Stock were issued as part of the Business Combination. The 100 shares of preferred stock that were exchanged for SCS,
Inc. common stock have been retroactively reflected as issued and outstanding on September 30, 2020. A The Series A Preferred Stock contained
a Board Designation Right which provides that the holders of the majority of the Series A Preferred Stock had the right to elect a majority
of our Board of Directors. All 100 shares of Series A Preferred Stock were converted to common stock on June 12, 2023.

 Warrants

 On
July 1, 2022, following the Business Combination, we assumed the outstanding warrants of Cipherloc.

 Warrant
activities for the period from July 1, 2022, to September 30, 2023, are as follows:

OF WARRANT ACTIVITY

 Number
 of Warrants (000's)

 Weighted
 Average Exercise Price

 Weighted
 Average Remaining Life

 Warrants Acquired
 at July 1, 2022

 87,794

 $
 0.56

 3.82

 Granted

 —

 —

 —

 Exercised

 —

 —

 —

 Canceled/Forfeited

 —

 —

 —

 Outstanding at September
 30, 2022

 87,794

 $
 0.56

 3.57

 Granted

 —

 —

 —

 Exercised

 —

 —

 —

 Canceled/Forfeited

 ( 18,513
)

 ( 1.20
)

 —

 Outstanding
 at September 30, 2023

 69,281

 $
 0.39

 3.31

 The
fair value of the warrants was considered as part of the acquisition costs of Cipherloc as described in Note 3.

 NOTE
9 - 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.

 The
provision (benefit) for income taxes from continued operations for the years ended September 30, 2023, and 2022 consist of the following:

 SCHEDULE OF PROVISION (BENEFIT) FOR INCOME TAXES FROM CONTINUED OPERATIONS

 2023

 2022

 September 30,

 (In thousands)

 2023

 2022

 Current:

 Federal

 $
 ( 136
)

 $

 State

 ( 32
)

 Total

 $
 ( 168
)

 $

 Deferred:

 Federal

 $
 —

 $
 —

 State

 ( 211
)

 —

 Total

 ( 211
)

 —

 Provision (benefit) for income taxes, net

 $
 ( 379
)

 $

 The
difference between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense is
as follows:

 SCHEDULE OF FEDERAL STATUTORY CORPORATE TAX RATE AND ACTUAL INCOME TAX EXPENSE

 30,

 2023

 2022

 Statutory federal income tax
 rate

 21.00
 %

 21.00
 %

 Non-deductible contingent consideration

 ( 1.89
)

 ( 8.72
)

 Non-deductible impairment of goodwill

 —

 ( 8.14

)

 Non-deductible stock-based compensation

 —

 ( 0.10

)

 Prior Year Adjustment

 1.58

 —

 Non-deductible meals & entertainment

 ( 0.22
)

 —

 State tax

 3.02

 0.80

 Change in valuation allowance

 ( 18.36
)

 ( 4.84

)

 Effective tax rate

 5.13
 %

 —
 %

 For
the years ended September 30, 2023, and 2022, the difference between the amounts of income tax expense or benefit that would result
from applying the statutory rates to pretax income to the reported income tax benefit $ 379,000
for the year ended September 30, 2023, and income tax expense of $ 195,000
for the year ended September 30, 2022. The September 30, 2022, expense of $ 195,000 was accrued as an estimate of income taxes
due by SCS, Inc. for activity prior to the Business Combination. The actual taxes due by SCS, Inc. for such activity was zero ($ 0)
resulting in a reversal of the $ 195,000 accrual during fiscal year 2023. The reversal was partially offset by $ 27,000 of state
income taxes incurred by the Company during fiscal year 2023. In addition, a deferred tax liability was recognized for a book versus tax basis difference for state income taxes
upon the business combination with Cipherloc in 2022. During the year ended September 30, 2023 this deferred tax liability was reduced
to zero resulting in a deferred income tax benefit of $ 211,000.

income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for
tax purposes. The tax effect of these temporary differences representing deferred tax asset and liabilities result principally from the
following:

 Federal

 SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

 2023

 2022

 30,

 2023

 2022

 Net operating loss carry forward

 $
 7,603

 $
 7,480

 Intangible asset – not deductible for
 tax

 ( 1,038
)

 ( 1,038
)

 AIPR&D capitalization

 Other

 Deferred compensation

 ( 59
)

 Valuation allowance

 ( 6,736
)

 ( 6,383
)

 Deferred income tax asset

 $
 —

 $
 —

 State

 2023

 2022

 30,

 2023

 2022

 Net operating loss carry forward

 $

 $

 Intangible asset – not deductible for
 tax

 ( 218
)

 ( 211
)

 Other

 Valuation allowance

 ( 43
)

 ( 178
)

 Deferred income tax asset

 $
 —

 $
 ( 211
)

 The
Company has a net operating loss carry forward of $ 36.2
million available to offset future taxable income, of which, $ 2.6
million will expire within the next five years, $ 12.5
million will expire thereafter, and the remaining $ 21.1
million will not expire. For income tax reporting purposes, the Company's aggregate unused net operating losses were subject
to the limitations of Section 382 of the Internal Revenue Code, as amended. The Company has adjusted the net operating losses
incurred prior to 2015 to reflect only the losses not subject to limitation. The Company has provided for a valuation reserve
against the net operating loss benefit, because in the opinion of management based upon the earning history of the Company, it is
more likely than not that the benefits will not be realized. For income tax reporting purposes, Management has determined that net
operating losses prior to February 5, 2015, are subject to an annual limitation of approximately $ 525,000.

 Utilization
of the pre-Business Combination net operating loss carryforwards ("pre-Combination NOL's") attributable to Cipherloc
may become subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes
occurred during the tax year associated with the Business Combination. In general, an ownership change, as defined by Section 382, results
from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over
a three-year period. Future ownership changes may trigger Section 382 and therefore, substantially limit the amount of pre-Combination
NOLs that can be utilized annually to offset future taxable income.

 The
Company is current on all its federal income tax filings. The Company is subject to IRS examinations for periods beginning after September
30, 2019, and all net operating losses we may use in future federal tax filings are subject to IRS examination.

 NOTE
10 - SUBSEQUENT EVENTS

 On
November 6, 2023, Anthony Ambrose, a current Member of our Board of Directors ("Board"),
and the Chairman of the Nomination and Corporate Governance Committee, informed us of his upcoming retirement from the Board.

 Mr.
Ambrose will remain a member of the Board until our next Annual Meeting of Stockholders ("Annual Meeting"),
at which time Mr. Ambrose will not stand for re-election as a Member of the Board.

 Mr.
Ambrose's departure is not the result of any disagreement with our management, our Board, or us on any matter related to its operations, policies, or practices.

 In
recognition of Mr. Ambrose's tenure and contributions to us during his nearly five years of service as a member of the
Board, we will accelerate the vesting of Mr. Ambrose's 333,334 restricted stock units, which were awarded to Mr. Ambrose
on July 2, 2022 and previously scheduled to vest pro-ratably on June 1, 2024 and on June 1, 2025. The full amount of unvested restricted
stock units will now vest on January 2, 2024. The full terms of Mr. Ambrose's separation will be formalized in a forthcoming Separation
Agreement between us and Mr. Ambrose.

 Also
on November 7, 2023, we announced an offer ("Offer to Exchange") made to certain holders of 55,549,615
 of our warrants issued during 2021 with an exercise
price of $ 0.36
 and expiration
dates between March 31, 2026 and April 16, 2026 ("2021 Investor Warrants"). The Offer to Exchange provided 2021 Investor
Warrant holders one (1) share of common stock for every six 2021 Investor Warrants and one (1) New Warrant for every two and one-half
(2.5) 2021 Investor Warrants. The Offer to Exchange expired at 5:00 PM EST on December 26, 2023 ("Expiration Date"). The New Warrants being offered have a five ( 5)
year term, an exercise price of $ 0.18,
and an automatic conversion if the bid price of the stock is equal to or greater than $ 0.36
 for 30 consecutive days.

 On
November 14, 2023, the Offer to Exchange was amended to include an Amended New Warrant Agreement which removed a restriction on the cashless
exercise of the New Warrant.

 On
November 21, 2023, we received a Comment Letter from the SEC about the Offer to Exchange. On December 1, 2023 we filed a response with
the SEC to the Comment Letter and on December 4, 2023, we filed an Amended Offer to Exchange which reflected the clarifications and corrections
requested by the SEC.

 The
Offer to Exchange was made as an offer for all or none of the 2021 Investor Warrants. At its meeting on December 11, 2023, our Board
approved waiving the all or nothing clause and authorized us to close the offer on the Expiration Date if the percentage of 2021 Investor
Warrants validly tendered and not validly withdrawn exceed 65% of the total 2021 Investor Warrants outstanding. The Expiration Date
was also changed to December 26, 2023.

 On December 11, 2023, we received a Comment
Letter from the SEC requesting clarifications on three responses we submitted regarding the November 21, 2023 Comment Letter. On December
21, 2023, we filed an Amended Offer to Exchange which reflected the clarifications requested by the SEC.

 On December 26, 2023, we closed the Offer to Exchange and issued 7,270,958 shares of common stock and 17,415,437 New Warrants in exchange for 43,538,501 2021 Investor Warrants
( 78.4 % of the total outstanding 2021 Investor Warrants).

 ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 None.

 ITEM
9A. CONTROLS AND PROCEDURES

 Our
management is responsible for establishing and maintaining adequate "disclosure controls and procedures," as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in
reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated and communicated to our principal executive
officer to allow timely decisions regarding required disclosure. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the
Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer ("CEO") and Chief
Financial Officer ("CFO"), to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and
procedures, the Company recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide
only reasonable assurance of achieving the desired control objectives, and we necessarily are required to apply our judgment in
evaluating the cost-benefit relationship of possible disclosure controls and procedures.

 Evaluation
of Disclosure Controls and Procedures

 As
of September 30, 2023, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated
the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).
Our CEO and CFO have concluded, based upon the
evaluation described above, that, as of September 30, 2023, our disclosure controls and procedures were not effective at the
reasonable assurance level because of the material weaknesses discussed below.

 Notwithstanding the material weakness in internal control over financial reporting described below, our management
has concluded that our consolidated financial statements included in this Form 10-K are fairly stated in all material respects in accordance
with GAAP.

 Material
Weaknesses

 A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented
or detected on a timely basis.

 In
connection with the preparation of our audited financial statements for the year ended September 30, 2022, we identified material weaknesses
in our internal controls over financial reporting, as of September 30, 2022. These material weaknesses had not been fully remediated
as of September 30, 2023. The material weaknesses identified related to the fact that we did not design and maintain accounting policies,
procedures and controls to ensure complete, accurate and timely financial reporting in accordance with U.S. GAAP. Specifically, the material
weaknesses identified included the following:

 Did
 not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting,
 reporting and disclosures, including controls over the preparation and review of account reconciliations, journal entries and classification
 of certain costs;

 We
 had not developed and effectively communicated to our employees our accounting policies and procedures, which resulted in inconsistent
 practices. Since these entity level programs have a pervasive effect across the organization, management has determined that these
 circumstances constitute a material weakness;

 We
 do not have sufficient, qualified finance and accounting staff with the appropriate U.S. GAAP technical accounting expertise to identify,
 evaluate and account for accounting and financial reporting, and effectively design and implement systems and processes that allow
 for the timely production of accurate financial information in accordance with internal financial reporting timelines. As a result,
 we did not design and maintain formal accounting policies, processes and controls related to complex transactions necessary for an
 effective financial reporting process; and

 As
 a high-growth, smaller reporting company that became responsible for listed financial reporting within the last eighteen (18) months,
 we have a limited staff and budget available to adequately test and monitor the effectiveness of certain internal controls.

 Remediation
Plan

 Our
management is actively engaged and committed to taking the steps necessary to remediate the control deficiencies that constituted the
material weaknesses. During fiscal year 2023, we made the following enhancement to our control environment:

 In
 February 2023, we hired a permanent Staff Accountant whose responsibilities include working with our CFO, existing employees and
 third-party consultants to improve the design, implementation, execution and supervision of our controls. We expect to continue evaluating
 our needs for additional personnel. We expect to provide enhanced training to existing and new employees in order to enhance the
 level of communication and understanding of controls with personnel that provide key information and perform key roles within our
 financial accounting and reporting function; and

 We
 began documenting accounting policies, procedures and controls to achieve complete, accurate, and timely financial accounting, reporting
 and disclosures including controls over the preparation and review of account reconciliations, journal entries and classification
 of certain costs.

 Our
remediation activities are continuing during fiscal year 2024. In addition to the above actions, we expect to engage in additional activities,
including, but not limited to:

 Engaging
 external consultants to provide support and to assist us in our evaluation of more complex applications of GAAP, and to assist us
 with documenting and assessing our accounting policies and procedures until we have sufficient technical accounting resources;

 Implementing
 business process-level controls across all significant accounts and information technology general controls across all relevant systems.
 This includes providing training for control owners that will present expectations as it relates to the control design, execution
 and monitoring of such controls, including enhancements to the documentation to evidence the execution of the controls; and

 Implementing
 improvements to our accounting system to enhance the accuracy of our financial records.

 We
continue to enhance corporate oversight over process-level controls and structures to ensure that there is appropriate assignment of
authority, responsibility, and accountability to enable remediation of our material weaknesses. We believe that our remediation plan
will be sufficient to remediate the identified material weaknesses and strengthen our controls. As we continue to evaluate, and work
to improve our controls, management may determine that additional measures to address control deficiencies or modifications to the remediation
plan are necessary.

 While
we have performed certain remediation activities to strengthen our controls to address the identified material weaknesses, control weaknesses
are not considered remediated until new internal controls have been operational for a period of time, are tested, and management concludes
that these controls are operating effectively. We will continue to monitor the effectiveness of our remediation measures in connection
with our future assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures,
and we will make any changes to the design of our plan and take such other actions that we deem appropriate given the circumstances.

 Management's
Annual Report on Internal Control over Financial Reporting

 We are engaged in the process of design and implementation of our internal control over financial reporting in a
manner commensurate with the scale of our operations subsequent to the Business Combination, including the enhancement of our internal
and external technical accounting resources (as well as to address the material weaknesses discussed above). However, the design of internal
control over financial reporting for our company post-business combination has required and will continue to require significant time
and resources from management and other personnel. As a result, management was unable, without incurring unreasonable effort or expense
to fully assess our internal control over financial reporting as of September 30, 2023.

 Changes
in Internal Control over Financial Reporting

 There
have been no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) during the fiscal year ended September 30, 2023 covered by this Form 10-K that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting, other than described herein. We are continuing to take steps to remediate the material weakness in our internal control over financial reporting,
as discussed above.

 Inherent Limitation on the Effectiveness of Internal
Control

 Readers are cautioned that internal control over financial reporting, no matter how well designed, has inherent limitations
and may not prevent or detect misstatements. Therefore, even effective internal control over financial reporting can only provide reasonable
assurance with respect to the financial statement preparation and presentation.

 This
annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting
firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management's report in
this annual report.

 ITEM
9B. OTHER INFORMATION

 None.

 ITEM
9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 None.

 PART
III

 ITEM
10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

regarding directors and executive officers of the Company, as well as the required disclosures with respect to the Company's audit
committee financial expert, is incorporated herein by reference to the information included in our Proxy Statement for our next Annual
Meeting of Stockholders which will be filed with the SEC within 120 days after the end of our fiscal year 2023.

 The
Company has adopted a Code of Ethics that applies to all of our directors, officers and employees, including our Chief Executive Officer
and Chief Financial Officer. The complete text of this Code of Ethics is available on the SEC's EDGAR system as described in Part
IV, Item 15 of this Form 10-K.

 ITEM
11. EXECUTIVE COMPENSATION

 Information regarding executive compensation of our directors and officers, is incorporated herein by reference to
the information included in our Proxy Statement for our next Annual Meeting of Stockholders which will be filed with the SEC within 120
days after the end of our fiscal year 2023.

 ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

regarding security ownership of certain beneficial owners and management and the Company's equity compensation plans are incorporated
herein by reference to the information included in our
Proxy Statement for our next Annual Meeting of Stockholders which will be filed with the SEC within 120 days after the end of our fiscal
year 2023.

 ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

regarding certain relationships and related transactions and director independence is incorporated herein by reference to the information
included in our Proxy Statement for our next Annual Meeting
of Stockholders which will be filed with the SEC within 120 days after the end of our fiscal year 2023.

 ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

regarding principal accounting fees and services is incorporated herein by reference to the information included in
our Proxy Statement for our next Annual Meeting of Stockholders which will be filed with the SEC within 120 days after the end of our
fiscal year 2023.

 PART
IV

 ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 (a)

 Documents
 filed as part of this report:

 1.

 Financial
 Statements

 The
 financial statements and schedules required by this Item 15 are set forth in Part II, Item 8 of this Form 10-K.

 (b)

 Exhibits.
 The following exhibits are filed as a part of this report:

 Exhibit

 Number

 Description
 of Document

 2.1

 Agreement
 and Plan of Merger by and between Cipherloc Corporation, a Texas corporation and Cipherloc Corporation, a Delaware corporation (incorporated
 by reference to Exhibit 2.1 to Current Report on Form 8-K filed September 17, 2021).

 3.1

 Certificate
 of Incorporation of Cipherloc Corporation, a Delaware corporation (incorporated by reference to Exhibit 3.1 to the Company's
 Current Report on Form 8-K filed on September 30, 2021).

 3.2

 Bylaws
 (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K, filed on September 30, 2021).

 3.3

 Certificate
 of Amendment of Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.2 to the Company's Current
 Report on Form 8-K filed July 6, 2022).

 3.4

 Certificate
 of Designation of Series A Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form
 8-K filed July 6, 2022).

 4.1

 Description
 of the Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed herewith).

 10.1

 Form
 of Securities Purchase Agreement between Cipherloc, a Texas corporation and the several purchasers of the Company's units (incorporated
 by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 8, 2021).

 10.2

 Form
 of Registration Rights Agreement dated March 31, 2021 (incorporated by reference to Exhibit 10.2 to the Company's Current Report
 on Form 8-K filed on April 8, 2021).

 10.3

 Form
 of Lockup Agreement between Cipherloc Corporation, a Texas corporation and the several purchasers of the Company's Units (incorporated
 by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on April 8, 2021).

 10.4

 Placement Agent Agreement between Cipherloc Corporation, a Texas corporation and Paulsen Investment Company, LLC related to the Company's sole of Units incorporated by reference to Exhibit 10.4.

 10.5

 Indemnification
 Agreement by and between the Company and Paulson Investment Company, LLC (incorporated by reference to Exhibit 10.5 to the Company's
 Current Report on Form 8-K filed on April 8, 2021).

 10.6

 Letter
 Agreement with Paulson Investment Company, LLC (incorporated by reference to Exhibit 10.1 to the Company's Current Report on
 Form 8-K filed on July 28, 2021).

 10.9

 Ryan
 Polk Executive Employment Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K
 filed on October 12, 2021).

 10.10

 2021 Omnibus Equity Incentive Plan approved by the Company's stockholders at the 2021 Annual Meeting held September 13, 2021 (incorporated by reference to Appendix A to the Company's Definitive Proxy Statement filed on July 20, 2021).

 10.12

 Purchase
 Agreement between the Company and SideChannel, Inc. and The Sellers Therein and Brian Haugli, as the Seller Representative (incorporated
 by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed May 18, 2022).

 10.13

 Brian
 Haugli Executive Employment Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K
 filed on July 6, 2022).

 10.14

 Independent Contractor Agreement by and between the Company and Thomas Wilkinson (Thomas W. Wilkinson, CPA, PLLC) dated December 28, 2022 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 30, 2022).

 10.15

 Ryan Polk 2023 Compensation Change Authorization (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 5, 2023).

 10.16

 Offer to Exchange Common Stock for Certain Outstanding Warrants, dated August 21, 2023 (i ncorporated by reference to Exhibit (a)(1)(A) to the Schedule TO filed on August 22, 2023).

 10.17

 Notice of Extension of the Offer to the Holders of the Warrants, dated September 19, 2023 (incorporated by reference to Exhibit (a)(1)(I) to the Schedule TO Amendment No. 2 filed on September 20, 2023.

 10.18

 Notice of Withdrawal of the Offer to the Holders of Warrants, dated November 3, 2023 (incorporated by reference to Exhibit (a)(1)(J) to the Schedule TO Amendment No. 3 filed on November 3, 2023).

 10.19

 Offer to Exchange Common Stock for Certain Outstanding Warrants, dated November 6, 2023 (incorporated by reference to Exhibit (a)(1)(A) to the Schedule TO filed on November 7, 2023).

 10.20

 2023 Common Stock Purchase Warrant as Amended on November 14, 2023, dated November 14, 2023 (incorporated by reference to Exhibit (a)(1)(F) to the Schedule TO Amendment No. 1 filed on November 14, 2023).

 10.21

 Offer to Exchange Common Stock and New Warrants for 2021 Investor Warrants and Amended on December 1, 2023 (incorporated by reference to Exhibit (a)(1)(H) to the Schedule TO Amendment No. 2 filed on December 4, 2023).

 14.1

 Code
 of Ethics for Directors, Officers and Employees of SideChannel and its Affiliates, dated August 8, 2019 (incorporated by reference
 to Exhibit 14.1 to the Company's Current Report on Form 8-K, filed on August 12, 2019).

 21.1

 Subsidiaries
 of the Registrant.

 23.1*

 Consent of Independent Registered Public Accounting Firm.

 24.1*

 Power
 of Attorney (included on signature page)

 31.1*

 Certification
 of Principal Executive Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section
 302 of the Sarbanes-Oxley Act of 2002.

 31.2*

 Certification
 of Principal Financial Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section
 302 of the Sarbanes-Oxley Act of 2002.

 32.1**

 Certification
 of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 32.2**

 Certification
 of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 101.INS*

 101.SCH*

 101.CAL*

 101.LAB*

 101.PRE*

 101.DEF*

 104*

 Cover

Indicates management or compensatory plan or arrangement

 *
Filed herewith

 **
Furnished herewith

 EXHIBIT
16. FORM 10-K SUMMARY

 None

 SIGNATURES

 In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, there unto duly authorized.

 SideChannel,
 Inc.

 Date:

 By:

 /s/
 Brian Haugli

 Brian
 Haugli

 President
 and Chief Executive Officer

 Date:

 By:

 /s/
 Ryan Polk

 Ryan
 Polk

 Chief
 Financial Officer

 POWER
OF ATTORNEY

 Each
person whose signature appears below hereby appoints Brian Haugli and Ryan Polk, and each of them, as attorney-in-fact with full power
of substitution to execute in the name and on behalf of the registrant and each such person, individually and in each capacity stated
below, one or more amendments to the annual report on Form 10-K, which amendments may make such changes in the report as the attorney-in-fact
acting deems appropriate and to file any such amendment to the annual report on Form 10-K with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.

 In
accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.

 Date:

 By:

 /s/
 Brian Haugli

 Brian
 Haugli

 President,
 Chief Executive Officer, and Director (principal executive officer)

 Date:

 By:

 /s/
 Ryan Polk

 Ryan
 Polk

 Chief
 Financial Officer (principal financial officer and principal accounting officer)

 Date: December 27, 2023

 By:

 /s/ Deborah MacConnel

 Deborah MacConnel

 Chairwoman of the Board

 Date:

 By:

 /s/
 Anthony Ambrose

 Anthony
 Ambrose

 Director

 Date:

 By:

 /s/ Kevin Powers

 Kevin Powers

 Director

 Date:

 By:

 /s/ Hugh Regan, Jr.

 Hugh Regan, Jr.

 Director