DEF 14A: SideChannel, Inc. Seeks Stockholder Approval for Reverse Stock Split and Board Elections at Upcoming Annual Meeting

SideChannel, Inc. is holding its annual meeting on February 12, 2025, to elect directors, ratify the appointment of its accounting firm, and approve a potential reverse stock split to facilitate a future uplisting to NYSE American or Nasdaq.

Summary

• SideChannel, Inc. will hold its Annual Meeting of Stockholders on February 12, 2025, at its Worcester, MA office.
• Stockholders will vote on three proposals: electing five members to the Board of Directors, ratifying the appointment of RBSM, LLP as the independent registered public accounting firm for the fiscal year ending September 30, 2025, and approving an amendment to the company's certificate of incorporation to effectuate a reverse stock split.
• The reverse stock split ratio will be between 1-for-2 and 1-for-200, determined at the Board's discretion.
• The Board has set December 19, 2024, as the record date for determining stockholders eligible to vote.
• The company is making proxy materials available online and intends to mail a Notice of Internet Availability of Proxy Materials on or about December 31, 2024.
• As of the record date, there were 225,975,331 shares of common stock outstanding, each entitled to one vote.
• The Board recommends voting for all director nominees, ratifying the accounting firm, and approving the reverse stock split.
• The company's goal for the reverse stock split is to meet the minimum bid price requirements for listing on NYSE American or Nasdaq.
• The company paid $77,500 in board fees during the year ended September 30, 2024.
• The company paid RealCISO $30,160 for licenses and received $122,284 for software development services during fiscal year 2024.

Sentiment

Score: 6

Explanation: The document is neutral in tone, primarily focusing on procedural matters related to the annual meeting and the potential reverse stock split. While the potential uplisting is a positive development, there are also risks and uncertainties associated with it.

Positives

• The company is taking steps to potentially uplist to a major exchange (NYSE American or Nasdaq), which could increase visibility and attract more investors.
• The Board is recommending actions that they believe are in the best interest of the company and its stockholders.
• The company has an Audit Committee in place to oversee financial reporting and internal controls.
• The company has adopted a formal Code of Ethics applicable to all Board members, officers, and employees.

Negatives

• There is no guarantee that the reverse stock split will increase the stock price or that the company will meet all listing requirements for NYSE American or Nasdaq.
• A reverse stock split could decrease the liquidity of the company's common stock and result in higher transaction costs.
• The company does not currently meet certain of the other NYSE American or Nasdaq listing standards.
• The company may continue to require significant proceeds from sales of its debt or equity securities to fund its operations for the near future, which will cause further dilution to stockholders.

Risks

• The reverse stock split may not increase the stock price sufficiently to meet the minimum bid price requirement for NYSE American or Nasdaq listing.
• The reverse stock split could decrease the liquidity of the company's common stock.
• The company may not meet all other listing requirements for NYSE American or Nasdaq, even if the reverse stock split is approved.
• The company's access to capital could be limited if it is unable to uplist to NYSE American or Nasdaq.
• The company may continue to require significant proceeds from sales of its debt or equity securities to fund its operations for the near future, which will cause further dilution to stockholders.

Future Outlook

The company is considering a reverse stock split to potentially meet listing requirements for NYSE American or Nasdaq, but there is no guarantee that this will be successful or that the company will meet all listing requirements.

Management Comments

• Management believes that a reverse stock split could increase the market price of our common stock sufficiently to satisfy the Minimum Bid Price Requirement in the near term.
• The Board has weighed the potential harm to us and our stockholders resulting from an inability to uplist to NYSE American or Nasdaq against the potential harm to us and our stockholders from a significant reverse stock split.
• Management does not anticipate that our financial condition, the percentage ownership of common stock by management, the number of our stockholders, or any aspect of our business will materially change as a result of the Reverse Stock Split.

Industry Context

Many companies with low stock prices consider reverse stock splits to improve their stock's appeal to institutional investors and meet exchange listing requirements. The cybersecurity industry is competitive, and uplisting to a major exchange could provide SideChannel with increased visibility and access to capital.

Comparison to Industry Standards

• Reverse stock splits are a relatively common strategy for companies trading on over-the-counter markets seeking to list on major exchanges like NYSE or Nasdaq.
• Many companies in the technology sector, particularly those in cybersecurity, aim to list on major exchanges to attract institutional investors and increase their market capitalization.
• Comparable companies in the cybersecurity space, such as CrowdStrike or Palo Alto Networks, trade on Nasdaq and have significantly higher stock prices and market capitalizations than SideChannel.
• The minimum bid price requirement for listing on NYSE American and Nasdaq is typically $4.00 per share, which SideChannel's current stock price does not meet.

Management Changes

Related Party Transactions

• SideChannel paid RealCISO $30,160 and $25,980 for licenses in fiscal years 2024 and 2023, respectively.
• SideChannel received $122,284 and $62,700 from RealCISO for software development services in fiscal years 2024 and 2023, respectively.
• On October 13, 2023, the Association of the US Army (AUSA) signed an agreement for a cybersecurity risk assessment for $24,425.
• On July 8, 2024, AUSA signed an agreement for recurring vCISO Services which will generate $108,000 of annual revenue for the Company.

Stakeholder Impact

• Approval of the reverse stock split could impact shareholders by potentially increasing the stock price and attracting more investors, but it also carries the risk of decreased liquidity.
• The potential uplisting to NYSE American or Nasdaq could benefit shareholders by increasing the company's visibility and access to capital.
• Employees could benefit from the company's increased success and growth if the uplisting is successful.
• The ratification of the independent auditor ensures the integrity of the company's financial reporting, which is important for all stakeholders.

Next Steps

• Stockholders will vote on the proposals at the Annual Meeting on February 12, 2025.
• The Board will determine whether to implement the reverse stock split and at what ratio, based on market conditions and other factors.
• If the reverse stock split is implemented, the company will file a Certificate of Amendment with the Secretary of State of Delaware.
• The company may apply to have its common stock listed on NYSE American or Nasdaq in the future.

Key Dates

Keywords

reverse stock split, annual meeting, proxy statement, board of directors, stockholders, RBSM LLP, uplisting, NYSE American, Nasdaq, common stock, directors, audit committee, executive compensation, RealCISO