UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
Filed
by the Registrant ☒
Filed
by a Party other than the Registrant ☐
Check
the appropriate box:
| ☐ |
Preliminary
Proxy Statement |
| ☐ |
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☒ |
Definitive
Proxy Statement |
| ☐ |
Definitive
Additional Materials |
| ☐ |
Soliciting
Material under §240.14a-12 |
SideChannel,
Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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No
fee required |
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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(1) |
Title
of each class of securities to which transaction applies: |
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(2) |
Aggregate
number of securities to which transaction applies: |
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(3) |
Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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(4) |
Proposed
maximum aggregate value of transaction: |
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(5) |
Total
fee paid: |
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Fee
paid previously with preliminary materials. |
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box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its
filing. |
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(1) |
Amount
Previously Paid: |
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(2) |
Form,
Schedule or Registration Statement No.: |
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Party: |
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SIDECHANNEL,
INC.
146
Main Street, Suite 405
Worcester,
MA 01608
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held on February 12, 2025
Dear
Stockholder:
We
are pleased to invite you to attend the annual meeting of stockholders (the “Annual Meeting”) of SideChannel, Inc. (the “Company”),
which will be held on February 12, 2025, at 9:00 a.m. Eastern time at the Company’s office at 146 Main Street, Suite 405, Worcester,
MA 01608, for the following purposes:
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1. |
To
elect five members to our Board of Directors (“Board”); |
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2. |
To
ratify the appointment of RBSM, LLP as our independent registered public accounting firm for our fiscal year ending September 30,
2025; |
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3. |
To
approve the amendment of the Company’s certificate of incorporation, as amended, to effectuate a reverse stock split of the
Company’s outstanding shares of common stock, at a ratio of no less than 1-for-2 and no more than 1-for-200, with such ratio
to be determined by our Board in its sole discretion; and |
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4. |
To
transact such other matters as may properly come before the Annual Meeting and any adjournment or postponement thereof. |
The
Board has fixed the close of business on December 19, 2024 (the “Record Date”) as the record date for a determination of
stockholders entitled to notice of, and to vote at, the Annual Meeting or any adjournment or postponement thereof.
If
You Plan to Attend
Please
note that space limitations make it necessary to limit attendance of the Annual Meeting to our stockholders. Registration and seating
will begin at 8:30 a.m. Eastern time.
For
admission to the Annual Meeting, each stockholder may be asked to present valid picture identification, such as a driver’s license
or passport, and proof of stock ownership as of the Record Date, such as the enclosed proxy card or a brokerage statement reflecting
stock ownership. Cameras, recording devices and other electronic devices will not be permitted at the Annual Meeting. Your vote at the
Annual Meeting is especially important. If you do not plan on attending the Annual Meeting, please vote, date, and sign the enclosed
proxy and return it in the business envelope provided. Even if you do plan to attend the Annual Meeting, we recommend that you vote your
shares at your earliest convenience in order to ensure your representation at the Annual Meeting.
If
you have questions or need assistance voting your shares, please contact Computershare by calling 1-866-595-6048.
| Dated:
December 31, 2024 |
By
the Order of the Board of Directors |
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|
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/s/
Ryan Polk |
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Ryan
Polk |
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Secretary
of the Board of Directors |
Whether
or not you expect to attend the Annual Meeting in person, we urge you to vote your shares at your earliest convenience. This will ensure
the presence of a quorum at the Annual Meeting. Promptly voting your shares will save the Company the expenses and extra work of additional
solicitation. An addressed envelope for which no postage is required if mailed in the United States is enclosed if you wish to vote by
mail. Submitting your proxy now will not prevent you from voting your shares at the Annual Meeting if you desire to do so, as your proxy
is revocable at your option. Your vote is important, so please act today!
SIDECHANNEL,
INC.
146
Main Street, Suite 405
Worcester,
MA 01608
PROXY
STATEMENT FOR THE
ANNUAL
MEETING OF STOCKHOLDERS
TO
BE HELD ON FEBRUARY 12, 2025
The
Board of Directors (the “Board”) of SideChannel, Inc. (the “Company”) is soliciting your proxy to vote at the
annual meeting of stockholders (the “Annual Meeting”) to be held on February 12, 2025, at 9:00 a.m. Eastern time at 146 Main
Street, Suite 405, Worcester, MA 01608, including at any adjournments or postponements of the Annual Meeting.
Our
Board is asking you to vote your shares by completing, signing, and returning a proxy card or by voting over the Internet. If you attend
the Annual Meeting in person, you may vote at the Annual Meeting even if you have previously returned a proxy card. Please note, however,
that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the Annual Meeting, you must obtain
a proxy issued in your name from that record holder as described in more detail below.
INTERNET
AVAILABILITY OF PROXY MATERIALS
As
permitted by Securities and Exchange Commission (“SEC”) rules, we are making this proxy statement and our annual report available
to our stockholders primarily via the Internet, rather than mailing printed copies of these materials to each stockholder. We believe
that this process will expedite stockholders’ receipt of the proxy materials, lower the costs of the Annual Meeting, and help to
conserve natural resources. On or about December 31, 2024, we intend to begin mailing to each stockholder a Notice of Internet Availability
of Proxy Materials (the “Notice”) containing instructions on how to access and review the proxy materials, including our
proxy statement and our annual report, on the Internet and how to access an electronic proxy card to vote on the Internet or by telephone.
The Notice also contains instructions on how to receive a paper copy of the proxy materials. If you receive the Notice by mail, you will
not receive a printed copy of the proxy materials unless you request one. If you receive the Notice by mail and would like to receive
a printed copy of our proxy materials, please follow the instructions included in the Notice. Only stockholders who owned our common
stock on December 19, 2024 (the “Record Date”) are entitled to vote at the Annual Meeting.
Important
Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to be Held on February 12, 2025:
The
Notice of Meeting, Proxy Statement, and our 2024 Annual Report on Form 10-K are available at:
www.edocumentview.com/SDCH
|
QUESTIONS
AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
What
is a proxy?
A
proxy is the legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone
as your proxy in a written document, that document is also called a proxy or a proxy card. By completing, signing, and returning the
accompanying proxy card, you are designating the individuals identified on the proxy card as your proxy for the Annual Meeting and you
are authorizing those individuals to vote your shares at the Annual Meeting as you have instructed on the proxy card. This way, your
shares will be voted whether or not you attend the Annual Meeting. Even if you plan to attend the Annual Meeting, we urge you to vote
in one of the ways described below so that your vote will be counted even if you are unable or decide not to attend the Annual Meeting.
What
is a proxy statement?
A
proxy statement is a document that we are required by regulations of the SEC to give you when we ask you to sign a proxy card designating
the individuals identified on the proxy card to vote on your behalf.
Why
did you send me this proxy statement?
We
sent you this proxy statement and proxy card because our Board is soliciting your proxy to vote at the Annual Meeting and any adjournment
and postponement thereof. This proxy statement summarizes information related to your vote at the Annual Meeting. All stockholders who
find it convenient to do so are cordially invited to attend the Annual Meeting. However, you do not need to attend the meeting to vote
your shares. Instead, you may simply complete, sign and return the proxy card by mail or vote over the Internet or by phone.
On
or about December 31, 2024, we intend to begin mailing to each stockholder a Notice of Internet Availability of Proxy Materials containing
instructions on how to access and review the proxy materials, including our proxy statement and our annual report, on the Internet and
how to access an electronic proxy card to vote on the Internet. Only stockholders who owned our common stock on the Record Date are entitled
to vote at the Annual Meeting.
What
Does it Mean if I Receive More than one set of proxy materials?
If
you receive more than one set of proxy materials, your shares may be registered in more than one name or in different accounts. Please
complete, sign, and return each proxy card to ensure that all of your shares are voted.
How
do I attend the Annual Meeting?
The
Annual Meeting will be held on February 12, 2025, at 9:00 a.m. Eastern time at 146 Main Street, Suite 405, Worcester, MA 01608. Information
on how to vote in person at the Annual Meeting is discussed below.
Who
is Entitled to Vote?
The
Board has fixed the close of business on December 19, 2024, as the Record Date for the determination of stockholders entitled to notice
of, and to vote at, the Annual Meeting or any adjournment or postponement thereof. On the Record Date, there were 225,975,331 shares
of common stock, $0.001 par value, outstanding. Each share of common stock is entitled to one vote that may be cast on each proposal
that may come before the Annual Meeting.
What
is the Difference Between Holding Shares as a Record Holder and as a Beneficial Owner (Holding Shares in Street Name)?
If
your shares are registered in your name with our transfer agent, Computershare Limited, you are the “record holder” of those
shares. If you are a record holder, a Notice of Internet Availability of Proxy Materials with instructions on how to obtain these proxy
materials was provided directly to you by the Company.
If
your shares are held in a stock brokerage account, a bank or other holder of record, you are considered the “beneficial owner”
of those shares held in “street name.” If your shares are held in street name, the Notice has been forwarded to you by that
organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual
Meeting. As the beneficial owner, you have the right to instruct this organization on how to vote your shares. See “How Will my
Shares be Voted if I Give No Specific Instruction?” below for information on how shares held in street name will be voted without
instructions provided.
Who
May Attend the Annual Meeting?
Only
record holders and beneficial owners of our common stock, or their duly authorized proxies, may attend the Annual Meeting. If your shares
of common stock are held in street name, you will need to provide a copy of a brokerage statement or other documentation reflecting your
stock ownership as of the Record Date.
What
am I Voting on?
There
are three matters scheduled for a vote:
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1.
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To
elect five members to our Board; |
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|
|
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2. |
To
ratify the appointment of RBSM, LLP as our independent registered public accounting firm for the fiscal year ending September 30,
2025; and |
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|
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3. |
To
approve the amendment of the Company’s certificate of incorporation, as amended (the “Certificate of Incorporation”),
to effectuate a reverse stock split of the Company’s outstanding shares of common stock, at a ratio of no less than 1-for-2
and no more than 1-for-200, with such ratio to be determined by our Board in its sole discretion (the “Reverse Stock Split”). |
What
if another matter is properly brought before the Annual Meeting?
The
Board knows of no other matters that will be presented for consideration at the Annual Meeting. The proxy also has discretionary authority
to vote to adjourn the Annual Meeting, including for the purpose of soliciting votes in accordance with our Board’s recommendations.
If any other matters are properly brought before the Annual Meeting, it is the intention of the person named in the accompanying proxy
to vote on those matters in accordance with his best judgment.
How
Do I Vote?
| MAIL |
|
INTERNET |
Send
your signed proxy card or voter instruction card to:
Proxy
Services
C/O
Computershare Investor Services
PO
Box 43101
Providence,
RI 02940-5067 |
|
Click
this link:
www.envisionreports.com/SDCH |
Stockholders
of Record
If
you are a registered stockholder, you may vote by mail, Internet, phone or online at the Annual Meeting by following the instructions
in the Notice. You also may submit your proxy by mail by following the instructions included with your proxy card. The deadline for submitting
your proxy by Internet is 11:59 p.m. Eastern Time on February 11, 2025. Our Board’s designated proxies identified in the proxy
card, will vote your shares according to your instructions. If you attend the Annual Meeting, you also will be able to vote your shares
at the meeting up until the time the polls are closed.
Beneficial
Owners of Shares Held in Street Name
If
you are a street name holder, your broker or nominee firm is the legal, registered owner of the shares, and it may provide you with the
Notice. Follow the instructions on the Notice to access our proxy materials and vote or to request a paper or email copy of our proxy
materials. The materials include a voting instruction card so that you can instruct your broker or nominee how to vote your shares. Please
check the Notice or voting instruction card or contact your broker or other nominee to determine whether you will be able to deliver
your voting instructions by Internet in advance of the meeting and whether, if you attend the Annual Meeting, you will be able to vote
your shares at the meeting up until the time the polls are closed.
All
shares entitled to vote and represented by a properly completed and executed proxy received before the Annual Meeting and not revoked
will be voted at the Annual Meeting as instructed in a proxy delivered before the Annual Meeting. We provide Internet proxy voting to
allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions.
However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access
providers and telephone companies.
IMPORTANT:
If you vote by Internet, please DO NOT mail your proxy card.
How
Many Votes do I Have?
On
each matter to be voted upon, you have one vote for each share of common stock you own as of the close of business on the Record Date.
Is
My Vote Confidential?
Yes,
your vote is confidential. Only the inspector of elections, individuals who help with processing and counting your votes and persons
who need access for legal reasons will have access to your vote. This information will not be disclosed, except as required by law.
What
Constitutes a Quorum?
To
carry on business at the Annual Meeting, we must have a quorum. A quorum is present when a majority of the shares entitled to vote, as
of the Record Date, are represented in person or by proxy. Thus, 112,987,666 shares must be represented in person or by proxy to have
a quorum at the Annual Meeting. Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted
on your behalf by your broker, bank, or other nominee) or if you vote in via the Internet or person at the Annual Meeting. Abstentions
and broker non-votes will be counted towards the quorum requirement. Shares owned by the Company are not considered outstanding or considered
to be present at the Annual Meeting. If there is not a quorum at the Annual Meeting, either the chairperson of the Annual Meeting or
our stockholders entitled to vote at the Annual Meeting may adjourn the Annual Meeting.
How
Will my Shares be Voted if I Give No Specific Instruction?
We
must vote your shares as you have instructed. If there is a matter on which a stockholder of record has given no specific instruction
but has authorized us generally to vote the shares, they will be voted as follows:
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1.
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“For”
the election of the Board of Directors’ five nominees to our Board; |
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2. |
“For”
the ratification of the appointment of RBSM, LLP as our independent registered public accounting firm for the fiscal year ending
September 30, 2025; |
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3. |
“For”
approval of the amendment of the Company’s Certificate of Incorporation to effectuate the Reverse Stock Split. |
This
authorization would exist, for example, if a stockholder of record merely signs, dates, and returns the proxy card but does not indicate
how the stockholder’s shares are to be voted on one or more proposals. If other matters properly come before the Annual Meeting
and you do not provide specific voting instructions, your shares will be voted at the discretion of the Board’s designated proxies.
If
your shares are held in street name, see “What is a Broker Non-Vote?” below regarding the ability of banks, brokers, and
other such holders of record to vote the uninstructed shares of their customers or other beneficial owners in their discretion.
How
are Votes Counted?
Votes
will be counted by the inspector of election appointed for the Annual Meeting, who will separately count, for the election of Directors,
“For,” “Withhold” and broker non-votes; and, with respect to the other proposals, votes “For” and
“Against,” abstentions and broker non-votes. With respect to the election of Directors, only shares that are voted in favor
of the nominee will be counted toward the achievement of a plurality and, as a result, where a stockholder properly withholds authority
to vote for a particular nominee, such shares will not be counted toward such nominee’s or any other nominee’s achievement
of a plurality.
What
is a Broker Non-Vote?
A
“broker non-vote” occurs when shares held by a broker in “street name” for a beneficial owner are not voted with
respect to a proposal because (1) the broker has not received voting instructions from the stockholder who beneficially owns the shares,
and (2) the broker lacks the authority to vote the shares at their discretion.
What
is an Abstention?
An
abstention is a stockholder’s affirmative choice to decline to vote on a proposal. Under Delaware law, abstentions are counted
as shares present and entitled to vote at the Annual Meeting. Generally, unless provided otherwise by applicable law, our amended and
restated bylaws (the “Bylaws”) provide that an action of our stockholders (other than the election of Directors) is approved
if a majority of the number of shares of stock present at the meeting (either in person or by proxy) vote in favor of the proposal. Therefore,
if a stockholder abstains from voting on Proposal No. 3, for example, such shares are considered present at the Annual Meeting for such
proposal but, since they are not affirmative votes for the proposal, they will have the same effect as votes against the proposal.
How
many votes are required to approve each proposal?
The
table below summarizes the proposals that will be voted on, the vote required to approve each item and how votes are counted:
| Proposal |
|
Votes
Required |
|
Voting
Options |
|
Impact
of “Withhold” or “Abstain” Votes |
| Proposal
No. 1: Election of Directors |
|
The
plurality of the votes cast. This means that the nominees receiving the highest number of affirmative “FOR” votes will
be elected as Directors. |
|
“FOR”
“WITHHOLD” |
|
None |
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|
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|
|
|
|
| Proposal
No. 2: Ratification of Appointment of Independent Registered Public Accounting Firm |
|
The
affirmative vote of the holders of a majority in voting power of the votes which could be cast affirmatively or negatively at the
Annual Meeting by the holders entitled to vote thereon. |
|
“FOR”
“AGAINST” “ABSTAIN” |
|
Against
(1) |
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|
|
|
|
|
|
Proposal
No. 3:
Amendment
of Certificate of Incorporation to Effectuate Reverse Stock Split |
|
The
affirmative vote of the holders of a majority in voting power of the votes which could be cast affirmatively or negatively at the
Annual Meeting by the holders entitled to vote thereon. |
|
“FOR”
“AGAINST” “ABSTAIN” |
|
Against
(1) |
| (1)
|
A
vote marked as an “Abstention” is a vote that could be cast at the Annual Meeting and, therefore, will be treated as
a vote against the proposal. |
What
Are the Voting Procedures?
In
voting by proxy with regard to the election of Directors, you may vote in favor of the nominee or withhold your votes as to the nominee.
With regard to other proposals, you may vote in favor of or against the proposal, or you may abstain from voting on the proposal. You
should specify your respective choices on the accompanying proxy card or your vote instruction form.
Is
My Proxy Revocable?
You
may revoke your proxy and reclaim your right to vote at any time before your proxy is voted by giving written notice to the Corporate
Secretary of the Company by delivering a properly completed, later-dated proxy card or vote instruction form or by voting in person at
the Annual Meeting. All written notices of revocation and other communications with respect to revocations of proxies should be addressed
to: SideChannel, Inc., 146 Main Street, Suite 405, Worcester, MA 01608 Attention: Corporate Secretary. Your most current proxy card or
Internet proxy is the one that will be counted.
Who
is Paying for the Expenses Involved in Preparing and Mailing this Proxy Statement?
All
of the expenses involved in preparing, assembling and mailing these proxy materials and all costs of soliciting proxies will be paid
by us. In addition to the solicitation by mail, proxies may be solicited by our Directors, officers and other employees, personally or
by telephone, facsimile or email. Such persons will receive no compensation for their services in connection with these solicitation
activities other than their regular salaries. Arrangements will also be made with brokerage houses and other custodians, nominees, and
fiduciaries to forward solicitation materials to the beneficial owners of the shares held of record by such persons, and we may reimburse
such persons for reasonable out of pocket expenses incurred by them in forwarding solicitation materials. If you have any questions or
require any assistance with completing your proxy, please contact Computershare by telephone at 1-866-595-6048.
Do
I Have Dissenters’ Rights of Appraisal?
Stockholders
do not have appraisal rights under Delaware law or under our governing documents with respect to Proposal No. 1 (Election of Directors),
Proposal No. 2 (Ratification of Appointment of Independent Registered Public Accounting Firm), or Proposal No. 3 (Amendment of Certificate
of Incorporation to Effectuate Reverse Stock Split).
How
can I Find out the Results of the Voting at the Annual Meeting?
Preliminary
voting results will be announced at the Annual Meeting. In addition, final voting results will be disclosed in a Current Report on Form
8-K that we expect to file with the SEC within four business days after the Annual Meeting. If final voting results are not available
to us in time to file a Form 8-K with the SEC within four business days after the Annual Meeting, we intend to file a Form 8-K to publish
preliminary results and, within four business days after the final results are known to us, file an amended Form 8-K to publish the final
results.
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
The
size of our Board has been set at seven members. At the Annual Meeting, the stockholders will elect five Directors to hold office until
the next annual meeting of stockholders. As of the Record Date, there are two vacancies on our Board. The Board expects to initiate a
search for individuals to fill the two vacancies and may appoint individuals to fill these vacancies as it sees fit. Directors are elected
by a plurality of votes cast by stockholders. Accordingly, the nominees receiving the highest number of affirmative votes will be elected
as Directors. In the event the nominee is unable or unwilling to serve as a Director at the time of the Annual Meeting, proxies will
be voted for any substitute nominee designated by the present Board or the proxy holders to fill such vacancy. The Board has no reason
to believe that the persons named below will be unable or unwilling to serve as nominees or as Directors if elected.
Assuming
a quorum is present, the five nominees receiving the highest number of affirmative votes of shares entitled to be voted for such persons
will be elected as our Directors to serve until their successors are elected and qualified. Unless marked otherwise, proxies received
will be voted “FOR” the election of the nominees named below. In the event that additional persons are nominated for election
as Directors, the proxy holders intend to vote all proxies received by them in such a manner as will ensure the election of the nominee
listed below, and, in such event, the specific nominees to be voted for will be determined by the proxy holders.
Information
with Respect to Director Nominees
Listed
below are the persons nominated by the Board of Directors for election as our Directors to hold office until their successors are elected
and qualified, and their ages as of December 31, 2024.
| Name | |
Age | |
| Robert Brown | |
| 65 | |
| Brian Haugli | |
| 44 | |
| Nick Hnatiw | |
| 44 | |
| Deborah MacConnel | |
| 61 | |
| Hugh Regan, Jr. | |
| 64 | |
Robert
Brown – Director
General
(Retired) Brown joined our Board in February 2024. He has served as the Chief Executive Officer of the Association of the United States
Army (AUSA) since October 2021. AUSA is the Army’s premier non-profit association that over the last 75 years has educated, informed
and connected America with the Army. He graduated from the United States Military Academy, West Point in 1981 and served in critical
leadership positions involved in disaster response operations, peacekeeping operations in Haiti, and Bosnia and combat operations in
the middle east throughout his 38 years of service. He attained the highest rank in the military, serving as a 4 Star General with his
final command position of the United States Army Pacific, with responsibility for 126,000 soldiers and half the earth’s surface
in the Pacific theater. The Armed Services YMCA (ASYMCA) has benefited from General Brown’s participation on the National Board
of Directors since April 2020, and he was recently selected to be the Chairman of the ASYMCA Board in January 2024. He earned a Master
of Education from the University of Virginia and a Master of Science in National Security and Strategic Studies from the National War
College where he was a Distinguished Graduate. We believe General Brown is qualified to serve as a Director because of his extensive
national security and leadership experience.
Brian
Haugli - Director and Chief Executive Officer
Mr.
Haugli is our Chief Executive Officer and has served in that role since our incorporation in 2019 while simultaneously serving as a Director.
During October 2020, Mr. Haugli founded RealCISO, Inc., a cybersecurity risk assessment SaaS platform, and has been the creator and host
of #CISOlife YouTube and Podcast since August 2019. Mr. Haugli worked for the Hanover Insurance Group,
a leading property and casualty insurance carrier, offering broad and innovative insurance protection
for small and mid-sized businesses, from May 2015 to April 2019, most recently as VP and Chief Security Officer. Mr. Haugli was an Adjunct
Professor at Boston College from June 2020 through January 2022, and from September 2019 to August 2020, he was an advisor to zScaler,
which uses zero trust principles, to help IT move away from legacy network infrastructure
to achieve modern workplace enablement, infrastructure modernization, and security transformation. Mr. Haugli received his Bachelor
of Technology in Network Administration from the State University of New York at Morrisville. We
believe Mr. Haugli is qualified to serve as the Chief Executive Officer and Director based on his cybersecurity leadership experience.
Nick
Hnatiw – Director and Chief Technology Officer
Mr.
Hnatiw serves as the Company’s Chief Technology Officer since November 2020 and was elected to our Board in February 2024. Mr.
Hnatiw has more than 15 years of experience creating software technologies from network security to artificial intelligence. Mr. Hnatiw
has led the design and development of a security risk assessment SaaS platform, run a security monitoring service with a custom-built
next generation automation and SIEM system. Prior to joining the Company, Mr. Hnatiw served as the technical director for network operations
supporting U.S. Cyber Command, U.S. Intelligence Agencies, and other Department of Defense research organizations from October 2010 to
October 2014. From June 2015 to September 2019, Mr. Hnatiw was the Chief Executive Officer of Loki Labs, a cyber security firm. Mr. Hnatiw
is also a stockholder of RealCISO.io (since October 2020). Mr. Hnatiw earned a Bachelor of Science degree in computer engineering and
computer science at the University of Massachusetts, Amherst. We believe Mr. Hnatiw is qualified to serve as the Chief Technology Officer
and Director based on his technology leadership experience.
Deborah
MacConnel – Director
Ms.
MacConnel has served as a Member of our Board of Directors since July 2022. Ms. MacConnel has been involved in the computer industry
for 34 years, retiring April 2022 from International Business Machines Corporation (“IBM”) (NYSE: IBM) after 28 years. Prior
to her retirement, Ms. MacConnel was instrumental in transforming information technology for IBM’s human resource function, which
supported up to 450,000 employees. Ms. MacConnel’s team at IBM was also responsible for revamping the succession planning process
for executive selection and promotion, along with enhancing the processes for Mergers and Acquisition and Talent Acquisition. Ms. MacConnel
has a Bachelor of Science in Business Administration from the University of Texas. We believe Ms. MacConnel is qualified to serve as
a member of our Board because of her experience scaling global teams for technology companies.
Hugh
Regan, Jr. – Director
Mr.
Regan has served as a Member of our Board of Directors since July 2022. Mr. Regan retired in June 2021 from his role as Secretary, Treasurer
and Chief Financial Officer of inTEST Corporation (NYSE: INTT), a publicly traded manufacturer of capital equipment used in the semiconductor
industry and other markets. He currently works as a private consultant to businesses, assisting them with various strategic issues. Mr.
Regan served in various roles at inTEST for just over 25 years, from April 1996 until June 2021. Prior to joining inTEST, Mr. Regan served
in multiple financial capacities for Value Property Trust, a publicly traded real estate investment trust, including Vice President of
Finance from 1989 to September 1995 and Chief Financial Officer from September 1995 until April 1996. Mr. Regan received his Bachelor
of Science in Commerce with majors in Accounting and Finance from Rider University and is a Certified Public Accountant licensed in New
Jersey. We believe Mr. Regan is qualified to serve on
our Board based on his finance and public company reporting oversight experience.
Family
Relationships and Other Arrangements
There
are no family relationships among our Directors and executive officers. There are no arrangements or understandings between or among
our Directors and executive officers pursuant to which any Director or executive officer was or is to be selected as a Director or executive
officer.
Involvement
in Certain Legal Proceedings
To
the best of our knowledge, except as discussed in the individual biographies of our executive officers and Directors, above or disclosed
herein, none of our Directors or executive officers has been involved in any of the following events during the past 10 years: (1) any
bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being a named subject to a pending
criminal proceeding (excluding traffic violations and minor offenses); (3) being subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or banking activities; (4) being found by a court of competent
jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities
or commodities law; (5) being the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree,
or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of (i) any Federal or State securities
or commodities law or regulation; (ii) any law or regulation respecting financial institutions or insurance companies, including, but
not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent
cease-and-desist order, or removal or prohibition order, or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection
with any business entity; or (6) being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or
vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)), any registered entity (as defined in Section (1a)(40) of the Commodity Exchange Act), or any equivalent
exchange, association, entity, or organization that has disciplinary authority over its members or persons associated with a member.
Board
Leadership Structure and Role in Risk Oversight
We
have a separate Chairwoman and Chief Executive Officer leadership structure with Deborah MacConnel serving as the Chairwoman of our Board
and Brian Haugli serving as Chief Executive Officer. It is our present intent to maintain a separation of roles between Chairwoman of
the Board and the Chief Executive Officer. The Chairperson of the Board will be elected by the Directors after each Annual Meeting.
All
of our Directors attended more than 75% of the aggregate number of meetings of the Board and each committee on which they served during
the period of their service. In the fiscal year ended September 30, 2024, the Board met eleven times.
We
require our Directors to attend the annual meeting of stockholders; however, they may be excluded from doing so if an unavoidable conflict
arises. [All Directors attended our last annual meeting.]
Our
Board of Directors exercises general oversight of risk in our business operations, communicating regularly with our management regarding
risk and our possible exposure to risk in our operations.
Our
Board has established an Audit Committee which operates pursuant to a charter adopted by our Board. The Audit Committee has the composition
and responsibilities described below. The Charter of this committee is available online at https://investors.sidechannel.com/corporate-governance.
We do not have a Compensation Committee or a Nominating and Corporate Governance Committee. Our Board may establish other committees
from time to time.
Director
Independence
The
Board considers Messrs. Brown and Regan, and Ms. MacConnel to be “independent” under the independent director requirements
of the Nasdaq Stock Market LLC.
Audit
Committee
Messrs.
Brown and Regan, and Ms. MacConnel serve as members of the Audit Committee, and Mr. Regan acts as Chairman of the Audit Committee. The
Board has determined that Mr. Regan is an audit committee financial expert under the rules established by the SEC. The Audit Committee
met four times in the 2024 fiscal year. The Audit Committee’s responsibilities include:
| |
● |
appointing,
approving the compensation of, and assessing the independence of our independent registered public accounting firm; |
| |
|
|
| |
● |
pre-approving
auditing and permissible non-audit services, and the terms of such services, to be provided by our independent registered public
accounting firm; |
| |
|
|
| |
● |
reviewing
the overall audit plan with our independent registered public accounting firm and members of management responsible for preparing
our financial statements; |
| |
|
|
| |
● |
reviewing
and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements
and related disclosures as well as critical accounting policies and practices used by us; |
| |
|
|
| |
● |
coordinating
the oversight and reviewing the adequacy of our internal control over financial reporting; |
| |
● |
establishing
policies and procedures for the receipt and retention of accounting-related complaints and concerns; |
| |
|
|
| |
● |
recommending
based upon the audit committee’s review and discussions with management and our independent registered public accounting firm
whether our audited financial statements will be included in our Annual Reports on Form 10-K; |
| |
|
|
| |
● |
monitoring
the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to our financial
statements and accounting matters; |
| |
|
|
| |
● |
preparing
the audit committee report required by SEC rules to be included in our annual proxy statement; |
| |
● |
reviewing
all related person transactions for potential conflict of interest situations and approving all such transactions; and |
| |
|
|
| |
● |
reviewing
quarterly earnings releases. |
Stockholder
Communications
Although
we do not have a formal policy regarding communications with the Board, stockholders may communicate with the Board by writing to SideChannel,
Inc., 146 Main Street, Suite 405, Worcester, MA 01608. Stockholders who would like their submission directed to a member of the Board
may so specify, and the communication will be forwarded, as appropriate.
Code
of Ethics
We
have adopted a formal Code of Ethics applicable to all Board members, officers, and employees. A copy of our Code of Ethics may be obtained
without charge upon written request to Secretary, SideChannel, Inc., 146 Main Street, Suite 405, Worcester, MA 01608.
Compensation
of Directors
Only
independent directors receive compensation for their services on our Board.
Annual
Director compensation is $15,000 for the Chairperson of the Board and $15,000 for the other Directors with an additional $15,000 earned
by the Director who serves as the Audit Committee chairperson. During the year ended September 30, 2024, we paid $77,500 in board fees.
Our
2021 Omnibus Equity Compensation Plan (“Equity Incentive Plan”) was approved by stockholders on September 13, 2021. We have
made Awards to our Named Executive Officers (as hereinafter defined) and Directors under the Equity Incentive Plan in the form of Restricted
Stock Units (“RSUs”) and stock options for our common stock.
We
also have granted RSUs and stock options to Directors with three-year vesting periods. We calculate grant date fair value of stock-based
compensation in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 718.
During
the year ended September 30, 2024, we granted an aggregate of 3.3 million stock options to Directors with an aggregate grant date
fair value totaling $148,000.
The
following table sets forth summary information concerning the compensation we paid to non-executive Directors for the year ended September
30, 2024:
2024
Director Compensation Table
| Name | |
Fees Earned or Paid in Cash | | |
Stock Awards (1) | | |
Option Awards (2) | | |
All Other Compensation | | |
Total Compensation | |
| Anthony Ambrose (3) | |
$ | 11,250 | | |
$ | 2,063 | | |
$ | | | |
$ | — | | |
$ | 13,313 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Robert Brown | |
| 2,500 | | |
| 1,000 | | |
| 49,200 | | |
| — | | |
| 52,700 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| James Hansen (4) | |
| 3,750 | | |
| 1,500 | | |
| | | |
| — | | |
| 5,250 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Deborah MacConnel | |
| 15,000 | | |
| 4,250 | | |
| 49,200 | | |
| — | | |
| 68,450 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Kevin Powers (4) | |
| 15,000 | | |
| 4,250 | | |
| | | |
| — | | |
| 19,250 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Hugh Regan | |
| 30,000 | | |
| 4,250 | | |
| 49,200 | | |
| — | | |
| 83,450 | |
*
The table above does not include the amount of any expense reimbursements paid to the above Directors.
(1)
Represents the grant date fair value of board fees paid in common stock plus RSUs for our common stock awarded during the fiscal year
calculated in accordance with FASB’s ASC Topic 718. As noted in the details below, RSUs granted with a vesting schedule will typically
vest on a one RSU for one common share ratio over a three year period on a pro rata and be paid in common shares. The shares received
and the average share price used to determine the compensation value to each Director is listed below:
| |
● |
Anthony
Ambrose received 62,501 shares of common stock as board fees with an average fair date value of $0.03 per share. Mr. Ambrose also
received an additional 333,334 shares from the vesting of RSUs granted in prior fiscal years. |
| |
● |
Robert
Brown received 13,889 shares of common stock as board fees with an average fair value grant date value of $0.07 per share. |
| |
● |
James
Hansen received 20,834 shares of common stock as board fees with an average fair value grant date value of $0.07 per share. |
| |
● |
Deborah
MacConnel received 83,334 shares of common stock as board fees with an average fair value grant date value of $0.05 per share. Ms.
MacConnel also received an additional 33,333 shares from the vesting of RSUs granted in prior fiscal years. |
| |
● |
Kevin
Powers received 83,334 shares of common stock as board fees with an average fair value grant date value of $0.05 per share. Mr. Powers
also received an additional 33,333 shares from the vesting of RSUs granted in prior fiscal years. |
| |
● |
Hugh
Regan received 83,334 shares of common stock as board fees with an average fair value grant date value of $0.05 per share. Mr. Regan
also received an additional 33,333 shares from the vesting of RSUs granted in prior fiscal years. |
(2)
Represents the grant date fair value of board fees paid in stock options awarded during the fiscal year calculated in accordance with
FASB’s ASC Topic 718, as indicated below:
| |
● |
Mr.
Brown was awarded stock options to purchase 1.1 million shares of common stock. The grant date fair value of such options was $49,200. |
| |
● |
Mr.
Hansen was awarded stock options to purchase 1.1 million shares of common stock. The grant date fair value of such options was $49,200. |
| |
● |
Ms.
MacConnel was awarded stock options to purchase 1.1 million shares of common stock. The grant date fair value of such options was
$49,200. |
| |
● |
Mr.
Regan was awarded stock options to purchase 1.1 million shares of common stock. The grant date fair value of such options was $49,200. |
(3)
Mr. Ambrose retired from the Board effective February 15, 2024.
(4)
Mr. Hansen resigned from the Board effective June 18, 2024. As a result, his stock options were forfeited.
(5)
Mr. Powers resigned from the Board effective May 7, 2024
Required
Vote of Stockholders
A
plurality of the votes cast at the Annual Meeting is required to elect a nominee as a Director. Accordingly, the nominees receiving the
highest number of affirmative votes will be elected as Directors.
Board
Recommendation
The
Board unanimously recommends a vote “FOR” the election of Robert Brown, Brian Haugli, Nick Hnatiw, Deborah
MacConnel, and Hugh Regan, Jr., as Directors of the Company.
PROPOSAL
NO. 2
RATIFICATION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our
Board has selected RBSM, LLP (“RBSM”) to audit our financial statements for the fiscal year ending September 30, 2025. RBSM
acted as our independent registered public accounting firm for the fiscal year ended September 30, 2024.
Although
stockholder approval of the selection of RBSM is not required by law, our Board believes it is advisable to give stockholders an opportunity
to ratify this selection. If this proposal is not approved at the Annual Meeting, the Board may reconsider its selection of RBSM.
Fees
of Independent Registered Public Accounting Firm
RBSM
acted as our independent registered public accounting firm for the fiscal years ended September 30, 2024 and 2023. The following table
shows the fees that we incurred for audit and other services provided by RBSM for such fiscal years.
| | |
Year Ended September 30, | |
| | |
2024 | | |
2023 | |
| Audit Fees (1) | |
$ | 137,250 | | |
$ | 123,000 | |
| Audit-related Fees (2) | |
| 10,000 | | |
| - | |
| Tax Fees | |
| - | | |
| - | |
| Other Fees | |
| - | | |
| - | |
| Total | |
$ | 147,250 | | |
$ | 123,000 | |
| (1) |
Audit
fees represent fees for professional services provided in connection with the audit of our annual financial statements and the review
of our financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided in connection
with statutory or regulatory filings. RBSM was our only provider of audit services. |
| |
|
| (2) |
Audit-related
fees represent fees for professional services provided in connection with the preparation of Form S-8. RBSM was our only provider of
audit-related services, |
Pre-Approval
Policies and Procedures
All
audit-related services, tax services and other services rendered by RBSM were pre-approved by our Board. The Audit Committee has adopted
a pre-approval policy that provides for the pre-approval of all services performed for us by our independent registered public accounting
firm. Our independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding
the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval policy, and
the fees for the services performed to date.
Interests
of Officers and Directors in this Proposal
Our
officers and Directors do not have any substantial interest, direct or indirect, in this proposal.
Required
Vote of Stockholders
The
affirmative vote of a majority of the votes cast at the Annual Meeting is required to ratify the appointment of the independent registered
public accounting firm.
Board
Recommendation
The
Board unanimously recommends a vote “FOR” the ratification of the appointment of RBSM as our independent registered
public accounting firm.
AUDIT
COMMITTEE REPORT
The
following Audit Committee Report shall not be deemed to be “soliciting material,” deemed “filed” with the SEC
or subject to the liabilities of Section 18 of the Exchange Act. Notwithstanding anything to the contrary set forth in any of the Company’s
previous filings under the Securities Act of 1933, as amended, or the Exchange Act that might incorporate by reference future filings,
including this proxy statement, in whole or in part, the following Audit Committee Report shall not be incorporated by reference into
any such filings.
The
primary function of the Audit Committee is to assist the Board of Directors in its oversight of the Company’s financial reporting
processes. Management is responsible for the Company’s financial statements and overall reporting process, including the system
of internal controls. The independent registered public accounting firm is responsible for conducting annual audits and quarterly reviews
of the Company’s financial statements and expressing an opinion as to the conformity of the annual financial statements with generally
accepted accounting principles.
The
Audit Committee submits the following report pursuant to the SEC rules:
| | ● | We
have reviewed and discussed with management and RBSM, our independent registered public accounting
firm, our audited financial statements as of and for the fiscal year ended September 30,
2024. |
| | ● | RBSM
has advised management of the Company and the Audit Committee that it has discussed with
them all the matters required to be discussed by applicable requirements of the Public Company
Accounting Oversight Board (the “PCAOB”) and the SEC. |
| | ● | We
have received the written disclosures and the letter from RBSM required by applicable requirements
of the PCAOB regarding RBSM’s communications with the Audit Committee concerning independence,
and have discussed with RBSM, their independence from management and the Company. Based on
this evaluation and discussion, we have recommended that RBSM be selected as the Company’s
independent registered public accounting firm for the fiscal year ending September 30, 2025. |
| | ● | Based
on the review and discussions referred to above, as well as representations of RBSM and the
audit opinion presented by RBSM on the 2024 Financial Statements, we recommended to the Board
that the 2024 Financial Statements be included in our Annual Report on Form 10-K for the
fiscal year ended September 30, 2024 for filing with the SEC. |
| |
Submitted
by the Audit Committee, |
| |
|
| |
Hugh
Regan, Jr., Chairman |
| |
|
| |
Robert
Brown |
| |
|
| |
Deborah
MacConnel |
EXECUTIVE
OFFICERS
The
table below identifies and sets forth certain biographical and other information regarding our executive officers as of date of this
proxy statement. There are no family relationships among any of our Directors or executive officers.
| Name |
|
Age |
|
Positions |
| Brian
Haugli |
|
44 |
|
Chief
Executive Officer, Director |
| Nick
Hnatiw |
|
44 |
|
Chief
Technology Officer, Director |
| Ryan
Polk |
|
56 |
|
Chief
Financial Officer |
See
“Proposal No. 1—Election of Directors” for biographical and other information regarding Mr. Haugli and Mr. Hnatiw.
Ryan
Polk – Chief Financial Officer
Mr.
Polk has served as our Chief Financial Officer since February 1, 2020. From January 2019 to September 2020, Mr. Polk served in Chief
Executive Officer and Chief Financial Officer roles for Automated Retail Technologies, which develops and deploys innovative kiosks from
April 2019 through September 2020. Cellpoint Corporation, a mobile phone parts supplier, hired Mr. Polk as Chief Financial Officer from
June 2017 through October 2018. LDI, LLC, a family office investing in portfolio companies, employed Mr. Polk as Vice President, Business
Unit Operations from July 2011 through May 2017. He is a part-time employee of SideChannel and is engaged in providing CEO and CFO services
to other companies. He is a graduate of Purdue University with two Bachelor of Science degrees from the Krannert School of Management.
We believe Mr. Polk is qualified to serve as the Chief Financial Officer based on his finance and leadership experience.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following table sets forth certain information concerning all compensation paid, earned or accrued for service by (i) our principal
executive officer(s) during the fiscal year ended September 30, 2024 and (ii) each of our other two most highly compensated executive
officers who served in such capacity at the end of the fiscal year whose total salary and bonus exceeded $100,000 (collectively, the
“Named Executive Officers”):
2024
SUMMARY COMPENSATION TABLE
| Name and Position | |
Year | |
Salary | | |
Bonus | | |
Stock Awards (1) | | |
All Other Compensation (2) | | |
Total | |
| | |
| |
| | |
| | |
| | |
| | |
| |
| Brian Haugli, | |
2024 | |
$ | 300,000 | | |
$ | 30,400 | | |
$ | 188,383 | | |
$ | 39,130 | | |
$ | 557,913 | |
| Chief Executive Officer | |
2023 | |
$ | 300,000 | | |
$ | — | | |
$ | 222,222 | | |
$ | 44,419 | | |
$ | 566,641 | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| Nicholas Hnatiw, | |
2024 | |
$ | 214,585 | | |
$ | 22,700 | | |
$ | 72,833 | | |
$ | 32,303 | | |
$ | 342,421 | |
| Chief Technology Officer | |
2023 | |
$ | 200,000 | | |
$ | — | | |
$ | 26,667 | | |
$ | 28,329 | | |
$ | 254,996 | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| Ryan Polk, | |
2024 | |
$ | 192,917 | | |
$ | 24,200 | | |
$ | 121,422 | | |
$ | 11,668 | | |
$ | 350,207 | |
| Chief Financial Officer | |
2023 | |
$ | 175,000 | | |
$ | — | | |
$ | 40,000 | | |
$ | 10,344 | | |
$ | 225,344 | |
No
executive officer was granted or earned any option awards, non-equity incentive plan compensation or nonqualified deferred compensation
during the periods reported above.
(1)
Represents the grant date fair value of RSUs for our common stock calculated in accordance with Financial Accounting Standards Board
Accounting Standards Codification Topic 718. The shares received and the average share price used to determine the compensation value
to each officer is listed below:
| |
● |
Brian
Haugli received awards totaling 3,395,985 RSUs at an average grant date fair value of $0.06. RSUs granted to Mr. Haugli that vest
over three years were 2,562,651 and RSUs granted to Mr. Haugli that vested immediately were 833,334. Of the RSUs that vested immediately,
Mr. Haugli received a net quantity of 567,954 shares of common stock after using 265,380 to pay for income tax withholding. Mr. Haugli
also received an additional 592,592 shares from the vesting of RSUs granted in prior fiscal years, of which he received a net quantity
of 384,532 shares of common stock after using 208,060 shares to pay for income tax withholding. |
| |
● |
Nick
Hnatiw received awards totaling 1,283,332 RSUs at an average grant date fair value of $0.06. RSUs granted to Mr. Hnatiw that vest
over three years were 694,444 and RSUs granted to Mr. Hnatiw that vested immediately were 588,888. Of the RSUs that vested immediately,
Mr. Hnatiw received a net quantity of 385,132 shares of common stock after using 203,756 to pay for income tax withholding. Mr. Hnatiw
also received an additional 388,890 shares from the vesting of RSUs granted in prior fiscal years, of which he received a net quantity
of 254,334 shares of common stock after using 134,556 shares to pay for income tax withholding. |
| |
● |
Ryan
Polk received awards totaling 2,194,545 RSUs at an average grant date fair value of $0.06. RSUs granted to Mr. Polk that vest over
three years were 1,708,434 and RSUs granted to Mr. Polk that vested immediately were 486,111. Of the RSUs that vested immediately,
Mr. Polk received a net quantity of 286,902 shares of common stock after using 199,209 to pay for income tax withholding. Mr. Polk
also received 518,519 shares from the vesting of RSUs granted in prior fiscal years, of which he received a net quantity of 306,029
shares of common stock after using 212,490 shares to pay for income tax withholding. |
(2)
All Other Compensation represents the following:
| |
● |
Brian
Haugli
2024:
$23,208 for medical, dental, vision, life, and personal accident insurance, $12,000 for 401(k) match, and $3,922 for a club
membership.
2023:
$21,554 for medical, dental, vision, life, and personal accident insurance, $12,000 for 401(k) match, and $10,865 for a golf
club membership. |
| |
● |
Nick
Hnatiw
2024:
$23,120 for medical, dental, vision, life, and personal accident insurance and $8,583 401(k) match and $600 cell phone reimbursement.
2023:
$20,662 for medical, dental, vision, life, and personal accident insurance and $7,667 401(k) match. |
| |
● |
Ryan
Polk:
2024:
$11,068 for medical, dental, vision, life, and personal accident insurance and $600 cell phone reimbursement.
2023:
$10,344 for medical, dental, vision, life, and personal accident insurance. |
Employment
Contracts
Brian
Haugli
On
July 1, 2022, the Board appointed Brian Haugli as our Chief Executive Officer and Director.
In
connection with Mr. Haugli’s appointment as Chief Executive Officer, we entered into an Employment Agreement dated July 1, 2022
(“Haugli Executive Agreement”), with Mr. Haugli, pursuant to which he will receive a base annual salary of $300,000, payable
in accordance with our standard payroll schedule, and other customary benefits. Mr. Haugli is also eligible to receive (i) an annual
cash bonus based on personal and Company-based metrics; and (ii) annual grants of stock options and/or restricted stock units at the
discretion of our Board. Mr. Haugli is further eligible to receive discretionary bonuses payable from time to time in cash, stock or
options, in the discretion of the Board.
If
we terminate Mr. Haugli’s employment other than for Cause (as defined in the Haugli Employment Agreement) or Mr. Haugli resigns
for Good Reason (as defined in the Haugli Employment Agreement), then we are obligated to pay to Mr. Haugli an amount equal to twenty-four
(24) months of his salary.
During
fiscal year 2024, Mr. Haugli’s annual base salary was $300,000. During fiscal year 2025, Mr. Haugli’s annual base salary
is $327,000.
Nick
Hnatiw
On
July 14, 2021, we hired Nick Hnatiw as our Chief Technology Officer.
We
entered into an Employment Agreement dated June 1, 2021 (“Hnatiw Executive Agreement”), with Mr. Hnatiw pursuant to which
he will receive a base annual salary of $200,000, payable in accordance with our standard payroll schedule, and other customary benefits.
Mr. Hnatiw is also eligible to receive (i) an annual cash bonus based on personal and Company-based metrics; and (ii) annual grants of
stock options and/or restricted stock units at the discretion of our Board. Mr. Hnatiw is further eligible to receive discretionary bonuses
payable from time to time in cash, stock or options, in the discretion of the Board.
If
we terminate Mr. Hnatiw’s employment other than for Cause (as defined in the Hnatiw Employment Agreement) or Mr. Hnatiw resigns
for Good Reason (as defined in the Hnatiw Employment Agreement), then we are obligated to pay to Mr. Hnatiw an amount equal to six months
of his salary.
During
fiscal year 2024, Mr. Hnatiw’s salary was increased to $225,000. During fiscal year 2025, Mr. Hnatiw’s annual base salary
is $236,250.
Ryan
Polk
On
February 1, 2020, the Board appointed Ryan Polk as our Chief Financial Officer.
We
entered into an Employment Agreement dated June 1, 2021 (“Polk Executive Agreement”), with Mr. Polk pursuant to which he
will receive a base annual salary, payable in accordance with our standard payroll schedule, and other customary benefits. Mr. Polk is
also eligible to receive (i) an annual cash bonus based on personal and Company-based metrics; and (ii) annual grants of stock options
and/or restricted stock units at the discretion of our Board. Mr. Polk is further eligible to receive discretionary bonuses payable from
time to time in cash, stock or options, in the discretion of the Board.
If
we terminate Mr. Polk’s employment other than for Cause (as defined in the Polk Employment Agreement) or Mr. Polk resigns for Good
Reason (as defined in the Polk Employment Agreement), then we are obligated to pay to Mr. Polk an amount equal to six months of his salary.
During
fiscal year 2024, Mr. Polk’s salary was decreased to $120,000. During fiscal year 2025, Mr. Polk’s annual base salary is
$130,800.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth information regarding the beneficial ownership of our common stock as of the Record Date by (i) each Named
Executive Officer, (ii) each member of our Board, (iii) each person deemed to be the beneficial owner of more than 5% of our common stock,
and (iv) all of our executive officers and Directors as a group. Unless otherwise indicated, each person named in the following table
is assumed to have sole voting power and investment power with respect to all shares of our stock listed as owned by such person. The
address of each person is deemed to be the address of the Company unless otherwise noted.
Beneficial
ownership is determined in accordance with the rules of the SEC and includes voting and/or investing power with respect to securities.
These rules generally provide that shares of common stock subject to options, warrants or other convertible securities that are currently
exercisable or convertible, or exercisable or convertible within 60 days of the Record Date, are deemed to be outstanding and to be beneficially
owned by the person or group holding such options, warrants or other convertible securities for the purpose of computing the percentage
ownership of such person or group, but are not treated as outstanding for the purpose of computing the percentage ownership of any other
person or group. The percentages are based upon 225,975,331 shares of our common stock outstanding as of the Record Date.
| Name of Beneficial Owner | |
Amount
and Nature of Beneficial Ownership (1) | | |
Percent of Class | |
| Executive Officers and Directors: | |
| | | |
| | |
| Robert Brown (2) | |
| 13,889 | | |
| * | % |
| Brian Haugli (3) | |
| 87,842,142 | | |
| 38.87 | % |
| Nick Hnatiw (4) | |
| 14,324,563 | | |
| 6.34 | % |
| Deborah MacConnel (5) | |
| 330,557 | | |
| * | % |
| Ryan Polk (6) | |
| 1,037,374 | | |
| * | % |
| Hugh Regan, Jr. (7) | |
| 358,335 | | |
| * | % |
| All Directors and executive officers as a group (6 persons) | |
| 103,906,860 | (8) | |
| 45.98 | % |
| Other 5% or Greater Stockholders: | |
| | | |
| | |
| None | |
| | | |
| | |
*Less than 1%
| |
(1) |
Includes
shares of common stock that individuals have the right to acquire within 60 days of the Record Date. |
| |
(2) |
In
addition, as of the Record Date, Mr. Brown has (i) an aggregate of 0 unvested RSUs; and (ii) an aggregate of 1,100,000 unvested stock
options. |
| |
(4) |
In
addition, as of the Record Date, Mr. Haugli has an aggregate of 3,377,467 unvested RSUs. |
| |
(5) |
In
addition, as of the Record Date, Mr. Hnatiw has an aggregate of 1,101,853 unvested RSUs. |
| |
(6) |
In
addition, as of the Record Date, Ms. MacConnel has (i) an aggregate of 1,100,000 unvested stock options; and (ii) an aggregate of
33,334 unvested RSUs. |
| |
(7) |
In
addition, as of the Record Date, Mr. Polk has an aggregate of 2,301,028 unvested RSUs. |
| |
(8) |
In
addition, as of the Record Date, Mr. Regan has (i) an aggregate of 1,100,000 unvested stock options; and (ii) an aggregate of 33,334
unvested RSUs. |
| |
(9) |
In
addition, as of the Record Date, the executive officers and directors, as a group, have (i) an aggregate of 6,857,016 unvested RSUs;
and (ii) an aggregate of 3,300,000 unvested stock options. |
Equity
Compensation Plan Information
From
time to time, the Company makes equity compensation awards to employees, directors, and contractors pursuant to the 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 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. On February 15, 2024, the Board of Directors authorized an increase
of 13,599,834 in the shares reserved for the Equity Incentive Plan. Awards granted under the Equity Incentive Plan in lieu of compensation
are exempt from counting against the reserve.
2021 Omnibus Equity Incentive Plan Reserve (In thousands) | |
Shares of Common Stock | |
| | |
| |
| Initial Reserve at September 13, 2021 | |
| 8,000 | |
| | |
| | |
| Non-exempt Awards | |
| (24,783 | ) |
| Forfeitures | |
| 3,036 | |
| Annual Reserve Increases | |
| 21,786 | |
| | |
| | |
| Reserve at September 30, 2024 | |
| 8,039 | |
| | |
| | |
| Reserve Percent of Outstanding Shares at September 30, 2024 | |
| 3.6 | % |
The
Company has granted and intends to continue granting RSUs to Directors, employees, and certain contractors with service-based vesting
conditions. The RSUs vest over a 3-year service period. The following table summarizes the activity of our RSUs granted under our Equity
Incentive Plan.
RSUs
| Outstanding RSUs | |
Number of RSUs | | |
Weighted Average Grant Date Value Per RSU | |
| (In thousands) | |
| | |
| |
| | |
| | |
| |
| Outstanding Grants at September 30, 2022 | |
| 4,309 | | |
$ | 0.11 | |
| Granted | |
| 8,174 | | |
| 0.10 | |
| Vested | |
| (2,988 | ) | |
| 0.12 | |
| Canceled/Forfeited | |
| (858 | ) | |
| 0.12 | |
| Outstanding Grants at September 30, 2023 | |
| 8,637 | | |
| 0.10 | |
| | |
| | | |
| | |
| Outstanding Grants at September 30, 2023 | |
| 8,637 | | |
| 0.10 | |
| Granted | |
| 11,048 | | |
| 0.05 | |
| Vested | |
| (6,537 | ) | |
| 0.08 | |
| Canceled/Forfeited | |
| (2,000 | ) | |
| 0.10 | |
| Outstanding Grants at September 30, 2024 | |
| 11,148 | | |
$ | 0.06 | |
The
weighted-average remaining vesting period of RSUs at September 30, 2024 was 1.92 years.
Stock
Options
The
following table summarizes the activity of our stock options granted under the Equity Incentive Plan during the year ended September
30, 2024. We did not grant stock options during the year ended September 30, 2023.
| Outstanding Stock Options | |
Number of | |
| (In thousands) | |
Stock Options | |
| Outstanding Grants at September 30, 2023 | |
| — | |
| Granted | |
| 4,400 | |
| Vested | |
| — | |
| Canceled/Forfeited | |
| (1,100 | ) |
| Outstanding Grants at September 30, 2024 | |
| 3,300 | |
Stock
options were granted to our independent directors on June 10, 2024. Each of our four independent directors received 1.1 million stock
options priced at $0.18 with a 3-year vesting period, expiring on June 10, 2034. One independent director resigned from our Board on
June 18, 2024, resulting in the forfeiture of 1.1 million stock options.
The
weighted-average remaining vesting period of stock options at September 30, 2024, was 2.67 years.
The
unamortized stock compensation expense at September 30, 2024 was $667,000 and the remaining weighted average term to vesting was 2.2
years.
EXISTING
EQUITY COMPENSATION PLAN INFORMATION
The
table below shows information with respect to all our equity compensation plans as of September 30, 2024.
| Plan category | |
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(1) | | |
Weighted- average exercise price of outstanding options, warrants and
rights (2) | | |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column
(1)) | |
| (in thousands) | |
| | |
| | |
| |
| Equity compensation plans approved by security holders | |
| 14,448,270 | | |
$ | 0.04 | | |
| 8,039,767 | |
| Equity compensation plans not approved by security holders | |
| N/A | | |
$ | N/A | | |
| N/A | |
| (1) |
This
represents 11,148,270 RSUs and 3,300,000 stock options. |
| |
|
| (2) |
The
exercise price of stock options is $0.18. There is no conversion or exercise price
on the RSUs. |
PROPOSAL
NO. 3:
REVERSE
STOCK SPLIT AMENDMENT
Our
management team has been studying the potential benefits of effectuating a Reverse Stock Split of our common stock for the purpose of
uplisting to either the NYSE American or the Nasdaq Stock Market (“Nasdaq”) in the future. Based on our stage of development,
certain developments in our industry, our observations regarding the market for our peers whose securities are traded on NYSE American
or Nasdaq, and discussions with U.S.-based investment banks and other advisors, we believe that there may be potential benefits of a
Reverse Stock Split and a possible future uplisting of our common stock from the OTCQB tier of the OTC Markets to NYSE American or Nasdaq,
including:
| |
● |
a larger
pool of available capital; |
| |
● |
a greater
average daily trading volume; |
| |
|
|
| |
● |
a greater
number of U.S. retail and institutional investors; and |
| |
|
|
| |
● |
a potential
increase in market valuation. |
We
must satisfy a variety of requirements to be accepted for listing on NYSE American or Nasdaq, including the requirement that the listed
securities maintain a minimum per-share trading price for a specific period of time. We are contemplating the possibility of proceeding
to complete the Reverse Stock Split in order to satisfy this requirement. This is not the only listing standard that we must meet, however,
and we do not currently meet certain of the other NYSE American or Nasdaq listing standards. The Reverse Stock Split is merely a step
toward a possible uplisting to NYSE American or Nasdaq. Even if stockholders approve Proposal No. 3, there can be no assurance that (i)
we will effectuate the Reverse Stock Split, (ii) we will meet the NYSE American and/or Nasdaq listing standards, (iii) we will apply
to have our common stock listed on NYSE American or Nasdaq, or (iv) our common stock will be approved for listing on NYSE American or
Nasdaq.
Our
Board has unanimously adopted a resolution authorizing, approving, declaring advisable and recommending to our stockholders for their
approval an amendment to our Certificate of Incorporation (the “Reverse Stock Split Amendment”) to effectuate a Reverse Stock
Split of the Company’s outstanding shares of common stock, at a ratio of no less than 1-for-2 and no more than 1-for-200 shares,
with such ratio to be determined by our Board in its sole discretion. The Reverse Stock Split Amendment will become effective upon the
filing of a Certificate of Amendment with the Secretary of State of the State of Delaware, or at such later time as is set forth therein.
If
the Board determines to implement the Reverse Stock Split Amendment, we will communicate to the public, prior to the effective time of
the Reverse Stock Split Amendment, additional details regarding the Reverse Stock Split and the Reverse Stock Split Amendment (including
the final Reverse Stock Split ratio, as determined by the Board in its sole discretion within the range approved by stockholders). The
Board may determine, in its sole discretion, not to effectuate the Reverse Stock Split and not to file any Reverse Stock Split Amendment.
If
Proposal No. 3 is approved in determining whether to proceed with the Reverse Stock Split and what ratio (within the range approved by
stockholders) to implement, the Board may consider, among other things, various factors, such as:
| |
● |
the
historical trading price and trading volume of our common stock; |
| |
● |
the
then-prevailing trading price and trading volume of our common stock and the expected impact of the Reverse Stock Split on the trading
market for our common stock in the short- and long-term; |
| |
● |
threshold
prices of brokerage houses or institutional investors that could impact their ability to invest or recommend investments in our common
stock; |
| |
● |
minimum
listing requirements of NYSE American or Nasdaq; |
| |
● |
which
Reverse Stock Split ratio would result in the least administrative cost to us; and |
| |
● |
prevailing
general market and economic conditions. |
The
failure of our stockholders to approve Proposal No. 3 could prevent us from meeting the minimum bid price requirements of NYSE American
and Nasdaq (the “Minimum Bid Price Requirement”), among other things, unless the market price of our common stock increases
above the Minimum Bid Price Requirement without a Reverse Stock Split. If we are unable to uplist our common stock to NYSE American or
Nasdaq, interest in our common stock may decline and certain institutions may not have the ability to trade in our common stock, all
of which could have a material adverse effect on the liquidity or trading volume of our common stock. If our common stock becomes significantly
less liquid due to our inability to qualify for listing on NYSE American or Nasdaq, our stockholders may not have the ability to liquidate
their investments in our common stock as and when desired and we believe our access to capital would become significantly diminished
as a result. Even if stockholders approve Proposal No. 3, there can be no assurance that (i) we will effectuate the Reverse Stock Split,
(ii) we will meet the NYSE American and/or Nasdaq listing standards, (iii) we will apply to have our common stock listed on NYSE American
or Nasdaq, or (iv) our common stock will be approved for listing on NYSE American or Nasdaq.
Reasons
for the Reverse Stock Split
To
uplist to NYSE American or Nasdaq in the future
We
believe 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, though we cannot provide any assurance that a Reverse Stock Split will have that effect or that a Reverse
Stock Split would increase the market price sufficiently for a prolonged period of time. 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, including the risks described below under “Certain Risks Associated with a Reverse Stock
Split.” We believe we may continue to need to raise capital to fund our operations until the businesses we are engaged in become
cash flow positive or profitable (of which there is no assurance). If we are unable to uplist to NYSE American or Nasdaq, our access
to capital may become further limited and we may not have sufficient capital to enable our operating subsidiaries to continue their operations
or become cash flow positive or profitable. Therefore, the Board has concluded that the potential harm to us and our stockholders resulting
from a possible uplisting to NYSE American or Nasdaq outweighs the potential harm to us and our stockholders from another significant
reverse stock split. The Minimum Bid Price Requirement is not the only listing standard that we must meet, however, and we do not currently
meet certain of the other NYSE American or Nasdaq listing standards. The Reverse Stock Split is merely the first step toward an uplisting
on NYSE American or Nasdaq. Even if stockholders approve Proposal No. 3, there can be no assurance that (i) we will effectuate the Reverse
Stock Split, (ii) we will meet the NYSE American and/or Nasdaq listing standards, (iii) we will apply to have our common stock listed
on NYSE American or Nasdaq, or (iv) our common stock will be approved for listing on NYSE American or Nasdaq.
To
potentially improve the liquidity of our common stock.
A
Reverse Stock Split could allow a broader range of institutions to invest in our common stock (namely, funds that are prohibited from
buying stocks whose price is below a certain threshold), potentially increasing trading volume and liquidity of our common stock and
potentially decreasing the volatility of our common stock if institutions become long-term holders of our common stock. A Reverse Stock
Split could help increase analyst and broker interest in our common stock as their policies can discourage them from following or recommending
companies with low stock prices.
Because
of the trading volatility often associated with low-priced stocks, many brokerage houses and institutional investors have internal policies
and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending
low-priced stocks to their customers. Some of those policies and practices may make the processing of trades in low-priced stocks economically
unattractive to brokers. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage
of the stock price than commissions on higher-priced stocks, a low average price per share of common stock can result in individual stockholders
paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were higher.
Certain
Risks Associated with a Reverse Stock Split
There
can be no assurance that the Reverse Stock Split will increase the market price of the common stock and have the desired effect of achieving
compliance with the Minimum Bid Price Requirement. The Board believes that a Reverse Stock Split has the potential to increase the market
price of our common stock so that we may be able to satisfy the Minimum Bid Price Requirement. However, the long- and near-term effect
of the Reverse Stock Split upon the market price of the common stock cannot be predicted with any certainty.
As
of the Record Date, the closing price of our common stock was $0.042. Historically, however, the closing price of our common stock during
the fiscal year ended September 30, 2024, has traded as low as $0.01 per share to a high of $0.07 per share. As a result, we cannot be
assured of compliance with the Minimum Bid Price Requirement in the future, even if the Reverse Stock Split is effectuated. There can
be no assurance that a Reverse Stock Split will increase the market price of our common stock so that we may be able to meet the Minimum
Bid Price Requirement, that we would meet the other listing criteria on a national stock exchange, or that we will be able to maintain
compliance with the Minimum Bid Price going forward.
The
proposed Reverse Stock Split may decrease the liquidity of our common stock and result in higher transaction costs. The liquidity of
our common stock may be negatively impacted by the Reverse Stock Split, given the reduced number of shares that will be outstanding after
the Reverse Stock Split, particularly if the per share trading price does not increase as a result of the Reverse Stock Split. In addition,
if the Reverse Stock Split is implemented, it may increase the number of our stockholders who own “odd lots” of fewer than
100 shares of common stock. Brokerage commissions and other costs of transactions in odd lots are generally higher than the costs of
transactions of more than 100 shares of common stock. Accordingly, the Reverse Stock Split may not result in increasing the marketability
of our common stock.
Further,
following any reverse stock split, we will continue to require significant proceeds from sales of our debt or equity securities to fund
our operations for the near future, which will cause further dilution to stockholders. The issuance of a substantial number of shares
of common stock or securities convertible into or exercisable for common stock in the future could cause downward pressure on the price
of our common stock and there is no assurance that the market price for our common stock will remain at a level sufficient to satisfy
the Minimum Bid Price Requirement.
Even
if a Reverse Stock Split enables us to meet the Minimum Bid Price Requirement, we may be unable to meet the other criteria of listing
on NYSE American or Nasdaq. Further, the Reverse Stock Split may not result in a per share price that would attract brokers and investors
who do not trade in lower priced stocks.
A
Reverse Stock Split would affect all of our common stockholders uniformly and would not affect any stockholder’s percentage ownership
interests or proportionate voting power. The other principal effects of the Reverse Stock Split will be that:
| |
● |
the
number of issued and outstanding shares of common stock will be reduced proportionately based on the final Reverse Stock Split ratio,
as determined by the Board; and |
| |
|
|
| |
● |
although
our authorized capital stock will remain the same, the number of shares of our authorized common stock that are unissued and not
reserved for future issuance will increase. |
Although
the number of outstanding shares of common stock would decrease following the Reverse Stock Split, the Board does not intend for a Reverse
Stock Split to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.
The
following table reflects the number of shares of common stock that would be outstanding as a result of the effectiveness of the Reverse
Stock Split Amendment and the approximate percentage reduction in the number of outstanding shares based on 225,975,331 shares of common
stock issued and outstanding on the Record Date. As of the Record Date, we had 455,024,669 shares of common stock available for issuance.
The following table also shows the shares that would be available for issuance at various ratios that the Board of Directors may consider
if the Reverse Stock Split is effectuated.
| Reverse Stock Split Ratio | |
Approximate Percentage Reduction | | |
Approximate Shares of Common Stock to be Outstanding After the Reverse Stock Split | | |
Shares of Common Stock Available for Issuance After the Reverse Stock Split | |
| | |
| | |
| | |
| |
| 1-for-2 | |
| 50.0 | % | |
| 112,987,666 | | |
| 568,012,334 | |
| 1-for-50 | |
| 98.0 | % | |
| 4,519,507 | | |
| 676,480,493 | |
| 1-for-100 | |
| 99.0 | % | |
| 2,259,754 | | |
| 678,740,246 | |
| 1-for-200 | |
| 99.5 | % | |
| 1,129,877 | | |
| 679,870,123 | |
Effect
of Reverse Stock Split and Potential Anti-Takeover Effect
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. Because the Reverse Stock Split would apply
to all issued and outstanding shares of common stock and outstanding rights to purchase common stock or to convert other securities into
common stock, the proposed Reverse Stock Split would not alter the relative rights and preferences of existing stockholders. However,
the number of shares of common stock outstanding will be decreased, while the number of authorized but unissued shares will be increased.
Management
does not currently plan to use the increase in our authorized but unissued shares that will result from the Reverse Stock Split to make
it more difficult or to discourage a future merger, tender offer or proxy contest or the removal of incumbent management. This Proposal
No. 3 is not the result of management’s knowledge of an effort to accumulate our securities or to obtain control of the Company
by means of a merger, tender offer, solicitation or otherwise.
The
Reverse Stock Split may result in some stockholders owning “odd lots” of less than 100 shares of common stock. Odd lot shares
may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots may be higher than the costs of
transactions in “round lots” of even multiples of 100 shares.
After
the effective time of the Reverse Stock Split, our common stock will have a new Committee on Uniform Securities Identification Procedures,
or CUSIP, number, which is a number used to identify our common stock.
The
proposed Reverse Stock Split will have no impact on the total authorized capital stock, or on the par value of our securities.
As
a result of the Reverse Stock Split, at the effective time of the Reverse Stock Split, the stated capital on the Company’s balance
sheet attributable to our common stock, which consists of the par value per share of our common stock multiplied by the aggregate number
of shares of our common stock issued and outstanding, will be reduced in proportion to the Reverse Stock Split ratio chosen by the Board.
Correspondingly, the Company’s additional paid-in capital account, which consists of the difference between the Company’s
stated capital and the aggregate amount paid to the Company upon issuance of all currently outstanding shares of common stock, will be
credited with the amount by which the stated capital is reduced. The Company’s stockholders’ equity, in the aggregate, will
remain unchanged. The historical earnings or loss per share of our common stock reported in all financial reports published after the
effective date of the Reverse Stock Split will be restated to reflect the proportionate decrease in the number of outstanding shares
of common stock for all periods presented so that the results are comparable.
Fractional
Shares
In
the case of common stock registered directly on the books of Computershare, our transfer agent, if the Reverse Stock Split ratio determined
to be implemented by the Board, if any, will result in fractional shares, we will not issue fractional shares. Instead, stockholders
who otherwise would be entitled to receive fractional shares because they hold a number of shares not evenly divisible by the Reverse
Stock Split ratio will automatically be entitled to receive an additional fraction of a share of our common stock to round up to the
next whole share.
In
the case of common stock held through a broker, bank or nominee, your broker, bank or nominee will determine the process for dealing
with any entitlements to fractional shares of common stock.
Upon
the effectiveness of the Reverse Stock Split, we intend to treat shares of common stock held by stockholders in “street name,”
through a bank, broker, or other nominee, in the same manner as registered stockholders whose shares of common stock are registered in
their names. Banks, brokers, or other nominees will be instructed to effectuate the Reverse Stock Split for their beneficial holders
holding the common stock in “street name.” However, these banks, brokers or other nominees may have different procedures
than registered stockholders for processing the Reverse Stock Split. If a stockholder holds shares of common stock with a bank, broker
or other nominee and has any questions in this regard, stockholders are encouraged to contact their bank, broker, or other nominee.
Procedure
for Effecting Reverse Stock Split
If
the Board decides to implement a Reverse Stock Split, the Reverse Stock Split will become effective on the date the Reverse Stock Split
Amendment is filed with the Secretary of State of the State of Delaware (or at such other time as set forth therein). The time of such
filing, if any, will be determined by the Board in its sole discretion. Beginning on the effective time of the Reverse Stock Split, each
certificate representing pre-Reverse Stock Split shares of common stock will be deemed for all corporate purposes to evidence ownership
of post-Reverse Stock Split shares of common stock.
Effective
Time
The
effective time of the Reverse Stock Split, if the proposed Reverse Stock Split Amendment is adopted and approved by stockholders and
the Reverse Stock Split is implemented at the direction of the Board, will be the date and time that the Reverse Stock Split Amendment
effectuating the amendment with the ratio selected by the Board is filed with the Secretary of State or such later time as is specified
therein. Such filing may occur as shortly after the Annual Meeting or at any time prior to the date that is 12 months from the date of
the Annual Meeting. The exact timing of the Reverse Stock Split will be determined by our Board based on its evaluation as to when such
action will be the most advantageous to the Company and its stockholders, and the effective date will be publicly announced by the Company.
The
Board reserves the right to withdraw Proposal No. 3 relating to the Reverse Stock Split and, if such proposal is withdrawn, all references
in the Company’s proxy materials to voting for Proposal No. 3 should be disregarded. In addition, the Reverse Stock Split may be
delayed or abandoned without further action by the stockholders at any time prior to effectiveness of the Reverse Stock Split Amendment
with the Secretary of State, notwithstanding stockholder adoption and approval of the Reverse Stock Split Amendment, if the Board, in
its sole discretion, determines that it is in the best interests of the Company and its stockholders to delay or abandon the Reverse
Stock Split. If the Reverse Stock Split Amendment implementing the Reverse Stock Split has not been filed with the Secretary of State
on or before the date that is 12 months from the date of the Annual Meeting, the Board will be deemed to have abandoned the Reverse Stock
Split.
Certain
U.S. Federal Income Tax Consequences of the Reverse Stock Split
The
following discussion is a general summary of certain U.S. federal income tax consequences of the reverse split that may be relevant to
U.S. Holders (as defined below) of our common stock but does not purport to be a complete analysis of all potential tax effects. The
effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not
discussed. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated
thereunder (the “Treasury Regulations”), judicial decisions, and published rulings and administrative pronouncements of the
U.S. Internal Revenue Service (“IRS”), in each case in effect as of the date hereof. These authorities may change or be subject
to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely
affect a holder of our common stock. We have not sought and will not seek an opinion of counsel or any rulings from the IRS regarding
the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding
the tax consequences of the reverse split.
This
discussion is limited to holders that hold our common stock as “capital assets” within the meaning of Section 1221 of the
Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income tax consequences
relevant to such holders’ particular circumstances, including the impact of the tax on net investment income imposed by Section
1411 of the Code. In addition, it does not address consequences relevant to holders subject to particular rules, including, without limitation:
| |
● |
persons
that are not U.S. Holders (as defined below); |
| |
● |
persons
subject to the alternative minimum tax; |
| |
● |
U.S.
Holders (as defined below) whose functional currency is not the U.S. dollar; |
| |
● |
persons
holding our common stock as part of a hedge, straddle, or other risk reduction strategy or as part of a conversion transaction or
other integrated investment; |
| |
● |
banks,
insurance companies or other financial institutions; |
| |
● |
real
estate investment trusts or regulated investment companies; |
| |
● |
brokers,
dealers, or traders in securities; |
| |
● |
S
corporations, partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors
therein); |
| |
● |
tax-exempt
organizations or governmental organizations; |
| |
● |
persons
deemed to sell our common stock under the constructive sale provisions of the Code; |
| |
● |
persons
who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation; and |
| |
● |
tax-qualified
retirement plans. |
If
an entity treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in the
partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner
level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their own tax advisors
regarding the U.S. federal income tax consequences to them.
THIS
DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INTENDED AS TAX ADVICE. HOLDERS OF OUR COMMON STOCK SHOULD CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES
OF THE REVERSE STOCK SPLIT ARISING UNDER OTHER U.S. FEDERAL TAX LAWS (INCLUDING ESTATE AND GIFT TAX LAWS), UNDER THE LAWS OF ANY STATE,
LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
For
purposes of the discussion below, a “U.S. Holder” is a beneficial owner of shares of our common stock that for U.S. federal
income tax purposes is or is treated as: (1) an individual who is a citizen or resident of the United States; (2) a corporation created
or organized under the laws of the United States, any state thereof, or the District of Columbia; (3) an estate the income of which is
subject to U.S. federal income tax regardless of its source; or (4) a trust that (a) is subject to the primary supervision of a U.S.
court and the control of one of more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or
(b) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes.
A
reverse split should constitute a “recapitalization” for U.S. federal income tax purposes. As a result, a U.S. Holder generally
should not recognize gain or loss upon the reverse split, except with respect to cash received in lieu of a fractional share of our common
stock. A U.S. Holder’s aggregate tax basis in the shares of our common stock received pursuant to the reverse split should equal
the aggregate tax basis of the shares of our common stock surrendered (excluding any portion of such basis that is allocated to any fractional
share of our common stock), and such U.S. Holder’s holding period in the shares of our common stock received should include the
holding period in the shares of our common stock surrendered. Treasury Regulations provide detailed rules for allocating the tax basis
and holding period of the shares of our common stock surrendered to the shares of our common stock received pursuant to the reverse split.
Holders of shares of our common stock acquired on different dates and at different prices should consult their tax advisors regarding
the allocation of the tax basis and holding period of such shares.
Information
Reporting and Backup Withholding. A U.S. Holder (other than corporations and certain other exempt recipients) may be subject to information
reporting and backup withholding when such holder receives cash in lieu of a fractional share of our common stock pursuant to the reverse
split. A U.S. Holder will be subject to backup withholding if such holder is not otherwise exempt and such holder does not provide its
taxpayer identification number in the manner required or otherwise fails to comply with applicable backup withholding tax rules. Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or allowed as a credit
against the U.S. Holder’s federal income tax liability, if any, provided the required information is timely furnished to the IRS.
U.S. Holders should consult their tax advisors regarding their qualification for an exemption from backup withholding and the procedures
for obtaining such an exemption.
Appraisal
Rights
There
are no rights of appraisal or similar rights of dissenters with respect to this proposal.
Interests
of Officers and Directors in this Proposal
Our
officers and Directors do not have any substantial interest, direct or indirect, in this proposal.
Required
Vote of Stockholders
The
affirmative vote of the holders of a majority of the voting shares of our common stock is required to approve this proposal.
Board
Recommendation
The
Board of Directors unanimously recommends a vote “FOR” Proposal No. 3.
DELINQUENT
SECTION 16(A) REPORTS
Section
16(a) of the Exchange Act requires our Directors, executive officers, and holders of more than 10% of our common stock to file with the
SEC initial reports of ownership and reports of changes in the ownership of our common stock and other equity securities. Such persons
are required to furnish us copies of all Section 16(a) filings. Based solely upon a review of the copies of the forms furnished to us,
we believe that our Directors, executive officers, and holders of more than 10% of our common stock complied with all applicable filing
requirements, except as set forth below:
| Name | |
Late
or Omitted Form
3 or Form 4 | | |
No.
of Transactions to Which Section 16(a) Reports Relate | |
| Anthony
Ambrose | |
| 4 | | |
| 2 | |
| Robert
Brown | |
| 4 | | |
| 3 | |
| Robert
Brown | |
| 3 | | |
| 1 | |
| James
Hansen | |
| 4 | | |
| 2 | |
| James
Hansen | |
| 3 | | |
| 1 | |
| Brian
Haugli | |
| 4 | | |
| 2 | |
| Nick
Hnatiw | |
| 4 | | |
| 2 | |
| Nick
Hnatiw | |
| 3 | | |
| 1 | |
| Deborah
MacConnel | |
| 4 | | |
| 5 | |
| Ryan
Polk | |
| 4 | | |
| 2 | |
| Kevin
Powers | |
| 4 | | |
| 3 | |
| Hugh
Regan | |
| 4 | | |
| 5 | |
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Except
as discussed above under the caption “Executive Compensation”, the following sets forth a summary of all transactions since
October 1, 2023, or any currently proposed transaction, in which we were to be a participant and the amount involved exceeded or exceeds
the lesser of $120,000 or 1% of the average of our total assets at the fiscal year-end for September 30, 2024 and 2023, and in which
any Director, officer, or any stockholder owning greater than 5% of our outstanding voting shares, nor any member of the above referenced
individual’s immediate family, had or will have a direct or indirect material interest (other than compensation described above
under “Executive Compensation” and/or “Director Compensation”). We believe the terms obtained or consideration
that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the
amounts that would be paid or received, as applicable, in arm’s-length transactions.
Other
Payments
Brian
Haugli, our Chief Executive Officer and a greater than 5% stockholder in the Company, is also a principal stockholder of RealCISO Inc.
(“RealCISO”). In September 2020, SideChannel assigned to RealCISO 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 pay licensing fees to RealCISO for
such use. For the years ended September 30, 2024, and 2023, SideChannel paid $30,160 and $25,980 to RealCISO for licenses, respectively.
We
also received $122,284 and $62,700 from RealCISO for software development services that we provided Real CISO during fiscal years 2024
and 2023, respectively. We expect to continue to engage with RealCISO for software development services during fiscal year 2025.
On
October 13, 2023, the Association of the US Army (“AUSA”) signed an agreement for a cybersecurity risk assessment for $24,425.
On February 15, 2024, the President of AUSA, Retired U.S. Army General Robert Brown, joined our Board. On July 8, 2024, AUSA signed an
agreement for recurring vCISO Services which will generate $108,000 of annual revenue for the Company.
Review,
Approval or Ratification of Transactions with Related Parties
Our
Board reviews and approves transactions with Directors, officers, and holders of five percent or more of our voting securities and their
affiliates, each a related party. The material facts as to a related party’s relationship or interest in the transaction are disclosed
to our Board prior to their consideration of such transaction. Further, when stockholders are entitled to vote on a transaction with
a related party, the material facts of the related party’s relationship or interest in the transaction are disclosed to the stockholders,
who must approve the transaction in good faith. We do not have a related party transactions policy in place.
OTHER
MATTERS
The
Board knows of no other business, which will be presented to the Annual Meeting. If any other business is properly brought before the
Annual Meeting, proxies will be voted in accordance with the judgment of the persons voting the proxies. The proxy also has discretionary
authority to vote to adjourn the Annual Meeting, including for the purpose of soliciting votes in accordance with our Board’s recommendations.
If
you do not plan to attend the Annual Meeting, in order that your shares may be represented and in order to assure the required quorum,
please sign, date and return your proxy promptly. In the event you are able to attend the Annual Meeting, at your request, we will cancel
your previously submitted proxy.
STOCKHOLDER
PROPOSALS AND NOMINATIONS FOR DIRECTOR
For
business (including, but not limited to, Director nominations) to be properly brought before an annual meeting by a stockholder, the
stockholder or stockholders of record intending to propose the business (the “Proposing Stockholder”) must have given written
notice of the Proposing Stockholder’s nomination or proposal, either by personal delivery or by United States mail to the Secretary
of the Company not later than 60 calendar days prior to the date such annual meeting is to be held. If the current year’s meeting
is called for a date that is not within 30 days of the anniversary of the previous year’s annual meeting, notice must be received
not later than 10 calendar days following the day on which public announcement of the date of the annual meeting is first made. In no
event will an adjournment or postponement of an annual meeting of stockholders begin a new time period for giving a Proposing Stockholder’s
notice as provided above.
A
Proposing Stockholder’s notice must comply with SEC regulations, as well as the provisions of our Bylaws and shall include, but
not be limited to, as to each matter the Proposing Stockholder proposes to bring before the annual meeting:
(a)
The name and address of the Proposing Stockholder, and the classes and number of shares of the corporation held by the Proposing Stockholder.
(b)
If the notice is in regard to a nomination of a candidate for election as Director: (a) the name, age, and business and residence address
of the candidate; (b) the principal occupation or employment of the candidate; and (c) the class and number of shares of the corporation
beneficially owned by the candidate.
(c)
If the notice is about a proposal other than a nomination of a candidate for election as Director, a brief description of the business
desired to be brought before the meeting and the material interest of the Proposing Stockholder in such proposal.
Stockholders
who intend to have a proposal considered at our next Annual Meeting of Stockholders must submit the proposal to us at our corporate headquarters
no later than September 2, 2025, which proposal must be made in accordance with the provisions of our Bylaws and SEC regulations.
Additionally,
to comply with the SEC’s universal proxy rules, stockholders who intend to solicit proxies in support of Director nominees other
than our nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act, including a statement
that the stockholder intends to solicit the holders of shares representing at least 67% of the voting power of shares entitled to vote
on the election of directors, by the same deadline as disclosed above. If any change occurs with respect to such stockholder’s
intent to solicit the holders of shares representing at least 67% of such voting power, such stockholder must notify us promptly. If
the date of the Annual Meeting is changed by more than 30 calendar days from such anniversary date, however, then the stockholder must
provide notice by the later of 60 calendar days prior to the date of the Annual Meeting and the tenth calendar day following the date
on which public announcement of the date of the Annual Meeting is first made.
ADDITIONAL
INFORMATION
Householding
The
SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Proxy Availability
Notice or other Annual Meeting materials with respect to two or more stockholders sharing the same address by delivering a single Notice
or other Annual Meeting materials addressed to those stockholders. This process, which is commonly referred to as householding, potentially
provides extra convenience for stockholders and cost savings for companies. Stockholders who participate in householding will continue
to be able to access and receive separate proxy cards.
Brokers
with account holders who are our stockholders may be “householding” our proxy materials. A Notice or proxy materials will
be delivered in one single envelope to multiple stockholders sharing an address unless contrary instructions have been received from
one or more of the affected stockholders. Once you have received notice from your broker that they will be householding communications
to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in householding and would prefer to receive a separate Notice or proxy materials, please notify your broker,
or submit a request in writing to our Secretary, c/o SideChannel, Inc., 146 Main Street, Suite 405, Worcester, MA 01608. Stockholders
who currently receive multiple copies of the Notice or proxy materials at their address and would like to request householding of their
communications should contact their broker. In addition, we will promptly deliver, upon written or oral request to the address or telephone
number above, a separate copy of the Notice or proxy materials to a stockholder at a shared address to which a single copy of the documents
was delivered.
Annual
Reports and Form 10-K
Copies
of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, may be obtained without charge by writing to the Company’s
Secretary, SideChannel, Inc., 146 Main Street, Suite 405, Worcester, MA 01608 The Notice, our Annual Report on Form 10-K and this proxy
statement are also available online at https://investors.sidechannel.com/sec-filings.
| |
By
Order of the Board of Directors |
| |
|
| December 31, 2024 |
/s/
Ryan Polk |
| |
Ryan
Polk |
| |
Secretary
of the Board of Directors |
PROXY
CARD
SIDECHANNEL,
INC.
PROXY
FOR ANNUAL MEETING TO BE HELD ON FEBRUARY 12, 2025
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby appoints, Brian Haugli and Ryan Polk and each or either of them as proxies, with full power of substitution, to represent
and to vote all the shares of common stock of SideChannel, Inc. (the “Company”), which the undersigned would be entitled
to vote, at the Company’s Annual Meeting of Stockholders to be held on February 12, 2025, and at any adjournments thereof, subject
to the directions indicated on this Proxy Card.
In
his discretion, the proxy is authorized to vote upon any other matter that may properly come before the meeting or any adjournments thereof.
THIS
PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE, BUT IF NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF ALL NOMINEES AND FOR THE PROPOSALS LISTED ON THE REVERSE SIDE.
This
proxy is governed by the laws of the State of Delaware.
IMPORTANT—This
Proxy must be signed and dated on the reverse side.
THIS
IS YOUR PROXY
YOUR
VOTE IS IMPORTANT!
Dear
Stockholder:
We
cordially invite you to attend the Annual Meeting of Stockholders of SideChannel, Inc. to be held at 146 Main Street, Suite 405, Worcester,
Massachusetts, on February 12, 2025, beginning at 9:00 a.m. Eastern time.
Please
read the proxy statement which describes the proposals and presents other important information, and complete, sign and return your proxy
promptly in the enclosed envelope.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1-3
| 1.
Election of Directors Nominees |
|
FOR |
|
|
|
WITHHOLD
|
| 01 –
Robert Brown |
|
☐ |
|
|
|
☐ |
| 02 –
Brian Haugli |
|
☐ |
|
|
|
☐ |
| 03 –
Nick Hnatiw |
|
☐ |
|
|
|
☐ |
| 04 –
Deborah MacConnel |
|
☐ |
|
|
|
☐ |
| 05 –
Hugh Regan, Jr. |
|
☐ |
|
|
|
☐ |
| |
|
|
|
|
|
|
| 2. Proposal
to ratify RBSM, LLP as the Company’s independent registered public accountants for fiscal year ending September 30, 2025. |
|
FOR
☐ |
|
AGAINST
☐ |
|
ABSTAIN
☐ |
| |
|
|
|
|
|
|
| 3. Proposal
to approve the amendment of the Company’s certificate of incorporation, as amended, to effectuate a reverse stock split of
the Company’s outstanding shares of common stock, at a ratio of no less than 1-for-2 and no more than 1-for-200, with such
ratio to be determined by our Board in its sole discretion. |
|
FOR
☐ |
|
AGAINST
☐ |
|
ABSTAIN
☐ |
Important:
Please sign exactly as name appears on this proxy. When signing as attorney, executor, trustee, guardian, corporate officer, etc., please
indicate full title.
| |
Dated:
____________________________________ |
| |
|
| |
Signature |
|
| |
|
|
| |
Name (printed) |
|
| |
|
|
| |
Title |
|
BY
MAIL:
Proxy
Services
C/O
Computershare Investor Services
PO
Box 43101
Providence,
RI 02940-5067
BY
INTERNET:
www.envisionreports.com/SDCH
CONTROL
NUMBER:
You
may vote by Internet 24 hours a day, 7 days a week. Internet voting is available through 11:59 p.m., prevailing time, on February 11,
2025, unless you are voting in person at the Annual Meeting, in which case you can vote your shares at the meeting up until the time
the polls are closed.
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