Luke Wheatley

Luke Wheatley expressed concern that the growth in Enclave revenue might be merely replacing declining vCISO revenue, questioning if existing vCISO clients were being forced to switch services.

Answer

CEO Brian Haugli clarified that SideChannel is not giving clients an ultimatum to switch from vCISO to Enclave. He explained that vCISO and Enclave address different needs, with vCISO providing leadership and program management, while Enclave solves specific control gaps. He stated that the company aims to sell Enclave to both existing vCISO clients (where appropriate) and net new organizations, including those with existing CISOs. The observed decline in vCISO revenue was attributed to regular churn, not a forced transition.

Luke Wheatley inquired about SideChannel's cash flow strategy, the potential for a cash raise given recent negative trends and upcoming warrant expiration, and whether the company's opinion on at-the-market raises had changed. He also questioned the recent absence of 'deal won' 8-K filings, asking if the momentum had shifted, and expressed concern that the decline in vCISO revenue might indicate a mere replacement of services by Enclave rather than net new growth.

Answer

CEO Brian Haugli addressed the cash flow strategy, stating that a cash raise is an option but not actively pursued, emphasizing the company's debt-free approach and strategic use of generated cash for sales and marketing. He explained that the reverse split improved mechanics for attracting meaningful investors. Regarding 8-K filings, Haugli clarified that SideChannel avoids being an '8-K factory,' aims for meaningful announcements, and highlighted the strategic shift to hiring a Chief Marketing Officer, Jamie Wolf, to improve marketing cadence. CFO Ryan Polk added that the upcoming warrant expiration and the maturation of the Enclave product's marketing message make considering additional capital sources more viable for accelerating Enclave adoption, and clarified revenue recognition for Enclave. Haugli also firmly stated that vCISO and Enclave address different needs, with Enclave being sold to both existing vCISO clients and net new organizations, attributing vCISO decline to regular churn, not a forced replacement.