10-K: Data443 Risk Mitigation Reports 2023 Annual Results, Cites Growth and Acquisition

Data443 Risk Mitigation, Inc. released its 2023 annual report, highlighting revenue growth driven by acquisitions and increased demand for data security solutions.

Summary

• Data443 Risk Mitigation, Inc. reported a revenue of $5,578,942 for the year ended December 31, 2023, a 112% increase compared to $2,627,123 in 2022.
• The company's gross profit increased by 83% to $3,852,755 in 2023 from $2,108,280 in 2022.
• Operating expenses rose by 15% to $6,637,214 in 2023, up from $5,784,408 in the previous year.
• The net loss for 2023 was $4,244,708, a 56% decrease from the $9,713,467 loss in 2022.
• The company acquired certain assets of Cyren Ltd. in December 2023, which contributed to the revenue growth.
• The company's accumulated deficit as of December 31, 2023, was $55,656,836.
• The company effected a 1-for-600 reverse stock split on September 20, 2023.
• The company has a working capital deficiency of $13,377,611 as of December 31, 2023.
• The company's independent auditor has raised substantial doubt about its ability to continue as a going concern.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there is significant revenue growth and a reduction in net loss, the company faces substantial financial challenges, including a going concern warning and a large working capital deficiency. The need for additional capital and the competitive landscape add to the uncertainty.

Positives

• The company experienced significant revenue growth of 112% year-over-year.
• Gross profit increased by 83%, indicating improved profitability.
• The net loss decreased by 56%, showing progress towards financial stability.
• The acquisition of Cyren assets is expected to enhance the company's product offerings and competitive position.

Negatives

• The company has a significant working capital deficiency of $13,377,611.
• The company has an accumulated deficit of $55,656,836.
• The company's independent auditor has raised substantial doubt about its ability to continue as a going concern.
• The company has a history of losses and may incur future losses.

Risks

• The company will require additional funds to achieve its business strategy.
• There is substantial doubt about the company's ability to continue as a going concern.
• The company faces intense competition in its market.
• The company is dependent on the continued services of its founder and CEO.
• The company's common stock is thinly traded, reducing the ability to liquidate investments.
• The company has a history of losses and may incur future losses.
• The company has secured debt, which could have adverse consequences.
• The company may not be able to attract the attention of research analysts at major brokerage firms.
• The company's common stock is subject to the SEC's penny stock rules.
• The company may not be able to continue to comply with the continued listing standards of the Nasdaq Capital Market.

Future Outlook

The company aims to integrate its suite of data security, ransomware protection, and privacy products, targeting enterprise customers directly and through partner channels. The company also intends to pursue strategic acquisitions and expand its sales capacity.

Management Comments

• Management plans to continue to grow the business through strategic acquisitions and expand selling across subsidiaries and affiliated companies.
• Management expects to incur costs related to filing Exchange Act reports and operating the business.
• Management will require additional operating capital and will need to raise additional capital through debt or equity financing.

Industry Context

The document highlights the increasing demand for data security solutions due to the mounting ransomware landscape and other threats to data. The competitive marketplace is consolidating via buyouts and take-private transactions, which the company believes presents opportunities for them.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or competitors.
• The document mentions that many companies offer similar products and services for data security, and that the company may be at a disadvantage to competitors with more capital.
• The document notes that the competitive marketplace continues to consolidate via buyouts, take-private transactions and large unicorn competitors being acquired prior to their initial public offerings.

Corporate Governance

Related Party Transactions

• The company has relied on funding from Jason Remillard for working capital in the past.
• The company has transactions with DMB Group, LLC, a related party.
• The company has transactions with its Chief Executive Officer, Jason Remillard, and its Chief Financial Officer, Greg McCraw.

Stakeholder Impact

• Shareholders face the risk of losing their entire investment due to the company's financial challenges.
• Employees may be affected by the company's financial instability and potential restructuring.
• Customers may be impacted by the company's ability to provide ongoing services and support.
• Creditors face the risk of not being repaid due to the company's financial difficulties.

Next Steps

• The company intends to aggressively pursue acquisitions of other cybersecurity software and services providers.
• The company intends to increase spending on research and development to drive innovation.
• The company intends to grow its customer base and expand its sales capacity.
• The company plans to list its common stock on Nasdaq.

Key Dates

Keywords

data security, cybersecurity, data privacy, ransomware protection, threat intelligence, cloud security, SaaS, acquisitions, financial results, reverse stock split