RALEIGH, N.C., May 14, 2020 – Data443 Risk Mitigation, Inc. (OTCPK: ATDS), a leading data security and privacy software company, today announced operating results for the quarter ended March 31, 2020:
Recent Business Highlights:
- No customer or contract losses due to COVID-19 conditions
- Staff and business operations retained and on scope Released the CCPA version of the GDPR Framework for WordPress to the public
- Rapidly changed business operations to adapt to new operating conditions due to COVID-19 emergency
- New Data Center online and consolidation project nearing completion
- Second version of Global Privacy Manager™ available for private beta
- Public shopping cart ordering platform launched – more of the product line being added weekly
- Larger SMB & B2C marketing campaigns being launched starting Q2
Financial Highlights from Q1 2020:
- Continued significant growth of deferred revenues to $1,032,000
- 234% growth in revenue growth from same reporting period last year to $478,000
- Net income (loss) mainly attributable to change in fair value of derivative liability reporting
- Combined SG&A includes new product development, Data Center build out and sales force as well as listed items
Jason Remillard, CEO of Data443, commented, “The first quarter of 2020 reflects the combined business operations of all 5 reporting product lines. We incurred greater costs this quarter due to the extensive strategic planning and development undertaken, which included the launch of our new Data Center in the Raleigh-Durham Research Triangle Region near our headquarters. This initiative was taken to reduce our spend on the public cloud and provide our customers more options for their longer term and high capacity spend options, particularly for the ultra-high density orders we are seeing now. The build was made more complicated by challenges due to the COVID-19 pandemic – with component availability issues starting in December of 2019 and lasting throughout the last 4 months. However, it is now in full operation.”
“Outside of the Data Center build out, we continue to refine our product lines to facilitate the growing data privacy capabilities that we believe are required in today’s marketplace. Even within the current pandemic, we continue to validate the pricing, fit and capability requirements for both the Global Privacy Manager product, along with the additional capabilities that are available for our product lines – Classification, Governance, Secure Document Delivery and Distribution, large scale data lake for eDiscovery and search and massive file transfer services – ad hoc and scheduled. The emergent data privacy requirements are in many cases simply good data security and compliance practices – exercised at new business and risk levels. We are bringing many of these existing capabilities to new visibility and new availability. For example, consider the use case where a medium to small business owner would never have been able to afford – cash or staffing wise – the ability to deploy a large-scale classification or eDiscovery/data lake capability. Today, via our redeployment and engineering efforts – they are able to do so in just a few mouse clicks and pay for it on a monthly or yearly basis, while also enabling not just a new security and compliance stance, but also comply with the myriad of privacy laws across the US and around the world.
“As the California Attorney General recently reiterated – the CCPA will be enforced with rigor starting July 2020 and new modifications to the law are already slated for later this year. We fully expect more to come from California – and additional frequent and aggressive actions for different states in the next 6-18 months. The ongoing emergency with COVID-19 continues to highlight the privacy risks associated with personal information, the blurring lines between employer, government, community and data sharing and processing parties. This area of data privacy and processing will continue to see significant activity.”
“In conclusion, the ongoing emergency has highlighted the continued need for a multi-legged approach to our business. A solid foundation of multiple products that contribute to diversified revenue streams that we already take advantage of, as well as diverse staff capabilities and infrastructure that support the overall business in different ways. Throughout the past 8 weeks, we have seen our products used in many unique ways – and our staff members jump in to support and contribute in many ways as well. I am proud of our whole team, as they’ve done an incredible job, reacting swiftly and professionally in these highly evolving times. Our survival and our ability to thrive is no small feat in this climate, and I appreciate everyone’s support, including our loyal shareholders and service providers who continue to support us!” concluded Mr. Remillard.
Q1 2020 Financial Results:
We recognized $478,000 of revenue during the three months ended March 31, 2020, compared to $143,000 in revenue for the three months ended March 31, 2019. We had net billings for the three months ended March 31, 2020 of $603,000 compared to $417,000 in the prior year period. Deferred revenues are $1,032,000 as of March 31, 2020, an increase of $303,000 from $729,000 as of December 31, 2019.
General and Administrative Expenses
General and administrative expenses for the three months ended March 31, 2020 amounted to $1,425,000 as compared to $691,000 for the three months ended year ended March 31, 2019, an increase of $734,000, or 106%. The expenses for the three months ended March 31, 2020 primarily consisted of management costs, costs to integrate assets we acquired and to expand sales, audit and review fees, filing fees, professional fees, and other expenses, including the re-classification of sales-related management expenses, in connection with the projected growth of the Company’s business. Expenses for the three months ended March 31, 2019 consisted of primarily the same items.
Sales and Marketing Expenses
Sales and marketing expense for the three months ended March 31, 2020 amounted to $121,000 as compared to $226,000 for the three months ended year ended March 31, 2019, a decrease of $105,000, or 46%. The expenses for the three months ended March 31, 2020 primarily consisted of developing a sales operation, with some previously reported expenses, primarily management costs, reclassified to general and administrative expenses. Expenses for the three months ended March 31, 2019 consisted of primarily the same items with the exception of previously mentioned costs reclassified to general and administrative expenses.
Net Income (Loss)
The net loss for the three months ended March 31, 2020 was $10,181,000 as compared to net income of $6,030,000 for the three months ended March 31, 2019. The net loss for the three months ended March 31, 2020 was mainly derived from an operating loss of $1,103,000 and a loss from change in fair value of derivative liability of $8,506,000, associated with convertible notes payable. The net income for the three months ended March 31, 2019 was mainly derived from a gain on change in fair value of derivative liability of $6,813,000 associated with convertible notes payable and gross margins of $138,000, offset in part by general and administrative, and sales and marketing expenses of $921,000.
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