RALEIGH, N.C., August 21, 2018 — LandStar, Inc. (OTCPK: LDSR) (“LandStar” or the “Company”), the parent company of Data443™ Risk Mitigation, Inc. (“Data443”), a leading data security and privacy company, would like to share with investors an article published by Zacks Small Cap Research on Data443. In a rare occurrence, Zacks published the article yesterday, ahead of initiating coverage on Data443 later this fall. The article can be accessed at (http://scr.zacks.com/News/Press-Releases/Press-Release-Details/2018/LDSR-Benefitting-from-Growing-Demand-for-Cybersecurity/default.aspx) as well as in the text below:
Raleigh, North Carolina-based Data443 Risk Mitigation, a wholly owned subsidiary of LandStar, Inc. (LDSR), is a technology company that is developing an ambitious portfolio of cyber-security products and service offerings for blockchain, cyber data security, Personal Privacy & GDPR (General Data Protection Regulation), data compliance governance capabilities. In addition to products and services the company develops on its own, Data443 is also conducting an aggressive M&A campaign to complement its internally developed technologies. It has accessed the expertise of several advisors to help conduct this strategy in a time and cost sensitive way.
Data443 aims to provide a broad range of data security offerings, services and solutions. 2018 has been a transformational year, in our view, as the company has completed two significant acquisitions, with others in the near- and medium-term pipeline. Although Data443’s ClassiDocs is pre-revenue at this early stage, management expects that its overall M&A pipeline will produce a combined annual revenue run-rate of roughly $8-$10 million. Moreover, the terms of these acquisitions are designed to both protect the company’s downside and provide incentive to the acquired management teams to help grow the combined business, as the funding is generally a combination of cash and shares.
The company was formed by CEO Jason Remillard in 2017 and has accomplished much in a short time. The CEO has more than 25 years of experience in the IT field, developing technology solutions for both start-ups and Fortune 500 companies. His prior experience includes serving as VP of Security Architecture at Deutsche Bank, where he was responsible for Big Data, Security Architecture, Engineering and Analytics and as a product manager with Dell Software spearheading the development of the Enterprise Identity and Access Management portfolio. He has successfully operated several software security startups with previous exits.
Towards the goal of becoming a multi-solution IT company, Data443 acquired ClassiDocs, a data classification, governance, and GDPR-compliance company that Data443’s CEO founded in 2016. In the 2018 Cybersecurity Excellence awards, ClassiDocs was awarded honors for GDPR compliance, data classification and governance. GDPR regulation mandates that companies protect the personal data and privacy of European citizens for transactions that occur within EU member countries. Companies that do business in Europe will need to comply with GDPR, which could create significant opportunities for Data443. ClassiDocs is also capable of providing compliance to meet U.S. and other developing privacy laws worldwide, according to management.
ClassiDocs provides solutions for GDPR compliance, as noted, including for reporting and technical control capabilities. It provides Data Subject Access Requests (DSAR) management, enabling clients to respond to DSAR demands. According to the company, failure to comply with DSARs can lead to penalties of up to 4% of global net sales or €20 million. ClassiDocs also allows clients to maintain an accurate and current data inventory across over130 database types and, importantly, leading cloud SaaS services like Salesforce, QuickBooks, Microsoft Dynamic, Facebook and others, according to management. There are a myriad small companies that cannot maintain internal IT controls and need to rely on third-party solutions such as those provided by Data443.
Recently, the company secured the global technology, branding, and management rights to the WordPress GDPR Framework, which is an open-source plugin that addresses the EU’s GDPR compliance requirements. WordPress is “the world’s leading web hosting and content management ecosystem,” according to management, powering more than 50% of the global content management and e-commerce sites. Approximately 500 new WordPress sites are constructed each day, according to the company. The company views this relationship as a crucial step forward in its ability to reach smaller companies that are subject to data privacy laws but do not have a significant internal compliance resources. This is complementary to the solutions that ClassiDocs provide. The company has already released an upgrade to its WordPress GDPR capability.
The company has an internal sales team. However, to further assist with the expansion of its footprint and sales efforts, the company also developed associations with several partners, including N8 Identity, a cloud identity governance provider, Caretower, a European cyber security integrator and service provider and the Headtechnology Group global value-added distributor, among others. The company expects the relationship with Headtechnology Group to accelerate the expansion of its GDPR compliance solutions across Headtechnology Group’s network.
Importantly, the company also expects to close its second key acquisition before the end of Q3 2018. Data443 signed a letter of intent to acquire ARALOC, a secure digital content distribution and communication platform. The company expects the acquisition to close by the end of September 2018. According to management, ARALOC generates existing recurring monthly revenues, with operating income of roughly $500,000 in 2017. Moreover, management, focused on integrating and growing the companies it has acquired, believes that combining cyber technologies could yield synergistic cross-promotional opportunities to a broad and growing customer base.
The company has also assembled a strong team of strategic advisors. Specifically, Data443 appointed industry veterans Todd Spain, Steven Mail and Philip Niedermair to its newly formed strategic advisory board. Each of these board members has significant experience that management believes can help steer the company as it advances its goals. To further assist with the execution of its strategy, the company engaged law firm Whiteford, Taylor & Preston for advice on potential business transactions, consulting and reflecting its expertise. Whiteford, Taylor & Preston is one of the largest law firms in Maryland, with more than 170 lawyers.
Working initially with the Ripple Framework the company intends to be integral to blockchains, which is a decentralized and encrypted ledger that offers a secure method to store records and other information in a way that can be verified. Each block in the blockchain contains a hash – a digital fingerprint or unique identifier – and timestamped batches of prior transactions, as well as the hash of the previous block. The hash connects the blocks and prevents any block from being altered or inserted between two existing blocks. Each new block reinforces the verification of the previous block and therefore the overall blockchain. This characteristic is also believed to make it transparent if an attempted hacking tries to alter any part of the blockchain. According to IBM, blockchain architecture gives participants the ability to share a ledger that is updated, through peer-to-peer replication, every time a transaction occurs. Peer-to-peer replication means that each participant (node) in the network acts as both a publisher and a subscriber. Each node can receive or send transactions to other nodes, and the data is synchronized across the network as it is transferred.
Blockchain is viewed as a secure option for financial transactions that also provides flexibility and scalability. Blockchain technology also has broader applications beyond cryptocurrencies. Among other features, it can be used to process transactions, manage medical records, and verify and confirm proof of ownership. Blockchain can also record and track intangible assets such as intellectual property, patents, copyrights, or branding. In discussing blockchain, an article in the Harvard Business Review notes that, “Contracts, transactions, and the records of them are among the defining structures in our economic, legal, and political systems. They protect assets and set organizational boundaries…. With blockchain, we can imagine a world in which contracts are embedded in digital code and stored in transparent, shared databases, where they are protected from deletion, tampering, and revision.”
“Blockchain is a public ledger technology that uses digital signatures and cryptographic hashing to provide a record of secure transactions that cannot be altered,” according to TechRepublic. Specifically, blockchain is thought to be safe, immutable and transparent because no single person or party within the chain can alter the record without the agreement of all parties in the chain. Leading companies such as IBM and Mastercard have already adopted blockchain technology to protect transactions and American Express has launched instant blockchain payments for cross-border business-to-business payments.
The blockchain market is forecast to grow to $7.683 billion by 2022, up from $241.9 million in 2016, according to a December 2017 study by market research firm Markets and Markets, a compound annual growth rate of 79.6%, reflecting rising demand for blockchain and valuation of cryptocurrencies. Increased regulatory oversight of cryptocurrency could drive demand for cryptocurrency accounting software and services.
As enterprise and individuals rely increasingly on digital data, the opportunities for security breaches multiply. There are myriad examples of high-profile cybersecurity breaches, such as the Equifax breach that impacted an estimated upwards of 143 million consumers, as illustrated in the figure below. Sensitive data that was stolen included Social Security numbers and driver’s license numbers, among other metrics.
In addition, eBay, JP Morgan Chase and Yahoo have all experienced data breaches that have impacted billions of consumers. According to the 2017 Ponemon Cost of Data Breach study, the average cost of a data breach globally is $3.62 million. A 2017 Verizon Data Breach Investigations report concluded that 75% of breaches were perpetrated by outsiders, with 62% involving hacking. The Verizon report further found that 81% of the breaches leveraged stolen or weak passwords and 51% included malware. While some 24% of the companies breached were in the financial services sector, a sizable 61% of the companies were businesses that employ fewer than 1,000 people – in other words many were mid-size to small companies.
View Exhibit II
Ensuring online security is therefore crucial for enterprise, as well as personal users, particularly with the rising use of mobile technology. Mobile technology penetration has grown dramatically over the past decade. Adoption rates of mobile devices such as smartphones and tablets have tracked significantly ahead of that of other technology platforms such as PCs or broadband. Smartphones took only eight years to reach 20+% penetration globally and, according to comScore, exceeded 80% of the U.S. mobile subscriber market by 2016.
With increased mobile penetration, there has also been a growing trend towards BYOD (bring your own device), whereby employees bring their personal devices into the work environment for business and personal applications. Mobile apps have become an important way that users conduct commerce and access content both personally and professionally. The United Nations information and communication technologies agency, ITU, notes that over the last five years, mobile-broadband subscriptions have grown more than 20% per annum and reached an estimated 4.3 billion worldwide by 2017.
Control over companies’ wired networks has also become much more difficult in a BYOD work environment and with the many technology changes, creating challenges to maintain the benefits of mobility while concurrently monitoring security needs. In turn, this has driven demand for security to monitor mobile devices. At the same time, the volume of data has increased dramatically as individuals, corporations and government organizations access content from multiple connected devices. IDC forecasts that by 2020 the volume of digital information will have grown 300-fold when compared to 2005, boosting the need for storage and content management solutions.
The dramatic increase in content and data being transmitted over the internet and stored in the cloud is also placing burdens on enterprises and increasing concerns about security. Moreover, as more data storage and IP traffic moves to the cloud, cloud-based business analytics and business intelligence is also expected to grow, increasing the need for greater security, we believe. Gartner expects strong demand for all types of cloud services offerings. Market research firm Markets and Markets predicts that the cloud analytics market could reach $16.52 billion this year, which represents a 25.8% 2013-2018 CAGR. Overall, these changes have also made it that much more difficult to ensure internet privacy.
If Data443 can execute on its ambitious growth strategy, the company has a sizable market opportunity, as there is growing need and demand for cybersecurity services and solutions. That 61% of the companies that experienced data breaches in 2017 employ fewer than 1,000 people underscores, we believe, the opportunity that a start-up such as Data443 might have in success. The company’s founder and CEO has significant IT experience, which the company likely can leverage to promote and grow its technology products. As noted earlier, there are many small and mid-sized companies that cannot maintain internal IT controls and need to rely on third-party solutions such as those that Data443 provides.
The company has accomplished a lot in a short period of time, but likely is not on the radar screen yet for most investors. If Data443 can deliver on the revenue run rate of $8 million to $10 million and continue to grow the company from that base, we would expect more investors to notice and pay attention.
Photos accompanying this announcement are available at: