Data443 Narrows Losses Amid Revenue Dip, Liquidity Concerns Persist

TL;DR

**ATDS is still bleeding cash and drowning in debt, despite cutting losses; steer clear until they prove a path to sustainable profitability.**

AI Summary

Data443 Risk Mitigation, Inc. (ATDS) reported a net loss of $994,635 for the six months ended June 30, 2025, a significant improvement from the $3,139,956 net loss in the prior-year period. Revenue decreased slightly to $2,598,616 for the six months ended June 30, 2025, down from $2,660,143 in the same period of 2024. However, gross profit saw a substantial increase, reaching $1,996,136 in 2025 compared to $1,240,114 in 2024, driven by a sharp reduction in cost of revenue from $1,420,029 to $602,480. Operating expenses decreased from $2,554,212 to $2,367,018, primarily due to lower sales and marketing expenses. The company's cash position declined from $168,208 at December 31, 2024, to $59,671 at June 30, 2025. Total liabilities remain high at $18,696,043, exceeding total assets of $5,527,391, indicating a significant stockholders' deficit of $(13,168,652). The company continues to face liquidity challenges, as evidenced by its negative working capital and reliance on debt and equity conversions.

Why It Matters

For investors, ATDS's ability to significantly reduce its net loss by over 68% year-over-year, despite a slight revenue decline, suggests improved operational efficiency, particularly in cost of revenue. However, the persistent negative working capital and substantial stockholders' deficit of $(13.17) million raise serious going concern issues, making it a high-risk investment. Employees might face uncertainty given the company's financial instability, while customers could question the long-term viability of their service provider in a competitive cybersecurity market. The broader market will watch if ATDS can leverage its improved gross profit to achieve sustainable profitability and address its debt burden, especially against larger, more stable competitors.

Risk Assessment

Risk Level: high — The company's total liabilities of $18,696,043 significantly exceed its total assets of $5,527,391, resulting in a stockholders' deficit of $(13,168,652) as of June 30, 2025. Cash on hand is critically low at $59,671, and the company reported a net cash outflow from financing activities of $(76,487) for the six months ended June 30, 2025, indicating ongoing liquidity challenges.

Analyst Insight

Investors should exercise extreme caution and consider avoiding ATDS given its severe liquidity issues, substantial debt, and negative stockholders' equity. Await clear evidence of sustained positive cash flow from operations and a significant reduction in liabilities before considering any investment.

Financial Highlights

debt To Equity

N/A

revenue

$2.60M

operating Margin

-91.1%

total Assets

$5.53M

total Debt

$18.70M

net Income

-$994,635

eps

$0.00

gross Margin

76.8%

cash Position

$59,671

revenue Growth

-2.3%

Key Numbers

• $2.60M — Revenue (Decreased from $2.66M in 2024 to $2.60M in 2025 for the six-month period.)
• $1.99M — Gross Profit (Increased significantly from $1.24M in 2024 to $1.99M in 2025 for the six-month period.)
• $(994,635) — Net Loss (Improved from $(3,139,956) in 2024 to $(994,635) in 2025 for the six-month period.)
• $59,671 — Cash (Decreased from $168,208 at Dec 31, 2024, highlighting liquidity issues.)
• $18.70M — Total Liabilities (Remains high, exceeding total assets of $5.53M.)
• $(13.17M) — Stockholders' Deficit (Increased from $(13.09M) at Dec 31, 2024, indicating worsening financial health.)
• 323,928,739 — Common Shares Outstanding (As of August 14, 2025, indicating significant dilution.)
• $0.00 — Basic and Diluted Loss Per Common Share (For the six months ended June 30, 2025, compared to $(10.00) in 2024, due to increased share count.)

Key Players & Entities

• Data443 Risk Mitigation, Inc. (company) — registrant
• Centurion Holdings I, LLC (company) — acquisition target
• SEC (regulator) — Securities and Exchange Commission
• $994,635 (dollar_amount) — net loss for six months ended June 30, 2025
• $3,139,956 (dollar_amount) — net loss for six months ended June 30, 2024
• $2,598,616 (dollar_amount) — revenue for six months ended June 30, 2025
• $1,996,136 (dollar_amount) — gross profit for six months ended June 30, 2025
• $59,671 (dollar_amount) — cash balance as of June 30, 2025
• $18,696,043 (dollar_amount) — total liabilities as of June 30, 2025
• $13,168,652 (dollar_amount) — total stockholders' deficit as of June 30, 2025

FAQ

Risk Factors

• Substantial Stockholders' Deficit and Going Concern Uncertainty [high — financial]: The company has a significant stockholders' deficit of $(13,168,652) as of June 30, 2025, and a negative working capital. This, combined with a net loss of $994,635 for the six months ended June 30, 2025, raises substantial doubt about the company's ability to continue as a going concern. The company's ability to fund its operations and meet its obligations is dependent on its ability to raise additional capital through debt or equity financing.
• Liquidity and Cash Flow Challenges [high — financial]: Cash and cash equivalents decreased from $168,208 at December 31, 2024, to $59,671 at June 30, 2025. The company's operating activities consumed $1,007,000 in cash for the six months ended June 30, 2025. This persistent decline in cash reserves highlights ongoing liquidity challenges and the need for continuous access to funding.
• High Level of Total Liabilities [high — financial]: Total liabilities stand at $18,696,043 as of June 30, 2025, significantly exceeding total assets of $5,527,391. This imbalance creates a substantial leverage risk and limits financial flexibility, making the company vulnerable to adverse economic conditions or changes in credit markets.
• Dependence on Debt and Equity Financing [medium — financial]: The company's financial condition necessitates reliance on debt and equity conversions to fund operations. While these have provided necessary capital, they also contribute to dilution and increased interest expenses, posing a risk if future financing becomes unavailable or prohibitively expensive.
• Execution Risk in Revenue Generation [medium — operational]: Despite improvements in gross profit margin, revenue saw a slight decrease from $2,660,143 in the prior year to $2,598,616 for the six months ended June 30, 2025. The company must demonstrate a consistent ability to grow revenue to achieve profitability and sustainability.
• Dilution from Share Issuances [medium — financial]: With 323,928,739 common shares outstanding as of August 14, 2025, the company has experienced significant dilution. Future equity issuances, while potentially necessary for funding, will further dilute existing shareholders' ownership and earnings per share.
• Compliance with Data Privacy Regulations [medium — regulatory]: As a risk mitigation company, Data443 operates in a highly regulated environment concerning data privacy and security. Non-compliance with regulations such as GDPR, CCPA, or others could lead to significant fines, legal action, and reputational damage.
• Competitive Market Landscape [low — market]: The cybersecurity and risk mitigation market is highly competitive, with numerous established players and emerging technologies. Data443 faces the challenge of differentiating its offerings and capturing market share against competitors with potentially greater resources and brand recognition.

Industry Context

Data443 operates in the cybersecurity and risk mitigation sector, a rapidly growing but highly competitive market. Key trends include increasing data breaches, evolving regulatory landscapes (like GDPR and CCPA), and a growing demand for cloud-based security solutions. Companies in this space must continuously innovate to stay ahead of sophisticated threats and maintain compliance.

Regulatory Implications

As a provider of risk mitigation solutions, Data443 is subject to stringent data privacy and security regulations globally. Non-compliance can lead to severe penalties, legal liabilities, and reputational damage, impacting its ability to operate and attract customers.

What Investors Should Do

1. Monitor cash burn rate and future financing activities.
2. Assess the sustainability of gross profit margin improvements.
3. Evaluate the company's strategy for revenue growth.
4. Consider the impact of ongoing dilution on share value.

Key Dates

• 2025-06-30: End of Second Quarter — Reporting period for the condensed consolidated financial statements, showing improved net loss but declining cash.
• 2025-08-14: Common Shares Outstanding Date — Indicates a substantial number of shares outstanding (323,928,739), highlighting potential for significant dilution.
• 2024-12-31: End of Fiscal Year — Prior period balance sheet data for comparison, showing a higher cash position ($168,208) than at June 30, 2025.

Glossary

Stockholders' Deficit

A negative stockholders' equity, meaning the company's liabilities exceed its assets. (Indicates the company's financial distress, with liabilities of $18.70M exceeding assets of $5.53M, resulting in a deficit of $(13.17M).)

Going Concern

An accounting assumption that a business will continue to operate for the foreseeable future. (The company's substantial stockholders' deficit and recurring losses raise substantial doubt about its ability to continue as a going concern, requiring disclosure.)

Working Capital

The difference between a company's current assets and current liabilities. (The company has negative working capital, indicating it may not have sufficient liquid assets to cover its short-term obligations.)

Cost of Revenue

The direct costs attributable to the production or purchase of the goods or services sold by a company. (A significant reduction in cost of revenue from $1.42M to $602,480 drove the substantial increase in gross profit.)

Dilution

The reduction in the value of existing shareholders' equity resulting from the issuance of new shares. (The large number of common shares outstanding (323,928,739) suggests significant past dilution, and future equity financing could further dilute existing shareholders.)

Year-Over-Year Comparison

Compared to the six months ended June 30, 2024, Data443 Risk Mitigation, Inc. has significantly improved its net loss, reducing it from $3,139,956 to $994,635. This was primarily driven by a substantial increase in gross profit, achieved through a drastic reduction in the cost of revenue, and a decrease in operating expenses. However, revenue experienced a slight decline, and the company's cash position has deteriorated considerably, falling from $168,208 at the end of 2024 to $59,671. The overall financial health remains precarious, with a substantial stockholders' deficit and high liabilities.

Filing Documents

• form10-q.htm (10-Q) — 1222KB
• ex31-1.htm (EX-31.1) — 17KB
• ex31-2.htm (EX-31.2) — 17KB
• ex32-1.htm (EX-32.1) — 7KB
• ex32-2.htm (EX-32.2) — 7KB
• 0001641172-25-024042.txt ( ) — 6418KB
• atds-20250630.xsd (EX-101.SCH) — 55KB
• atds-20250630_cal.xml (EX-101.CAL) — 63KB
• atds-20250630_def.xml (EX-101.DEF) — 207KB
• atds-20250630_lab.xml (EX-101.LAB) — 409KB
• atds-20250630_pre.xml (EX-101.PRE) — 310KB
• form10-q_htm.xml (XML) — 996KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION ITEM 1.

Financial Statements

Financial Statements 2 Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 (unaudited) 2 Condensed Consolidated Statements of Operations for the six months ended June 30, 2025 and 2024 (unaudited) 3 Condensed Consolidated Statements of Stockholders' Deficit for the six months ended June 30, 2025 and 2024 (unaudited) 4 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (unaudited) 5 Notes to the Unaudited Condensed Consolidated Financial Statements 6 ITEM 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 20 ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 30 ITEM 4.

Controls and Procedures

Controls and Procedures 30

OTHER INFORMATION

PART II. OTHER INFORMATION 32 ITEM 1.

Legal Proceedings

Legal Proceedings 32 ITEM 1A.

Risk Factors

Risk Factors 32 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 32 ITEM 3. Defaults Upon Senior Securities 33 ITEM 4. Mine Safety Disclosures 33 ITEM 5. Other Information 33 ITEM 6. Exhibits 33

SIGNATURES

SIGNATURES 34 1 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL DATA443 RISK MITIGATION, INC. CONDENSED CONSOLIDATED BALANCE SHEETS June 30, December 31, 2025 2024 (Unaudited) (Audited) Assets Current assets Cash $ 59,671 $ 168,208 Accounts receivable, net 102,340 31,776 Total current assets 162,011 199,984 Property and equipment, net 194,378 252,903 Advance payment for acquisition 2,726,188 2,726,188 Intellectual property, net of accumulated amortization 2,439,952 2,798,816 Deposits 4,862 36,062 Total Assets $ 5,527,391 $ 6,013,953 Liabilities and Stockholders' Deficit Current Liabilities Accounts payable and accrued liabilities 6,284,524 5,919,988 Deferred revenue 1,118,221 1,591,326 Interest payable 2,141,956 2,097,216 Notes payable, net of unamortized discount 3,296,969 3,340,492 Convertible notes payable, net of unamortized discount 4,142,240 3,877,944 Due to a related party 150,303 144,303 Finance lease liability 10,341 10,341 Total Current Liabilities 17,144,554 16,981,610 Series B Preferred Stock, 80,000 shares designated; $ 0.001 par value; Stated value $ 10.00 , 0 and 0 shares issued and outstanding, net of discount, respectively - Notes payable, net of unamortized discount - non-current 1,064,446 1,406,849 Deferred revenues - non-current 487,043 714,127 Total Liabilities 18,696,043 19,102,586 Commitments and Contingencies - Stockholders' Deficit Preferred stock: 337,500 authorized; $ 0.001 par value Series A Preferred Stock, 150,000 shares designated; $ 0.001 par value; 148,445 and 149,492 shares issued and outstanding, respectively 148 149 Common stock: 500,000,000 authorized; $ 0.001 par value 227,757,139 and 1,150,223 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively 289,093 62,472 Additional paid in capital 49,280,760 48,592,764 Accumulated deficit ( 62,738,653 ) ( 61,744,018

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