Data443 Risk Mitigation Inc (ATDS)

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I wanted to share an interesting thing I recently picked up reading through one of the many Q2 reports. If you all recall, there were plenty of statements and restatements during this time frame. Anyways, I wanted to share this because I think it sheds some light on the large convertible note that we have on the books. Most investor concerns are that the note will fully convert and essentially swamp us with a ton of shares. I think what I am about to detail here should shed light on this subject and at a minimum possibly minimize some of those fears...

To the details>>>>

According to the attached: LANDSTAR, INC. AND SUBSIDIARIES
Condensed Consolidated
Financial Statements
June 30, 2018 and December 31, 2017

There are 2 key statements that I believe give us an insight into the expected value of the note.

"Management determined that liabilities created by beneficial conversion features associated with the issuance of certain convertible notes payable (see Note 4), and the purchase price discount included in the Equity Purchase Agreement (see Note 5) meet the criteria of derivatives and are required to be measured at fair value. The fair value of these derivative liabilities was determined based on management’s estimate of the expected future cash flows required to settle the liabilities. This valuation technique involves management’s estimates and judgment based on unobservable inputs and is classified in level 3"

And:

"Non-interest bearing convertible note held by Blue Citi LLC (“Blue Citi”) for the original principal of $125,000, payable on demand and convertible at the option of the holder into common shares at the conversion price of $0.00005 per share. The outstanding principal for the convertible note was $115,000 and $125,000 as of June 30, 2018 and December 31, 2017. The embedded conversion feature in this note created a BCF totaling approximately $5,028,000 as of June 30, 2018."

So the key point to take away from this is:
1. Back on June 30th 2018, management using the embedded conversion feature stated that the note was worth $5,028,000.
2. The closing stock price for June 29, 2018 was .0122.
3. The note still had $115,000 to convert (2.3 billion shares)

Doing the math for a full conversion would be 2.3 billion shares X .0122 = $28,060,000

Therefore, based off of this math, the conclusion one could come to is management in the filings certainly do not see the note the same way we do as fully converted. Their expected valuation of the note at the end of Q2 was 5,028,000 / 28,060,000 or 17.9% of full conversion.

Another thing to consider is given how much of a down turn we have had in the SP, we are down roughly 75% from the end of Q2. If adjusted to these current prices, I would expect that note liability to be adjusted down 75% as well. I am not privy to the conversion features of the note, but if there is a time period in which the conversions must be completed, the one benefit to the price being down here is at the end of the day, we could owe Blue Citi a lot less money than some might think.

All in my opinion, but some good food for thought.... I welcome any other opinions or insights. Best of luck LDSR longs!

https://backend.otcmarkets.com/otcapi/company/financial-report/202491/content