DATA443 REPORTS RECORD SECOND QUARTER RESULTS

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Sales and marketing expense for the three months ended June 30, 2020 amounted to $27,000, as compared to $156,000 for the three months ended June 30, 2019, which is a decrease of $129,000, or 83%. The expenses for the second quarter of fiscal year 2020 primarily consisted of developing our sales operation.

The net loss for the three months ended June 30, 2020 was $2,573,000 compared to a gain of $1,194,000 for the three months ended June 30, 2019. The net loss for the three months ended June 30, 2020 was mainly derived from a loss on change in fair value of derivative liability of $773,000 associated with convertible notes payable and gross margin of $447,000, offset in part by general and administrative, and sales and marketing expenses incurred. The net gain for the three months ended June 30, 2019 was mainly derived from a gain on change in fair value of derivative liability of $2,421,000 associated with convertible notes payable and gross margins of $339,000 offset in part by general and administrative, and sales and marketing expenses incurred.

First Half 2020 Financial Results

We had net billings for the six months ended June 30, 2019 of $1,535,000, compared to $957,000 in the prior year period. We recognized $944,000 of revenue during the six months ended June 30, 2020, compared to $501,000 of revenue during the six months ended June 30, 2019.

General and administrative expenses for the six months ended June 30, 2020 amounted to $3,091,000, as compared to $1,872,000 for the six months ended June 30, 2019, an increase of $1,219,000, or 65%. The expenses for the six months ended June 30, 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.

Sales and marketing expense for the six months ended June 30, 2020 amounted to $148,000, compared to $382,000 for the six months ended June 30, 2019, which is a decrease of $234,000, or 61%. The expenses for the six months ended June 30, 2020 primarily consisted of developing a sales operation.

The net loss for the six months ended June 30, 2020 was $12,754,000 as compared to a gain of $7,224,000 for the six months ended June 30, 2019. The net loss for the six months ended June 30, 2020 was mainly derived from a loss on change in fair value of derivative liability of $9,278,000, associated with convertible notes payable and gross margin of $890,000, offset in part by general and administrative, and sales and marketing expenses incurred. The net gain for the six months ended June 30, 2019 was mainly derived from a gain on change in fair value of derivative liability of $9,234,000, associated with convertible notes payable and gross margin of $462,000, offset in part by general and administrative, and sales and marketing expenses incurred.