Summary CyberScope Web3 Security Inc. is seek $5 million in an IPO, but revenue is sharply declining despite a rapidly growing blockchain security market. CYSC’s top line, gross profit, and margins are all falling, with sales and marketing spend now essentially zero and cash flow turning negative. The IPO valuation is highly excessive at over 82x EV/Revenue on shrinking revenue from a small base, making the risk/reward profile unattractive. My outlook is to sell (avoid) the CYSC IPO due to worsening financials, revenue concentration, talent dependency, and extreme valuation assumptions. CyberScope’s Revenue Is Falling In A Growing Industry CyberScope Web3 Security Inc. ( CYSC ) has filed to raise growth capital in an IPO of its ordinary shares, according to SEC F-1/A registration information . CYSC provides blockchain-related security software solutions for decentralized systems. The firm’s revenue is dropping sharply, it faces numerous risks, and its IPO valuation assumptions are excessive to the extreme, so my outlook is to sell (avoid) the CYSC IPO. What Does CyberScope Do? George Town, Cayman Islands-based CyberScope Web3 Security Inc. was founded in Greece, and offers various Web3 security tools and services for blockchain software systems. Management is led by Chairman Mr. Trishneet Arora, who wholly owns KYE9 Artificial Intelligence Research, owner of 40% of CYSC’s stock. The company's primary offerings include: Smart contract audits KYC verification Bug bounty program management Penetration testing Proprietary security tools Other services. CyberScope makes money primarily through selling its project-based auditing services for specialized security assessments. CyberScope has booked fair market value investment of $2.3 million through June 30, 2025, from investors, including TAC Infosec Limited and KYE9 Artificial Intelligence Research LLC. Sales and Marketing expenses as a percentage of total revenue have fallen to essentially 0 as revenues have decreased, as the figures below indicate: Sales and Marketing Expenses vs. Revenue Period Percentage Six Months Ended June 30, 2025 0.0% Year Ended December 31, 2024 2.3% February 8 to December 31, 2023 3.5% (Source - SEC.) The Rule of 40 is a software industry metric that says that if the combined revenue growth rate and operating margin equal or exceed 40%, the company is producing an acceptable growth/operating margin trajectory. (Operating margin strips out non-cash charges like SBC.) CYSC’s most recent calculation was 46% as of June 30, 2025, and the company has achieved this via its high adjusted operating margin on falling revenue, per the table below: Rule of 40 Calculation Recent Rev. Growth % -24% Adjusted Operating Margin 69% Total 46% (Source - SEC.) What Is CyberScope’s Market? According to a 2025 market research report by Mordor Intelligence, the global market for block-based security solutions was an estimated $3 billion in 2025 and is expected to exceed $15 billion by 2030. This represents a projected CAGR of 38.4% from 2026 to 2030, a very high expected rate of growth. The primary factors driving this expected growth are enterprise migration toward Web3 approaches, growing incidence of smart-contract threats and exploits and greater "regulations that demand tamper-proof audit trails." Also, elements that can constrain the industry's growth include difficulty in finding qualified blockchain security engineering personnel, regulatory uncertainties and the high cost of continuous code audits. Major competitive vendors or industry players include the following firms: IBM ( IBM ) Guardtime Microsoft ( MSFT ) CertiK Ltd. Quantstamp Consensys Diligence Hacken Halborn Others. The blockchain security industry appears to be shifting from a narrow code review mode to a more expansive approach to the entire operational lifecycle of a protocol. It is also seeing growing demand for continuous real-time monitoring and AI-augmented verification technologies. The firm sells its services via direct sales and marketing efforts to blockchain project owners and developers worldwide. The company says it has completed more than 2,700 smart contract audits and over 500 KYC verifications with clients and partners such as ApeSwap, Quarashi Network and Coinscope, among many others. Below is a thumbnail SWOT analysis for CyberScope: Strengths Proprietary smart contract analysis and compliance tools, audit certificate industry recognition, comprehensive service offering. Weaknesses Reliance on scarce technical talent, limited operating history, cost of keeping up with technological change. Opportunities Growing adoption of Web3, DeFi and tokenized assets, regulatory developments like MiCA increasing demand, strategic partnerships, investment in proprietary tools. Threats Cryptocurrency market volatility, intense competition from larger firms, project failure could lead to reputational damage. CyberScope’s Recent Financial Results The firm’s recent financial performance is summarized as shown below: Declining top line revenue Falling gross profit and gross margin Dropping operating profit A swing to cash used in operations. Below are the major financial results from the firm’s current registration statement: Total Revenue Period Total Revenue % Variance vs. Prior Six Months Ended June 30, 2025 $ 570,908 -23.6% Year Ended December 31, 2024 $ 1,404,605 38.9% February 8 to December 31, 2023 $ 1,011,178 Gross Profit (Loss) Period Gross Profit (Loss) % Variance vs. Prior Six Months Ended June 30, 2025 $ 535,658 -27.9% Year Ended December 31, 2024 $ 1,376,090 39.3% February 8 to December 31, 2023 $ 987,646 Gross Margin Period Gross Margin % Variance vs. Prior Six Months Ended June 30, 2025 93.83% -5.6% Year Ended December 31, 2024 97.97% 0.3% February 8 to December 31, 2023 97.67% Operating Profit (Loss) Period Operating Profit (Loss) Operating Margin Six Months Ended June 30, 2025 $ 322,426 56.5% Year Ended December 31, 2024 $ 1,017,454 72.4% February 8 to December 31, 2023 $ 795,019 78.6% Net Income (Loss) Period Net Income (Loss) Net Margin Six Months Ended June 30, 2025 $ 163,594 28.7% Year Ended December 31, 2024 $ 811,866 57.8% February 8 to December 31, 2023 $ 616,184 60.9% Cash Flow From (Used in) Operations Period Cash Flow From (Used in) Operations Six Months Ended June 30, 2025 $ (5,657) Year Ended December 31, 2024 $ 112,380 February 8 to December 31, 2023 $ 51,350 (Glossary Of Terms.) (Source - SEC.) CyberScope’s IPO Plan CYSCY intends to sell one million shares of ordinary shares at a proposed midpoint price of $5.00 per share for gross proceeds of approximately $5.0 m, not including the sale of customary underwriter options. No existing or possibly new shareholders have indicated an interest in acquiring additional shares, according to the most recent IPO filing. Company, shareholder and executive lock-ups will be for the normal and customary 180 days after the effective date of the IPO prospectus. According to CyberScope’s most recent regulatory filing, it plans to use the net proceeds as follows: We intend to use the net proceeds from this offering for general corporate purposes, including sales and marketing expenditures aimed at growing our business and research and development expenditures focused on product development. Although we have not allocated specific portions of the net proceeds to specific uses, we expect that a significant portion of such expenditures will relate to hiring additional sales and marketing and research and development personnel. We may also use net proceeds from this offering to make acquisitions or investments in complementary companies or technologies, although we do not have any agreement or understanding with respect to any such acquisition or investment at this time. (Source - SEC.) The company’s enterprise value at IPO (assuming no underwriter options) will approximate $101 million. Dilution in net tangible book value per share for investors in the IPO is expected to be $4.79. The float-to-outstanding-shares ratio (excluding underwriter options) will be approximately 4.76%, so the stock will be an extremely ‘low float’ stock subject to higher volatility in post-IPO trading. The firm’s presentation for its roadshow is not available. Pertaining to potential legal exposure, the firm said it was not a party to any material legal actions as of the prospectus date (January 13, 2026). Listed underwriters of the IPO are Maxim Group LLC. Here is a table of relevant capitalization and valuation figures for the firm: Measure [TTM] Amount Market Capitalization at IPO $105,000,000 Enterprise Value $100,867,685 Price / Sales 85.47 EV / Revenue 82.11 EV / EBITDA 146.23 Working Capital Ratio 1.9 Earnings Per Share $0.02 P/E Ratio 228.31 Operating Margin 59.71% Net Margin 37.70% Dilution to New Shareholders $4.79 Float To Outstanding Shares Ratio 4.76% SBC as Percentage of Free Cash Flow 0% Revenue Growth Rate -23.58% (Glossary Of Terms) (Source - SEC.) As of June 30, 2025, CyberScope had $682,553 in cash and equivalents and $508,500 in total liabilities. The company has generated free cash flow for the twelve months ended June 30, 2025, of $24,830. CyberScope’s Revenue Is Falling In A Growing Industry CYCS aims to raise public capital investment to fund its general growth plans. The company’s financials have produced falling topline revenue from a small base, declining gross profit and gross margin, reduced operating profit and a swing to cash used in operations. Sales and Marketing expenses as a percentage of total revenue have dropped to zero, as it appears the company has spent almost nothing on this function. The firm currently plans to pay no dividends and will retain all available funds for its growth initiatives and working capital needs. CYSC’s recent capital spending history shows it has spent almost zero on capital expenditures as a percentage of its operating cash flow. The company’s Rule of 40 results have been unusual, with a large drop in revenue more than offset by a high operating margin, contributing to a positive figure for this metric. The firm’s growth strategy includes expanding its service offering to monitoring and incident response, talent acquisition and retention efforts and ongoing investment in R&D The market opportunity for providing Web3 security services is moderate but expected to grow at a very high rate of growth in the coming years, so the company enjoys strong growth dynamics in its favor. Risks to the company’s outlook as a public firm include its "emerging growth company" and "foreign private issuer" status, which allows management to produce substantially less information for shareholders. Micro-cap company stocks like these have frequently performed poorly in open market trading after their IPO. The firm has revenue concentration risks in a relatively small part of the blockchain industry and it is highly dependent on a relatively limited number of knowledgeable blockchain code auditors. CYCS’s related party transactions are detailed here . As to valuation, CyberScope is asking investors to pay an EV/Revenue multiple of over 82x on sharply falling revenue from a small base, which is wildly excessive. Given the numerous risks, worsening financial results and excessive valuation assumptions by management, my outlook is to sell (avoid) the CYCS IPO. Expected IPO Pricing Date: To be announced.
