SRAX, Inc. - FORM 10-Q - May 24, 2021

Attached files

file	filename
EX-32 - SRAX, Inc.	ex-32.htm
EX-31.2 - SRAX, Inc.	ex31-2.htm
EX-31.1 - SRAX, Inc.	ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 001-37916

SRAX, INC.

(Exact name of registrant as specified in its charter)

Delaware

45-2925231

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2629 Townsgate Road #215

Westlake Village, CA

91361

(Address of principal executive offices)

(Zip Code)

(323) 694-9800

(Registrant’s telephone number, including area code)

(Former Name)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A common stock		SRAX		Nasdaq Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]		Accelerated filer [ ]
Non-accelerated filer [X]		Smaller reporting company [X]
		Emerging growth company [ ]

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The issuer had 23,186,265 shares of Class A common stock issued and outstanding as of May 21, 2021.

TABLE OF CONTENTS

		Page No
	PART I - FINANCIAL INFORMATION

ITEM 1.	Financial Statements.	F-1

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	3

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk.	16

ITEM 4.	Controls and Procedures.	16

	PART II - OTHER INFORMATION

ITEM 1.	Legal Proceedings.	16

ITEM 1A.	Risk Factors.	16

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	26

ITEM 3.	Defaults Upon Senior Securities.	26

ITEM 4.	Mine Safety Disclosures.	26

ITEM 5.	Other Information.	26

ITEM 6.	Exhibits.	26

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are considered to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include, but are not limited to: any projections of revenues, earnings, or other financial items; any statements of the strategies, plans and objectives of management for future operations; any statements concerning proposed new products or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” and any other similar words. These statements represent our expectations, beliefs, anticipations, commitments, intentions, and strategies regarding the future and include, but are not limited to, the risks and uncertainties described in the sections of this Quarterly Report entitled Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations and those discussed in other documents we file with the Securities and Exchange Commission (SEC). Readers are cautioned that actual results could differ materially from the anticipated results or other expectations that are expressed in forward-looking statements within this report. The forward-looking statements included in this report speak only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

We urge you to read this entire Quarterly Report on Form 10-Q, including the “Risk Factors” section, the financial statements and the related notes included therein. As used in this Quarterly Report, unless context otherwise requires, the words “we,” “us,” “our,” “the Company,” “SRAX,” “Registrant” refer to SRAX, Inc. and its subsidiaries. Additionally, any reference to (i) “LD Micro” and “LD Micro, Inc.” refer to the Company’s wholly owned subsidiary, “LD Micro, Inc. and the assets used in its operation. Also, any reference to “common share” or “common stock,” refers to our $.001 par value Class A common stock.

Any reference to “BIGToken” and “BIGToken, Inc.”, or the “BIGToken Project” refer to the Company’s previously wholly owned subsidiary, BIGToken, Inc. and the assets used in its operations which we transferred into Force Protection Video Equipment, Inc. (“FPVD”), which became our majority owned subsidiary on February 4, 2021.

Unless otherwise stated, the information which appears on our web sites www.srax.com are not part of this report and are specifically not incorporated by reference.

PART 1 - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

SRAX, Inc. and Subsidiaries

Three Months Ended March 31, 2021

Index to the Financial Statements

Contents		Page (s)

Condensed Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020		F-2

Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020		F-3

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ equity for the three months ended March 31, 2021 and 2020		F-4

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020		F-5

Unaudited Condensed Notes to the Consolidated Financial Statements		F-6

F-1

SRAX, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	As of			As of
	March 31,2021			December 31, 2020
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	13,509,000		$	451,000
Accounts receivable, net		3,314,000			2,608,000
Prepaid expenses		1,046,000			367,000
Marketable securities		18,008,000			8,447,000
Other current assets		25,000			-
Total current assets		35,902,000			11,873,000

Notes receivable		908,000			893,000
Property and equipment, net		132,000			118,000
Intangible assets, net		2,197,000			2,409,000
Right of use assets		340,000			366,000
Other assets		36,000			3,000
Goodwill		23,351,000			23,351,000
Total Assets	$	62,866,000		$	39,013,000

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable and accrued liabilities	$	3,583,000		$	3,561,000
Other current liabilities		11,150,000			8,711,000
Payroll protection loan - short-term		1,126,000			747,000
OID convertible debentures		3,101,000			6,016,000
Current liabilities		18,960,000			19,035,000

Right of use liability - long term		213,000			243,000
Payroll protection loan, less current portion		-			379,000
Deferred tax liability		131,000			131,000
Total liabilities		19,304,000			19,788,000

Stockholders’ equity
Common stock, authorized 250,000,000 shares, $0.001 par value, 23,186,265 and 16,145,778 shares issued and outstanding, respectively		23,000			16,000
Additional paid-in capital		93,485,000			69,551,000
Accumulated deficit		(61,432,000	)		(50,342,000	)
Total equity attributable to SRAX, Inc.		32,076,000			19,225,000
Noncontrolling interest		11,486,000			-
Total stockholders’ equity		43,562,000			19,225,000
Total Liabilities and Stockholders’ Equity	$	62,866,000		$	39,013,000

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements.

F-2

SRAX, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

For the Three Months Ended March 31,

	2021			2020

Revenues	$	5,442,000		$	351,000
Cost of revenues		1,650,000			112,000
Gross profit		3,792,000			239,000

Operating expenses
Employee related costs		2,316,000			2,026,000
Marketing and selling expenses		1,160,000			320,000
Platform Costs		106,000			403,000
Depreciation and amortization		384,000			308,000
General and administrative		1,252,000			1,056,000
Total operating expenses		5,218,000			4,113,000

Loss from operations		(1,426,000	)		(3,874,000	)

Other income (expense)
Interest income		15,000			−
Financing Costs		(15,040,000	)		(360,000	)
Gain (loss) from marketable securities		4,493,000			(71,000	)
Change in fair value of derivative liabilities		−			1,302,000
Other income		14,000			−
Total other income (loss)		(10,518,000	)		871,000

Loss before provision for income taxes		(11,944,000	)		(3,003,000	)

Provision for income taxes		−			−
Net loss		(11,944,000	)		(3,003,000	)
Net loss attributable to noncontrolling interest		854,000			−
Net loss attributable to SRAX, Inc. and subsidiaries	$	(11,090,000	)	$	(3,003,000	)

Net loss per share, basic and diluted	$	(0.57	)	$	(0.21	)

Weighted average shares outstanding - basic and diluted		19,411,519			14,000,275

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements.

F-3

SRAX, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months Ended March 31, 2021 and 2020

	Common Stock				Additional paid-in		Accumulated			Noncontrolling			Stockholders’
	Shares		Amount		Capital		Deficit			Interest			Equity

Balance, December 31, 2020		16,145,778	$	16,000	$	69,551,000	$	(50,342,000	)	$	–		$	19,225,000
Share based compensation		–		–		253,000		–			–			253,000
Shares issued for cash		53,616		–		284,000		–			–			284,000
Conversion of convertible debt to equity		2,041,551		2,000		3,445,000		–			–			3,447,000
Shares issued for exercise of warrants, net of offering costs		4,945,320		5,000		12,215,000		–			–			12,220,000
Warrants issued as inducement to exercise warrants		–		–		7,737,000		–			–			7,737,000
Acquisition of noncontrolling interest of FVPD		–		–		–		–			(95,000	)		(95,000	)
Warrants issued by FVPD for SRAX, Inc. debenture holders		–		–		–		–			885,000			885,000
Series B convertible preferred stock issued by FPVD		–		–		–		–			5,775,000			5,775,000
Beneficial conversion feature FPVD series B convertible preferred stock		–		–		–		–			5,775,000			5,775,000
Net loss		–		–		–		(11,090,000	)		(854,000	)		(11,944,000	)
Balance, March 31, 2021		23,186,265	$	23,000	$	93,485,000	$	(61,432,000	)	$	11,486,000		$	43,562,000

	Common Stock				Additional paid-in		Accumulated			Stockholders’
	Shares		Amount		Capital		Deficit			Equity

Balance, December 31, 2019		13,997,452	$	14,000	$	48,129,000	$	(35,637,000	)	$	12,506,000
Share based compensation		–		–		260,000		–			260,000
Relative fair value of warrants issued with notes payable		–		–		83,000		–			83,000
Shares issued for extension agreement		36,700		–		71,000		–			71,000
Net loss		–		–		–		(3,003,000	)		(3,003,000	)
Balance, March 31, 2020		14,034,152	$	14,000	$	48,543,000	$	(38,640,000	)	$	9,917,000

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements.

F-4

SRAX, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31,

	2021			2020
Cash Flows From Operating Activities
Net loss	$	(11,944,000	)	$	(3,003,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Unrealized (gain) loss from securities held for sale		(4,493,000	)		–
Interest income		(15,000	)		–
Fair value of warrants issued by FPVD for SRAX, Inc. debenture holders		885,000			–
Stock based compensation		253,000			260,000
Amortization of debt issue costs		532,000			17,000
Recognition of beneficial conversion feature - FPVD series B preferred stock		5,775,000			–
Warrant inducement expense		7,737,000			–
Change in fair value of derivative liabilities		–			(1,302,000	)
Marketable securities received for accounts receivable previously written off		(409,000	)		–
Provision for bad debts		81,000			15,000
Depreciation expense		18,000			19,000
Amortization of intangibles		366,000			290,000
Change in right of use asset		26,000			–
Changes in operating assets and liabilities:
Accounts receivable		(378,000	)		275,000
Prepaid expenses		(679,000	)		71,000
Other current assets		(25,000	)		5,000
Accounts payable and accrued expenses		22,000			554,000
Other current liabilities		(3,891,000	)		–
Change in right of use liability		(30,000	)		–
Net Cash Used in Operating Activities		(6,169,000	)		(2,799,000	)

Cash Flows From Investing Activities
Net cash received from acquisition of FPVD		955,000			–
Proceeds from the sale of marketable securities		2,266,000			–
Payment for deferred consideration to LD Micro		(1,004,000	)		–
Purchase of property and equipment		(32,000	)		–
Development of software		(154,000	)		(278,000	)
Other assets		(33,000	)		65,000
Net Cash Provided by (Used in) Investing Activities		1,998,000			(213,000	)

Cash Flows From Financing Activities
Proceeds from issuance of FPVD series B preferred stock		4,725,000			–
Proceeds from the exercise of warrants		12,220,000			–
Proceeds from issuance of common stock		284,000			–
Proceeds from issuance of notes payable less issuance costs		–			3,090,000
Net Cash Provided by Financing Activities		17,229,000			3,090,000

Net increase in Cash		13,058,000			78,000
Cash, Beginning of Period		451,000			32,000
Cash, End of Period	$	13,509,000		$	110,000

Supplemental disclosure of cash flow information:
Cash paid for interest	$	14,000		$	52,000
Cash paid for income taxes	$	–		$	–

Noncash investing and financing activities:
Convertible notes converted into shares	$	5,487,000		$	–
Fair value of marketable securities received for revenue contracts	$	7,334,000		$	–
Vesting of prepaid common stock award	$	–		$	94,000
Relative fair value of warrants issued with term loan	$	–		$	83,000
Shares of common stock issued for extension agreement	$	–		$	71,000

See accompanying notes to these Unaudited Condensed Consolidated Financial Statements.

F-5

SRAX, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2021

NOTE 1 – Organization and Basis Of Presentation

Organization

SRAX, Inc. (“SRAX”, “we”, “us”, “our” or the “Company”) is a Delaware corporation formed on August 2, 2011.

The Condensed Consolidated Financial Statements consist of SRAX and its wholly owned subsidiaries LD Micro, Inc. (“LD Micro”) and SRAX’s majority owned subsidiary Force Protection Video Equipment Corporation (“FPVD”) and FPVD’s wholly owned subsidiary BIG Token, Inc. (“BIGToken”) (See Note 8 – Stockholders’ Equity Noncontrolling Interest). All intercompany transactions have been eliminated.

Our business is organized into two reportable segments: Sequire and BIGToken. The Sequire segment includes the operations of LD Micro, and the BIGToken segment includes the operations of our majority owned subsidiary FPVD and its wholly owned subsidiary BIG Token, Inc.

We are a technology firm focused on enhancing communications between public companies and their shareholders and investors. We currently have two distinct business units:

	●	Our unique SaaS platform, Sequire provides users many features which allow issuers to track their shareholders’ behaviors and trends, then use data-driven insights to engage with shareholders across marketing channels.

	●	Through LD Micro, we organize and host investor conferences within the micro and small- cap markets, and plan to create several more niche events for the investor community.

Each of SRAX’s business units deliver valuable insights that assist our clients with their investor relations and communications initiatives.

We are headquartered in Westlake Village, California but work as a distributed virtual Company.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements and notes thereto are unaudited. The unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in the Company’s annual financial statements have been condensed or omitted. The December 31, 2020 condensed balance sheet data was derived from financial statements but does not include all disclosures required by GAAP. These interim unaudited condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim three-month period ended March 31, 2021 and 2020. The results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021 or for any future period.

These unaudited Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2020, included in the Company’s annual report on Form 10-K filed with the SEC on March 31, 2021.

Liquidity and Going Concern

The Company has incurred significant losses since its inception and has not demonstrated an ability to generate sufficient revenues from the sales of its goods and services to achieve profitable operations. In addition, the Company’s operations (Sequire, Corporate and Other), as well as the operations of the BIGToken segment, will require significant additional financing. As of March 31, 2021: (i) the Company had cash and cash equivalents of $8.7 million and (ii) BIGToken had cash and cash equivalents of $4.9 million. We believe that neither of the companies’ cash and cash equivalents is sufficient to fund the respective company’s planned operations through one year after the date these Condensed Consolidated Financial Statements are issued, and accordingly, these factors create substantial doubt about the ability of the Company and/or BIGToken to continue as a going concern within one year after the date that these Condensed Consolidated Financial Statements are issued. The Condensed Consolidated Financial Statements do not include any adjustments that might be necessary if either of the companies is unable to continue as a going concern. Accordingly, these Condensed Consolidated Financial Statements have been prepared on a basis that assumes that both companies will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

F-6

In making this assessment we performed a comprehensive analysis of the Company’s current circumstances including: financial position, cash flow and cash usage forecasts, and obligations and debts. Although the Company’s management has a long history of successful capital raises, and the fair market value of its marketable securities is approximately $20 million, the analysis used to determine the Company’s ability as a going concern does not include these aforementioned cash sources, which are outside the Company’s direct control and are therefore not considered to be available within the next 12 months for purposes of this analysis.

Based upon consultation with BIGToken’s management we anticipate that BIGToken will require significant additional capital through the private and public sales of BIGToken’s equity or debt securities. Although BIGToken’s management believes that such capital sources will be available, there can be no assurance that financing will be available when needed in order to allow BIGToken’s to continue operations as currently planned, or if available, on terms acceptable to BIGToken’s management. If BIGToken does not raise sufficient capital in a timely manner, among other things, BIGToken may be forced to scale back its operations or cease its operations altogether.

During the three months ended March 31, 2021, the Company was able to raise net cash proceeds (net of commissions, and fees) of approximately $12.5 million and BIGToken was able to raise net cash proceeds (net of commissions and fees) of approximately $4.7 million.

Covid-19

The ultimate impact of the COVID-19 pandemic on the operations of the Company and BIGToken continues to be unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, the Company, or BIGToken, may direct, which may result in an extended period of continued business disruption, reduced customer traffic and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but may have a material impact on both companies’ business, financial condition and results of operations.

The management of the Company and BIGToken continue to monitor the business environment for any significant changes that could impact their respective operations. The Company and BIGToken have individually taken proactive steps to manage costs and discretionary spending, such as remote working and reducing facility related expenses

Net Loss per Share

We use Accounting Standards Codification (“ASC”) 260, “Earnings Per Share” for calculating the basic and diluted earnings (loss) per share. We compute basic earnings (loss) per share by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and warrants and stock awards. For periods with a net loss, basic and diluted loss per share are the same, in that any potential common stock equivalents would have the effect of being anti-dilutive in the computation of net loss per share.

Recent Accounting Pronouncements

Changes to accounting principles are established by the Financial Accounting Standards Board’s (“FASB”) in the form of Accounting Standards Update (“ASU”) to the FASB’s Codification. We consider the applicability and impact of all ASUs on our financial position, results of operations, cash flows, or presentation thereof. The Company reviewed all recently issued pronouncement in 2021, but not yet effective, and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on the Company’s financial condition or the results of its operations.

F-7

NOTE 2 – Acquisition

On February 4, 2021 (“Acquisition Date”), the Company completed a share exchange agreement (“Exchange Agreement”) with FVPD (“Reverse Merger”). Pursuant to the Exchange Agreement the Company exchanged 100% of the issued and outstanding shares of BIGToken for 149,562,566,534 shares of FPVD’s common stock and 5,000,000 shares of FPVD’s series A preferred stock. The transaction has been accounted for as a reverse merger / reverse capitalization wherein FVPD is the legal acquirer, but BIGToken is the accounting acquirer. As such, for reporting purpose, as of December 31, 2020, BIGToken’s total shares outstanding were restated to reflect the 149,562,566,534 shares of common stock and 5,000,000 shares of series A preferred stock.

On the Acquisition date, the assets, liabilities, and net book value of FPVD were as follows:

Assets
Cash	$	955,000

Liabilities and Stockholders’ Deficit

Series B preferred stock		1,050,000

Stockholders’ deficit
Series A preferred stock		5,000
Series C preferred stock		832,000
Additional paid-in capital		3,865,000
Accumulated deficit		(4,797,000	)
Total Stockholders’ deficit		(95,000	)
Total Liabilities and Stockholders’ Deficit	$	955,000

See Note 7 - Series B Preferred Stock for the description of the series B preferred Stock.

FPVD was authorized to issue up to 20,000,000 shares of series A preferred stock (“Series A Preferred”), $0.0001 par value, which was redeemable at the option of the holder, with no fixed redemption date. As of the Acquisition Date there were 5,000,000 shares issued and outstanding, all of which were owned by SRAX, Inc.

FPVD was authorized to issue up to 8,318 shares of series C preferred stock (“Series C Preferred”) with a stated value of $100. The Series C Preferred are not redeemable, but convertible into 1,546,576 shares of common stock for each share of Series C Preferred or 12,864,419,168 shares of common stock. As of the Acquisition Date and March 31, 2021 there were 8,318 shares issued and outstanding.

F-8

NOTE 3 – Marketable Securities

During the second quarter of 2020, the Company began offering customers of its Sequire segment who purchase services on the Company’s proprietary SaaS platform the option to pay the contract price in securities issued by the Customer. The customers securities must be trading on a United States securities exchange. In accordance with ASC 606 - Revenue Recognition, the Company will value the shares received at the fair market value of the date the contract is executed. The shares received will be accounted for in accordance with ASC 320 – Investments – Debt and Equity Securities, as such the shares will be classified as available-for-sale securities and will be measured at each reporting period at fair value with the unrealized gain or (loss) as a component of other income (expense). Upon the sale of the shares, the Company will record the gain or (loss) in the statement of operations as a component of net income (loss).

The movement in this account is as follows:

	Balance as of
	March 31,			Common			Convertible
	2021			Stock			Debentures
Balances at beginning of year	$	8,447,000		$	7,764,000		$	683,000
Additions		7,334,000			7,314,000			20,000
Sale of marketable securities		(2,266,000	)		(2,266,000	)		−
Change in fair value		4,493,000			4,184,000			309,000
Balances at end of year	$	18,008,000		$	16,996,000		$	1,012,000

	Balance as of
	December 31,			Common			Convertible
	2020			Stock			Debentures
Balances at beginning of year	$	83,000		$	83,000		$	−
Additions		8,406,000			7,496,000			910,000
Sale of marketable securities		(916,000	)		(916,000	)		−
Change in fair value		874,000			1,101,000			(227,000	)
Balances at end of year	$	8,447,000		$	7,764,000		$	683,000

The Company’s sale of securities for the three months ended March 31, 2021 were approximately $2,266,000, with a book basis of approximately $1,750,000 which represented a gain of $516,000, which the Company recorded as other income included in the gains from marketable securities.

The Company recorded as a component of other income the realized and unrealized gain on marketable securities for three months ended March 31:

	2021		2020
Unrealized gain (loss)	$	3,977,000	$	(71,000	)
Realized gain		516,000		−
Change in fair value of marketable securities	$	4,493,000	$	(71,000	)

The Company accounts for its investments in equity securities in accordance with ASC 321-10 Investments - Equity Securities. The equity securities may be classified into two categories and accounted for as follows:

●

Equity securities with a readily determinable fair value are reported at fair value, with unrealized gains and losses included in earnings. Any dividends received are recorded in interest income, the fair value of equity investments with fair values is primarily obtained from third-party pricing services.

●

Equity securities without a readily determinable fair value are reported at their cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer and their impact on fair value. Any dividends received are recorded in interest income. For equity investments without readily determinable fair values, when an orderly transaction for the identical or similar investment of the same issuer is identified, we use the valuation techniques permitted under ASC 820 Fair Value Measurement to evaluate the observed transaction(s) and adjust the fair value of the equity investment

F-9

NOTE 4 – Right To Use Asset

The Company’s leases include both lease and non-lease components which are accounted for as a single lease component as we have elected the practical expedient. Some of our operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year and, as such, are accounted for as short-term leases as we have elected the practical expedient.

Operating leases are included in the right-of-use lease assets, other current liabilities and long-term lease liabilities on the Condensed Consolidated Balance Sheet. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, our incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term. We had no financing leases as of March 31, 2021.

We have operating leases for office space. Our leases have remaining lease terms of 2.5 years. We consider renewal options in determining the lease term used to establish our right-of-use assets and lease liabilities when it is determined that it is reasonably certain that the renewal option will be exercised.

As of March 31, 2021, there were no material variable lease costs or sublease income. Cash paid for operating leases are classified in operating expenses and were $46,000 and $65,000 for the three months ended March 31, 2021 and 2020, respectively. The following tables summarize the lease expense for the three months ended March 31:

	2021		2020
Operating lease expense	$	41,000	$	41,000
Short-term lease expense		5,000		24,000
Total lease expense	$	46,000	$	65,000

The below table summarizes these lease asset and liability accounts presented on our accompanying Condensed Consolidated Balance Sheets as of:

Operating Leases	Consolidated Balance Sheet Caption	March 31, 2021		December 31, 2020
Operating lease right-of-use assets - non-current	Right of use asset	$	340,000	$	366,000

Operating lease liabilities - current	Other current liabilities	$	113,000	$	109,000
Operating lease liabilities - non-current	Right to use liability - long term		213,000		243,000
Total operating lease liabilities		$	326,000	$	352,000

Components of Lease Expense

We recognize lease expense on a straight-line basis over the term of our operating leases, as reported within “general and administrative” expense on the accompanying Condensed Consolidated Statement of Operations.

Weighted Average Remaining Lease Term and Applied Discount Rate

Weighted

Average

Remaining

Lease Term

Weighted

Average

Discount Rate

Operating leases as of March 31, 2021

2.50 years

Operating leases as of December 31, 2020

2.75 years

Future Contractual Lease Payments as of March 31, 2021

The below table summarizes our (i) minimum lease payments over the next five years, (ii) lease arrangement implied interest, and (iii) present value of future lease payments for the years ending December 31:

Operating Leases - future payments
2021 (remaining 9 months)	$	122,000
2022		163,000
2023		123,000
Total future lease payments, undiscounted		408,000
Less: Implied interest		(82,000	)
Present value of operating lease payments	$	326,000

F-10

NOTE 5 – Other Current Liabilities

The following table summarizes the composition of other current liabilities presented on our accompanying Condensed Consolidated Balance Sheets:

	March 31, 2021		December 31, 2020
Revenue contract liabilities	$	8,434,000	$	4,842,000
BIGToken point liability		313,000		452,000
Operating lease liabilities - current		113,000		109,000
Other current liabilities		2,290,000		3,308,000
Total other current liabilities	$	11,150,000	$	8,711,000

NOTE 6 – OID Convertible Debentures

On June 25, 2020, the Company entered into a definitive securities purchase agreement (the “Securities Purchase Agreement or Transaction”) with certain accredited and institutional investors (the “Purchasers”) for the purchase and sale of an aggregate of: (i) $16,101,000 in principal amount of Original Issue Discount Senior Secured Convertible Debenture (the “Debentures”) for $14,169,000 (representing a 12% original issue discount) (“Purchase Price”) and (ii) warrants to purchase up to 6,440,561 shares of the Company’s Class A common stock (the “Warrants”) in a private placement (the “Offering”). The Purchase Price consists of (a) $13,000,000 in cash and (b) the cancellation of $1,169,000 in outstanding debt, consisting of the accounts receivable loans of $510,000 with accrued interest of $184,000, and the short-term promissory notes of $350,000 with accrued interest of $125,000.

The Debentures, which mature on December 31, 2021, pay interest in cash at the rate of 12.0% per annum commencing on June 30, 2021, with such interest payable quarterly, beginning on October 1, 2021. Commencing after the six-month anniversary of the issuance of the Debentures, the Company will be required to make amortization payments (“Amortization Payments”) with each Purchaser having the right to delay such Amortization Payments by a six month period up to three separate times (each, an “Extension”) in exchange for five percent in principal being added to the balance of such applicable Debenture on each such Extension. Accordingly, upon a Purchaser exercising three Extensions, such Purchaser’s Debenture will mature and be due and payable on June 30, 2023. Beginning on the date that the first Amortization Payment is due, and on a monthly basis thereafter, the Company will be required to pay one hundred fifteen percent of the value of one-twelfth of the outstanding principal plus any additional accrued interest due.

In the event a Purchaser converts a portion of its Debenture into shares of the Company’s Common Stock, such amount will be deducted from the next applicable Amortization Payment. In the event such conversion exceeds the next applicable Amortization Payment, such excess amount will be deducted, in reverse order, from future Amortization Payments. The Company’s obligations under the Debentures are secured by substantially all of the assets of the Company pursuant to a security agreement (the “Security Agreement”).

The Debentures are convertible at the option of the holder into shares of the Company’s common stock at an initial conversion price of $2.69 per share, subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations. The Debentures do not have any price protection or price reset provisions with respect to future issuances of securities.

Subject to the Company’s compliance with certain equity conditions, upon ten trading days’ notice to the Purchasers, the Company has the right to redeem the Debentures in cash at 115% of their outstanding principal, plus accrued interest. Additionally, in the event that (i) the Company sells or reprices any securities (each, a “Redemption Financing”), or (ii) the Company disposes of assets (except those sold or transferred in the ordinary course of business) (each, an “Asset Sale”), then the Purchasers shall have the right to cause the Company (a) in the event of a Redemption Financing at a price per Common Stock equivalent of $2.50 or less per share, the Purchasers may mandate that 100% of the proceeds be used to redeem the Debentures (b) in the event of a Redemption Financing at a price per Common Stock equivalent of greater than $2.50 per share, the Purchasers may mandate that up to 50% of the proceeds be used to redeem the Debentures, and (c) in the event of an Asset Sale, the Purchasers may mandate that up to 100% of the proceeds be used to redeem the Debentures.

F-11

The Debentures also contain certain customary events of default provisions, including, but not limited to, default in payment of principal or interest thereunder, breaches of covenants, agreements, representations or warranties thereunder, the occurrence of an event of default under certain material contracts of the Company, failure to register the shares underlying the Debentures in Warrants (as described below), changes in control of the Company, delisting of its securities from its trading market, and the entering or filing of certain monetary judgments against the Company. Upon the occurrence of any such event of default, the outstanding principal amount of the Debenture plus liquidated damages, interest and other amounts owing in respect thereof through the date of acceleration, shall become, at the Purchaser’s election, immediately due and payable in cash. The Company is also subject to certain negative covenants (unless waived by 67% of the then outstanding Purchasers, and including the lead Purchaser) under the Debentures, including but not limited to, the creation of certain debt obligations, liens on Company assets, amending its charter documents, repayment or repurchase of securities or certain debt of the Company, or the payment of dividends.

The Warrants are initially exercisable at 2.50 per share and, are subject to cashless exercise after six months if the shares underlying the Warrants are not subject to an effective resale registration statement. The Warrants are also subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations. The Warrants do not have any price protection or price reset provisions with respect to future issuances of securities.

Pursuant to the terms of the Debentures and Warrants, a Purchaser will not have the right to convert any portion of the Debentures or exercise any portion of the Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% or 9.99% (at the Purchaser’s option) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion or exercise, as such percentage ownership is determined in accordance with the terms of the Debentures and the Warrants; provided that at the election of a holder and notice to us such percentage ownership limitation may be increased to 9.99%; provided that any increase will not be effective until the 61st day after such notice is delivered from the holder to the Company.

The Company also agreed to use proceeds from the Offering to pay (i) $2,500,000 in outstanding principal plus accrued interest pursuant to the Company’s Term Loan and Security Agreement entered into on February 28, 2020 with BRF Finance Co., LLC (the “Term Loan”) and (ii) $136,000 in outstanding short-term promissory notes and accrued interest (collectively, the “Debt Repayments”).

In connection with Securities Purchase Agreement, the Company will issue to the Placement Agent (as defined below), an aggregate of 478,854 Common Stock purchase warrants (“PA Warrants”). The PA Warrants are substantially similar to the Warrants, except that the PA Warrants have an exercise price of $3.3625 per share. The fair value of the PA Warrants at issuance was estimated to be $360,000 based on a risk-free interest rate of .11%, an expected term of 2.417 years, an expected volatility of 96% and a 0% dividend yield.

Pursuant to a registration rights agreement (“Registration Rights Agreement”), the Company has agreed to file a registration statement registering the resale of the shares of the common stock underlying the Debentures and the Warrants within forty-five days from the date of the Registration Rights Agreement. The Company also agrees to have the registration statement declared effective within 90 days from the date of the Registration Rights Agreement and keep the registration statement continuously effective until the earlier of (i) the date after which all of the securities to be registered thereunder have been sold, or (ii) the date on which all the securities to be registered thereunder may be sold without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 under the Securities Act. The Company is also obligated to pay the Investors, as partial liquidated damages, a fee of 2.0% of each Purchaser’s subscription amount per month in cash upon the occurrence of certain events, including our failure to file and(or) have the registration statement declared effective within the time periods provided.

Bradley Woods & Co. Ltd. (“Placement Agent”) acted as the placement agent, in connection with the sale of the securities pursuant to the Securities Purchase Agreement. Pursuant to an engagement agreement entered into by and between the Company and the Placement Agent, the Company agreed to pay the Placement Agent a cash commission of $1,040,000. Pursuant to the discussion above, the Company also issued an aggregate of 478,854 PA Warrants to the Placement Agent. The Company has agreed to include the shares of our common stock underlying the PA Warrants to be included in the registration statement to be filed. Additionally, upon the exercise of Warrants issued in the Offering, the Placement Agent will be entitled to eight percent (8%) of the cash proceeds received from such exercises.

F-12

The Transaction closed on June 30, 2020 (the “Closing Date”), with approximately $3,800,000 cash proceeds received prior to Closing date, $4,200,000 received on the closing date and $5,000,000 received after the closing date. The gross proceeds received from the Offering were approximately $13,000,000 and net proceeds of approximately $9,100,000 after deducting the Placement Agent fees, the Debt Repayments and other offering expenses. Also, the Company reimbursed the lead Purchaser $75,000 for legal fees, which was deducted from the required subscription amount to be paid.

On February 21, 2021, the Company conducted an inducement offering whereby the warrant holders were given the right to exercise the existing warrants in exchange for replacement warrants. A majority of the warrants were exercised. See Note 8 – Stockholders’ Equity.

The Company evaluated all of the associated financial instruments in accordance with ASC 815 Derivatives and Hedging. Based on this evaluation, the Company has determined that no provisions required derivative accounting.

In accordance with ASC 470 - Debt, the Company first allocated the cash proceeds to the loan and the warrants on a relative fair value basis, secondly, the proceeds were allocated to the beneficial conversion feature.

During the three months ended March 31, 2021 certain debenture holders converted $5,481,000 of principal into 2,041,551 shares of the Company’s class A common stock shares. As a result of these conversions, the Company reduced the principal balance by approximately $5,481,000 and reduced the debt discount by approximately $2,034,000 for a net book value of $3,447,000, which was transferred to additional paid-in capital.

The table below summarizes the OID convertible debenture balances for the three months ended March 31, 2021:

	Principal			Debt discount			Net book value
Balances at beginning of year	$	9,386,000		$	(3,370,000	)	$	6,016,000
Conversion		(5,481,000	)		2,034,000			(3,447,000	)
Amortization		−			532,000			532,000
Total	$	3,905,000		$	(804,000	)	$	3,101,000

During the three months ended March 31, 2021, the Company recognized amortization expense of $532,000.

As of March 31, 2021, the Company has classified the debt as current liability because management intends to redeem the remaining convertible debentures within the following 12 months.

F-13

NOTE 7 – Series B Preferred Stock

On March 12, 2021 (“Closing Date’), FPVD entered into a Securities Purchase Agreements (“SPA”) and Registration Rights Agreements (“RRA”) with accredited investors pursuant to which investors purchased 47,248 shares of Series B preferred Stock (“Series B Stock”) for an aggregate of $4,725,000 or $100 per share (the “Offering”). FPVD had previously closed on 10,500 shares of Series B Preferred stock or $1,050,000 in October of 2020. As a result, on March 12, 2021, there were 57,748 shares of Series B Stock outstanding.

Pursuant to the terms of the FPVD’s Certificate of Designation of Preferences, Rights and Limitations of Series B Preferred Stock (“COD”), (i) each share of Series B Stock has a stated value of $100, (ii) the Series B Stock accrues a 5% dividend beginning one year after the original issue date and thereafter on a quarterly basis, (iii) the Series B Stock has no voting rights, except as required by law, and (iv) the Series B Stock has no liquidation preference over the FPVD’s Common Stock. Additionally, the Series B Stock converts into Common Stock (i) at the election of the holder at any time at a price equal to $15,000,000 divided by the fully diluted outstanding securities of FPVD at the time of conversion (“Standard Conversion Price”) or (ii) automatically upon the completion of an offering of $5,000,000 or more (“Qualified Offering”) at the lower of (a) the Standard Conversion Price or (b) eighty percent (80%) of the lowest per share purchase price of Common Stock in such Qualified Offering (“Qualified Offering Conversion Price”). The Offering meets the definition of a Qualified Offering as described in the COD and accordingly, all of the outstanding shares of Series B Stock will convert into Common Stock at eighty percent (80%) of the Standard Conversion Price. FPVD filed an amendment to its articles of incorporation decreasing the par value of its Common Stock in order to affect the conversion of all such Series B Stock into Common Stock.

The Closing of the Offering constituted a Qualified Financing, as such the Series B Stock conversion price was set at the Qualified Offering Conversion Price, which was $0.00007 (“Conversion Price”), for a total 82,343,910,015 shares of the FPVD’s common stock. Based on the Conversion Price, a beneficial conversion feature was calculated to be approximately $5,775,000, which was expensed and included in financing cost. In accordance with ASC 480 – Distinguish Liabilities from Equity, the Series B Stock would be classified as equity on the Closing Date, because they are convertible into a fixed number of shares at a fixed dollar amount. As of March 31, 2021, the Series B Stock was not converted (see Note 11 – Subsequent Events FPVD Series B Preferred Shares Conversion).

NOTE 8 – Stockholders’ Equity

Common Stock Warrants

On February 21, 2021 the Company entered into an agreement with the Debenture holders to exercise 4,544,440 of the Warrants. In consideration for the Debenture holders to exercise the Warrants, the Debenture holders would receive a new registered warrant (“New Warrant”) to purchase an aggregate of 4,545,440 shares of the Company’s common stock at an exercise price of $7.50 per share expiring on January 31, 2022. Each investor agreed to pay $0.125 for each New Warrant. The net proceeds received of approximately $11,022,000 consisted of the exercise price of $11,363,000, $568,000 for the purchase of the New Warrant less solicitation fees of approximately $909,000.

The New Warrants were valued using the Black Scholes option pricing model at a total of $7,737,000 based on a one-year term, implied volatility of 96%, a risk-free equivalent yield of 11%, and stock price of $5.83. The fair value of the New Warrants was expensed and included in Financing Costs.

Additional during the three months ended March 31, 2021, there were an additional 28,566 warrants exercised.

During the three months ended March 31, 2021, other warrant holders exercised warrants to purchase 399,880 shares for approximately $1,200,000.

During the three months ended March 31, 2021 the Company sold 53,626 shares of common stock, for approximately $293,000, through sales under its At the Market (ATM) offering.

A summary of the Company’s warrant activity and related information for the three months ended March 31, 2021 is as follows:

	Number of Shares			Weighted Average Strike Price/Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding — December 31, 2020		12,285,283		$	2.94		1.74	$	4,460,008
Granted		4,545,440			7.5		0.75		–
Exercised		(4,973,886	)		3.07		2.06		–
Forfeited		–			–		–		–
Outstanding — March 31, 2021		12,156,837		$	4.84		2.01	$	16,019,415
Vested and exercisable — March 31, 2021		11,856,837			4.84		1.96		16,019,415
Unvested and non-exercisable - March 31, 2021		300,000			4.75		3.12		-

As part of the Company’s Convertible Debenture offering in June 2020 (as described in Note 6 – OID Convertible Debentures), the Company negotiated the ability to release the BIGToken business, as security for the OID Convertible Debentures, for the purposes of selling BIGToken. As consideration for the release, the Company agreed to require the purchaser of BIGToken to issue warrants in the new entity. The warrants were to represent 13% of the new entities issued and outstanding on a fully diluted basis upon closing. As disclosed in Note 2– Acquisitions, the Company entered into an agreement to merge BIGToken with FPVD on February 4, 2021, which required the issuance of 25,568,064,462 warrants. Based on a valuation from an independent third-party, the fair-market value of the warrants required to be issued was determined to be $885,000 based on implied 3-year volatility of 92.30%, a risk-free equivalent yield of 18% and stock price of $0.00006552.

During the Quarter ended March 31, 2021, the Company did not issue any new stock-based awards. Stock based compensation expense for the three months ended March 31, 2021 and 2020 was $253,000 and $260,000 respectively.

F-14

Noncontrolling Interest

As disclosed in Note 2 – Acquisition, the Company entered into an agreement to merge BIGToken with FPVD on February 4, 2021. Since this was treated as a reverse merger, the transaction created a noncontrolling interest in FPVD. As a result, 8,682,368,578 shares were issued to noncontrolling parties, which was approximately 5.07% of the issued and outstanding shares at the date of the merger. Also, 8,318 shares of Series C Preferred were issued, which were convertible into 12,864,419,168 shares of common stock, or 7.52% of the issued and outstanding shares on the date of the merger. Since the Series C Preferred stock was convertible with no liquidation rights or other preferences, the 12,864,419,168 issuable shares were added to the calculation of the noncontrolling interest. As of the Acquisition Date and March 31, 2021, the noncontrolling interest was calculated to be approximately 13.00%. Transactions relating to the noncontrolling interest for the three months ended March 31, 2021 are summarized as follows:

Net book value of FPVD	$	(95,000	)
Warrants issued by FPVD for SRAX, Inc. debenture holders		885,000
Series B convertible preferred stock issued by FPVD		5,775,000
Beneficial conversion feature FPVD series B convertible preferred stock		5,775,000
Net loss attributable to noncontrolling interest		(854,000	)
	$	11,486,000

NOTE 9 – Fair Value of Financial Instruments

The carrying amounts of certain financial instruments, including cash and cash equivalents, restricted cash and accounts payable and accrued expenses, approximate their respective fair values due to the short-term nature of such instruments.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made. The Company considers marketable securities quoted on the OTC Pink sheets to be fair valued with Level 2 inputs. The Company had the following financial assets of March 31, 2021 and December 31, 2020:

			Quoted Prices in		Significant Other		Significant
	Balance as of		Active Markets for		Observable		Unobservable
	March 31,		Identical Assets		Inputs		Inputs
	2021		(Level 1)		(Level 2)		(Level 3)
Marketable securities	$	18,008,000	$	7,719,000	$	10,289,000	$	—
Total assets	$	18,008,000	$	7,719,000	$	10,289,000	$	—

			Quoted Prices in		Significant Other		Significant
	Balance as of		Active Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
	2020		(Level 1)		(Level 2)		(Level 3)
Marketable securities	$	8,447,000	$	7,764,000	$	683,000	$	—
Total assets	$	8,447,000	$	7,764,000	$	683,000	$	—

NOTE 10 – Segment Reporting

We have two reportable segments: (i) Investor data analysis technologies (Sequire) and (ii) Consumer based marketing services and data technologies (BIGToken). The Sequire segment includes the licensing of the Company’s proprietary SaaS platform and associated data analysis technologies. Additionally, the Sequire segment comprises consumer and investor targeted marketing solutions to allow users of our SaaS platform to act on the insights obtained through our technologies. Lastly, reported under Sequire is the newly acquired operating segment, LD Micro. The BIGToken segment includes the sale of advertising campaigns and proprietary consumer data obtained through our BIGToken application. The BIGToken segment includes certain operations from our discontinued sales verticals.

Our Chief Operating Decision Maker (CODM) does not evaluate operating segments using asset or liability information. The following table presents revenues and gross profits by reportable segment.

F-15

	For the Three Months Ended March 31,
	SEQUIRE				BIGToken				Corporate and Other				2021			Consolidated
	2021		2020		2021		2020		2021		2020		Eliminations			2021		2020
Sequire platform revenue	$	4,508,000	$	107,000	$	–	$	–	$	–	$	–	$	–		$	4,508,000	$	107,000
Conference revenue		45,000		–		–		–		–		–		–			45,000		–
Consumer Media / Data		–		–		855,000		193,000		–		–		–			855,000		193,000
Other		–		–		–		–		364,000		51,000		(330,000	)		34,000		51,000
Total Revenue		4,553,000		107,000		855,000		193,000		364,000		51,000		(330,000	)		5,442,000		351,000

Cost of Revenue		1,376,000		14,000		273,000		98,000		1,000		–		–			1,650,000		112,000
Gross profit	$	3,177,000	$	93,000	$	582,000	$	95,000	$	363,000	$	51,000	$	(330,000	)	$	3,792,000	$	239,000

Revenue Disaggregation

The following table breaks out the revenue types for Sequire and BIGToken for the three months ended March 31:

	2021			2020
Sequire platform revenue	$	4,508,000		$	107,000
Conference revenue		45,000			−
Sequire revenues		4,553,000			107,000

Consumer Media / Data		855,000			193,000
BIGToken revenues		855,000			193,000

Other revenues		364,000			51,000

Eliminations		(330,000	)		−

Total revenues	$	5,442,000		$	351,000

As of March 31, 2021 and March 31, 2020, revenue contract liabilities were approximately $8,434,000 and $0, respectively.

NOTE 11 – Subsequent Events

FPVD series B preferred shares issuance

On April 12, 2021, FPVD closed on an additional issuance of 850 shares of Series B Preferred for an aggregate of $85,000 or $100 per share.

FPVD series B preferred shares conversion

On May11, 2021, 47,248 shares of FPVD series B preferred stock were converted into 67,371,841,498 shares of Common stock, which does not include the conversion of the 850 shares of Series B Preferred issued on April 12, 2021 or the 10,500 shares of Series B Preferred acquired in the FPVD acquisition, with conversion price of $0.00007013. This issuance increases the noncontrolling interest from approximately 13.00% to approximately 37.13%.

F-16

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements regarding our business development plans, timing, strategies, expectations, anticipated expenses levels, business prospects and positioning with respect to market, demographic and pricing trends, business outlook, technology spending and various other matters (including contingent liabilities and obligations and changes in accounting policies, standards and interpretations) and express our current intentions, beliefs, expectations, strategies or predictions. These forward-looking statements are based on a number of assumptions and currently available information and are subject to a number of risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Special Note Regarding Forward-Looking Statements” and under “Risk Factors” and elsewhere in this quarterly report. The following discussion should be read in conjunction with our financial statements and related notes thereto included elsewhere in this quarterly report.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in addition to the accompanying condensed consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:

Recent Developments

On February 4, 2021, we announced the divestiture of our consumer-based data privacy business “BIGToken” from SRAX, Inc. (the Separation), effected by way of a share exchange. On February 21, 2021 we sold warrants to purchase up to 4,545,440 shares of our Class A common stock, $0.001 par value per share, at an exercise price of $7.50 per share (the “Warrants”). Each Warrant to purchase one share of our Class A common stock was sold pursuant to a prospectus supplement (File no. 333-235298) at purchase price of $0.125 per share to certain investors that entered into a letter agreement on February 21, 2021, to exercise all of their outstanding warrants issued on June 30, 2020 (“Old Warrants”). Each investor received one Warrant that expires on January 31, 2022 for every Old Warrant exercised plus the purchase price of $0.125 per Warrant.

Executive Overview

Our key operating metrics and financial results for the first quarter of 2021 are as follows:

Sequire platform growth:

	●	Sequire subscribers of 200 as of May 14, 2021, up from 183 as of March 25, 2021
	●	Over of 5 million investors within Sequire platform.

Financial results:

	●	Revenue was $5.4 million, up approximately 1,500% and 20% year-over-year and versus prior quarter, respectively.
	●	Cash and cash equivalents and marketable securities were $31.5 million as of March 31, 2021.

Reportable Segments

Our current operating business is Sequire, which consists of two components: Sequire and LD Micro. We report our financial performance inclusive of the BIGToken business as we currently hold a majority interest. Our financials include the following segments: Sequire and BIGToken. The segment amounts included in MD&A are presented on a basis consistent with our internal management reporting. All differences between our internal management reporting basis and accounting principles generally accepted in the United States of America (“GAAP”), along with certain corporate-level and other activity, are included in Corporate and Other.

Metrics

We use metrics in assessing the performance of our business and to make informed decisions regarding the allocation of resources. We disclose metrics to enable investors to evaluate progress against our ambitions, provide transparency into performance trends, and reflect the continued evolution of our products and services.

During the first quarter of 2021, we also continued to focus on our main revenue growth priorities: (i) The continued growth of our Sequire platform user base (ii) the expansion of the LD micro events and offerings, and (iii) the share exchange to reorganize the operations and raise capital for our BIGToken business.

Our business has been impacted by the COVID-19 pandemic, which has resulted in authorities implementing numerous preventative measures to contain or mitigate the outbreak of the virus, such as travel bans and restrictions, limitations on business activity, quarantines, and shelter-in-place orders. These measures have caused, and are continuing to cause, business slowdowns or shutdowns in affected areas, both regionally and worldwide, which have significantly impacted our business and results of operations. We are unable to predict the impact of the pandemic on user growth and engagement with any certainty, and we expect these trends to continue to be subject to volatility.

More recently, we believe the pandemic has contributed to an acceleration in the shift of commerce from offline to online, as well as increasing consumer demand for purchasing products as opposed to services, and we experienced increasing demand for our products as a result of these trends. The impact of the pandemic on our overall results of operations, remains highly uncertain for the foreseeable future.

We intend to continue to invest in our business based on our company priorities, and we anticipate that additional investments in our network infrastructure, as well as scaling our headcount to support our growth, will continue to drive expense growth in 2021.

Company Overview

About

We are a technology firm focused on enhancing communications between public companies and their investors. Our unique SaaS platform, Sequire is an operating system for public companies. Among many features it allows issuers to track their shareholders’ behaviors and trends, then use data-driven insights to engage with investors across marketing channels.

Our endeavor to unlock the value of data for our clients drove us to develop this platform, acquire LD Micro, and begin cultivating the Sequire Community. Each piece of the SRAX puzzle delivers valuable insights that assist our clients with their marketing and advertising efforts.

Through Sequire, we offer tools and related data and insight services to allow issuers of publicly traded securities to better understand their position in the market.

Through the acquisition of LD Micro, we organize and host investor conferences within the micro and small- cap space, and plan to create several more niche events for the investor community.

Sequire

In May of 2020 we rebranded our SaaS offering SRAX IR, as Sequire, emphasizing the platform’s strength to secure and acquire investors. The Sequire platform is a central hub where companies reach out and engage with shareholders, manage warrants, and identify potential investors.

This powerful software utilizes machine learning and advanced analytics to bring our clients actionable information that can be used to maximize ROI, as an innovative investor communication tool.

We built the Sequire platform to help our customers understand shareholder behavior, including the ability to identify buyers and sellers. Clients then have the ability to engage with targeted shareholder groups across marketing channels including; email, social media, programmatic, and hyperlocal.

When interpreting data, clients can see gains and losses over time, buying/selling trends, total outstanding shares, new shareholders, and shareholders broken out by percentage. Every bit of this data helps how we target ads and craft messaging to leverage the desired outcome for a client.

An important part of monitoring shareholders is the greater context of the investment landscape. Sequire features real-time level-two trading data, the ability to monitor competition, news alerts, and more.

We are always seeking ways to improve our clients’ communications with their shareholders, and we built a custom survey feature so that they could ask questions to all their shareholders at once or to specified groups.

The Sequire platform also allows users to manage warrants, attaining high-level insight by year and month, including a list of expiring and outstanding warrants. They can then calculate what their proceeds could be if those warrants were issued before they expire. Clients can also keep tabs on investor relations programs and corporate communication firms, all in one place.

We expanded the functionality of Sequire to include the hosting of virtual events, as more and more networking functions are being held in the digital space. Clients can attend an event held by industry guests, or hold a conference themselves. They then have the ability to import contacts from those events directly into their own list for later use and targeting.

Data Targeting

We help our clients build an investor base through targeted advertising and marketing campaigns, tailored to their needs. When our clients succeed, we succeed. Using data-driven insights, we help clients meet their unique marketing objectives, whether they’re messaging existing investors, new investors, or consumers.

Our team of experts takes a deep dive into each company, building out unique messaging to suit their target investors. Once media campaigns are built, they are run through the Sequire platform across multiple target segments. We then track performance and modify the campaign for the best possible results. Our clients have needs to target particular sectors and exchanges, and the value we deliver lies in the hyper-specific investor insights necessary for that kind of focused outreach.

We are maximizing the efficacy of our media campaigns by providing our clients with custom-built landing pages that are crafted to educate, engage, and convert new investors. When a new investor clicks through an ad, they will land on a story-driven page with data-tracking software embedded to collect analytics for later use.

Virtual Events and LD Micro

LD Micro was originally founded in 2006 as an independent resource for the microcap world. It quickly grew into a premier event platform in the space, successfully connecting investors and promoting small cap businesses. In September of 2020, we acquired LD Micro, and hosted the 2020 Main Event on our Sequire Virtual Events platform. We are proud to say we had over 50K attendees and hosted webinars with 250 companies.

The LD Micro Main Event is one of the most influential conferences in the small-cap space, and our acquisition has been able to provide LD access to our growing database of 5M+ investors.

At our core, we are in the business of helping companies connect to their audience, and creating events where companies are presenting to investors is a great way to execute on our mission. The LD Micro Main Event is just the start.

We are currently expanding our slate of events to include specialty conferences for individual industries such as: EdTech, FinTech, Minerals, Pharma, etc. We have built up a retail investor community of 5M+, and the ability to help educate investors with these events is valuable to our investor community.

We see the Sequire Virtual Events platform growing into the premier investor event tool. With the help of our events team, companies have the ability to create and organize their own webinars at scale. The Covid-19 Pandemic certainly created growth in this space, but we believe that virtual events are the future of targeted investor communication.

Through the events platform, we have the ability to host a variety of virtual events and conferences including: investor conferences, earnings calls, shareholder meetings, annual, investor/analyst days, corporate town halls, roadshows, and more.

We believe functionality is key, and some of the features we offer include multi-presenter capabilities, integrated graphic presentation options, tech support, real-time analytics, audience polling, downloadable resource offerings, and more. Each presentation, when concluded, delivers an analytics report to the client for data-driven review.

We are offering users a seamless, centrally-managed virtual events solution that can be customized to any industry. Sequire Virtual Events has already demonstrated success with the LD Micro Main Event, and we will continue to devote resources to the growth of this area of our business.

Sequire Community

Building a thriving community is often an overlooked aspect of business. With a significant number of investors aware of the LDMicro brand, we are moving to ensure that those people become passionate advocates, engaging with each other on a wide range of topics.

We have plans to develop investor education tools, host professional investment events, and cultivate a mature, educated community. Our vision for the Sequire Community is that it becomes a place where people can communicate and network, to learn and grow as investors, and ultimately become brand advocates.

We derive our revenues from the:

	●	Sale and licensing of our proprietary SaaS platform; and
	●	Sales of proprietary consumer data; and
	●	Attendance and sponsorship fees from investor conferences and events; and
	●	Sales of digital advertising campaigns.

FINANCIAL CONDITION

Cash, Cash Equivalents, and Investments

Cash, cash equivalents, and marketable securities totaled approximately $31.5 million and $9 million as of March 31, 2021 and December 31, 2020. Our marketable securities have been obtained through our Sequire business as payment for our services. They consist predominantly of debt and equity securities, diversified among industries and individual issuers. The investments are all U.S. dollar-denominated securities, but also include foreign issuer securities to diversify risk.

Valuation

In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine the fair value of our financial instruments. This pricing methodology applies to our Level 1 investments, such as U.S. government securities, common and preferred stock, and mutual funds. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly. Level 3 investments are valued using internally-developed models with unobservable inputs. Assets and liabilities measured at fair value on a recurring basis using unobservable inputs are an immaterial portion of our portfolio.

Going Concern

Cash on hand and marketable securities at March 31, 2021 for SRAX was approximately $13.5 million and $18.0 million, respectively. Based upon our cash flow projections taking into account cash, our recent capital raises, marketable securities and the projected cash flows from operations we believe we have enough liquidity, taking into account the uncertainty related to the ongoing pandemic and general economic uncertainty, for SRAX to continue to fund operations at their currently level through the remainder of the year.

The Company has incurred significant losses since its inception and has not demonstrated an ability to generate sufficient revenues from the sales of its services to achieved profitable operations on a consolidated basis. There can be no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis. In addition, the Company’s operations and specifically, the continued consolidation of BIGToken may require additional financial support or additional financing. These factors create uncertainty or doubt about the Company’s ability to continue as a going concern within one year after the date that the Condensed Consolidated Financial Statements are issued. The Condensed Consolidated Financial Statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the Condensed Consolidated Financial Statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Liquidity

During the three months ended March 31, 2021, our principal sources of liquidity have been proceeds from various debt and equity offerings as well as the sale of our marketable securities. Cash consists of cash on deposit with banks.

Historically, we have financed our operations primarily from the sale of debt and equity securities. There can be no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis. Based upon our current revenues, expenses and liabilities, we anticipate having to raise additional capital through the private and public sales of our equity or debt securities, or a combination thereof. Although management believes that such capital sources will be available, there can be no assurance that financing will be available to us when needed in order to allow us to continue our operations, or if available, on terms acceptable to us. If we do not raise enough capital in a timely manner, among other things, we may be forced scale back our operations or cease operations all together.

We monitor our cash flow, assess our business plan, and make expenditure adjustments accordingly. If appropriate, we may pursue limited financing including issuing additional equity and/or incurring additional debt. Although we have successfully funded our past operations through additional issuances of equity, there is no assurance that our capital raising efforts will be able to attract additional necessary capital at prices attractive to the Company. If we are unable to obtain additional funding for operations at any time in the future, we may not be able to continue operations as proposed. This would require us to modify our business plan, which could curtail various aspects of our operations.

We expect existing cash, cash equivalents, marketable securities, cash flows from operations, and access to capital markets to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities, such as debt maturities, for at least the next 12 months and thereafter for the foreseeable future. Additionally, we entered into an “At the Market” sales agreement with B. Riley, Inc. (“Sales Agent”) for the sale of up to $3,125,000 of shares of our Class A Common Stock. The at-the-market agreement was entered into pursuant to a takedown from our shelf registration statement declared effective on December 11, 2019 (Registration No. 333-235298). From January 1, 2021 through May 10, 2021, we have sold 53,626 shares of Class A Common Stock under such agreement at an average per share price of $5.47 resulting in gross proceeds of $293,000 and net proceeds of $284,000 after deducting Sales Agent commissions and other costs and expenses associated with such sales. Future sales under our at-the-market sales agreement are limited to $2,832,000, the remaining amount left pursuant to the takedown from our shelf registration statement.

Goodwill

We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. We evaluate our reporting units on an annual basis and, if necessary, reassign goodwill using a relative fair value allocation approach. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (December 31 for us) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated primarily through the use of a discounted cash flow methodology. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital.

The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions, and other factors. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for each reporting unit.

Components of Results of Operations

Sequire Revenues

Sequire Platform: We recognize revenue from the licensing of our Sequire platform, data, marketing and insight services performed in conjunction with the Sequire platform.

Conference Revenue. We recognize revenue from hosting conferences.

Cost of Revenue and Operating Expenses

Cost of revenue. Our cost of revenue consists primarily of expenses associated with the cost of media and data.

Employee Related Costs. These are the costs we incur to employ our staff.

Platform costs. Consist of the technology and content hosting of our BIGToken platform.

Marketing and sales. These are the costs we incur to market our products and services and third-party selling costs.

General and administrative. General and administrative expense consists primarily of human resources, information technology, professional fees, IT and facility overhead, and other general corporate expense. We expect our general and administrative expense to increase in absolute dollars primarily as a result of the increased costs associated with being a stand-alone public company. However, we also expect our general and administrative expense to fluctuate as a percentage of our revenue in future periods based on fluctuations in our revenue and the timing of such expense.

Results of operations

Quarter Ended March 31, 2021 compared to quarter ended March 31, 2020 (in $’s)

Selected Segment Financial Data

For the Three Months Ended March 31, (Unaudited)
	Sequire												BIGToken												Corporate and Other												Eliminations								Consolidated
	2021			2020			2021 vs. 2020 Change						2021			2020			2021 vs. 2020 Change						2021			2020			2021 vs. 2020 Change						2021			2020		2021 vs. 2020 Change			2021			2020			2021 vs. 2020 Change
							$			%									$			%									$			%								$		%							$			%
Sequire platform revenue		4,508,000			107,000			4,401,000			4,113	%		-			-			-			0	%		-			-			-			0	%		-			-		-		$	4,508,000		$	107,000			4,401,000			4,113	%
Conference revenue		45,000			-			45,000			100	%		-			-			-			0	%		-			-			-			0	%		-			-		-			45,000			-			45,000			100	%
BIGtoken revenue		-			-			-			0	%		855,000			193,000			662,000			343	%		-			-			-			0	%		-			-		-			855,000			193,000			662,000			343	%
Other		-			-			-			0	%		-			-			-			0	%		364,000			51,000			313,000			614	%		(330,000	)		-		-			34,000			51,000			(17,000	)		(33	)%
Total Revenue		4,553,000			107,000			4,446,000			4,155	%		855,000			193,000			662,000			343	%		364,000			51,000			313,000			614	%		(330,000	)		-		-			5,442,000			351,000			5,091,000			1,450	%

Cost of Revenue		1,376,000			14,000			1,362,000			9,729	%		273,000			98,000			175,000			179	%		1,000			0			-			100	%		0			-		-			1,650,000			112,000			1,538,000			1,373	%
Gross profit		3,177,000			93,000			3,084,000			3,316	%		582,000			95,000			487,000			513	%		363,000			51,000			313,000			614	%		(330,000	)		-		-			3,792,000			239,000			3,553,000			1,487	%
margin %		69.8	%		86.9	%		69.3	%					68.1	%		49.2	%		73.6	%					99.7	%		100.0	%		100	%					100.0	%							69.7	%		68.1	%

Operating expenses		1,958,000			184,000			1,774,000			964	%		2,118,000			2,370,000			(252,000	)		(11	)%		1,472,000			1,559,000			(29,000	)		(2)	%		(330,000	)		-		-			5,218,000			4,113,000			1,105,000			27	%

Operating Income / (loss)	$	1,219,000			(91,000	)		1,310,000			1439	%		(1,536,000	)		(2,275,000	)		739,000			32	%		(1,109,000	)		(1,508,000	)		399,000			36	%		0			0		-			(1,426,000	)		(3,874,000	)		2,448,000			63	%

Three months ended March 31, 2021 compared to three months ended March 31, 2020

2020 was the first full year of operations for our Sequire business. During the three months ended March 31, 2021 our customer base grew to approximately 200 subscribing companies. We charge a base monthly license fee for a Sequire subscription, which ranges from $1,000 per month up to $5,000 per month.

During the third quarter of 2020, we acquired LD Micro, Inc. LD Micro’s primary line of business was the hosting of investor related conferences. Historically, LD Micro’s investor conferences have been in-person, however, during the fourth-quarter of 2020 we successfully hosted a virtual conference leveraging Sequire’s platform technology to execute the event.

Sequire revenues

Sequire revenues for the three months ended March 31, 2021 increased to $4,553,000 from $107,000 during the three months ended March 31, 2020. Sequire’s continued growth was primarily driven by the growth of the services provided to issuers through the Sequire platform. During the quarter ended March 31, 2021 the Company had closed sales with total contract value of approximating $9.5 million.

Sequire Profit Margin

Sequire’s costs of revenue consist of data and media acquired from third parties to fulfill the data, media and advertising components of our revenues. Sequire’s profit margin for the quarter ended was 70% and 87% respectively.

Sequire Operating Expenses

Sequire’s operating expenses for the quarter-ended March 31, 2021 were $1,958,000 this is compared to $184,000 for the three months ended March 31, 2020. Operating expenses consisted of the following:

Employee Related Costs. These are the costs we incur to employ our staff. Employee related costs increased to $836,000 or by 727% from $101,000. The increase is primarily the result of an increase in staffing expenses due to an increase in the number of employees in all departments of the business to support the growth in operations during the year. We expect these expenses to continue to increase in absolute dollars as revenue increases.

Platform costs. Consist of the technology and content hosting. Platform costs for the three months ended March 31, 2021 were $19,000 compared to $0 for the three months ended March 31, 2020. We expect these costs to continue to increase in absolute dollars as we continue to grow but expect that they continue to decrease as a percentage of our revenues.

Marketing, data services and sales. These are the costs we incur to market our products and third-party services and selling costs. Marketing, data services and sales for the three months ended March 31, 2021 were $934,000 compared to $38,000 for the three months ended March 31, 2020. We expect these costs to continue to grow in nominal dollars as we continue to grow but expect that they continue to decrease as a percentage of our revenues.

Depreciation and Amortization. Depreciation and Amortization cost represent an allocation of the costs incurred to acquire the long-lived assets used in our business over their estimated useful lives. Our long-lived assets primarily consist of internally developed software. For the three months ended March 31, 2021 depreciation and amortization was $76,000 compared to $26,000 for the three months ended March 31, 2020. We expect these expenses to continue to increase as we anticipate further investment in long-lived assets to support our business growth.

General and administrative. General and administrative expense consists primarily of, information technology, professional fees, IT and facility overhead. We expect our general and administrative expense to increase in absolute dollars primarily as a result of the increased costs associated with being a stand-alone public company. However, we also expect our general and administrative expense to fluctuate as a percentage of our revenue in future periods based on fluctuations in our revenue and the timing of such expense. For the three months ended March 31, 2021 general and administrative expenses were $92,000 as compared to $19,000 for the three months ended March 31, 2020.

BIGToken revenues

BIGToken revenues for the three months-ended March 31, 2021 increased to $855,000 or 343% compared to $193,000 during the three months ended March 31, 2020. This increase is primarily driven by the increased acceptance of our product offering, the growth of our product offering and the continued investment in BIGToken user database.

BIGToken Profit Margin

BIGToken’s costs of revenue consist of media acquired from third parties to fulfill the media and advertising components of our revenues. Profit margin for the three months ended March 31, 2021 increased to 68% as compared to 49% for the three months ended March 31, 2020. The increase is driven by increased revenues and enhanced operational execution.

BIGToken Operating Expenses

Our operating costs for the three months ended March 31, 2021 decreased to $2,118,000 or by $252,000 or 11% as compared to $2,370,000 the three months ended March 31, 2020. The decrease in operating expense is primarily attributable to a decrease in employee compensation costs as further discussed below.

Employee Related Costs. These are the costs we incur to employ our staff. For the three months ended March 31, 2021 employee related costs decreased to $736,000 from $1,248,000 for the year period ending March 31, 2020, representing a decrease of approximately $500,000 or 40%. The decrease is primarily due to a reduction in employees in our sales and operations departments.

Platform costs. Consist of the technology and content hosting. Platform costs for the three months ended March 31, 2021 were $86,000 as compared to $48,000 for the three months ended March 31, 2020, representing an increase of $38,000 or 79%. The increase in expenses here is driven by the continued increase in our user database. We expect these costs to continue to increase in absolute dollars as we continue to grow our user database but expect that they continue to decrease as a percentage of our revenues.

Marketing, data services and sales. These are the costs we incur to market our products including the expenses we incur through BIGToken point redemptions. Marketing, data services and sales for the three months ended March 31, 2021 and 2020 were $164,000. We expect these costs to continue to grow in nominal dollars as we continue to grow but expect that they continue to decrease as a percentage of our revenues.

Depreciation and Amortization. Depreciation and Amortization cost represent an allocation of the costs incurred to acquire the long-lived assets used in our business over their estimated useful lives. Our long-lived assets primarily consist of internally developed software. For the three months ended March 31, 2021 depreciation and amortization was $143,000 compared to $120,000 for the three months ended March 31, 2020. We expect these expenses to continue to increase as we anticipate further investment in long-lived assets to support our business growth.

General and administrative. General and administrative expense consists primarily of, information technology, professional fees, IT, facility overhead and an allocation of corporate overhead. General and Administrative expenses were $990,000 for the three months ended March 31, 2021, which represents an increase $649,000 or 190%. Inclusive of this increase is approximately $330,000 of allocated corporate overheard. The remaining increase represent increased costs associated with moving to an independent stand-alone Company. However, we also expect our general and administrative expense to fluctuate as a percentage of our revenue in future periods based on fluctuations in our revenue and the timing of such expense.

Corporate and Other Operating Expenses

Corporate and Other Operating expense consists primarily of human resources, information technology, professional fees, IT and facility overhead, and other general corporate expense. General and Administrative expenses were $1,125,000 for the three months ended March 31, 2021, which represents a decrease of $366,000 or 25%. The decrease in expense in driven by a decrease in our allowance due to recoveries of amounts previously charged-off to bad-debt.

We expect our general and administrative expense to increase in absolute dollars as we continue to grow our business. However, we also expect our general and administrative expense to decrease as a percentage of our revenues as revenues increase.

The following table presents working capital as of March 31, 2021 and December 31, 2020:

	2021		2020

Current assets	$	35,902,000	$	11,873,000
Current liabilities		18,960,000		19,035,000
Working capital	$	16,942,000	$	(7,162,000	)

Cash flows from operating activities

The primary use of operating cash is to pay our media, data and platform vendors, employees and our users through point redemptions, others for a wide range of services. Cash flows used in operating activities decreased by $3,370,000 or 120% in during the three months ended March 31, 2021 primarily driven by an increase in operating expenses and costs of revenues, partially offset by increases in cash receipts and revenues.

Cash flows from investing activities

Our principal recurring investing activities are the funding of our internal software development and the sale of marketable securities. During the three months ended March 31, 2021, net cash provided by investing activities was $1,998,000 as compared to net cash used of $213,000 for the three months ended March 31, 2020. Expenditures for software development were $154,000 and $278,000 for the three months ended March 31, 2021, and 2020, respectively. During the three months ended March 31, 2021, the Company generated $2,266,000 from the sale of marketable securities.

Cash flows from financing activities

During the three months ended March 31, 2021 we generated net cash provided by financing activities of $17,229,000. During the three months ended March 31, 2020 cash provided by financing activities was $3,090,000. These proceeds consisted of the following:

	2021		2020

Proceeds from warrant exercises	$	12,220,000	$	-
Sale of Common stock		284,000		-
Subsidiary sale of Preferred shares		4,725,000		-
Sale of short-term notes		-		3,090,000
Total		17,229,000		3,090,000

Employees and Human Capital Resources

As of March 31, 2021, we had 145 full-time employees. 9 are engaged in executive management such as our Chief Executive Officer, 90 in information technology including those participating in our research and development efforts, 22 in sales and marketing, 16 in integration and customer support and 8 in administration. All employees are employed “at will.” We believe our relations with our employees are generally positive and we have no collective bargaining agreements with any labor unions.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees. The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel, whether existing employees or new hires, through the granting of stock-based and cash-based compensation awards. We believe that this increases value to our stockholders and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

As the success of our business is fundamentally connected to the well-being of our employees, we are committed to their health, safety and wellness. We provide our employees and their families with access to convenient health and wellness programs, including benefits that provide protection and security giving them peace of mind concerning events that may require time away from work or that impact their financial well-being; and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families. In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees, as well as the community in which we operate, and which comply with government regulations, including working in a remote environment where appropriate or required.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount in our Condensed Consolidated Financial Statements and related notes. On an ongoing basis, we evaluate estimates which are subject to significant judgment. The more critical accounting estimates include estimates related to revenue recognition and the fair value of financial instruments. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 1 to our Condensed Consolidated Financial Statements for the quarters ended March 31, 2021 and 2020 appearing elsewhere in this report. There have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2020.

The following critical accounting policies affect the more significant judgments and estimates used in the preparation of our Condensed Consolidated Financial Statements. In addition, you should refer to our accompanying Condensed Consolidated Balance Sheets as of March 31, 2021, and the Condensed Consolidated Statements of Operations, Changes in Stockholders’ Equity and Cash Flows for quarters ended March 31, 2021 and 2020, and the related notes thereto, for further discussion of our accounting policies.

On an ongoing basis, we evaluate our estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. To the extent that there are material differences between our estimates and our actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We believe the assumptions and estimates associated with the following have the greatest potential impact on our Condensed Consolidated Financial Statements.

Going concern assessment

With the implementation of Financial Accounting Standards Board’s (“FASB”) standard on going concern, Accounting Standards Update (“ASU”) No. 2014-15, we assess going concern uncertainty in our Condensed Consolidated Financial Statements to determine if we have sufficient cash and cash equivalents on hand and working capital, including available loans or lines of credit, if any, to operate for a period of at least one year from the date our Condensed Consolidated Financial Statements are issued, which is referred to as the “look-forward period” as defined by ASU No. 2014-15. As part of this assessment, based on conditions that are known and reasonably knowable to us, we consider various scenarios, forecasts, projections, and estimates, and we make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and our ability to delay or curtail those expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary or applicable, we make certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent we deem probable those implementations can be achieved and we have the proper authority to execute them within the look-forward period in accordance with ASU No. 2014-15. Based on our analysis, we have concluded that there is substantial doubt about the ability of SRAX and/or BIGToken to remain as a going concern after a period of 12 months.

Business Combinations

For all business combinations (whether partial, full or step acquisitions), the Company records 100% of all assets and liabilities of the acquired business, including goodwill, generally at their fair values; contingent consideration, if any, is recognized at its fair value on the acquisition date and, for certain arrangements, changes in fair value are recognized in earnings until settlement and acquisition-related transaction _and restructuring costs are expensed rather than treated as part of the cost of the acquisition.

Impairment of long-lived assets

We assess the impairment of long-lived assets, which consists primarily of long-lived intangible assets and office equipment, whenever events or changes in circumstances indicate that such assets might be impaired and the carrying value may not be recoverable. If events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and the expected undiscounted future cash flows attributable to the asset are less than the carrying amount of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded.

Goodwill and other indefinite-lived intangible assets

We account for goodwill and other indefinite-lived intangible assets in accordance with FASB Accounting Standards Codification (“ASC”) Topic 350 “Intangibles—Goodwill and Other.” Approximately 61% of our total assets as of December 31, 2020, consist of indefinite-lived intangible assets, such goodwill, the value of which depends significantly upon the operating results of our businesses. We believe that our estimate of the value of our goodwill is a critical accounting estimate as the value is significant in relation to our total assets, and our estimates incorporate variables and assumptions that are based on experiences and judgment about future operating performance of our markets and product offerings.

We do not amortize goodwill or other indefinite-lived intangible assets, but rather test for impairment annually or more frequently if events or circumstances indicate that an asset may be impaired. We complete our annual impairment tests in the fourth quarter of each year. The fair value measurements for our indefinite-lived intangible assets use significant unobservable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value including assumptions about risk. The unobservable inputs are defined in FASB ASC Topic 820 “Fair Value Measurements and Disclosures” as Level 3 inputs.

We have the option to assess whether it is more likely than not that an indefinite-lived intangible asset is impaired. If it is more likely than not that impairment exists, we are required to perform a quantitative analysis to estimate the fair value of the assets. The qualitative assessment requires significant judgment in considering events and circumstances that may affect the estimated fair value of our indefinite-lived intangible assets and to weigh these events and circumstances by what we believe to be the strongest to weakest indicator of potential impairment. Our annual test is conducted on December 31st.

The FASB guidance provides examples of events and circumstances that could affect the estimated fair value of indefinite-lived intangible assets; however, the examples are not all-inclusive and are not by themselves indicators of impairment. We considered these events and circumstances, as well as other external and internal considerations. Our analysis, in order of what we consider to be the strongest to weakest indicators of impairment include: (1) the difference between any recent fair value calculations and the carrying value; (2) financial performance, such as operating revenue, including performance as compared to projected results used in prior estimates of fair value; (3) macroeconomic economic conditions, including limitations on accessing capital that could affect the discount rates used in prior estimates of fair value; (4) industry and market considerations such as a declines in market-dependent multiples or metrics, a change in demand, competition, or other economic factors; (5) operating cost factors, such as increases in labor, that could have a negative effect on future expected earnings and cash flows; (6) legal, regulatory, contractual, political, business, or other factors; (7) other relevant entity-specific events such as changes in management or customers; and (8) any changes to the carrying amount of the indefinite-lived intangible asset.

We engage an independent third-party appraisal and valuation firm to assist us with determining the enterprise value. Noble Financial Capital Markets prepared the valuations for the testing period ending December 31, 2020 and 2019.

We performed a sensitivity analysis of certain key assumptions including reducing the long-term revenue growth rate to determine that such changes would have no incremental impact to the carrying value of goodwill associated with our Company.

Debt Issuance Costs, Debt Discount and Detachable Debt-Related Warrants

Costs incurred to issue debt are deferred and recorded as a reduction to the debt balance in our Condensed Consolidated Balance Sheets. We amortize debt issuance costs over the expected term of the related debt using the effective interest method. Debt discounts relate to the relative fair value of warrants issued in conjunction with the debt and are also recorded as a reduction to the debt balance and accreted over the expected term of the debt to interest expense using the effective interest method.

Revenue Recognition

The Company applies the guidance of ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) when recognizing revenue. The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

The following five steps are applied to achieve that core principle:

	●	Step 1: Identify the contract with the customer;

	●	Step 2: Identify the performance obligations in the contract;

	●	Step 3: Determine the transaction price;

	●	Step 4: Allocate the transaction price to the performance obligations in the contract; and

	●	Step 5: Recognize revenue when the company satisfies a performance obligation.

The Company’s current payment terms on credits to its customers are ranging from 60 days to 9 months, depending on the creditworthiness of its customers.

Stock-Based Compensation

The Company accounts for all stock-based payment awards made to employees and directors based on their fair values and recognizes such awards as compensation expense over the vesting period using the straight-line method over the requisite service period for each award as required by FASB ASC Topic No. 718, Compensation-Stock Compensation. If there are any modifications or cancellations of the underlying vested or unvested stock-based awards, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense, or record additional expense for vested stock-based awards. Future stock-based compensation expense and unearned stock- based compensation may increase to the extent we grant additional stock options or other stock-based awards.

Income Taxes

The Company accounts for income taxes under the provisions of FASB ASC Topic 740, “Income Tax,” which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Condensed Consolidated Financial Statements or tax returns. Deferred tax assets and liabilities are recognized for the future tax consequence attributable to the difference between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are measured using the enacted tax rate expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company establishes a valuation when it is more likely than not that the assets will not be recovered.

ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes,” defines uncertainty in income taxes and the evaluation of a tax position as a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.

Recently Issued Accounting Pronouncements

For further information on recently issued accounting pronouncements, see Note 1—Summary of Significant Accounting Policies in the accompanying notes to Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K.

Off balance sheet arrangements

As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable, as we are a smaller reporting company.

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluation as of the end of the period covered by this report, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were not effective to ensure that the information relating to our Company, required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure as a result of continuing material weaknesses in our internal control over financial reporting identified in our Annual Report on Form 10-K for the year ended December 31, 2021.

We continue to work toward full remediation of these material weaknesses. We expect that the remediation of these material weaknesses in our internal control over financial reporting will remediate the weakness in our disclosure controls and procedures.

Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

None.

ITEM 1A.

RISK FACTORS.

Please consider the following risk factors carefully. If any one or more of the following risks were to occur, it could have a material adverse effect on our business, prospects, financial condition and results of operations, and the market price of our securities could decrease significantly. Statements below to the effect that an event could or would harm our business (or have an adverse effect on our business or similar statements) mean that the event could or would have a material adverse effect on our business, prospects, financial condition and results of operations, which in turn could or would have a material adverse effect on the market price of our securities. Although we have organized the risk factors below under headings to make them easier to read, many of the risks we face involve more than one type of risk. Consequently, you should read all of the risk factors below carefully before making any decision to acquire or hold our securities.

Risks Related to our Business

We have a history of operating losses and there are no assurances we will report profitable operations in the foreseeable future.

For the year-ended December 31, 2020 we reported losses from operations and an accumulated deficit of $11,597,000 and $50,342,000, respectively. Additionally, for the 3 months ended March 31, 2021 and 2020, we recorded losses from operations of $1,426,000 and $3,874,000 and accumulated deficit of $61,432,000 and $38,640,000, respectively. Our future success depends upon our ability to continue to grow our revenues, contain our operating expenses and generate profits. We do not have any long-term agreements with our customers. There are no assurances that we will be able to increase our revenues and cash flow to a level which supports profitable operations. We may continue to incur losses in future periods until such time, if ever, as we are successful in significantly increasing our revenues and cash flow beyond what is necessary to fund our ongoing operations and pay our obligations as they become due. If we are able to significantly increase our revenues in future periods, the rapid growth which we are pursuing will strain our organization and we may encounter difficulties in maintaining the quality of our operations. If we are not able to grow successfully, it is unlikely we will be able to generate sufficient cash from operations to pay our operating expenses and service our debt obligations or report profitable operations in future periods.

A pandemic, epidemic or outbreak of an infectious disease in the markets in which we operate or that otherwise impacts our facilities or advisors could adversely impact our business.

If a pandemic, epidemic, or outbreak of an infectious disease including the recent outbreak of respiratory illness caused by a novel coronavirus (COVID-19) or other public health crisis were to affect our operations, facilities or those of our customers or suppliers, our business could be adversely affected. A pandemic typically results in social distancing, travel bans and quarantine, and this may limit access to our facilities, customers, management, support staff and professional advisors. These factors, in turn, may not only materially impact our operations, financial condition and demand for our services but our overall ability to react timely to mitigate the impact of this event. Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission.

Our auditors have expressed substantial doubt about our ability to continue as a going concern.

Our auditors’ report on our December 31, 2020 Consolidated Financial Statements expresses an opinion that our capital resources as of the date of their audit report were not sufficient to sustain operations or complete our planned activities for the upcoming year unless we raised additional funds. Based upon our cash position on March 31, 2021, there is substantial doubt about our ability to continue as a going concern past the end of the year. Our ability to continue as a going concern is based on several factors; (i) our ability to sustain our current operating performance, and (ii) our ability to raise additional capital. If we are not successful with either of these, we may no longer be able to continue as a going concern and may cease operation or seek bankruptcy protection.

We may need to raise additional capital to pay our indebtedness as it comes due.

In June 2020, we entered into a securities purchase agreement with institutional investors for the issuance of approximately $16.1 million in principal of debentures. Pursuant to the terms of the debentures (subject to three (3) separate deferrals of six (6) months each in exchange for increased principal added to the Debentures), we will be required to begin making amortization payments on the debentures beginning on December 31, 2020. Payment of the debentures is secured by substantially all the assets and the intellectual property of the Company. Although we have recently achieved profitability, we may not be able to generate sufficient cash flow to repay the debentures as they come due. As of March 31, 2021, the outstanding balance of the debentures was approximately $3,100,000. If we are not able to generate enough cashflow through the operation of our business, we will need to raise additional capital through the sale of debt or equity or the sale of assets, in order to make the required amortization payments. If we are unable to make the required payments, or if we fail to comply with the various requirements and covenants of the debentures, we would be in default, which would permit the holders of the debentures to accelerate the maturity and require immediate repayment and lead to potential foreclosure on the assets securing the debt. If we are unable to refinance or repay our indebtedness as it becomes due, including upon an event of default, we may become insolvent and be unable to continue operations.

Our failure to maintain an effective system of internal control over financial reporting, has resulted in the need for us to restate previously issued financial statements. As a result, current and potential stockholders may lose confidence in our financial reporting, which could harm our business and value of our stock.

Or management has determined that, as of March 31, 2021, we did not maintain effective internal controls over financial reporting based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework as a result of identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Natural disasters, epidemic or pandemic disease outbreaks, trade wars, political unrest or other events could disrupt our business or operations or those of our development partners, manufacturers, regulators or other third parties with whom we conduct business now or in the future.

A wide variety of events beyond our control, including natural disasters, epidemic or pandemic disease outbreaks (such as the recent novel coronavirus outbreak), trade wars, political unrest or other events could disrupt our business or operations or those of our manufacturers, regulatory authorities, or other third parties with whom we conduct business. These events may cause businesses and government agencies to be shut down, supply chains to be interrupted, slowed, or rendered inoperable, and individuals to become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions. For example, California ordered most businesses closed, mandating work-from-home arrangements, where feasible, in response to the coronavirus pandemic. These limitations could negatively affect our business operations and continuity, and could negatively impact ability to timely perform basic business functions, including making SEC filings and preparing financial reports. If our operations or those of third parties with whom we have business are impaired or curtailed as a result of these events, the development and commercialization of our products and product candidates could be impaired or halted, which could have a material adverse impact on our business.

Regulatory, legislative or self-regulatory developments regarding internet privacy matters could adversely affect our ability to conduct our business.

The United States and foreign governments have enacted, considered or are considering legislation or regulations that could significantly restrict our ability to collect, process, use, transfer and pool data collected from and about consumers and devices. Trade associations and industry self-regulatory groups have also promulgated best practices and other industry standards relating to targeted advertising. Various U.S. and foreign governments, self-regulatory bodies and public advocacy groups have called for new regulations specifically directed at the digital advertising industry, and we expect to see an increase in legislation, regulation and self-regulation in this area. The legal, regulatory and judicial environment we face around privacy and other matters is constantly evolving and can be subject to significant change. For example, the General Data Protection Regulation, or GDPR, which was agreed by E.U. institutions in 2016 and came into effect after a two year transition period on May 25, 2018, updated and modernized the principles of the 1995 Data Protection Directive and significantly increases the level of sanctions for non-compliance. Data Protection Authorities will have the power to impose administrative fines of up to a maximum of €20 million or 4% of the data controller’s or data processor’s total worldwide turnover of the preceding financial year. Similarly, the E-Privacy Regulation, which was launched by the European Parliament in October 2016, could result in, once enacted, new rules and mechanisms for “cookie” consent. In addition, the interpretation and application of data protection laws in the U.S., Europe and elsewhere are often uncertain and in flux. Legislative and regulatory authorities around the world may decide to enact additional legislation or regulations, which could reduce the amount of data we can collect or process and, as a result, significantly impact our business. Similarly, clarifications of and changes to these existing and proposed laws, regulations, judicial interpretations and industry standards can be costly to comply with, and we may be unable to pass along those costs to our clients in the form of increased fees, which may negatively affect our operating results. Such changes can also delay or impede the development of new solutions, result in negative publicity and reputational harm, require significant incremental management time and attention, increase our risk of non-compliance and subject us to claims or other remedies, including fines or demands that we modify or cease existing business practices, including our ability to charge per click or the scope of clicks for which we charge. Additionally, any perception of our practices or solutions as an invasion of privacy, whether or not such practices or solutions are consistent with current or future regulations and industry practices, may subject us to public criticism, private class actions, reputational harm or claims by regulators, which could disrupt our business and expose us to increased liability. Finally, our legal and financial exposure often depends in part on our clients’ or other third parties’ adherence to privacy laws and regulations and their use of our services in ways consistent with visitors’ expectations. We rely on representations made to us by clients that they will comply with all applicable laws, including all relevant privacy and data protection regulations. We make reasonable efforts to enforce such representations and contractual requirements, but we do not fully audit our clients’ compliance with our recommended disclosures or their adherence to privacy laws and regulations. If our clients fail to adhere to our contracts in this regard, or a court or governmental agency determines that we have not adequately, accurately or completely described our own solutions, services and data collection, use and sharing practices in our own disclosures to consumers, then we and our clients may be subject to potentially adverse publicity, damages and related possible investigation or other regulatory activity in connection with our privacy practices or those of our clients.

Unfavorable media coverage could negatively affect our business.

Unfavorable publicity regarding, for example, our privacy practices, terms of service, regulatory activity, the actions of third parties, the use of our products or services for illicit, objectionable, or illegal ends or the actions of other companies that provide similar services to us, could adversely affect our reputation. Such negative publicity also could have an adverse effect on the size, engagement, and loyalty of our customer base which could adversely affect our business and financial results.

Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, content, competition, consumer protection, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.

We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, such as privacy, data protection and personal information, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, electronic contracts and other communications, competition, protection of minors, consumer protection, taxation and securities law compliance. Expansion of our activities in certain jurisdictions, or other actions that we may take, may subject us to additional laws, regulations, or other government scrutiny. In addition, foreign data protection, privacy, content, competition, and other laws and regulations can impose different obligations or be more restrictive than those in the United States.

Additionally, as we expand our product offerings, we may become subject to the European General Data Protection Regulation (GDPR), effective as of May 2018. The GDPR increases privacy rights for individuals in Europe, extends the scope of responsibilities for data controllers and data processors and imposes increased requirements and potential penalties on companies offering goods or services to individuals who are located in Europe or monitoring the behavior of such individuals (including by companies based outside of Europe). Noncompliance can result in penalties of up to the greater of €20 million, or 4% of global company revenues.

These U.S. federal and state and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government authorities, are constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the newer industry in which we operate, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices.

These laws and regulations, as well as any associated inquiries or investigations or any other government actions, may be costly to comply with and may delay or impede our international growth, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to remedies that may harm our business.

Security breaches and improper access to or disclosure of our data or user data, or other hacking and phishing attacks on our systems, could harm our reputation and adversely affect our business.

Our industry is prone to cyber-attacks by third parties seeking unauthorized access to our data or users’ data or to disrupt our ability to provide service. Any failure to prevent or mitigate security breaches and improper access to or disclosure of our data or user data, including personal information, content, or payment information from or to users, or information from marketers, could result in the loss or misuse of such data, which could harm our business and reputation and diminish our competitive position. In addition, computer malware, viruses, social engineering (predominantly spear phishing attacks), and general hacking have become more prevalent in our industry. As a result of recent attention and growth of, the size of our user base, and the types and volume of personal data on our systems, we believe that we are a particularly attractive target for such breaches and attacks. Our efforts to address undesirable activity may also increase the risk of retaliatory attacks. Such attacks may cause interruptions to the services we provide, degrade the user experience, cause users or marketers to lose confidence and trust in our products, impair our internal systems, or result in financial harm to us. Our efforts to protect our company data or the information we receive may also be unsuccessful due to software bugs or other technical malfunctions; employee, contractor, or vendor error or malfeasance; government surveillance; or other threats that evolve. In addition, third parties may attempt to fraudulently induce employees or users to disclose information in order to gain access to our data or our users’ data. Cyber-attacks continue to evolve in sophistication and volume, and inherently may be difficult to detect for long periods of time. Although we are currently in the process of developing systems and processes that are designed to protect our data and user data, to prevent data loss and to prevent or detect security breaches, we cannot assure you that such measures will ultimately become operational or provide absolute security, and we may incur significant costs in protecting against or remediating cyber-attacks.

Affected parties or government authorities could initiate legal or regulatory actions against us in connection with any actual or perceived security breaches or improper disclosure of data, which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices. Such incidents or our efforts to remediate such incidents may also result in a decline in our active user base or engagement levels. Any of these events could have a material and adverse effect on our business, reputation, or financial results.

If we were to lose or have limited access to certain platforms or data sources, we will lose our existing revenue from these platform and sources.

The loss of access to any platforms or data sources could limit our ability to effectively grow a portion of our operations. Our business would be harmed if these platforms:

	●	discontinues or limits access to its platform by us and other application developers;

	●	modify terms of service or other policies, including fees charged to, or other restrictions on, us or other application developers, or changes how the personal information of its users is made available to application developers;

	●	establishes more favorable relationships with one or more of our competitors; or

	●	develops its own competitive offerings.

We depend on the services of our executive officers and the loss of any of their services could harm our ability to operate our business in future periods.

Our success largely depends on the efforts and abilities of our executive officers, including Christopher Miglino, Michael Malone, and Christopher Lahiji, the president of our wholly owned subsidiary, LD Micro. We are a party to an employment agreement with each of Mr. Miglino, Mr. Malone and Mr. Lahiji. Although we do not expect to lose their services in the foreseeable future, the loss of any of them could materially harm our business and operations in future periods until such time as we were able to engage a suitable replacement.

If advertising on the Internet loses its appeal, our revenue could decline.

Our business model may not continue to be effective in the future for a number of reasons, including:

	●	our ability to create applications for our customers;

	●	internet advertisements and promotions are, by their nature, limited in content relative to other media;

	●	companies may prefer other forms of Internet advertising and promotions that we do not offer; and

	●	regulatory actions may negatively impact our business practices.

Weak economic conditions may reduce consumer demand for products and services.

A weak economy in the United States could adversely affect demand for advertising products, and services. A substantial portion of our revenue is derived from businesses that are highly dependent on discretionary spending by individuals, which typically falls during times of economic instability. Accordingly, the ability of our advertisers to increase or maintain revenue and earnings could be adversely affected to the extent that relevant economic environments remain weak or decline further. We currently are unable to predict the extent of any of these potential adverse effects.

Certain of our subsidiaries and business affiliates have operations outside of the United States that are subject to numerous operational risks.

Certain of our subsidiaries and business affiliates have operations in countries other than the United States. In many foreign countries, it is not uncommon to encounter business practices that are prohibited by certain regulations, such as the Foreign Corrupt Practices Act and similar laws. Although certain of our subsidiaries and business affiliates have undertaken compliance efforts with respect to these laws, their respective employees, contractors and agents, as well as those companies to which they outsource certain of their business operations, may take actions in violation of their policies and procedures. Any such violation, even if prohibited by the policies and procedures of these subsidiaries and business affiliates or the law, could have certain adverse effects on the financial condition of these subsidiaries and business affiliates. Any failure by these subsidiaries and business affiliates to effectively manage the challenges associated with the international operation of their businesses could materially adversely affect their, and hence our, financial condition.

In the event that we are unable to conduct business with certain third-party providers of data and information integral to our operations, our revenue and business prospects may suffer.

We rely on access to certain third-party providers of data in the investment sector in order for Sequire’s platform to function and provide meaningful data and insights for our customers. We have benefited from the data that these third-parties have provided to us on behalf of their customers. In the event that we lose access to these third-party providers, it would limit our ability to effectively market the Sequire platform and sell our services to our customers. In the event that these third-party providers change their terms or our ability to access their data on a cost-effective basis to us, our business may be materially harmed.

Competitors may create products that compete with Sequire platform and there can be no assurances that we’ll be able to protect our intellectual property related to Sequire.

The Sequire platform’s success depends heavily on our intellectual property and the continued development and innovation of the platform. Notwithstanding, there may be competitors seeking to compete by creating similar platforms with more aggressive pricing or lower cost structures, greater functionality, and by emulating the services provided by the Sequire platform. Furthermore, certain of the information that we implement in our Sequire platform is either publicly available or ascertained through third-party service providers for which no barrier to entry exists. Companies with significantly more resources than us may attempt to create competing products at lower prices. Furthermore, there can be no assurances that we are able to adequately defend our trade secrets or intellectual property rights with respect to competitors.

Our insurance coverage strategy may not be adequate to protect us from all business risks.

We may be subject, in the ordinary course of business, to losses resulting from accidents, acts of God and other claims against us, for which we may have no insurance coverage. As a general matter, we do not maintain as much insurance coverage as many other companies do, and in some cases, we do not maintain any at all. Additionally, the policies that we do have may include significant deductibles or self-insured retentions, policy limitations and exclusions, and we cannot be certain that our insurance coverage will be sufficient to cover all future losses or claims against us. A loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which may harm our financial condition and operating results.

Risks Related to receipt of Securities for Services

We are not, and do not intend to become, regulated as an investment company under the U.S. Investment Company Act of 1940 (and similar legislation in other jurisdictions) and if we are deemed an “investment company” under the U.S. Investment Company Act of 1940, applicable restrictions would make it impractical for us to operate as contemplated.

The U.S. Investment Company Act of 1940 and the rules thereunder (and similar legislation in other jurisdictions) provide certain protections to investors and impose certain restrictions on companies that are registered as investment companies. Among other things, such rules limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities and impose certain governance requirements. We have not been and do not intend to become regulated as an investment company and we intend to conduct its activities so it will not be deemed to be an investment company under the U.S. Investment Company Act of 1940 (and similar legislation in other jurisdictions). In order to ensure that we are not deemed to be an investment company, we may be required to materially restrict or limit the scope of our operations or plans related to Sequire, we will be limited in the types of acquisitions that we may make and we may need to modify our organizational structure or dispose of assets that we would not otherwise dispose of. Moreover, if anything were to happen which would potentially cause us to be deemed an investment company under the U.S. Investment Company Act of 1940, it would be impractical for us to operate as intended pursuant to the Sequire platform and our business, financial condition and results of operations would be materially adversely affected. Accordingly, we would be required to take extraordinary steps to address the situation, such as the modification and restructuring of our Sequire platform, which would materially adversely affect our ability to derive revenue.

Sequire’s services are primarily paid for in restricted shares of stock of its customers, which are often smaller publicly traded companies with volatile stock prices, limited liquidity, and risker operations.

The Sequire platform provides SaaS, and payment is often made through equity securities of customers instead of cash. The securities issued are often those of smaller size public companies that often have limited operating cash and negative cash flows. Additionally, these securities are primarily restricted, and are subject to legal holding periods pursuant to Rule 144. The value of such securities on the date of receipt compared to the date when we are able to legally sell the securities may decrease, and the stock price of such issuers is often volatile, unpredictable and has limited liquidity. As a result, the value of the equity received on the date of payment may be significantly greater than the actual revenue derived by us upon a sale of the securities. Furthermore, there is no guarantee that the companies we receive securities from pursuant to our Sequire services will remain solvent during the legally required holding period under Rule 144, which would result in the loss of some or all of our anticipated revenue. As we are not experienced stock traders, there can be no assurances that our personnel responsible for selling the securities will do so at opportune times, or be able to maximize revenue.

Sequire’s receipt of securities in lieu of cash may be affected negatively by a downturn in the U.S. and/or global securities markets and could significantly reduce our revenue.

General political and economic conditions and events such as U.S. fiscal and monetary policy, economic recession, governmental shutdown, trade tensions and disputes, global economic slowdown, widespread health epidemics or pandemics, natural disasters, terrorist attacks, war, changes in local and national economic and political conditions, regulatory changes or changes in the law, or interest rate or currency rate fluctuations could create a downturn in the U.S. and/or global securities markets. As we receive restricted securities of companies, a downturn in the U.S. or global markets may impact such companies and the value of our securities.

The spread of COVID-19 during the past year has adversely affected global business activities and has resulted in significant uncertainty in the global economy and volatility in financial markets. The impact of the coronavirus continues to evolve and has been marked by rapid changes and developments. Accordingly, we cannot reliably predict the ultimate impact on financial markets and value of our securities held.

Risks Related to LD Micro

In the event that we are unable to integrate LD Micro, our newly acquired wholly owned subsidiary with our current assets or continue to develop LD Micro, it could materially affect our business, financial condition and results of operations.

In September 2020, we acquired LD Micro as a wholly owned subsidiary. Management is currently integrating operational aspects of LD Micro into SRAX. There can be no assurances that LD Micro is profitable, that we successfully integrate LD Micro’s business with that of SRAX, or that we are able to successfully operate LD Micro’s operations profitably. The failure to do any of the foregoing could materially affect our business, financial condition, and results of operations.

LD Micro, our newly acquired subsidiary operates in a business segment that has been negatively affected by the COVID-19 pandemic.

Our recently acquired subsidiary, LD Micro, hosts online and in-person investor conferences for publicly traded companies. While we believe we will be able to transition a majority of the events and conferences into an online format during the COVID-19 pandemic, there can be no assurances that we will be able to do so successfully, or that investors and other attendees will find such virtual conferences as compelling.

Risk Related to Force Protection Video Equipment Corp., the Acquirer of BIGToken

The financial statements of Force Protection Video Equipment Corp. are consolidated with our financials.

On February 4, 2021, we completed the divestiture of our wholly owned subsidiary, BIGToken, Inc. pursuant to the terms of our share exchange agreement entered into on September 30, 2020. As a result of the transaction, SRAX was issued 149,562,566,534 shares of Force Protection Video Equipment Corp. (“FPVD”) common stock representing approximately 95% of FPVD’s voting power. As a result, we are required by GAAP to consolidated FPVD’s financial statements with ours. As a result of market conditions, FPVD has an implied market value of approximately $1 billion as of May 13, 2021. As a result of this valuation, FPVD may incur significant non-cash expenses related to charges associated with its financial instruments, which we will be required to consolidate into our Condensed Consolidated Financial Statements.

We may have to expend significant human capital to assist FPVD in its operations which could detract from management’s ability to focus on our business.

FPVD has a history of operating losses and there are no assurances it will report profitable operations in the foreseeable future, which may impact our ownership of FPVD Common Stock.

Upon completion of the divestiture of BIG Token to FPVD, we received 149,562,566,534 shares of FPVD’s restricted common stock. There are no assurances that FPVD’s common stock will trade in high enough volume or have a liquid market pursuant to which we are able to sell our shares if and when they are registered or otherwise available for public resale pursuant to securities laws. Further, there are no assurances that FPVD will be able to continue its operations, or ever achieve profitability, both of which may impact that value of our FPVD common stock. For the year-ended December 31, 2020 FPVD reported losses from operations and an accumulated deficit of $8,581,000 and $36,571,000 respectively. Additionally, for the 3 months ended March 31, 2021 and 2020, FPVD recorded losses from operations of $1,521,000 and $3,051,000 and accumulated deficit of $43,867,000 and $36,571,000, respectively. FPVD’s future success depends upon its ability to continue to grow its revenues, contain its operating expenses and generate profits. FPVD does not have any long-term agreements with its customers. There are no assurances that FPVD will be able to increase revenues and cash flow to a level which supports profitable operations. FPVD may continue to incur losses in future periods until such time, if ever, as FPVD is successful in significantly increasing its revenues and cash flow beyond what is necessary to fund its ongoing operations and pay its obligations as they become due. If FPVD is unable to significantly increase its revenues in future periods, the rapid growth which FPVD is pursuing will strain the organization and it may encounter difficulties in maintaining the quality of its operations. If FPVD is not able to grow successfully or continue as a going concern, or able to continue its operations it would materially impact the value of the shares of FPVD common stock that we own,

FPVD has a limited number of employees and depends highly on SRAX’s employees and management to provide services under the Transition Services Agreement.

FPVD’s ability to successfully operate, including making its public filings with the SEC, is largely dependent on the services that SRAX provides pursuant to the Transition Services Agreement. If SRAX is required to provide services at a greater than expected level, it could materially impact our management’s ability to focus on SRAX’s business and operations.

Risks Related to Ownership of our Securities.

The market price of our common stock may be adversely affected by sales of substantial amounts of our common stock pursuant to our at the market sales agreement.

We are a party to an at-the-market sales agreement pursuant to which we are able to sell our Class A common shares directly into the market. Currently, we would be required to use the proceeds to pay for the redemption of our outstanding Debentures, subject to certain amounts as more fully set forth in the Debentures. If we are required to sell a substantial number of shares, or the public perceives that these sales may occur, it could cause the market price of our Class A Common Stock to decline. In addition, the sale of these shares in the public market, or the possibility of such sales, could impair our ability to raise capital through the sale of additional equity securities.

Our management will have broad discretion over the use of proceeds from sales under our at-the-market sales agreement, and may not use the proceeds effectively.

As a result of sales made under our at-the-market sales agreement in excess of those required to be paid pursuant to our outstanding Debentures, our management will have broad discretion in the application of such net proceeds, if any, and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our Class A Common Stock. You will be relying on the judgment of our management concerning these uses and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. The failure of our management to apply these funds effectively could result in unfavorable returns and uncertainty about our prospects, each of which could cause the price of our Class A Common Stock to decline.

The actual number of shares we will issue under the at-the-market sales agreement, at any one time or in total, is uncertain.

Subject to certain limitations in the at-the-market sales agreement and compliance with applicable law, we and our Sales Agent may mutually agree to sell shares of our Class A Common Stock at any time throughout the term of the ATM. The number of shares that are sold by the Sales Agent after agreement on the terms of the transaction acceptance will fluctuate based on the market price of the shares of our Class A Common Stock during the sales period and limits we set with our Sales Agent. Because the price per share of each share sold will fluctuate based on the market price of our shares of Class A Common Stock during the sales period, it is not possible to predict the number of shares that will ultimately be issued.

Conversions of our convertible debentures and the exercise of our common stock warrants may dilute the ownership interest of existing stockholders, or may otherwise depress the price of our common stock.

The conversion of some or all of the outstanding convertible debentures issued by us would dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion or exercise of outstanding warrants could adversely affect their prevailing market prices. In addition, the existence of the convertible debentures and purchase warrants may encourage short selling by market participants because the conversion of such notes could be used to satisfy short positions, or the anticipated conversion of such debentures into shares of our common stock could depress the price of our common stock.

The market price of our Class A common stock may be volatile.

The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than those of a seasoned issuer. The volatility in our share price is attributable to a number of factors. Mainly however, we are a speculative or “risky” investment due to our limited operating history, lack of significant revenues to date, our continued operating losses and missed guidance. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Additionally, in the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

The trading price of the shares of our Class A common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this quarterly report, these factors include:

	●	the success of competitive products;

	●	actual or anticipated changes in our growth rate relative to our competitors;

	●	announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;

	●	regulatory or legal developments in the United States and other countries;

	●	the recruitment or departure of key personnel;

	●	the level of expenses;

	●	actual or anticipated changes in estimates to financial results, development timelines or recommendations by securities analysts;

	●	variations in our financial results or those of companies that are perceived to be similar to us;

	●	fluctuations in the valuation of companies perceived by investors to be comparable to us

	●	inconsistent trading volume levels of our shares;

	●	announcement or expectation of additional financing efforts;

	●	sales of our Class A common stock by us, our insiders or our other stockholders;

	●	additional issuances of securities upon the exercise of outstanding options and warrants;

	●	market conditions in the technology sectors; and

	●	general economic, industry and market conditions.

In addition, the stock market in general, and advertising technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our Class A common stock, regardless of our actual operating performance. The realization of any of these risks could have a dramatic and material adverse impact on the market price of the shares of our Class A common stock.

We may be subject to securities litigation, which is expensive and could divert management attention.

The market price of the shares of our Class A common stock may be volatile, and in the past companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business. To the extent that any claims or suits are brought against us and successfully concluded, we could be materially adversely affected, jeopardizing our ability to operate successfully. Furthermore, our human and capital resources could be adversely affected by the need to defend any such actions, even if we are ultimately successful in our defense.

Failure to meet the financial performance guidance or other forward-looking statements we have provided to the public could result in a decline in our stock price.

We have previously provided, and may provide in the future, public guidance on our expected financial results for future periods. Although we believe that this guidance provides investors with a better understanding of management’s expectations for the future and is useful to our stockholders and potential stockholders, such guidance is comprised of forward-looking statements subject to the risks and uncertainties. Our actual results may not always be in line with or exceed the guidance we have provided. For example, in the past, we have missed guidance a number of times. If our financial results for a particular period do not meet our guidance or if we reduce our guidance for future periods, the market price of our Class A common stock may decline.

Delaware law contains anti-takeover provisions that could deter takeover attempts that could be beneficial to our stockholders.

Provisions of Delaware law could make it more difficult for a third-party to acquire us, even if doing so would be beneficial to our stockholders. Section 203 of the Delaware General Corporation Law may make the acquisition of our company and the removal of incumbent officers and directors more difficult by prohibiting stockholders holding 15% or more of our outstanding voting stock from acquiring us, without our board of directors’ consent, for at least three years from the date they first hold 15% or more of the voting stock.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the trading price of our Class A common stock and trading volume could decline.

The trading market for our shares of our Class A common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. A small number of securities and industry analysts currently publish research regarding our Company on a limited basis. In the event that one or more of the securities or industry analysts who have initiated coverage downgrade our securities or publish inaccurate or unfavourable research about our business, the price of our shares of Class A common stock would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the trading price of our shares of Class A common stock and trading volume to decline.

The elimination of monetary liability against our directors and officers under Delaware law and the existence of indemnification rights held by our directors and officers may result in substantial expenditures by us and may discourage lawsuits against our directors and officers.

Our certificate of incorporation eliminates the personal liability of our directors and officers to our company and our stockholders for damages for breach of fiduciary duty as a director or officer to the extent permissible under Delaware law. Further, our bylaws provide that we are obligated to indemnify any of our directors or officers to the fullest extent authorized by Delaware law. We are also parties to separate indemnification agreements with certain of our directors and our officers which, subject to certain conditions, require us to advance the expenses incurred by any director or officer in defending any action, suit or proceeding prior to its final disposition. Those indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against our directors or officers, which we may be unable to recoup. These provisions and resultant costs may also discourage us from bringing a lawsuit against any of our current or former directors or officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even if such actions, if successful, might otherwise benefit us or our stockholders.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

MINE SAFETY DISCLOSURES.

Not applicable to our company’s operations.

ITEM 5.

OTHER INFORMATION.

None.

ITEM 6.

EXHIBITS.

Incorporated by Reference

Filed/

Exhibit

Furnished

Exhibit

Filing

No.

Description

Herewith

Form

No.

File No.

Date

3.01(i)

Certificate of Incorporation, filed on 8/3/11

S-1

3.01(i)

333-179151

1/24/12

3.02(i)

Certificate of Correction to Certificate of Incorporation, filed on 8/31/11

S-1

3.01(ii)

333-179151

1/24/12

3.03(i)

Certificate of Amendment to Certificate of Incorporation authorizing 1:5 reverse stock split

8-K

3.5

000-54996

9/19/16

3.04(i)

Certificate of Designation of Series 1 Preferred Stock

8-K

3.4

000-54996

8/22/13

3.05(i)	Certificate of Amendment to Certificate of Incorporation as Amended, effective 8/25/19	8-K	3.01(i)	001-37916	8/15/19
3.06(ii)	Amended and Restated Bylaws of Social Reality, Inc. adopted March 27, 2019	8-K	3.01(ii)	001-37916	4/2/19
4.01	Specimen of Class A Common Stock Certificate	8-A12B	4.1	001-37916	10/12/16
4.02	Class A Common Stock Purchase Warrant Issued to Investors in October 2014	8-K	4.7	000-54996	11/4/14
4.03	Class A Common Stock Purchase Warrant issued in Steel Media Transaction dated October 30, 2014	8-K	4.8	000-54996	11/4/14
4.04	Class A Common Stock Warrant issued in September 2016 Offering	8-K	4.6	000-54996	10/6/16
4.05	Class A Common Stock Warrant issued to October 2013 Offering	8-K	4.7	000-54996	10/24/13
4.06	Class A Common Stock Warrant issued to T.R. Winston & Company issued 8/22/13	10-Q	4.5	000-54996	11/13/13
4.07	Class A Common Stock Warrant issued to Investors in January 2014 Offering	8-K	4.6	000-54966	1/27/14
4.08	Class A Common Stock Warrant issued to Investors in September 2016	8-K	4.6	000-54966	10/6/16
4.09	Class A Common Stock Warrant issued to Investors in January 2017 Offering	8-K	4.1	001-37916	1/4/17
4.10	Class A Common Stock Warrant issued to Investors in January 2017 Offering (2nd Warrant)	8-K	4.2	001-37916	1/4/17
4.11	Class A Common Stock Placement Agent Warrant issued in January 2017 Offering	8-K	4.3	001-37916	1/4/17
4.12	Class A Common Stock Placement Agent Warrant issued in October 2016 Offering	10-K	4.12	001-37916	3/31/17
4.13	Class A Common Stock Warrant issued in Leapfrog Media Trading Acquisition	10-K	4.13	001-37916	4/2/18
4.14	Form of 12.5% Secured Convertible Debenture issued in April 2017 Offering	8-K	4.2	001-33672	4/21/17
4.15	Class A Common Stock Warrant issued in April 2017 Offering	8-K	4.1	001-33672	4/21/17
4.16	Form of Class A Common Stock Placement Agent Warrant issued in April 2017 Offering	8-K	4.3	001-33672	4/21/17
4.17**	2016 Equity Compensation Plan	1/20/17	A-1	001-37916	1/20/17
4.18**	2014 Equity Compensation Plan	8-K	10.33	000-54996	11/10/14
4.19	2012 Equity Compensation Plan	S-1	4.02	333-179151	1/24/12
4.20	Form of Stock Option Agreement for 2012, 2014 and 2016 Equity Compensation Plan	S-1	4.03	333-179151	1/24/12
4.21	Form of Restricted Stock Unit Agreement for 2012, 2014 and 2016 Equity Compensation Plan	S-1	4.04	333-179151	1/24/12
4.22	Form of Restricted Stock Award Agreement for 2012, 2014 and 2016 Equity Compensation Plan	S-1	4.05	333-179151	1/24/12
4.23	Class A Common Stock Warrant Issued to Investors and Placement Agents in October 2017 Offering	8-K	4.02	001-37916	10/27/17

4.24	Form of Placement Agent Warrant from April 2019 Offering	8-K	4.01	001-37916	4/10/19
4.25	Form of Series A Common Stock Warrant from August 2019 Offering	8-K	4.01	001-37916	8/14/19
4.26	Form of Series B and Series C Common Stock Warrant from August 2019 Offering	8-K	4.02	001-37916	8/14/19
4.27	Form of Placement Agent Warrant from August 2019 Offering	8-K	4.03	001-37916	8/14/19
4.28	Form of Class A common stock purchase warrant issued in February 2020 Offering	8-K	4.01	001-37916	3/5/20
4.29	Form of Original Issue Discount Senior Secured Convertible Debenture from June 2020 Offering	8-K	4.01	001-37916	6/30/20
4.30	Form of Warrant from June 2020 Offering	8-K	4.02	001-37916	6/30/20
4.31	Form of Placement Agent Warrant from June 2020 Offering	S-3	4.06	333-240270	7/31/20
10.01	Purchase Agreement among Richard Steel, Steel Media, and Social Reality, dated 10/30/14	8-K	2.1	000-54996	11/4/14
10.02	Asset Purchase Agreement with LeapFrog Media Trading dated 4/20/17	10-K	10.02	001-37916	4/2/18
10.03	Amendment to Asset Purchase Agreement with Leapfrog Media Trading dated 8/17/17	10-K	10.03	001-37916	4/2/18
10.04	Transition Services Agreement in Leapfrog Media Trading Transaction	10-K	10.04	001-37916	4/2/18
10.05	Sample Leakout Agreement in Leapfrog Media Trading Transaction	10-K	10.05	001-37916	4/2/18
10.06	Form of Securities Purchase Agreement for April 2017 Offering	8-K	10.1	001-37916	4/21/17
10.07	Form of Security Agreement for April 2017 Offering	8-K	10.2	001-37916	4/21/17
10.08	Form of Registration Rights Agreement for April 2017 Offering	8-K	10.3	001-37916	4/21/17
10.09	Form of Securities Purchase Agreement for October 2017 Offering	8-K	10.01	001-37916	10/27/17
10.10**	Employment Agreement with Christopher Miglino dated 1/1/12	S-1	10.01	333-179151	1/24/12
10.11**	Form of Proprietary Information, Inventions and Confidentiality Agreement	S-1	10.03	333-179151	1/25/12
10.12**	Form of Indemnification Agreement with Officers and Directors	S-1	10.04	333-179151	1/25/12

10.13	Services Agreement with Servicios y Asesorias Planic, S.A. de cv dated 1/25/13	10-K	10.9	000-54996	3/31/15
10.14	Financing and Security Agreement with FastPay Partners, LLC	8-K	10.41	000-54996	9/23/16
10.15	Securities Purchase Agreement for January 2017 Offering	8-K	10.1	001-37916	1/4/17
10.16	Placement Agent Agreement for January 2017 Offering with Chardan Capital Markets	8-K	10.2	001-37916	1/4/17
10.17	Letter Agreement dated 1/5/17	10-K	10.35	001-37916	3/31/17
10.18	Insider Trading Policy adopted as of 2/23/16	10-K	10.36	001-37916	3/31/17
10.19	Form of Securities Purchase Agreement for April 2019 Offering	8-K	10.01	001-37916	4/10/19
10.20	Form of Placement Agent Agreement from April 2019 Offering	8-K	10.02	001-37916	4/10/19
10.21	Form of Securities Purchase Agreement from August 2019 Offering	8-K	10.01	001-37916	8/14/19
10.22	Form of First Placement Agent Agreement from August 2019 Offering	8-K	10.02	001-37916	8/14/19
10.23	Form of Second Placement Agent Agreement from August 2019 Offering	8-K	10.03	001-37916	8/14/19
10.24	Form of Term Loan and Security Agreement from February 2020 Offering	8-K	10.01	001-37916	3/5/20
10.25	Form of Intellectual Property Security Agreement from February 2020 Offering	8-K	10.01	001-37916	3/5/20
10.26	Form of Securities Purchase Agreement from June 2020 Offering	8-K	10.01	001-37916	6/30/20
10.27	Form of Registration Rights Agreement from June 2020 Offering	8-K	10.02	001-37916	6/30/20
10.28	Form of Security Agreement from June 2020 Offering	8-K	10.03	001-37916	6/30/20

10.29

Agreement and Plan of Merger dated September 4, 2020 between SRAX, Inc., Townsgate Merger Sub 1, and LD Micro, Inc.

8-K

10.01

001-37916

9/11/20

10.30

Lock-up agreement dated September 4, 2020 between SRAX and Christopher Lahiji

8-K

10.02

001-37916

9/11/20

10.31

Voting Proxy Agreement dated September 4, 2020 between SRAX and Christopher Lahiji

8-K

10.03

001-37916

9/11/20

10.32

Employment Agreement between SRAX and Christopher Lahiji Dated September 4, 2020

8-K

10.04

001-37916

9/11/20

10.33

Unit Redemption Agreement dated October 30, 2020 between SRAX and Halyard MD, LLC

8-K

10.01

001-37916

11/3/20

10.34

Unit Redemption Agreement dated October 30, 2020 between SRAX and MD CoInvest, LLC

8-K

10.02

001-37916

11/3/20

10.35

Share Exchange Agreement between SRAX, Force Protection Video Equipment Corp, and Paul Feldman, dated September 30, 2020

8-K

10.01

001-37916

10/4/20

31.1 / 31.2

Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 / 32.2

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. § 1350

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

101.DEF

XBRL Taxonomy Extension Definition Linkbase

101.LAB

XBRL Taxonomy Extension Label Linkbase

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

* Filed herein

** Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SRAX, INC.

May 24, 2021	By:	/s/ Christopher Miglino
		Christopher Miglino, Chief Executive Officer, principal executive officer

May 24, 2021	By:	/s/ Michael Malone
		Michael Malone, Chief Financial Officer, principal financial and accounting officer

SRAX, Inc. - FORM 10-Q - May 24, 2021

Attached files

SRAX, Inc. Reports