EDGAR 10-K Filing

Company CIK: 1538217
Filing Year: 2021
Filename: 1538217_10-K_2021_0001493152-21-007542.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS.
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 space, and plan to create several more niche events for the investor community.
Our endeavor provides our clients an integrated investor and shareholder analytics platform drove us to develop this platform, acquire LD Micro, and begin cultivating the Sequire Community. Each SRAX business unit delivers valuable insights that assist our clients with their investor relations and communications initiatives.
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 we believe can be used to maximize ROI through better investor and stockholder communications. 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. Based on this data, we can then build companies a customized communications campaign in which we use targeted ads and crafted messaging to reach 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. Additionally, Sequire’s functionality includes a custom survey feature that allows issuers to 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.
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.
We are currently expanding our slate of events to include specialty conferences for individual industries such as: EdTech, FinTech, Minerals, Pharma, etc. Our retail investor community of 5M+ investors, and the ability to help educate investors with these events, is valuable to our investor community. 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 see the Sequire Virtual Events platform growing into the premier investor event tool. Although the Covid-19 Pandemic certainly created growth in this space, we believe that virtual events are the future of targeted investor communication.
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.
Marketing and sales
We market our services through our in-house sales and marketing team. Our team focuses on social media, including Facebook, LinkedIn and Twitter, public relations (PR), industry events and the creation of white papers which assist in our marketing efforts and are used as lead generation tools.
Intellectual property
We currently rely on a combination of trade secret laws and restrictions on disclosure to protect our intellectual property rights. Our success depends on the protection of the proprietary aspects of our technology as well as our ability to operate without infringing on the proprietary rights of others. We also enter into proprietary information and confidentiality agreements with our employees, consultants and commercial partners and control access to, and distribution of, our software documentation and other proprietary information.
Government regulation
We are subject to a variety of laws and regulations in the United States that involve matters central to our business. Many of these laws and regulations are still evolving and being tested in courts and could be interpreted in ways that could harm our business. We are also subject to many of the laws that cover the securities industry and are regulated by the Securities and Exchange Commission.
These laws may involve 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, product liability, taxation, economic or other trade prohibitions or sanctions, anti-corruption law compliance, securities law compliance, and online payment services. In particular, we are subject to federal, state, and foreign laws regarding privacy and protection of people’s data. 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. U.S. federal and state and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, 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 new and rapidly evolving industry in which we operate and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices.
Proposed or new legislation and regulations could also significantly affect our business. For example, the European General Data Protection Regulation (GDPR) took effect in May 2018 and applies to all of our products and services used by people in Europe. The GDPR includes operational requirements for companies that receive or process personal data of residents of the European Union that are different from those previously in place in the European Union and includes significant penalties for non-compliance. The California Consumer Privacy Act, which took effect in January 2020, also establishes certain transparency rules and creates new data privacy rights for users. Similarly, there are a number of legislative proposals in the European Union, the United States, at both the federal and state level, as well as other jurisdictions that could impose new obligations or limitations in areas affecting our business, such as liability for copyright infringement. In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services.
We may become the subject of investigations, inquiries, data requests, requests for information, actions, and audits by government authorities and regulators in the United States, Europe, and around the world, particularly in the areas of privacy, data protection, law enforcement, consumer protection, and competition, as we continue to grow and expand our operations. We are currently, and may in the future be, subject to regulatory orders or consent decrees, including the modified consent order we entered into in July 2019 with the U.S. Federal Trade Commission (FTC) which is pending federal court approval and which, among other matters, will require us to implement a comprehensive expansion of our privacy program. Orders issued by, or inquiries or enforcement actions initiated by, government or regulatory authorities could cause us to incur substantial costs, expose us to unanticipated civil and criminal liability or penalties (including substantial monetary remedies), interrupt or require us to change our business practices in a manner materially adverse to our business, divert resources and the attention of management from our business, or subject us to other remedies that adversely affect our business.
Employees
As of March 29, 2021, we had 153 full-time employees. We also employ services of certain consultants on an as needed basis. There are no collective bargaining agreements covering any of our employees.
Our history
We were originally organized in August 2009 as a California limited liability company under the name Social Reality, LLC, and we converted to a Delaware corporation effective January 1, 2012. Social Reality, LLC began business in May 2010. Upon the conversion, we changed our name to Social Reality, Inc. On August 15, 2019 we formally changed our Name to SRAX, Inc. During the second half of 2018, we sold our SRAXmd product line. In September of 2020, we acquired LD Micro as a wholly owned subsidiary. In February of 2021 we completed the divestiture of our BIGToken subsidiary and related product lines.
Additional information
We file annual and quarterly reports on Forms 10-K and 10-Q, current reports on Form 8-K and other information with the Securities and Exchange Commission (“SEC” or the “Commission”). The public may read and copy any materials that we file with the Commission at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549, on official business days during the hours of 10:00 a.m. to 3:00 p.m. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission also maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission.
Other information about SRAX can be found on our website www.srax.com. Reference in this document to that website address does not constitute incorporation by reference of the information contained on the website.

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ITEM 1A. RISK FACTORS
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. 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 December 31, 2020, there is substantial doubt about our ability to continue as a going concern past the third quarter of 2021. 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 December 31, 2020, the outstanding balance of the debentures was approximately 9,386,000. Although a number of debentures have been converted, as of March 28, 2021, the outstanding balance of debentures is $3,800,000. 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 December 31, 2020 and 2019, 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 recently 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.
If we are unable to manage our marketing and advertising expenses, it could materially harm our results of operations and growth.
We plan to rely in part on our marketing and advertising efforts to attract new members. Our future growth and profitability, as well as the maintenance and enhancement of our brand, will depend in large part on the effectiveness and efficiency of our marketing and advertising strategies and expenditures. If we are unable to maintain our marketing and advertising channels on cost-effective terms, our marketing and advertising expenses could increase substantially, and our business, financial condition and results of operations may suffer. In addition, we may be required to incur significantly higher marketing and advertising expenses than we currently anticipate if excessive numbers of members withdraw their member data from our Database.
If we are unable to satisfy data privacy, protection, security, and other government- and industry-specific requirements, our growth could be harmed.
We need or may in the future need to comply with a number of data protection, security, privacy and other government- and industry-specific requirements, including those that require companies to notify individuals of data security incidents involving certain types of personal data. Security compromises could harm our reputation, erode user confidence in the effectiveness of our security measures, negatively impact our ability to attract new members, or cause existing users to withdraw their data from BIGToken.
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 user base and result in user attrition 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 allow European users, we are 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 users 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 have benefited from Facebook’s strong brand recognition and large user base. Facebook has broad discretion to change its terms of service and other policies with respect to us and other developers, and any changes to those terms of service may be unfavorable to us. Facebook may also change its fee structure, add fees associated with access to and use of the Facebook platform, change how the personal information of its users is made available to application developers on the Facebook platform or restrict how Facebook users can share information with friends on their platform. In the event Facebook makes any changes in the future, we may have to modify the structure of our campaigns which could impact the effectiveness of our campaigns and adversely impact our results of operations in future periods.
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.
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.
Recently, the spread of COVID-19 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
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.
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.
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.
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 unfavorable 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.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable to a smaller reporting company.

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ITEM 2. PROPERTIES
ITEM 2. DESCRIPTION OF PROPERTY.
As a result of COVID-19, we our currently operating as a virtually distributed operation. We lease our principal executive offices, located in Westlake Village, California and consisting of approximately 500 square feet on a month-to-month basis at a rate of $1,000 per month. We also maintain offices in Mexicali, Mexico where we lease approximately 3,400 square feet of office space from an unrelated third party under a lease agreement terminating in September 2021 at an initial annual rental of $77,580 plus a value-added tax (VAT) or its equivalent in the Mexican national currency and a 10% VAT for maintenance and certain overhead expenses. We believe both locations are suitable and adequate for our current levels of operations and anticipated growth.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS.
As of the date of this Annual Report, there are no material pending legal or governmental proceedings relating to our company or properties to which we are a party, and to our knowledge there are no material proceedings to which any of our directors, executive officers or affiliates are a party adverse to us or which have a material interest adverse to us.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market for Our Common Equity
Our Class A common stock is listed on the Nasdaq Capital Market under the symbol “SRAX.”
As of March 25, 2021, there were approximately 48 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial holders represented by these record holders, but it is well in excess of the number of record holders.
Dividend policy
We have never paid cash dividends on either our Class A common stock or our Class B common stock. Under Delaware law, we may declare and pay dividends on our capital stock either out of our surplus, as defined in the relevant Delaware statutes, or if there is no such surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. If, however, the capital of our company, computed in accordance with the relevant Delaware statutes, has been diminished by depreciation in the value of our property, or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets, we are prohibited from declaring and paying out of such net profits and dividends upon any shares of our capital stock until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets shall have been repaired.
Securities Authorized for Issuance under Equity Compensation Plans
See information contained in Part III Item 12 of Annual Report entitled “Equity Compensation Plan Information.”
Recent sales of unregistered securities
The following information is given with regard to unregistered securities sold since January 1, 2020. The following securities were issued in private offerings pursuant to the exemption from registration contained in the Securities Act of 1933, as amended (the “Securities Act”) and the rules promulgated thereunder in reliance on Section 4(2) thereof, relating to offers of securities by an issuer not involving any public offering:
● In January 2020, we sold non-performing receivables in the aggregate amount of $529,000 for a purchase price of $510,000 whereby in the event of payment on the receivables being received, we agreed to provide a true-up to the purchaser of the receivable of between 10% and 36% depending on the payment date. In the event of nonpayment of the receivables by March 24, 2020 and March 30, 2020, as applicable to the receivables, the purchaser may require us to purchase any outstanding portion of the receivables for 136% of its outstanding balance (“Payment Date”). In order to secure our performance to repurchase the receivables, we pledged 239,029 shares of our Class A common stock. The purchaser and Company agreed to extend the Payment Date until June 23 and June 30, 2020, as applicable, in exchange for an aggregate of 36,700 Class A common shares If we fail to repay the receivable, the purchaser may sell the pledged shares and we are liable for the any deficiency on amounts owed thereunder. On June 30, 2020, the holder exchanged all of the outstanding value in the receivables for securities sold in the June 2020 Offering (as described below).
● On February 28, 2020, we entered into a term loan and security agreement with BRF Finance Co., LLC to borrow up to $5,000,000 subject to certain restrictions. We initially drew down gross proceeds of $2,500,000 less fees and expenses and we can access the remaining $2,500,000 within thirty (30) days of entering into an at the market sales agreement with the Lender. The loan bears interest at 10% annually and had a maturity date of March 1, 2022. We were required to make monthly payments of principal and interest on an eighteen (18) month straight line amortization schedule beginning July 31, 2020. The loan was secured by substantially all of the assets of the company. On June 30, 2020 pursuant to proceeds received from our June 2020 Offering (as described below), we repaid the full amount of the loan.
● On April 9, 2020 the Company entered into an agreement to amend the January 22 and 30 Accounts receivable agreements. The Purchaser agreed to amend the payment of the Put Price to June 23, 2020 and June 30, 2020 for the receivable sale originating on January 22, 2020 and January 30, 2020, respectively. As consideration for the extension the Company agreed to issue the purchaser 32,668 and 4,032 shares of Class A common stock for the receivable sale originating on January 22, 2020 and January 30, 2020, respectively.
● On June 30, 2020, in a private placement, we issued (i) $16,101,388 in principal of Debentures consisting of an original issue discount on (a) $13,000,000 in cash and (b) $1,169,264 in debt cancellation, and (ii) an aggregate of 6,440,561 common stock purchase warrants (the “June 2020 Offering”). The Debentures (i) have a maturity date of December 31, 2021 (subject to three (3) extensions of six (6) months each by the holder, (ii) have a conversion price of $2.69, (iii) accrue interest at twelve percent (12%) per annum beginning six (6) months after issuance, and (iv) are secured by substantially all of the assets of the Company. The warrants (i) have an exercise price of $2.50 per share, and (ii) expire on October 30, 2022. In connection with the offering, we issued the Special Equities Group 478,854 placement agent warrants, which (i) have an exercise price of $3.3625 per share, and (ii) expire on October 30, 2022. Pursuant to the June 2020 Offering, we entered into a registration rights agreement whereby we are required to register the shares underlying the Debentures and warrants within ninety (90) days of the closing of the June 2020 Offering, or by September 23, 2020. As of the date hereof, the registration statement registering the shares underlying the Debentures and warrants was declared effective.
● On September 4, 2020, pursuant to an agreement and plan of merger (“Merger Agreement”), we acquired LD Micro, Inc. as a wholly owned subsidiary in exchange for the following compensation paid to LD Micro’s stockholders: (i) four million dollars ($4,000,000) payable as follows (collectively, the “Cash Payment”): (a) $1,000,000 at the closing, (b) one million dollars ($1,000,000) on January 1, 2021, (c) one million dollars ($1,000,000) on April 1, 2021, and (d) one million dollars ($1,000,000) on July 1, 2021; and (ii) one million six hundred thousand (1,600,000) shares of Class A common stock issued at the closing
● On November 13, 2020, we issued Christopher Miglino, our CEO, options to purchase 300,000 shares of Class A Common Stock. The Options have an exercise price of $2.97 per share, a term of 5 years, and are vested fully on the grant date. The options were issued pursuant to the Company’s 2012 Equity Compensation Plan and have a Black Scholes value of $ $649,000.
● On March 15, 2021, we issued Brock Pierce, our newly appointed Board member, an option to purchase 803 shares of Class A common Stock for joining the Board. The Grant covers the period from March 10, 2021 (his appointment date), through April 15, 2021. The options have an exercise price of $4.48 per share, a term of seven (7) years, and will vest fully on April 15, 2021. The options were issued as payment for services on the Board from March 10, 2021 through April 15, 2021 and is valued at $2,958. The options were issued from our 2014 equity compensation plan.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable to a smaller reporting company.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. 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 annual report. The following discussion should be read in conjunction with our financial statements and related notes thereto included elsewhere in this annual report.
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in addition to the accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:
The consolidated financial statements of SRAX, Inc. combine the Sequire business with the consumer-based data platform BIGToken and are prepared in conformity with U.S. generally accepted accounting principles (GAAP).
In the accompanying analysis of financial information, we sometimes use information derived from consolidated financial data but not presented in our financial statements prepared in accordance with GAAP. Certain of these data are considered “non-GAAP financial measures” under SEC rules. See the Non-GAAP Financial Measures section for the reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures.
Recent Developments
On February 4, 2021, we announced the completion of the separation 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 of Full Year 2020 Results
Our key operating metrics and financial results for 2020 are as follows:
Sequire platform growth:
● Sequire subscribers of 183 as of March 25, 2021, up from 95 as of November 15, 2020
● Over of 3 million investors within Sequire platform.
Financial results:
● Revenue was $4.5 million and $8.6 million, up 316% and 141% year-over-year for the fourth quarter and year, respectively.
● Full year Net loss of $14.7 million as compared to Net Loss of $16.9 million.
● Cash and cash equivalents and marketable securities were $9 million as of December 31, 2020.
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.
In 2020, 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.
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 $9,000,000 and $100,000 as of December 31, 2020 and 2019. 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 December 31, 2020 was approximately $451,000 and $8,447,000. Based upon our cash flow projections taking into account cash, our recent capital raise, 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, 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 consolidated financial statements are issued. The 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 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 2020, our principal sources of liquidity have been proceeds from various debt and equity offerings as well as the sale of our receivables. 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 March 25, 2021, we have sold 53,626 shares 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.
Additionally, on October 30, 2020, we sold our remaining position in TI Health (f/k/a SRAXmd) for a total of $8,000,000 of which $7,000,000 was received upon closing. The remaining $1 million is to be paid the earlier of three years after closing or upon a future sale of the TI-Health business. Substantially, all of these proceeds were used to redeem a portion of Convertible Debentures issued on June 30, 2020.
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.
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 consist of property and equipment and internally developed software.
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
Year ended December 31, 2020 compared to year ended December 31, 2019 (in 1,000s)
Selected Segment Financial Data
Year ended December 31,
Sequire BIGToken Corporate and Other Consolidated
2019 2019
Sequire platform revenue $ 5,781,000 $ 87,000 $ - $ - $ - $ - $ 5,781,000 $ 87,000
Conference revenue 503,000 - - - - - 503,000 -
BIGtoken revenue - - 2,168,000 3,228,000 - - 2,168,000 3,228,000
Other - - - - 195,000 269,000 195,000 269,000
Total Revenue 6,284,000 87,000 2,168,000 3,228,000 195,000 269,000 8,647,000 3,584,000
Cost of Revenue 1,783,000 7,000 800,000 1,613,000 6,000 60,000 2,589,000 1,680,000
Gross profit 4,501,000 80,000 1,368,000 1,615,000 189,000 209,000 6,058,000 1,904,000
margin % 72 % 92 % 63 % 50 % 98 % 78 % 70 % 53 %
Operating expenses 3,412,000 462,000 5,933,000 10,751,000 8,310,000 8,549,000 17,655,000 19,762,000
Operating Income $ 1,089,000 $ (382,000 ) $ (4,565,000 ) $ (9,136,000 ) $ (8,121,000 ) $ (8,340,000 ) $ (11,597,000 ) $ (17,858,000 )
Full year 2020 compared to 2019
was the first full year of operations for our Sequire business. During the year-ended December 31, 2020 our customer base grew from approximately 37 subscribing companies to approximately 125 subscribing companies as of year-end. We charge a base monthly license fee for a Sequire subscription, which ranges from $1,000 per month up to $5,000 per month.
Due to a sales initiative, we launched in 2Q 2020 whereby we allow our customers to pay for our services with their securities, mainly common stock, we estimated that there was a greater likelihood we’d be successful with pricing adjustments and our ability to sell additional ancillary services.
During the third quarter, 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.
For the first year of operations, we generated revenues of $6,284,000. This compares to $87,000 from the limited operations during the year ended December 31, 2019. During the year ended December 31, 2020 the Company had closed sales with total contract value approximating $14,800,000.
Sequire revenues
Sequire revenues for the year ended December 31, 2020 increased to $6,284,000 or by 7,123% compared to $87,000 during the prior year. Sequire’s continued growth was primarily driven by the growth of the services provided to issuers through the Sequire platform. During the year ended December 31, 2020 the Company had closed sales with total contract value approximating $14,800,000.
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 year ended was 72% and 92% respectively.
Sequire Operating Expenses
Sequire Operating Expenses
Sequire’s operating expenses for the year-ended December 31, 2020 were $3,412,000 this is compared to $462,000 for the year-ended December 31, 2019. Operating expenses consisted of the following:
Employee Related Costs. These are the costs we incur to employ our staff. Employee related costs increased to $1,854,000 or by 739% from $221,000. 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 full year ending December 31, 2020 were $40,000 a 25% increase compared to $32,000 for the year ended December 31, 2019. 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 full year ending December 31, 2020 were $1,216,000 a 1,348% increase compared to $84,000 for the year ended December 31, 2019. 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 year ended December 31, 2020 depreciation and amortization expense was $136,000 which represents an increase of $84,000 or 159%. 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.
BIGToken revenues
BIGToken revenues for the year-ended December 31, 2020 decreased to $2,168,000 or 33% compared to $3,228,000 during the year ended December 31, 2019. This decrease is primarily driven by the loss of core customers from our legacy sales verticals.
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 year-ended December 31, 2020 increased to 63% as compared to 50% in 2019. The increase is driven by the increase in revenues and enhanced operational execution.
BIGtoken Operating Expenses
Our operating costs for the year-ended December 31, 2020 declined to $5,933,000 or by 45% as compared to $10,751,000 for the year-ended December 31, 2019. The decrease in operating expenses were attributable to the following: to the reductions in staffing related and other general administrative expenses attributable to our legacy media verticals, and the reduction of our BIGToken point liability.
Employee Related Costs. These are the costs we incur to employ our staff. For the year-ended December 31, 2020 employee related costs decreased to $3,211,000 from $6,281,000 for the full year period ending December 31, 2019, representing a decrease of $3,070,000 or approximately 49%. 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 full year ending December 31, 2020 were $707,000 as compared to $580,000 for the year ended December 31, 2019, representing an increase of $127,000 or 22%. 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. For the year-ended December 31, 2019 the company incurred $960,000 in expenses related to payments to users for point redemptions and accruals for future redemptions. For the year ended December 31, 2020, BIGtoken user payment and accruals for future payments for point redemptions decreased to $721,000 . Marketing, data services and sales for the full year ending December 31, 2020 were $958,000 as compared to $1,751,000 for the year ended December 31, 2019. 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 year ended December 31, 2020 depreciation and amortization expense was $531,000 which represents an increase of $182,000 or 52%. 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. General and Administrative expenses were $526,000 for the full year ended December 31, 2020, which represents a decrease of $1,264,000. The decrease in expense in driven by a decrease in the following: bad-debt expenses of $394,000, consulting expenses of $175,000, stock based compensation of $230,000.
We expect our general and administrative expense to increase in absolute dollars primarily as a result of the 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 $8,310,000 for the full year ended December 31, 2020, which represents a decrease of $239,000 or 3%. The decrease in expense in driven by a decrease in lower staffing costs.
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 December 31, 2020 and 2019:
Current assets $ 11,873,000 $ 1,941,000
Current liabilities 19,035,000 7,376,000
Working capital $ (7,162,000 ) $ (5,435,000 )
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 $1,861,000 or 12% in 2020 primarily driven by a reduction in operating expenses.
Cash flows from investing activities
Our principal recurring investing activities are the funding of our internal software development and the sale of marketable securities. Expenditures for software development were $1,205,000 and $1,292,000 for the years ended 2020 and 2019, respectively. During the year-ended 2020, the Company generated $916,000 from the sale of marketable securities and $7,000,000 of proceeds from the sale of our investment of TI Health (formerly SRAXMd). Also, we used $697,000 for the acquisition of LD Micro.
Cash flows from financing activities
During the years ended December 31, 2020 net cash provided by financing activities decreased by 41% to $7,862,000 primarily consisting of proceeds, less redemptions, from our OID convertible notes. Also, we received $1,084,000 from the Payroll Protection Program.
During the years ended December 31, 2019, net cash provided from financing activities was $13,393,000 consisting of proceeds from the sales of common stock in the amount totaling $12,197,000 and the proceeds from the exercise of warrants in the amount of $1,196,000.
Employees and Human Capital Resources
As of March 26, 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 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 accounts receivable allowances. 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 consolidated financial statements for the years ended December 31, 2020 and 2019 appearing elsewhere in this report.
The following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements. In addition, you should refer to our accompanying consolidated balance sheets as of December 31, 2020 and 2019, and the consolidated statements of operations, changes in stockholders’ equity and cash flows for the fiscal years ended December 31, 2020 and 2019, 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 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 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 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.
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.
Accounts receivable and allowance for doubtful accounts
Accounts receivable represent customer accounts receivables. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience, general economic environment trends, and a review of the current status of trade accounts receivable. Management reviews its accounts receivable each reporting period to determine if the allowance for doubtful accounts is adequate. Such allowances, if any, would be recorded in the period the impairment is identified. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change. Uncollectible accounts receivables are charged against the allowance for doubtful accounts when all reasonable efforts to collect the amounts due have been exhausted.
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 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
On January 1, 2018, the Company adopted ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) using the modified retrospective method. 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.
Results for reporting periods beginning after January 1, 2018 are presented in accordance with ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 605 - Revenue Recognition (“ASC 605”). Under current and prior revenue guidance, revenues are recognized when control of the promised goods or services are transferred to the customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those good or services.
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 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 this 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.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable for a smaller reporting company.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Please see our consolidated financial statements beginning on page of this annual report.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our management, consisting of our Principal Executive Officer and Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2020. This evaluation included consideration of the controls, processes and procedures that are designed to ensure that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management has identified material weaknesses in the Company’s internal control over financial reporting. Based on that evaluation, management concluded that our disclosure controls and procedures as of December 31, 2020 were ineffective.
Inherent Limitations over Internal Controls
The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company’s internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
(iv) Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management’s Annual Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of the Chief Executive Officer and Chief Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013).
Based on the Company’s assessment, management has concluded that, our internal control over financial reporting was ineffective as of December 31, 2020 because of the following material weaknesses in internal controls over financial reporting:
● a lack of sufficient in-house qualified accounting staff;
● inadequate controls and segregation of duties due to limited resources and number of employees;
● limited checks and balances in processing cash transactions;
● substantial reliance on manual reporting processes and spreadsheets external to the accounting system for financial reporting;
● lack of adequate controls in the accounting for internally developed software costs.,
● products and services; and the recording of sophisticated, material financing transactions which are heavily dependent upon the use of estimates and assumptions and require us using consultants;
● and our lack of experience in monitoring and administering, the Company’s internal control over financial reporting
To mitigate the items identified in the assessment, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting professionals/consultants. As we grow, we expect to increase the number of employees, which would enable us to implement adequate segregation of duties within the internal control framework.
Remediation
We are continuing to seek ways to remediate these weaknesses, which stem from our small workforce and limited resources.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred during the quarter ended December 31, 2020 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION.
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required by this Item is set forth under the heading “Directors, Executive Officers and Corporate Governance” in our 2021 Proxy Statement to be filed with the SEC in connection with the solicitation of proxies for our 2021 Annual Meeting of Shareholders (“2021 Proxy Statement”) and is incorporated herein by reference. Such Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year to which this report relates. The information required by this item regarding delinquent filers pursuant to Item 405 of Regulation S-K will be included under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in the 2021 Proxy Statement and is incorporated herein by reference.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is set forth under the headings “Director Compensation” and “Executive Compensation” of our 2021 Proxy Statement and is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The information required by this Item is set forth under the headings “Beneficial Owners of Shares of Common Stock” and “Equity Compensation Plan Information” of our 2021 Proxy Statement and is incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required by this Item is set forth under the heading “Certain Relationships and Related Transactions” of our 2021 Proxy Statement and is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this Item is set forth under the heading “Independent Registered Public Accounting Firm” of our 2021 Proxy Statement and is incorporated herein by reference.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
Documents filed as part of this report:
(1) Financial Statements. See Index to Consolidated Financial Statements appearing on page.
(2) Exhibits
Filed/
Incorporated by Reference
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(i)
Certificate of Designation of BIGToken Preferred Tracking Stock
S-1/A
3.05(i)
333-229606
10/16/19
3.07(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
Form of 12.5% Secured Convertible Debenture issued in October 2017 Offering
8-K
4.01
001-37916
10/27/17
4.24
Class A Common Stock Warrant Issued to Investors and Placement Agents in October 2017 Offering
8-K
4.02
001-37916
10/27/17
4.25
Form of Placement Agent Warrant from April 2019 Offering
8-K
4.01
001-37916
4/10/19
4.26
Form of Series A Common Stock Warrant from August 2019 Offering
8-K
4.01
001-37916
8/14/19
4.27
Form of Series B and Series C Common Stock Warrant from August 2019 Offering
8-K
4.02
001-37916
8/14/19
4.28
Form of Placement Agent Warrant from August 2019 Offering
8-K
4.03
001-37916
8/14/19
4.29
Form of Class A common stock purchase warrant issued in February 2020 Offering
8-K
4.01
001-37916
3/5/20
4.30
Form of Original Issue Discount Senior Secured Convertible Debenture from June 2020 Offering
8-K
4.01
001-37916
6/30/20
4.31
Form of Warrant from June 2020 Offering
8-K
4.02
001-37916
6/30/20
4.32
Form of Placement Agent Warrant from June 2020 Offering
S-1
4.06
333-240270
7/31/20
4.33
Form of New Warrant issued February 22, 2021
8-K
4.01
001-37916
2/22/21
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
Form of Registration Rights Agreement for October 2017 Offering
8-K
10.02
001-37916
10/27/17
10.11**
Employment Agreement with Christopher Miglino dated 1/1/12
S-1
10.01
333-179151
1/24/12
10.12**
Employment Agreement with Erin DeRuggiero dated 10/19/15
10-K
10.3
000-54996
2/26/16
10.13**
Employment Agreement with Joseph P. Hannan dated 10/17/16
10-Q
10.48
001-37916
11/14/16
10.14**
Employment Agreement with Richard Steel dated 10/30/14
8-K
10.27
000-54996
11/4/14
10.15**
Employment Agreement with Chad Holsinger dated 10/30/14
8-K
10.28
000-54996
11/4/14
10.16
Employment Agreement with Adam Bigelow dated 10/30/14
8-K
10.29
000-54996
11/4/14
10.17**
Separation Agreement and Release with Richard Steel dated 1/25/17
8-K
10.1
333-215791
1/27/17
10.18**
Employment Agreement with Dustin Suchter dated 12/19/14
8-K
10.36
000-54996
12/22/14
10.19**
Form of Proprietary Information, Inventions and Confidentiality Agreement
S-1
10.03
333-179151
1/25/12
10.20**
Form of Indemnification Agreement with Officers and Directors
S-1
10.04
333-179151
1/25/12
10.21
Indemnification Agreement with Richard Steel dated 10/30/14
8-K
10.30
333-215791
11/4/14
10.22
Sublease for principal executive offices dated 8/12/12 with TrueCar, Inc.
S-1
10.16
333-193611
1/28/14
10.23
Services Agreement with Servicios y Asesorias Planic, S.A. de cv dated 1/25/13
10-K
10.9
000-54996
3/31/15
10.24
Sublease Agreement with Amarcore, LLC dated 1/1/15
S-1
10.17
333-206791
9/4/15
10.25
Advisory Agreement with Kathy Ireland Worldwide, LLC dated 11/14/16
10-Q
10.49
001-37916
11/14/16
10.26
Financing and Security Agreement with FastPay Partners, LLC
8-K
10.41
000-54996
9/23/16
10.27
Share Acquisition and Exchange Agreement with Five Delta, Inc.
8-K
10.34
000-54996
12/22/14
10.28
Secured Subordinated Promissory Note to Richard Steel dated 10/30/14
8-K
10.18
000-54996
11/4/14
10.29
Subordination Agreement with Richard Steel and Victory Park Management, LLC dated 10/30/14
8-K
10.22
000-54996
11/4/14
10.30
Securities Purchase Agreement for January 2017 Offering
8-K
10.1
001-37916
1/4/17
10.31
Placement Agent Agreement for January 2017 Offering with Chardan Capital Markets
8-K
10.2
001-37916
1/4/17
10.32
Financing Agreement with certain Lenders and Victory Park Management, LLC
8-K
10.23
000-54996
11/4/14
10.33
First Amendment to Financing Agreement dated 5/14/15
10-Q
10.38
000-54996
5/15/15
10.34
Pledge and Security Agreement with Steel Media and Victory Park Management, LLC dated 10/30/14
8-K
10.25
000-54996
11/4/14
10.35
Registration Rights Agreement dated 10/30/14
8-K
10.26
000-54996
11/4/14
10.36
Forbearance Agreement with Steel Media, Five Delta, Inc, Lenders and Victory Park Management, LLC dated 8/22/16
8-K
10.46
000-54996
8/24/16
10.37
Letter Agreement dated 1/5/17
10-K
10.35
001-37916
3/31/17
10.38
Insider Trading Policy adopted as of 2/23/16
10-K
10.36
001-37916
3/31/17
10.39
Form of Securities Purchase Agreement for April 2019 Offering
8-K
10.01
001-37916
4/10/19
10.40
Form of Placement Agent Agreement from April 2019 Offering
8-K
10.02
001-37916
4/10/19
10.41
Form of Securities Purchase Agreement from August 2019 Offering
8-K
10.01
001-37916
8/14/19
10.42
Form of First Placement Agent Agreement from August 2019 Offering
8-K
10.02
001-37916
8/14/19
10.43
Form of Second Placement Agent Agreement from August 2019 Offering
8-K
10.03
001-37916
8/14/19
10.44
Form of Term Loan and Security Agreement from February 2020 Offering
8-K
10.01
001-37916
3/5/20
10.45
Form of Intellectual Property Security Agreement from February 2020 Offering
8-K
10.01
001-37916
3/5/20
10.46
Form of Securities Purchase Agreement from June 2020 Offering
8-K
10.01
001-37916
6/30/20
10.47
Form of Registration Rights Agreement from June 2020 Offering
8-K
10.02
001-37916
6/30/20
10.48
Form of Security Agreement from June 2020 Offering
8-K
10.03
001-37916
6/30/20
10.49
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
10.50
Lock-up agreement dated September 4, 2020 between SRAX and Christopher Lahiji
8-K
10.02
001-37916
9/11/20
10.51
Voting Proxy Agreement dated September 4, 2020 between SRAX and Christopher Lahiji
8-K
10.03
001-37916
9/11/20
10.52
Employment Agreement between SRAX and Christopher Lahiji Dated September 4, 2020
8-K
10.04
001-37916
9/11/20
10.53
Unit Redemption Agreement dated October 30, 2020 between SRAX and Halyard MD, LLC
8-K
10.01
001-37916
11/3/20
10.54
Unit Redemption Agreement dated October 30, 2020 between SRAX and MD CoInvest, LLC
8-K
10.02
001-37916
11/3/20
10.55
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
10.56
Form of Letter Agreement dated February 21, 2021
8-K
10.01
001-37916
2/22/21
14.01
Code of Conduct and Ethics
S-1/A
99.1
333-179151
6/4/12
18.01
Preference Letter regarding Change in Accounting Principle
10-Q
18.1
001-37916
11/14/16
21.01
Subsidiaries of Registrant
*
23.01
Consent of RBSM LLP
*
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.