UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 2021 or ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number: 001-37916 SRAX, INC. (Exact name of registrant as specified in its charter) Delaware 45-2925231 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 2629 Townsgate Road #215, Westlake Village, CA 91361 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (323) 694-9800 Securities registered under Section 12(b) of the Act: Title of Class Trading Symbol Name of Each Exchange on Which Registered Class A Common Stock, $0.001 par value SRAX Nasdaq Global Market Securities registered under Section 12(g) of the Act: None (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☐ Yes ☒ No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☐ Yes ☒ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $121,972,024 based on the closing price of $5.44 on June 30, 2021. Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 26,315,178 shares of Class A common stock are outstanding as of October 10, 2022. DOCUMENTS INCORPORATED BY REFERENCE None. TABLE OF CONTENTS Page No. Part I Item 1. Business. 1 Item 1A. Risk Factors. 4 Item 1B. Unresolved Staff Comments. 11 Item 2. Description of Property. 11 Item 3. Legal Proceedings. 11 Item 4. Mine Safety Disclosures. 11 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 12 Item 6. Selected Financial Data. 15 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 15 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 25 Item 8. Financial Statements and Supplementary Data. 25 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. 25 Item 9A. Controls and Procedures. 25 Item 9B. Other Information. 26 Part III Item 10. Directors, Executive Officers and Corporate Governance. 27 Item 11. Executive Compensation. 31 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 38 Item 13. Certain Relationships and Related Transactions, and Director Independence. 40 Item 14. Principal Accounting Fees and Services. 41 Part IV Item 15. Exhibits, Financial Statement Schedules. 42 Item 16. Form 10-K Summary.3 44 i PART I We urge you to read this entire Annual Report on Form 10-K, including the “Risk Factors” section, the financial statements and the related notes included therein. As used in this Annual Report, unless context otherwise requires, the words “we,” “us,” “our,” “the Company,” “SRAX,” “Registrant” refer to SRAX, Inc. and its subsidiaries. Additionally, and reference to “LD Micro” refers to the Company’s wholly owned subsidiary, LD Micro, Inc. and the assets used in its operations. Any reference to “BIGToken” and “BIGToken, Inc.”, or the “BIGToken Project” refer to the Company’s previously wholly owned subsidiary, BIGToken, Inc. and the assets used in its operations. BIGToken was divested pursuant to a share exchange agreement that closed on February 4, 2021. Any reference to “common share” or “common stock,” refers to our $0.001 par value Class A common stock. Any reference to our Series A Preferred Stock refers to our $0.001 par value Series A Non-Voting Preferred Stock. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS The statements contained in this Annual Report on Form 10-K that are not purely historical are considered to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include, but are not limited to: any projections of revenues, earnings, or other financial items; any statements of the strategies, plans and objectives of management for future operations; any statements concerning proposed new products or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” and any other similar words. These statements represent our expectations, beliefs, anticipations, commitments, intentions, and strategies regarding the future and include, but are not limited to, the risks and uncertainties outlined in Item 1.A Risk Factors and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and those discussed in other documents we file with the Securities and Exchange Commission (SEC). Readers are cautioned that actual results could differ materially from the anticipated results or other expectations that are expressed in forward-looking statements within this report. The forward-looking statements included in this report speak only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. ITEM 1. BUSINESS. Overview 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, which allows issuers to track their shareholders’ behaviors and trends, then use data-driven insights to engage with shareholders across marketing channels. 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. ● LD Micro organizes and hosts investor conferences for micro and small-cap companies. We derive our revenues from the: ● Licensing of our proprietary SaaS platform; ● Sales of proprietary data; ● Attendance and sponsorship fees from investor conferences and events; and ● Sales of insight and consulting services. Sequire The Sequire platform is a central hub where companies can manage certain administrative functions, reach out and engage with shareholders as well as identify potential new investors. The platform 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 can 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 assist our users in developing customized communications campaign utilizing targeted ads and messaging. Among other features, the Sequire platform provides its users tools to monitor investor sentiment and activities and simplify back office administration such as: ● real-time level-two trading data, ● the ability to monitor the activities of competitive public companies of the user, ● news alerts, ● custom survey feature to enhance shareholder communications; ● real-time and searchable warrant and option ledgers; and ● integrated communication between investor relations programs and corporate communication firms. Data Targeting We help our clients build an investor base through targeted advertising and marketing campaigns, tailored to their needs. Using data-driven insights, we help clients meet their unique marketing objectives, whether they’re messaging existing investors, new investors, or consumers. 1 Website Disclosing the Value of our Securities Portfolio Pursuant to the terms of the transaction documents in our Senior Secured Revolving Credit Facility entered into on August 8, 2022, we are required to disseminate more current information regarding our portfolio of securities that we receive from customers. Accordingly, we have elected to disseminate such required information via a website at https://srax.com/stock-portfolio (the “Portfolio Website”). The most current information about the portfolio of securities will be available on the Portfolio Website, which will be updated daily. Additionally, the Portfolio Website describes or details the value of such portfolio of securities separately that are currently restricted or unrestricted. The Portfolio Website additionally outlines the dollar value of securities that have been sold in a given quarter. Individuals accessing the Portfolio Website are cautioned that the value of securities contained on the Portfolio Website are calculated by multiplying the quoted price of each security on its applicable exchange or interdealer quotation system, by the quantity owned. This method does not take into account any adjustment of value based on liquidity, the potential lack of an active market, excessive bid-ask spread, and other inputs used generally for valuing securities under the generally accepted principles of accounting (GAAP), the financial accounting standards board (FASB) and U.S. securities laws. Accordingly, the dollar values contained on the Portfolio Website may not be indicative of the fair value of the securities that we own, and the value for which we may be able to sell such securities could be materially and substantially less than that presented on the Portfolio Website. Additionally, the value of the securities contained on the Portfolio Website may be materially different from the value ascribed to such securities in our periodic reports filed with the Securities and Exchange Commission. Further, as a result of the potential holding periods of such securities and other restrictions on transferability or sale, we may, with respect to any specific security, (i) realize substantially less value upon the sale of such security or (ii) realize no value at all. Additionally, any disclosure with regard to the ability to sell as a result of such securities being unrestricted is subject to change and is highly dependent on facts that may change and that we have no control over. Any projections of sales for any future quarter or other time period are forward looking and speculative and you should not place any reliance on such projections. In addition, the values of securities listed on the Portfolio Website do not take into account any embedded features that may result in the adjustment of any conversion prices or issuance of additional shares. You are further cautioned not to rely on the values listed on the Portfolio Website for purposes of determining the fair value of our portfolio of securities. 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 is the premier event platform for micro-cap and small cap companies. In September of 2020, we acquired LD Micro, and hosted the 2020 Main Event on our Sequire Virtual Events platform. The 2021 Main Event had over 3,000 attendees and hosted webinars with over 500 companies. We are currently planning to expand the number and subject matter of our conferences and events. 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 that our ability to offer users a seamless, centrally managed virtual events solution that can be customized to any industry will help transform our platform into the premier investor event tool. 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 patents, 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. We currently have eight (8) US patent applications filed. 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. 2 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 and Human Capital Resources As of August 31, 2022, we had 10 full-time employees. Of these employees, 5 are engaged in executive management, 68 in information technology including those participating in our research and development efforts, 17 in sales and marketing, 28 in integration and customer support and 12 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. We provide our employees and their families with access to health and wellness programs, including benefits that provide protection and security concerning events that may require time away from work or that impact their financial well-being; and that offer choices where possible so employees can customize their benefits to meet their needs. 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. As of the date of this Annual Report, all of our employees are currently working remotely. 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. 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 the related platform. 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. 3 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 years-ended December 31, 2021 and 2020, we reported income/(loss) from operations of $(85,000) and ($7,032,000), respectively, and accumulated deficit of ($30,355,000) and ($50,342,000), respectively. Our future success depends on 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 significantly increase our revenues in future periods, the rapid growth may strain our organization and we may encounter difficulties in maintaining the quality of our operations. If we are not able to successfully increase our revenues, 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. Our auditors have expressed substantial doubt about our ability to continue as a going concern. Our auditors’ report on our December 31, 2021 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, 2021, there is substantial doubt about our ability to continue as a going concern past the first quarter of 2023. 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, of which $1,267,000 remains outstanding as of December 31, 2021. In July 2022, we amended certain terms of the debentures whereby in exchange for an additional five percent (5%) to be added onto the outstanding principal, we extended the maturity dates by six (6) months or until December 31, 2023 as well as extended the date we are required to begin making amortization payments until January 1, 2023. In addition, the holders of the debentures have the unilateral right to extend the maturity date and amortization payments by another six (6) months each in exchange for another additional five percent (5%) to be added to the principal of the debentures. On July 1, 2022, we entered into an original issue discount bridge loan with a principal amount of $650,000 in exchange for $500,000 in cash. On August 8, 2022, the bridge loan was exchanged for revolving notes in the senior secured revolving credit facility whereby we received $4,930,000 cash on the first draw down. Of the amount received, we paid off approximately $3.75 million of outstanding obligations. The payment of the debentures and revolving credit facility are secured by substantially all the assets and the intellectual property of the Company. Further, in addition to payments required pursuant the revolving credit facility, the lender is also entitled to ten percent (10%) of the net proceeds of any sales of securities acquired from our customers during the term of the loan. As a result, this will further negatively impact our cash flows from operations and may require us to raise additional capital earlier than previously anticipated. Depending on our level of operations, we may not be able to generate sufficient cash flow to repay the debentures or revolving credit facility as they come due. 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 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 and revolving credit facility, we would be in default, which would permit the holders of the debentures and lender in the revolving credit facility 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 outstanding loan obligations contain substantial covenants that may impact our business, our ability to secure additional debt financing, and our ability to pay our debts as they become due. As of August 31, 2022, we have approximately (i) $1.1 million outstanding of our secured convertible debentures issued in June 2020 that are due and payable on December 31, 2023 and (ii) $5,580,000 of revolving notes outstanding pursuant to our senior secured revolving credit facility. Each of the debentures and revolving notes / credit facility contain a number of affirmative and negative covenants, including, but not limited to: reporting requirements, certain financial covenants related to our stock portfolio, collateral limitations, certain limitations on liens and indebtedness, dispositions, mergers and acquisitions, restricted payments and investments, corporate changes and limitations on waivers and amendments to certain agreements, our organizational documents, etc. Our failure to comply with the covenants in the credit agreement governing the credit facility and the debentures and associated transaction documents could result in an event of default that, if not cured or waived, could result in the acceleration of all or a substantial portion of our debt and potential foreclosure on the assets pledged to secure the debt. Further, we agreed to pay the lender in the credit facility, an amount equal to ten percent (10%) of the net proceeds actually received by us from the sale any securities of a customer that we acquired during the term of the revolving note(s). Given that we have not yet achieved profitability, and we will additionally be required to make payments upon the sales of our customer’s securities to the lender, we may be unable to continue to meet our obligations as they become due. If we are unable to refinance or repay our indebtedness as it becomes due or upon an event of default, we may become insolvent and be unable to continue operations. Additionally, the revolving loan obligations under our secured credit facility provide for variable repayment terms ranging from 10% to 30% of the net proceeds actually received upon the sale of our customer’s securities that we receive pursuant to the provision of services. This will further negatively impact our cash flows and may further accelerate the anticipated timeframe in which we need to raise additional capital. 4 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, 2021, we did not maintain effective internal controls over financial reporting based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework as a result of identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Natural disasters, epidemic or pandemic disease outbreaks, trade wars, political unrest or other events could disrupt our business or operations or those of our development partners, manufacturers, regulators or other third parties with whom we conduct business now or in the future. A wide variety of events beyond our control, including natural disasters, epidemic or pandemic disease outbreaks (such as the recent novel coronavirus outbreak), trade wars, political unrest or other events could disrupt our business or operations or those of our manufacturers, regulatory authorities, or other third parties with whom we conduct business. These events may cause businesses and government agencies to be shut down, supply chains to be interrupted, slowed, or rendered inoperable, and individuals to become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions. 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. 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 Commission 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. Additionally, 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. 5 Unfavorable media coverage could negatively affect our business. Unfavorable publicity regarding, for example, our privacy practices, terms of service, regulatory activity, the actions of third parties, the use of our products or services for illicit, objectionable, or illegal ends or the actions of other companies that provide similar services to us, could adversely affect our reputation. Such negative publicity also could have an adverse effect on the size, engagement, and loyalty of our customer base which could adversely affect our business and financial results. Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, content, competition, consumer protection, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business. We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, such as privacy, data protection and personal information, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, electronic contracts and other communications, competition, protection of minors, consumer protection, taxation and securities law compliance. Expansion of our activities in certain jurisdictions, or other actions that we may take, may subject us to additional laws, regulations, or other government scrutiny. In addition, foreign data protection, privacy, content, competition, and other laws and regulations can impose different obligations or be more restrictive than those in the United States. Additionally, as we expand our product offerings, we may become subject to the European General Data Protection Regulation (GDPR), effective as of May 2018. The GDPR increases privacy rights for individuals in Europe, extends the scope of responsibilities for data controllers and data processors and imposes increased requirements and potential penalties on companies offering goods or services to individuals who are located in Europe or monitoring the behavior of such individuals (including by companies based outside of Europe). Noncompliance can result in penalties of up to the greater of €20 million, or 4% of global company revenues. These U.S. federal and state and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government authorities, are constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the newer industry in which we operate, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. These laws and regulations, as well as any associated inquiries or investigations or any other government actions, may be costly to comply with and may delay or impede our international growth, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to remedies that may harm our business. Security breaches and improper access to or disclosure of our data or user data, or other hacking and phishing attacks on our systems, could harm our reputation and adversely affect our business. Our industry is prone to cyber-attacks by third parties seeking unauthorized access to our data or users’ data or to disrupt our ability to provide service. Any failure to prevent or mitigate security breaches and improper access to or disclosure of our data or user data, including personal information, content, or payment information from or to users, or information from marketers, could result in the loss or misuse of such data, which could harm our business and reputation and diminish our competitive position. In addition, computer malware, viruses, social engineering (predominantly spear phishing attacks), and general hacking have become more prevalent in our industry. As a result of recent attention and growth of, the size of our user base, and the types and volume of personal data on our systems, we believe that we are a particularly attractive target for such breaches and attacks. Our efforts to address undesirable activity may also increase the risk of retaliatory attacks. Such attacks may cause interruptions to the services we provide, degrade the user experience, cause users or marketers to lose confidence and trust in our products, impair our internal systems, or result in financial harm to us. Our efforts to protect our company data or the information we receive may also be unsuccessful due to software bugs or other technical malfunctions; employee, contractor, or vendor error or malfeasance; government surveillance; or other threats that evolve. In addition, third parties may attempt to fraudulently induce employees or users to disclose information in order to gain access to our data or our users’ data. Cyber-attacks continue to evolve in sophistication and volume, and inherently may be difficult to detect for long periods of time. Although we are currently in the process of developing systems and processes that are designed to protect our data and user data, to prevent data loss and to prevent or detect security breaches, we cannot assure you that such measures will ultimately become operational or provide absolute security, and we may incur significant costs in protecting against or remediating cyber- attacks. 6 Affected parties or government authorities could initiate legal or regulatory actions against us in connection with any actual or perceived security breaches or improper disclosure of data, which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices. Such incidents or our efforts to remediate such incidents may also result in a decline in our active user base or engagement levels. Any of these events could have a material and adverse effect on our business, reputation, or financial results. If we were to lose or have limited access to certain platforms or data sources, we will lose our existing revenue from these platform and sources. The loss of access to any platforms or data sources could limit our ability to effectively grow a portion of our operations. Our business would be harmed if these platforms: ● discontinues or limits access to its platform by us and other application developers; ● modify terms of service or other policies, including fees charged to, or other restrictions on, us or other application developers, or changes how the personal information of its users is made available to application developers; ● establishes more favorable relationships with one or more of our competitors; or ● develops its own competitive offerings. We depend on the services of our executive officers and the loss of any of their services could harm our ability to operate our business in future periods. Our success largely depends on the efforts and abilities of our executive officers, including Christopher Miglino, Michael Malone, and Christopher Lahiji, the president of our wholly owned subsidiary, LD Micro. We are a party to an employment agreement with each of Mr. Miglino, Mr. Malone and Mr. Lahiji. Although we do not expect to lose their services in the foreseeable future, the loss of any of them could materially harm our business and operations in future periods until such time as we were able to engage a suitable replacement. 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 business affiliates have operations outside of the United States that are subject to numerous operational risks. Certain of our 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 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 business affiliates or the law, could have certain adverse effects on the financial condition of these business affiliates. Any failure by these 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 the Sequire 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. 7 Competitors may create products that compete with the Sequire platform and there can be no assurances that we will be able to protect our intellectual property related to Sequire. The Sequire platform’s success depends heavily on our intellectual property and the continued development and innovation of the platform. Notwithstanding, there may be competitors seeking to compete by creating similar platforms with more aggressive pricing or lower cost structures, greater functionality, and by emulating the services provided by the Sequire platform. Furthermore, certain of the information that we implement in our Sequire platform is either publicly available or ascertained through third-party service providers for which no barrier to entry exists. Companies with significantly more resources than us may attempt to create competing products at lower prices. Furthermore, there can be no assurances that we are able to adequately defend our trade secrets or intellectual property rights with respect to competitors. Our insurance coverage strategy may not be adequate to protect us from all business risks. We may be subject, in the ordinary course of business, to losses resulting from accidents, acts of God and other claims against us, for which we may have no insurance coverage. As a general matter, we do not maintain as much insurance coverage as many other companies do, and in some cases, we do not maintain any at all. Additionally, the policies that we do have may include significant deductibles or self-insured retentions, policy limitations and exclusions, and we cannot be certain that our insurance coverage will be sufficient to cover all future losses or claims against us. A loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which may harm our financial condition and operating results. Risks Related to receipt of Securities for Services Many of the securities we receive for services do not have an active trading market, and we value these securities at fair value as determined in good faith under procedures adopted by our Board of Directors, which valuation is inherently subjective and may not reflect what we may actually realize for the sale of these securities. The majority of securities comprising our stock portfolio are, and are expected to continue to be, in securities that have a limited market, limited liquidity, high volatility, and accordingly, their market price may not accurately reflect the true value in the event that they were traded on an active market. As of December 31, 2021, we had unrealized losses from our stock portfolio of approximately $8.0 million. The fair value of assets whose true values are not readily ascertainable are determined in good faith under procedures adopted by our Board of Directors. Our Board of Directors utilizes the services of independent third-party valuation firms in determining the fair value of a portion of the securities we hold. Investment professionals from our investment adviser also prepare valuations using sources and/or proprietary models depending on the availability of information on our assets and the type of asset being valued, all in accordance with our valuation policy. Accordingly, the actual value of the securities we received could be substantially less than we previously estimated. Because fair valuations, and particularly fair valuations of securities without efficient markets are inherently uncertain, may fluctuate over short periods of time, and are often based to a large extent on estimates, comparisons and qualitative evaluations of information, it may be more difficult for investors to value accurately our securities and could lead to undervaluation or overvaluation of our Common Stock. In addition, the valuation of these types of securities may result in substantial write-downs and earnings volatility. The value ascribed to our assets in our financial statements as of a particular date may be materially greater than or less than the value that would be realized if our assets were to be liquidated as of such date. For example, if we were required to sell a certain asset or all or a substantial portion of our assets on a particular date, the actual price that we would realize upon the disposition of such asset or assets could be materially less than the value of such asset or assets as reflected in our financial statements. Volatile market conditions could also cause reduced liquidity in the market for certain assets, which could result in liquidation values that are materially less than the values of such assets as reflected in our financial statements. We run the risk of inadvertently being deemed to be an investment company that is required to register under the Investment Company Act of 1940. We run the risk of inadvertently being deemed to be an investment company that is required to register under the Investment Company Act of 1940 (the “Investment Company Act”) because a significant portion of our assets consists of securities in companies in which we own less than a majority interest. The risk varies depending on events beyond our control, such as significant appreciation or depreciation in the market value of certain of our publicly traded holdings, adverse developments with respect to our ownership of certain of our subsidiaries, and transactions involving the sale of certain assets. If we are deemed to be an inadvertent investment company, we may seek to rely on a safe-harbor under the Investment Company Act that would provide us a one-year grace period to take steps to avoid being deemed to be an investment company. In order to ensure we avoid being deemed an investment company, we have taken, and may need to continue to take, steps to reduce the percentage of our assets that constitute investment assets under the Investment Company Act. These steps have included, among others, selling marketable securities that we might otherwise hold for the long-term and deploying our cash in non-investment assets. We have recently sold marketable securities, including at times at a loss, and we may be forced to sell our investment assets at unattractive prices or to sell assets that we otherwise believe benefit our business in the future to remain below the requisite threshold. We may also seek to acquire additional non-investment assets to maintain compliance with the Investment Company Act, and we may need to incur debt, issue additional equity or enter into other financing arrangements that are not otherwise attractive to our business. Any of these actions could have a material adverse effect on our results of operations and financial condition. Moreover, we can make no assurance that we would successfully be able to take the necessary steps to avoid being deemed to be an investment company in accordance with the safe harbor. If we were unsuccessful, then we would have to register as an investment company, and we would be unable to operate our business in its current form. We would be subject to extensive, restrictive, and potentially adverse statutory provisions and regulations relating to, among other things, operating methods, management, capital structure, indebtedness, dividends, and transactions with affiliates. If we were deemed to be an investment company and did not register as an investment company when required to do so, there would be a risk, among other material adverse consequences, that we could become subject to monetary penalties or injunctive relief, or both, that we would be unable to enforce contracts with third parties, and/or that third parties could seek to obtain rescission of transactions with us undertaken during the period in which we were an unregistered investment company. 8 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 Investment Company Act 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 our activities so that we will not be deemed to be an investment company under the Investment Company Act (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, which may limit us 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 Investment Company Act, 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 its customers’ stock, which are often smaller publicly traded companies with volatile stock prices, limited liquidity, riskier operations and whose securities are frequently quoted on the OTC Markets, which includes the OTCQX, OTCQB as well as the OTC Pink, which typically quotes securities with increased risk and less liquidity. Payment related to our Sequire platform and services is often made through the equity securities of our customers instead of cash. Since larger companies typically pay in cash, the securities issued are often those of smaller public companies that often have limited operating histories, limited operating cash, and negative cash flows. Additionally, these securities are primarily restricted, and are subject to legal holding periods pursuant to Rule 144 or other applicable exemptions. As of December 31, 2021 approximately $11.4 million of our holdings are issued by companies whose securities trade on the OTC Markets Inc. Additionally, of these securities quoted on the OTC Markets, approximately 69% are quoted on the OTC Pink. While our agreements for OTC issuers may contain certain provisions providing for the issuance of additional securities upon certain events, 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 significantly, and the stock price of such issuers is often volatile, unpredictable, and with limited liquidity. Additionally, the OTC Pink has less stringent requirements for listing than even other OTC Markets, such as the OTCQB or OTCQX. Often, the OTC Pink lists companies that (i) may not be providing current information, (ii) may not have independent directors, (iii) may have little to no trading, and (iv) may be very volatile. 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 that we receive securities from will remain solvent or maintain “current information”, or other required criteria during the legally required holding period under Rule 144, which would result in the loss of some or all of our anticipated revenue. These risks are significantly increased for OTC Pink issuers. As we are not experienced 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 profitability. Our receipt of securities in lieu of cash may be negatively affected 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 policies, economic recessions, inflationary events, governmental shutdowns, trade tensions and disputes, global economic slowdowns, widespread health epidemics or pandemics, natural disasters, terrorist attacks, wars, changes in local and national economic and political conditions, regulatory changes or changes in the laws, or interest rate or currency rate fluctuations could create a downturn in the U.S. and/or global securities markets. As we often receive restricted securities of companies, a downturn in the U.S. or global markets may impact such companies and the value of the securities we receive for services pursuant to the Sequire platform. Risks Related to Ownership of our Securities; Listing of our Securities. Our Common Stock does not currently meet the continued listing requirements for the Nasdaq Market and accordingly is subject to delisting. On April 19, 2022, we received a written notice from the Nasdaq Stock Market LLC that we are not in compliance with Nasdaq Listing Rule 5250(c)(1), because we had not yet filed our Annual Report on Form 10-K for the year ended December 31, 2021. Nasdaq Listing Rule 5250(c)(1) requires listed companies to timely file all required periodic reports with the SEC. Pursuant to Nasdaq rules, we have 60 calendar days from the date of the notification letter, or until June 20, 2022, to file the 2021 Annual Report on Form 10-K. Additionally, on May 24, 2022, we received another written notice from Nasdaq that we are further not in compliance with Nasdaq Listing Rule 5250(c)(1) because we had not yet filed our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022. Similarly, on August 17, 2022, we received another written notice from Nasdaq that we are further not in compliance with Nasdaq Listing Rule 5250(c)(1) because we had not yet filed our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022. Nasdaq previously provided the Company with an extension of one hundred eighty (180) days from the initial due date of the 2021 Form 10-K or until October 12, 2022, to regain compliance with Nasdaq’s continued listing rule as it relates to all of the untimely filings. Accordingly, the Company’s (i) 2021 Form 10-K, (ii) March 30, 2022 Form 10-Q, and (iii) June 30, 2022 Form 10-Q are all required to be filed with the SEC by October 12, 2022. If our shares lose their status on the Nasdaq Market, we believe that our shares would likely be eligible to be quoted on the inter-dealer electronic quotation and trading system operated by OTC Markets Group, commonly referred to as the over-the-counter market. These markets are generally considered not to be as efficient as, and not as broad as, the Nasdaq Market. If our common stock is delisted, this would, among other things, substantially impair our ability to raise additional funds and could result in a loss of institutional investor interest and fewer development opportunities for us. Conversions of our convertible debentures, notes issued under our revolving credit facility, and the exercise of our common stock warrants may dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock. The conversion of some or all of the outstanding convertible debentures or the revolving note issued in our secured revolving credit facility would dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion or exercise of outstanding warrants could adversely affect their prevailing market prices. In addition, the existence of the convertible debentures, revolving note, and outstanding warrants may encourage short selling by market participants because the conversion of such notes could be used to satisfy short positions, or the anticipated conversion of such debentures into shares of our common stock could depress the price of our common stock. 9 The market price of our 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 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 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 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 common stock. The Revolving Note issued under our senior secured revolving credit facility contains an adjustment to the price at which the note can be converted into our common stock, which may result in further dilution to our shareholders. The revolving note issued in our August 2022 secured revolving credit facility, of which $5,580,000 in principal is currently outstanding, is convertible into our common stock at a conversion price of $15.00 per share (the “Conversion Price”). Notwithstanding, the Conversion Price is subject to adjustment upon certain enumerated events which includes the sale of our common stock or equivalents at a deemed price equal to or less than $5.00 per share. On August 31, 2022, the closing price of our common stock was $2.37 per share. In the event that we are required to raise additional capital through the sale of our equity or debt securities, given our current market price, it is likely that the Conversion Price would be adjusted, and we may be required to issue a significantly greater number of shares upon conversion, than currently anticipated, resulting in greater dilution to our existing shareholders. We may be subject to securities litigation, which is expensive and could divert management attention. The market price of the shares of our 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. 10 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 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 common stock and trading volume could decline. The trading market for our shares of our 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 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 common stock and trading volume to decline. The elimination of monetary liability against our directors and officers under Delaware law and the existence of indemnification rights held by our directors and officers may result in substantial expenditures by us and may discourage lawsuits against our directors and officers. Our certificate of incorporation eliminates the personal liability of our directors and officers to our company and our stockholders for damages for breach of fiduciary duty as a director or officer to the extent permissible under Delaware law. Further, our bylaws provide that we are obligated to indemnify any of our directors or officers to the fullest extent authorized by Delaware law. We are also parties to separate indemnification agreements with certain of our directors and our officers which, subject to certain conditions, require us to advance the expenses incurred by any director or officer in defending any action, suit or proceeding prior to its final disposition. Those indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against our directors or officers, which we may be unable to recoup. These provisions and resultant costs may also discourage us from bringing a lawsuit against any of our current or former directors or officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even if such actions, if successful, might otherwise benefit us or our stockholders. ITEM 1B. UNRESOLVED STAFF COMMENTS. Not applicable to a smaller reporting company. 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 under a lease agreement terminating in September 2023 at an annual rental of $140,000 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. 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. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. 11 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market for Our Common Equity Class A Common Stock. Our Class A common stock is listed on the Nasdaq Global Market under the symbol “SRAX.” As of August 31, 2022, there were approximately 47 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 Common Stock 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. Series A Preferred Stock We issued a one-time return of capital consisting of a total of 36,462,417 shares of our Series A Preferred Stock to Qualified Recipients (as defined below) on a 1-for-1 as converted to common stock basis (the “Dividend”). The record date for the Dividend was September 20, 2021 (the “Record Date”). The Series A Preferred Stock entitles the Qualified Recipients with the right to receive the net proceeds from sales of certain securities received by SRAX as payment from its customers for access to the Sequire Platform services (the “Designated Assets”). As of the Record Date, the following holders of securities were entitled to receive the Dividend (collectively, the “Qualified Recipients): (i) each outstanding share of common stock, of which 25,160,504 shares were issued and outstanding, (ii) each share of common stock underlying outstanding common stock purchase warrants containing a contractual right to receive the Dividend of which, 10,377,645 were outstanding, and (iii) each original issue discount senior convertible debenture issued on June 30, 2020, containing a contractual right to receive the Dividend on an as converted to common stock basis, of which $2,486,275 of Debentures were outstanding in principal and interest, convertible into 924,268 shares of common stock. 12 As of the Record Date, the Designated Assets had an aggregate value of approximately $6.5 million and consisted of securities (i) from twenty-five (25) companies that trade or are quoted on the OTC Markets, (ii) having stock prices ranging from $0.01 to $5.15, (iii) with aggregate values of the securities held by the Company ranging from $1,930 to $900,000, and (iv) with the average value held by the Company equal to $260,000 per issuer. The Designated Assets consist of (a) 24 issuers’ common stock and (b) one (1) issuer’s convertible debt instrument that is convertible into common stock. The securities and cash that underly the Designated Assets had a market value of $3,925,000 as of December 31, 2021. During the fourth quarter and portion of the third quarter of 2021, we sold an aggregate of approximately $680,000 of the Designated Assets. On January 30, 2022, we distributed the net proceeds from those shares to holders of our Series A Preferred Shares. Pursuant to the distribution, each holder of Series A Preferred Stock received approximately $0.01 per share. During the first quarter of 2022, we sold an aggregate of $268,000 of the Designated Assets. The sale of Designated Assets did not result in sufficient proceeds to declare a distribution pursuant to the terms of the Series A Preferred Stock. During the second quarter of 2022, we sold an aggregate of $127,000 of the Designated Assets. The sale of Designated Assets did not result in sufficient proceeds to declare a distribution pursuant to the terms of the Series A Preferred Stock. As of June 30, 2022, after taking into account the sale of approximately $691,000, $268,000, and $127,000 during 2021, first quarter of 2022, and the second quarter of 2022, respectively, of the Designated Assets, the remaining Designated Assets have an aggregate value of approximately $2,789,383 (pursuant to the same valuation methods that our other securities are valued in this Annual Report, with such quoted market price potentially being greater or lesser than such value) and subsequent to sales and other transactions, consisted of securities (i) from nineteen (19) companies that trade or are quoted on the OTC Markets, (ii) having quoted stock prices ranging from $0.001 to $2.50, (iii) with aggregate values of the securities held by us ranging from $0 to $550,000, and (iv) with an average value equal to $93,000 per issuer. The Designated Assets consist of (a) 19 issuers’ common stock and (b) cash. 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, 2021. 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: ● During 2021 we issued a total of 183,772 shares of A common stock in connection with the cashless exercise of 445,294 common stock purchase warrants. ● On March 15, 2021, we issued Brock Pierce, our newly appointed Board member, an option to purchase 803 shares of 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. ● On January 2, 2022 Michael Malone, our Chief Financial Officer exercised an option to purchase 100,000 shares of our common stock that was issued on December 15, 2018. The option was exercised on a cashless basis and included 57,016 shares withheld pursuant to the cashless exercise and an additional 16,732 shares withheld for tax withholding. Accordingly, we issued Mr. Malone 26,252 shares of common stock. ● On January 6, 2022, we issued Michael Malone, our Chief Financial Officer, a conditional option to purchase 100,000 shares of Class A common stock. The option is a conditional grant, subject to shareholder approval. Assuming approval by the shareholders, the option has an exercise price of $4.25 per share, a term of seven (7) years and vests in equal quarterly installments over a three (3) year period from the grant date. The option had a Black-Scholes value on the grant date of $331,000. ● On January 3, 2022, we issued four (4) common stock purchase options to our non-employee directors, pursuant to our amended non-employee director compensation policy. Each option entitled the holder to purchase 29,533 shares of common stock at an exercise price of $4.35 per share, for an aggregate exercise amount of $128,468.55. The options vest in equal quarterly over a one (1) year period from the issuance date. The options expire on the seven (7) year anniversary of the issuance date. Each option has a Black-Scholes value of $100,000. 13 ● On January 6, 2022, we issued Christopher Miglino, our Chief Executive Officer, an option to purchase 120,000 shares of common stock. The option has an exercise price of $4.25 per share, a term of seven (7) years and vests in equal quarterly installments over a three (3) year period from the grant date. The option had a Black-Scholes value on the grant date of $397,000. ● On January 6, 2022, we issued our employees, options to purchase an aggregate of 380,000 shares of common stock. Each of the options has an exercise price of $4.25 per share, a term of five (5) years, and vests in equal quarterly installments over a three (3) year period from the grant date. The aggregate of the 380,000 options had a Black-Scholes value on the grant date $1,126,000. ● On January 6, 2022, we issued our employees, options to purchase an aggregate of 120,000 shares of common stock. Each of the options is a conditional grant, subject to shareholder approval. Each of the options has an exercise price of $4.25 per share, and 100,000 have a term of seven (7) years and 20,000 have a term of five (5) years, and each vest in equal quarterly installments over a three (3) year period from the grant date. The aggregate of the 120,000 options had a Black-Scholes value on the grant date of $390,000. ● During the second quarter of 2022, warrant holders exercised 689,173 warrants on a cashless basis for an aggregate of 195,525 shares of common stock. ● On June 13, 2022, we entered into an agreement with an institutional investor whereby in exchange for the payment of $404,513.40 (the “Purchase Price”), the investor received (i) the right to receive the net proceeds upon the sale of certain securities of the Company (“CVR Payments”) with a quoted price equal to $674,190 (with a guaranteed minimum return of 120% of such Purchase Price and (ii) the right after 90 days but before 120 days to demand payment of 120% of the Purchase Price in cash less amounts previously paid from the CVR Payments. ● On July 1, 2022, we issued an original issue discount bridge note in principal amount of $650,000 to an institutional investor in exchange for $500,000 in cash. The Bridge Note was non-interest bearing and a maturity date of August 15, 2022. Effective August 8, 2022, the bridge note was exchanged for revolving notes in the senior secured revolving credit facility. ● On August 8, 2022, we entered into a senior secured revolving credit facility agreement with an institutional investor to initially borrow up to $9,450,000 in the aggregate from time to time, subject to certain conditions. The loans are secured by all of our assets. There is currently $5,580,000 in principal outstanding on the revolving loans, which are convertible into our common stock at a conversion price of $15.00 per share, subject to adjustment for stock splits, dividends, fundamental transactions, and upon sales of our equity securities at $5.00 per share or less. In addition, as part of the transaction we extended the maturity dates of 2,590,358 outstanding common stock purchase warrants held by the lender until September 30, 2023. The revolving loans are convertible into our common stock at an initial price per share of $15.00, subject to adjustment in certain enumerated events, including deemed sales of our common stock or common stock equivalents at a price per share that is $5.00 or less. Purchases of equity securities by the issuer and affiliated purchasers. The following table provides information about our repurchases of our common stock that is registered pursuant to Section 12 of the Securities Exchange Act of 1934 during the year ended December 31, 2021. Period Total Number of Shares Purchased(b) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a)(b) Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (a)(b) August 1, to August 31, 2021 — — — $ 10,000,000 September 1 to September 30, 2021 — — — $ 10,000,000 October 1 to October 31, 2021 — — — $ 10,000,000 November 1 to November 30, 2021 155,000 5.12 155,000 $ 9,206,000 December 1 to December 31, 2021 — — — $ 9,206,000 Total 155,000 5.12 155,000 9,206,000 (a) In August 2021, our Board of Directors approved a share repurchase program pursuant to which we are authorized to repurchase up to $10,000,000 of our common stock in privately negotiated transactions or in the open market at prices per share not exceeding the then-current market prices. The total remaining authorization for future common share repurchases under our share repurchase program was $9.2 million as of December 31, 2021. Under the program, management has discretion to determine the dollar amount of shares to be repurchased and the timing of any repurchases in compliance with applicable law and regulation. This includes purchases pursuant to Rule 10b5-1 plans, including accelerated share repurchases. The program does not have an expiration date. 14 ITEM 6. SELECTED FINANCIAL DATA. Not applicable to a smaller reporting company. 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 consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows: Executive Overview Financial results: ● Revenue was $26.7 million, up approximately 312% for year ended December 31, 2021 versus 2020. ● Cash, cash equivalents and marketable securities were $17.0 million as of December 31, 2021. Reportable Segments We have a single operating and business segment, Sequire, which is comprised of two reporting units; Sequire and LD Micro. Our Sequire segment includes the licensing of our SaaS based Sequire platform and related services, and our event and conference operations. 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. Our management, along with our chief executive officer, who acts as our Chief Operating Decision Maker (as such term is defined accounting segment reporting guidance), review financial information presented on a consolidated basis for purposes of allocating resources and evaluating performance and do not evaluate using asset information. Deconsolidation of BIGToken, Inc. On December 29, 2021, our subsidiary BIGtoken, Inc. (fka Force Protection Video Equipment) completed a merger with BritePool, Inc. (BritePool). As a result of the transaction our ownership interest in BIGToken was reduced from 65.9% to 36.45% of the issued and outstanding common stock. As part of the transaction, we entered into an exchange agreement pursuant to which we converted 135,870,262,448 or approximately 50% of the issued and outstanding shares of BIGToken into non-voting Series D Convertible Preferred Stock (“Series D Stock”). The decrease in our ownership of voting equity resulted in our loss of the ability to exert significant control over BIGToken resulted in us deconsolidating its operation. We have classified the related assets and liabilities associated with BIGToken’s business as discontinued operations in our consolidated balance sheet. The financial results of BIGToken’s business has been presented as discontinued operations in our consolidated statement of income for all periods presented through the respective transaction close date. Please see “Note 2 — Discontinued Operations” in our consolidated financial statements included elsewhere in this report for additional information. As such, the discussion of our results of operations and the related tables, below do not included the operations of BIGToken, as its results of operations have been included in discontinued operations on the consolidated statements of operations. 15 Business Focus During 2021, we have focused on: (i) the continued growth of our Sequire platform’s functionality and user base and (ii) the expansion of LD micro events and offerings. Covid-19 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 2022. FINANCIAL CONDITION Going Concern Cash on hand and marketable securities at December 31, 2021 was approximately $1.35 million and $15.6 million, respectively. Based upon our cash flow projections taking into account cash, 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 cash from the sales of its services to in excess of operating expenses. In addition, the Company’s operations 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. Cash, Cash Equivalents, and Investments As of December 31, 2021, we had (i) cash of $1.35 million , and (ii) marketable securities of $15.6 million for a total of approximately $17 million compared to $8.90 million as of December 31, 2020. Cash and cash equivalents consist primarily of highly liquid investments such as money market funds and deposits held at major banks. In addition, we had availability of $1,000,000 of unused amounts available under a credit facility as of December 31, 2021. Certain of such unused amounts are subject to satisfying specified conditions prior to draw-down (such as pledging to our lenders sufficient subscriptions and customer contracts). 16 Components of Results of Operations 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. We recognize revenue using the percentage of completion method based primarily on time. Conference Revenue. We recognize revenue from hosting conferences and associated sponsorships. We receive payment from presenting companies and sponsors of the conferences. 2020 was the first full year of operations for our Sequire business. We charge a base monthly license fee for a Sequire subscription, which ranges from $1,000 per month up to $5,000 per month. During the third quarter of 2020, we acquired LD Micro, Inc. LD Micro’s primary line of business was the hosting of investor related conferences. Historically, LD Micro’s investor conferences have been in-person, however, during the past year we have successfully hosted virtual conferences leveraging Sequire’s platform technology to execute these events. The following table presents net revenues by type for the periods indicated (in dollars, except percentages): Year Ended December 31, 2021 2020 % Change Sequire platform revenue $ 24,514,000 $ 5,976,000 310% Conference revenue 1,229,000 503,000 144% Other revenues 964,000 - n/a Total net revenues $ 26,707,000 $ 6,479,000 312% Operating Expenses Cost of revenue. Our cost of revenue consists primarily of expenses associated with the cost of media from third parties. If the estimated consideration expected to be received under a revenue contract less than the estimated cost to fulfill our obligations under the contract, the Company will record a liability for the estimated cost in excess of estimated consideration in the period this is knowable. Employee Related Costs. These are the costs we incur to employ our staff. Platform costs. Consist of the technology and content hosting of our Sequire. Marketing, data services and sales. These are the costs we incur to market our products, data service fees 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. 2020 was the first full year of operations for our Sequire business. We charge a base monthly license fee for a Sequire subscription, which ranges from $1,000 per month up to $5,000 per month. During the third quarter of 2020, we acquired LD Micro, Inc. LD Micro’s primary line of business was the hosting of investor related conferences. Historically, LD Micro’s investor conferences have been in-person, however, during the past year we have successfully hosted virtual conferences leveraging Sequire’s platform technology to execute these events. 17 Operating Expenses The following table presents operating expenses for the periods indicated (in dollars, except percentages): Year Ended December 31, 2021 2020 % Change Cost of revenues 6,521,000 1,789,000 265% % of net revenues 24% 28% Employee related costs 7,533,000 4,683,000 61% % of net revenues 28% 72% Platform costs 214,000 960,000 (78)% % of net revenues 1% 15% Marketing, data service and sales 6,330,000 1,717,000 269% % of net revenues 24% 27% Depreciation and Amortization 842,000 772,000 9% % of net revenues 3% 12% General and administrative 5,352,000 3,590,000 49% % of net revenues 20% 55% Total operating expenses 26,792,000 13,511,000 98% Revenues Revenues for the year ended December 31, 2021 increased to approximately $26,707,000 compared to approximately $6,479,000 for the year ended December 31, 2020. 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, 2021, the Company closed sales with total gross contract value of approximating $44,000,000. In certain circumstances, the Company accepts payment in the form of securities of our publicly held customers. The Company values the securities in accordance with ASC 820, see the Valuation section of our Management Discussion and Analysis section for further discussion. Sequire Operating Expenses Operating expenses consisted of the following: Costs of revenue: Sequire’s operating expenses for the years ended December 31, 2021 and 2020 were approximately $6,521,000 and $1,789,000, respectively. Employee Related Costs. These are the costs we incur to employ our staff. Employee related costs increased to $7,533,000 during the year ended December 31, 2021 compared to $4,683,000 for the year ended December 31, 2020. 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 year ended December 31, 2021 were $214,000. For the year ended December 31, 2020 Platform costs were $960,000. These costs decreased from the prior year due to the Company’s elimination of the outsourcing of certain function to support to the Company’s platform. 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 years ended December 31, 2021 and 2020 were $6,330,000 and $1,717,000, respectively. 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 years ended December 31, 2021 and 2020 depreciation and amortization were $842,000 and $772,000, respectively. We expect these expenses to continue to increase as we anticipate further investment in long-lived assets to support our business growth. 18 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 approximately $5,352,000 and $3,590,000 million for the years ended December 31, 2021 and 2020, respectively. The increase in expense for the year is driven by an increase in corporate employee and staffing related expenses to support the growth of the Company. 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. Net Loss The Company’s Net Loss for the year-ended December 31, 2021 was $41,227,000. This represented an increase of $26,522,000 from the prior year. The increase in Net Loss for the year ended December 31, 2021 was primarily due to an increase in Net loss from our Discontinued Operations. Discontinued Operations represent the results from operations of BIGtoken. Upon the deconsolidation of BIGtoken, BIGtoken’s operating results, assets, liabilities and cash flows for all periods presented have been classified as discontinued operations within the Consolidated Financial Statements. Loss from discontinued operations for the year ended December 31, 2021 was $25,060,000, which represented an increase of $20,419,000 from the year ended December 31,2020. The loss from discontinued operations for the year-ended December 31, 2021 includes a loss of $10,684,000 related to our disposal of BIGtoken. See “Note 2 – Discontinued Operations” in our consolidated financial statements included elsewhere in this report for additional information. Loss from continuing operations for the year ended December 31, 2021 was $16,167,000, which represented an increase of $6,103,000 from the year ended December 31,2020. Cash Flows Year Ended December 31, 2021 2020 (In $) Net cash provided by (used in): Continuing operating activities (15,317,000) (9,154,000) Continuing investing activities 3,998,000 6,221,000 Continuing financing activities 15,443,000 7,862,000 Cash flows from continuing operating activities The primary use of operating cash is to pay our media, data and platform vendors, employees and others for a wide range of services. Cash flows used in operating activities increased by $6,163,000 during the year ended December 31, 2021, primarily driven by an increase in operating expenses and costs of revenues, partially offset by increases in cash receipts and revenues. The Company expects to continue to use cash in excess of receipts generated from operations for the foreseeable future due to the substantial portion of the Company’s sales paid for in marketable securities of our customers. The Company classifies sales of marketable securities received from our customers for the payment of our services as investing activities. 19 Cash flows from continuing investing activities Our principal recurring investing activities are the funding of our internal software development and the sale of marketable securities. During the years ended December 31, 2021, and 2020, net cash provided by investing activities was $3,998,000 and $6,221,000, respectively. Expenditures for software development were $798,000 and $633,000 for the years ended December 31, 2021, and 2020, respectively. Deferred payments related to our acquisition of LD Micro during the year December 31, 2021, were $3,004,000. During years ended December 31, 2021, the Company generated $8,666,000 from the sale of marketable securities and purchased $1,450,000 of marketable securities. Cash flows from continuing financing activities During the years ended December 31, 2021, we generated net cash from financing activities of $15,443,000. During the years ended December 31, 2020, cash provided by financing activities was $7,862,000. Recently Issued Accounting Pronouncements For further information on recently issued accounting pronouncements, see Note 1—Summary of Significant Accounting Policies in the accompanying notes to Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of our Annual Report on Form 10- K. Off balance sheet arrangements As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets. Liquidity and Capital Resource Requirements Our primary source of cash is from proceeds received from the sale of marketable securities we receive from our customers as consideration for our services, as well as cash proceeds received directly from customers as consideration. Our primary use of cash is the payment of our operating costs, which consist primarily of employee-related expenses, such as compensation and benefits, as well as general operating expenses for our SaaS operations, marketing, facilities and overhead costs, and capital expenditures. We also utilize cash for debt service, stock repurchases, dividends on the Preferred Stock, and business acquisitions. Cash generated from operations, along with our existing cash, cash equivalents, and short-term investments, are our primary sources of operating liquidity, and we believe that our operating liquidity is currently insufficient to support our business operations, including debt service, and capital expenditure requirements. We believe that our current sources of funds, along with the financing source described below, will provide us with adequate liquidity during the 12-month period following December 31, 2021, including to repay our remaining debt obligations. Our future capital requirements will depend on many factors, however, the Company’s primary source of capital is the sale of marketable securities received as consideration for the licensing of our Sequire platform and the associated services. The marketable securities the Company receives are primarily issued through an exemption to registration and as a result are restricted from resale into the public market for a period of time. The periods of restriction are generally at least six months, and in some cases up to two years. These restriction periods often change based on circumstances outside of the Company’s control, such as the issuers status with filing of current information. Since a majority of the marketable securities are primarily listed on the OTC Markets, they are more likely to experience such changes in restriction periods. The changes in restriction periods in conjunction with market volatility make it difficult to predict the timing of the associated cash flows from the sales of these marketable securities. Additionally, other factors such as , our subscription growth rate, subscription renewal activity, including the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts, the introduction of new and enhanced products, the continuing market adoption of Sequire. Financing Arrangements In May 2020, we entered into an at-the-market Sales Agreement with B. Riley FBR, Inc. 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). During 2021, we sold 53,616 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 commissions and other costs and expenses associated with such sales. On April 15, 2022 we lost our ability to utilize Form S-3 registration statements for the registration of our securities. Accordingly, we are no longer able to utilize the ATM. During the three months ended March 31, 2022 the Company entered into a factoring agreement with a financial institution to sell certain accounts receivable and future sales of up to $3 million. The factoring agreement was fully paid off with the proceeds of our revolving credit facility described below. Pursuant to the revolving credit facility, we are precluded from entering into future factoring agreements while loans are outstanding under the credit facility. We may, in the future, enter into arrangements to acquire or invest in complementary businesses, products, and technologies. Finally, we continually evaluate our cash needs and may decide it is best to raise additional capital or seek alternative financing sources to fund the rapid growth of our business, including through drawdowns on existing debt facilities. Conversely, we may also from time to time determine that it is in our best interests to voluntarily repay certain indebtedness early or repurchase our common stock through our Stock buy-back program. On August 8, 2022, we entered into a revolving line of credit allowing us to borrow up to $9.45 million in principal. Until such time that the Company becomes current on its reporting obligations under the Securities Exchange Act of 1934, the maximum amount accessible is limited to $5.5 million. The revolving credit line has a two-year term with a variable repayment schedule that is tied to the proceeds the Company generates from the sale of marketable securities from its portfolio. The principal repayment as a percentage of proceeds from marketable securities is 10% for the first three months and increase up to 20% after 12 months. Further, we agreed to pay the lender in the credit facility, an amount equal to ten percent (10%) of the net proceeds actually received by us from the sale any securities of a customer that we acquired during the term of the revolving note(s). 20 As of December 31, 2021, our cash on hand was approximately $1.35 million. We reported a net loss from continuing operations for both the years ended December 31, 2021 and 2020. We have historically financed our operations primarily from the sale of debt and equity securities. Recently, our operations from Sequire and LD Micro have resulted in increased revenue, but we are still not cash flow positive, and accordingly cannot fund our operations solely from our revenue. Notwithstanding our recent revolving credit facility financing (including the bridge note), for which we have received approximately $5.5 million, partially offset by the required payments we made under outstanding obligations of $3.75 million at closing, we are still unable to meet all of our obligations as they become due. We anticipate that we will need to continue to fund our operations from the sale of debt and equity securities. Additionally, we are delinquent in our SEC reporting obligations and have received notices from Nasdaq that if we are not current with our reporting obligations by October 12, 2022, we will be delisted. Although we have been historically successful in raising capital through the sale of our equity and debt securities, and management believes that such capital sources will be available should they be required, 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. Further, in the event we are delisted from Nasdaq, raising capital through the sale of our equity or debt securities will be more challenging as investors are historically less likely to purchase securities that are not listed on a national exchange. Capital Allocation Framework As noted above, after cash utilization required for working capital, capital expenditures, and required debt service, we expect that our primary usage of cash will be for business combinations, repayment of outstanding indebtedness, and/or stock repurchases under repurchase programs that may be in place from time to time (subject to the terms of our 2020 Credit Agreement). For further information regarding our recent stock repurchase program, see above. Critical Accounting Policies and Estimates Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant. Revenue Recognition We derive and report our revenue in two categories: (a) recurring revenue, which includes bundled SaaS, unbundled SaaS, and optional managed services, and (b) nonrecurring revenue, which primarily consists of our event revenue. We account for a contract with a customer when approved, the contract is committed, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration is probable of collection. We recognize revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those services. Products sold by us are delivered electronically. We generate all of our revenue from contracts with customers. We generally invoice a customer in advance of delivery, or in accordance with specific contractual provisions. Payments are due as per contract terms and do not contain a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our goods and services, and not to provide financing to or from customers. We account for revenue in accordance with Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). Our revenue recognition policies require us to make significant judgments and estimates. In applying our revenue recognition policy, we must determine which portions of our revenue are recognized at a point in time and which portions must be deferred and recognized over time. We analyze various factors including, but not limited to, the selling price of undelivered services when sold on a stand-alone basis, our pricing policies, the creditworthiness of our customers, and contractual terms and conditions in helping us to make such judgments about revenue recognition. Changes in judgment on any of these factors could materially impact the timing and amount of revenue recognized in a given period. Our contracts with customers often include promises to transfer multiple products and services to a customer. In contracts with multiple performance obligations, we identify each performance obligation and evaluate whether the performance obligations are distinct within the context of the contract at contract inception. Performance obligations that are not distinct at contract inception are combined. For bundled SaaS arrangements, we determine whether the services performed during the initial phases of an arrangement, such as setup activities, are distinct. In most cases, we consider our bundled SaaS deliverable to represent a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). We record deferred revenue attributable to certain process transition, setup activities where such activities do not represent separate performance obligations. Implementation, support, and other services are typically considered distinct performance obligations when sold with a software license unless these services are determined to significantly modify the software. The transaction price is generally in the form of a fixed fee at contract inception. 21 We enter into contracts to sell our products and services, and while some of our sales agreements contain standard terms and conditions, there are agreements that contain non-standard terms and conditions and include promises to transfer multiple goods or services. As a result, significant interpretation and judgment is sometimes required to determine the appropriate accounting for these transactions including: (1) whether performance obligations are considered distinct and required to be accounted for separately or combined, including allocation of transaction price; (2) developing an estimate of the stand-alone selling price, or SSP, of each distinct performance obligation; (3) combining contracts that may impact the allocation of the transaction price between product and services; and (4) estimating and accounting for variable consideration, including rights of return, rebates, price protection, expected penalties or other price concessions as a reduction of the transaction price. We then look to how control transfers to the customer in order to determine the timing of revenue recognition. Revenue related to bundled SaaS, professional services and customer education services is typically recognized over time as the services are performed. Accounting for Business Combinations We allocate the purchase price of acquired companies to the tangible and intangible assets acquired, including in-process research and development assets, and liabilities assumed, based upon their estimated fair values at the acquisition dates, with the remaining unallocated purchase prices recorded as goodwill. These fair values are typically estimated with assistance from independent valuation specialists. The purchase price allocation process requires us to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets, contractual support obligations assumed, contingent consideration arrangements, and pre-acquisition contingencies. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to: ● future expected cash flows from software license sales, SaaS and support agreements, consulting contracts, other customer contracts, and acquired developed technologies; ● expected costs to develop in-process research and development into commercially viable products and estimated cash flows from the projects when completed; ● the acquired company’s brand and competitive position, as well as assumptions about the period of time the acquired brand will continue to be used in the combined company’s product portfolio; ● cost of capital and discount rates; and ● estimating the useful lives of acquired assets as well as the pattern or manner in which the assets will amortize. Goodwill and Other Acquired Intangible Assets We test goodwill for impairment at the reporting unit level, which can be an operating segment or one level below an operating segment, on an annual basis as of December 31, or more frequently if changes in facts and circumstances indicate that impairment in the value of goodwill may exist. Subsequent to the divestiture of BIGtoken, Inc. on December 28, 2021, we became a pure-play data/insights company that operates as a single reporting unit. In testing for goodwill impairment, we may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we elect to bypass a qualitative assessment, or if our qualitative assessment indicates that goodwill impairment is more likely than not, we perform quantitative impairment testing. If our quantitative testing determines that the carrying value of the reporting unit exceeds its fair value, goodwill impairment is recognized in an amount equal to that excess, limited to the total goodwill allocated to the reporting unit. 22 When we decide to perform a qualitative assessment, we assess and make judgments regarding a variety of factors which potentially impact the fair value of the reporting unit, including general economic conditions, industry and market-specific conditions, customer behavior, cost factors, our financial performance and trends, our strategies and business plans, capital requirements, management and personnel issues, and our stock price, among others. We then consider the totality of these and other factors, placing more weight on the events and circumstances that are judged to most affect the reporting unit’s fair value or the carrying amount of its net assets, to reach a qualitative conclusion regarding whether it is more likely than not that the fair value of the reporting unit exceeds its carrying amount. When we perform quantitative impairment testing, we utilize one or more of three primary approaches to assess fair value: (a) an income-based approach, using projected discounted cash flows, (b) a market-based approach, using valuation multiples of comparable companies, and (c) a transaction-based approach, using valuation multiples for recent acquisitions of similar businesses made in the marketplace. Our estimate of fair value of our reporting unit is based on a number of subjective factors, including: (a) appropriate consideration of valuation approaches (income approach, comparable public company approach, and comparable transaction approach), (b) estimates of future growth rates, (c) estimates of our future cost structure, (d) discount rates for our estimated cash flows, (e) selection of peer group companies for the comparable public company and the comparable transaction approaches, (f) required levels of working capital, (g) assumed terminal value, and (h) time horizon of cash flow forecasts. The determination of reporting units also requires judgment. We assess whether a reporting unit exists within a reportable segment by identifying the unit, determining whether the unit qualifies as a business under GAAP, and assessing the availability and regular review by segment management of discrete financial information for the unit. We review intangible assets that have finite useful lives and other long-lived assets when an event occurs indicating the potential for impairment. If any indicators are present, we perform a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to the assets in question to their carrying amounts. If the undiscounted cash flows used in the test for recoverability are less than the long-lived assets carrying amount, we determine the fair value of the long-lived asset and recognize an impairment loss if the carrying amount of the long-lived asset exceeds its fair value. The impairment loss recognized is the amount by which the carrying amount of the long-lived asset exceeds its fair value. For all our goodwill and other intangible asset impairment reviews, the assumptions and estimates used in the process are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy or our internal forecasts. Although we believe the assumptions, judgments, and estimates we have used in our assessments are reasonable and appropriate, a material change in any of our assumptions or external factors could lead to future goodwill or other intangible asset impairment charges. Based upon our December 31, 2021 quantitative goodwill impairment review of our reporting unit, we concluded that the estimated fair value of our reporting units exceeded its carrying value. Our reporting unit carried goodwill of $17.9 million at December 31, 2021. Accounting for Stock-Based Compensation We recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of the award. Awards are generally subject to multi-year vesting periods. We recognize compensation expense for awards on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods. Changes in assumptions can materially affect the estimate of fair value of stock-based compensation and, consequently, the related expense recognized. The assumptions we use in calculating the fair value of stock-based payment awards represent our best estimates, which involve inherent uncertainties and the application of judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. 23 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. Valuation Definition and Hierarchy Fair value is defined as the price received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation techniques. A fair value hierarchy for inputs is used in measuring fair value. It maximizes observable inputs and minimizes unobservable inputs. Valuation techniques consistent with the market or income approach are used to measure fair value. The fair value hierarchy is categorized into three levels: Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 – Valuations based on inputs, other than quoted prices included in Level 1, that are observable either directly or indirectly. Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Fair value is a market-based measure that is based on assumptions of prices and inputs considered from the perspective of a market participant on the measurement date. Therefore, even when market assumptions are not readily available, the fund’s own assumptions reflect those that market participants would use in pricing the asset or liability at the measurement date. The availability of valuation techniques and observable inputs can vary from investment to investment and are affected by a wide variety of factors. The determination of fair value requires prudent judgment. Due to the inherent uncertainty of valuation, estimated values may be materially different from values were a ready market available. Inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the fund’s level is based on the lowest significant level input to the fair value measurement. Valuation Techniques and Inputs Investments in securities and listed on major securities exchanges are valued at their last reported sales price as of the valuation date. Many over-the-counter contracts have bid and ask prices that are observable in the marketplace. Bid prices reflect the highest price that the marketplace participants are willing to pay for an asset. Ask prices represent the lowest price that the marketplace participants are willing to accept for an asset. For securities whose inputs are based on bid-ask prices, the Company’s valuation policies do not require that fair value always be a predetermined point in the bid-ask range. The Company’s policy for securities traded in OTC markets and for listed securities for which no sale was reported on that date are generally valued at their last reported bid price if held long and last reported ask These securities are categorized in Level 1 of the fair value hierarchy to the extent these securities are actively traded. Securities traded on inactive markets or valued by reference to similar instruments are generally categorized in Level 2 of the fair value hierarchy. Investments in Restricted Securities of Public Companies Investments in restricted securities of public companies cannot be offered for sale to the public until the company complies with certain statutory requirements. The valuation will not exceed the listed price on any major securities exchange. Investments in restricted securities of public companies are generally categorized in Level 1 of the fair value hierarchy. However, investments in restricted securities in public companies may be categorized in Level 2 or 3 of the fair value hierarchy depending on the level of observable liquidity. If the restriction on the sale of the restricted securities exceeds 180 days, the Company applies a marketability discount due to the nature of the restriction related to the security. 24 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. Off balance sheet arrangements As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable for a smaller reporting company. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Please see our consolidated financial statements beginning on page F-1 of this annual report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 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, 2021. 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, 2021 were ineffective. 25 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, 2021 because of the following material weaknesses in internal controls over financial reporting: ● a lack of internal valuation experts ● a lack of sufficient in-house qualified accounting staff; ● a lack of validation of completeness and accuracy of internally prepared data, including key reports generated from systems, utilized in the operations of controls, leading to delays in the Company’s closing process; ● inadequate controls and segregation of duties due to limited resources and number of employees; ● Lack of internal personnel to properly evaluate the fair value and the associated revenue recognition related to our non-cash revenue contracts; ● substantial reliance on manual reporting processes and spreadsheets external to the accounting system for financial reporting leading to delays in the Company’s closing process; ● 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. The Company plans to hire an independent valuation expert to value the securities it receives as consideration for its services. Changes in Internal Control over Financial Reporting No change in our internal control over financial reporting occurred during the quarter ended December 31, 2021 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. ITEM 9B. OTHER INFORMATION. None. 26 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The names of our directors and executive officers and their ages, positions, and biographies as of August 31, 2022 (except as expressly stated) are set forth below. Our executive officers are appointed by, and serve at the discretion of the Board. There are no family relationships among any of our directors or executive officers. Named Executive Officers and Directors Name Age Positions Position Since Christopher Miglino 53 Chairman of the Board, Chief Executive Officer, President 2010 Michael Malone 40 Chief Financial Officer 2019 Christopher Lahiji 38 Director, President of LD Micro, Inc. (Subsidiary) 2020 Mark Savas 54 Director 2012 Robert Jordan 53 Director 2017 Colleen DiClaudio 44 Director 2017 Brock Pierce 41 Director 2021 The following is biographical information on the current members of our executive officers and board of directors: Christopher Miglino. Since co-founding our company in April 2010, Mr. Miglino has served as our Chief Executive Officer and a member of our board of directors. He was appointed President of our company in January 2017. He also served as our Chief Financial Officer from April 2010 until November 2014. Mr. Miglino has spent the past 20 years working in the digital advertising space and has successfully launched and sold two internet companies. Both of these companies were sold to publicly-traded companies on the NASDAQ. He has a detailed understanding of the relationship between technology and brands. Mr. Miglino previously served as a Board member for EVmo, Inc. (fka YaYYo, Inc) [OTC: YAYO] and served on their compensation committee until January 2020. Mr. Miglino also served as chairman of the Board and as interim chief executive officer of BIGtoken, Inc., a former majority owned subsidiary of SARX [OTC: BGTK]. In evaluating Mr. Miglino’s specific experience, attributes and skills in connection with his appointment to our board, we took into account his role as a co-founder of our company, his operational experience in our company as well as his professional experience in our business sector. Christopher Lahiji. Christopher Lahiji has served as the president of LD Micro, Inc., our wholly owned subsidiary since it was acquired in September 2020. Mr. Lahiji has over 14 years of experience creating, managing, and running in-person and virtual conferences in the public sector. He has served as the president of LD Micro since 2006, providing investor conferences and data to micro-cap public corporations. In evaluating Mr. Lahiji’s specific experience, attributes and skills in connection with his appointment to our board, we took into account his founding of LD Micro, as well as his operational experience in LD Micro as well as professional experience in the investor conference space. Michael Malone. Michael Malone has served as our chief financial officer since January 2019. Mr. Malone has over fourteen (14) years of experience in corporate finance in public and private companies. From 2014 until December 2018, he served as Vice President Finance of Westwood One, LLC, a subsidiary of Cumulus Media, Inc. (NYSE: “CMLS”), an audio broadcast network in New York. Prior to that, from January 2013 through June 2014, he served as Finance Director / Controller for Cumulus Media Network’, audio broadcast network in Georgia, until its merger with Westwood One, LLC. Prior to that from 2012 to 2013, he worked as Director of Internal Auditing of Cumulus Media. He holds a BA in accounting from Monmouth College. Marc Savas. Mr. Savas has been a member of our board of directors since January 2012. Mr. Savas has over 15 years of experience in management and sales consulting and six years of experience in real estate easement acquisitions. Since January 2007 he has served as CEO of Living Full Blast, Inc., overseeing business development and consulting for numerous companies and putting together sales teams for such companies. In addition, from January 1998 until January 2006, Mr. Savas was also CEO for Unfair Advantage Inc., where he conducted 118 management consulting projects, many of which were created using programs that his company had designed. Additionally, from January 2005 until January 2009, Mr. Savas was the national Vice President of Business Development for Connexion Technologies where he built national teams of qualified individuals to effectively secure easements from large real estate owners in order to build telecommunication systems through their properties. In evaluating Mr. Savas’s specific experience, attributes and skills in connection with his appointment to our board, we took into account his management consulting and operational experience. 27 Robert Jordan. Mr. Jordan has been a member of our board of directors since March 2017. He is a seasoned business executive who has spent the past 20 years acquiring, managing and divesting middle-market companies spanning a variety of industries. Since 2016 he has served as Chief Executive Officer of Yoi Corporation, a Los-Angeles-based company that provides software as a service (SaaS)-based mobile digital tools for line managers. In 2013, Mr. Jordan founded Tribeca Capital Partners LLC, a private investment holding company focused on acquiring and operating lower middle market companies. Immediately prior to founding Tribeca Capital Partners LLC, from 2003 to 2013 Mr. Jordan was Chief Executive Officer of KMS Software Company, LLC, a leading human capital management SaaS company which he successfully sold to SAP AG in April 2013. Prior to KMS, Mr. Jordan held chief executive officer roles at a number of companies across several industry sectors and senior management positions at both The Walt Disney Company and Pepsi-Cola Bottling Company. He received a BSBA from Northern Arizona University and attended Executive Education programs at both Harvard Business School and UCLA School of Business. In evaluating Mr. Jordan’s specific experience, attributes and skills in connection with his appointment to our board, we took into account his executive level and senior management business experience coupled by his private investment company experience. Colleen DiClaudio. Ms. DiClaudio has been a member of our board of directors since September 2017. She currently serves as president of 340B Technologies, a 340B software solutions healthcare technology company she co-founded in August 2014. From June 2009 through August 2014 she served as vice president of business development of CompleteCare Health Network, located in New Jersey. Ms. DiClaudio has received a Master’s Degree of Public Health from the University of Medicine and Dentistry of New Jersey and a Bachelor’s Degree in Public Health from Stockton University. In evaluating Ms. DiClaudio’s specific experience, attributes and skills in connection with his appointment to our board, we took into account her experience in the healthcare technology sector and entrepreneurial background. Brock Pierce. Mr. Pierce has been a member of our board of directors since March 2021. Mr. Piece is currently employed or associated with the following entities: (i) Areytos Experiences, LLC, since March 2020, (ii) The Roundtable LLC, since February 2020, (iii) Affinity Media PR LLC, since May 2019, (iv) Percival Services LLC, since January 2019, (v) Unicorn Ventures LLC, since March 2018, and (vi) Integro Foundation Inc., since December 2017. Mr. Pierce has co-founded, advised, and funded over 100 companies, primarily focused on technological innovation and blockchain technologies. Mr. Pierce also ran as a presidential candidate in the United States for the 2020 election. In evaluating Mr. Pierce’s specific experience, attributes and skills in connection with his appointment to our board, we took into account his investment experience and knowledge of various technology industries. Code of Ethics We are committed to maintaining the highest standards of honest and ethical conduct in running our business efficiently, serving our stockholders interests and maintaining our integrity in the marketplace. To further this commitment, we have adopted our Code of Conduct and Business Code of Ethics, which applies to all our directors, officers and employees. To assist in its governance, our Board has formed three standing committees composed entirely of independent directors, Audit, Compensation and Corporate Governance and Nominating committees. A discussion of each committee’s function is set forth below. Bylaws Our bylaws, the charters of each Board committee, the independent status of a majority of our board of directors, our Code of Conduct and Business Code of Ethics provide the framework for our corporate governance. Copies of our Bylaws, Committee Charters, Code of Conduct and Business Code of Ethics may be found on our website at www.SRAX.com under the tab Investors – Governance. Copies of these materials also are available without charge upon written request to our Corporate Secretary at 2629 Townsgate Road #215, Westlake Village, CA 91361. 28 Board of directors The Board of Directors oversees our business affairs and monitors the performance of management. In accordance with our corporate governance principles, the board of directors does not involve itself in day-to-day operations. The directors keep themselves informed through discussions with the Chairman and Chief Executive Officer and our Chief Financial Officer and by reading the reports and other materials that we send them and by participating in board of directors and committee meetings. Directors are elected for a term of one year. Our directors hold office until their successors have been elected and duly qualified unless the director resigns or by reason of death or other cause is unable to serve in the capacity of director. If any director resigns, dies or is otherwise unable to serve out his or her term, or if the Board increases the number of directors, the Board may fill any vacancy by a vote of a majority of the directors then in office, although less than a quorum exists. A director appointed to fill a vacancy shall serve for the unexpired term of his or her predecessor. Vacancies occurring by reason of the removal of directors without cause may only be filled by vote of the stockholders. The Board currently holds regularly scheduled meetings and calls for special meetings or acts through unanimous written consents as necessary. Meetings of the Board may be held telephonically or via electronic video format. Directors are expected to attend all Board meetings and meetings of the committees of the Board on which they serve and to spend the time needed and meet as frequently as necessary to properly discharge their duties. Information with regard to committee meetings is provided for below. Although attendance of meetings is encouraged, we do not have a formal policy regarding attendance by directors at Board and committee meetings. Board leadership structure and Board’s role in risk oversight Mr. Miglino serves as both the Chairman of our Board of Directors and our Chief Executive Officer. We do not have a lead independent director. Given the small size of the Board and limited number of executive officers, the Board has determined that a lead independent director is currently not necessary. Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including credit risk, liquidity risk, operational risk, strategic risk and reputation risk. Management is responsible for the day-to-day management of the risks we face, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. To do this, the Board meets regularly to review SRAX’s risks. Our Chief Financial Officer generally attends the Board meetings and is available to address any questions or concerns raised by any member of the Board on risk management and any other matter. The independent members of the Board work together to provide strong, independent oversight of our management and affairs through the Board’s standing committees and, when necessary, special meetings of independent directors. Our independent directors may meet at any time in their sole discretion without any other directors or representatives of management present. Each independent director has access to the members of our management team or other employees as well as full access to our books and records. We have no policy limiting, and exert no control over, meetings of our independent directors. Board committees The Board of Directors has standing Audit, Compensation, Compensation and Corporate Governance and Nominating committees. Each committee has a written charter. The charters are available on our website at www.SRAX.com. All committee members are independent directors. Information concerning the current membership and function of each committee is as follows: Director Audit Committee Compensation Committee Corporate Governance and Nominating Committee Marc Savas (1) Colleen DiClaudio (1) Robert Jordan (1) (1) Denotes chairperson. 29 Independence Our Class A common stock is listed on the Nasdaq Global Market. As such, we are subject to the Nasdaq Stock Market LLC (“Nasdaq”) director independence standards. In accordance with these standards, in determining independence the Board affirmatively determines whether a director has a “material relationship” with SRAX that would compromise his or her independence from management or would cause him or her to fail to meet the Nasdaq’s specific independence criteria. When assessing the “materiality” of a director’s relationship with SRAX, the Board considers all relevant facts and circumstances, not merely from the director’s standpoint, but from that of the persons or organizations with which the director has an affiliation, and, where applicable, the frequency and regularity of the services, and whether the services are being carried out at arm’s length in the ordinary course of business. Material relationships can include commercial, consulting, charitable, familial and other relationships. A relationship is not material if, in the Board’s judgment, it is not inconsistent with the Nasdaq’s director independence standards and it does not compromise a director’s independence from management. Applying the Nasdaq’s standards, the Board has determined that Messrs. Savas, Jordan, and Pierce, and Ms. DiClaudio are each “independent” as that term is defined by the Nasdaq’s independence standards. Audit Committee We have a designated audit committee in accordance with section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee are Robert Jordan (Chairperson), Colleen DiClaudio, and Marc Savas. The main function of our Audit Committee is to oversee our accounting and financial reporting processes. The Audit Committee assists the Board in fulfilling its oversight and monitoring responsibility of reviewing the financial information provided to shareholders and others, appoints SRAX’s independent registered public accounting firm, reviews the services performed by the independent registered public accounting firm and SRAX’s finance department, evaluates SRAX’s accounting policies and the system of internal controls established by management and the Board, reviews significant financial transactions, and oversees enterprise risk management. The Board has determined that Robert Jordan qualifies as an “audit committee financial expert” within the meaning of SEC rules. An audit committee financial expert is a person who can demonstrate the following attributes: (1) an understanding of generally accepted accounting principles and financial statements; (2) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; (3) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company’s financial statements, or experience actively supervising one or more persons engaged in such activities; (4) an understanding of internal controls and procedures for financial reporting; and (5) an understanding of audit committee functions. Mr. Jordan has also been determined to be “independent” by the Board as such term is defined in the NASDAQ listing standards. Additionally, Mr. Jordan meets the independence standards for audit committees under the NASDAQ rules. Compensation Committee The Compensation Committee assists the Board in: ● Recommending, in executive session at which our chief executive officer is not present, the compensation and awards / bonuses for our CEO or president, if such person is acting as the CEO, as well as other executive officers; ● discharging its responsibilities for approving and evaluating our officer compensation plans, policies and programs; ● reviewing and recommending to the Board, compensation to be provided to our employees and directors; and ● administering our equity compensation plan(s). 30 The Compensation Committee is charged with ensuring that our compensation programs are competitive, designed to attract and retain highly qualified directors, officers and employees, encourage high performance, promote accountability and assure that employee interests are aligned with the interests of our stockholders. The Compensation Committee is composed of two directors, each of whom has been determined by the Board to be independent within the meaning of Rule 5605 of the Nasdaq Marketplace Rules. Mr. Savas and Ms. DiClaudio are the current members of the Compensation Committee. Corporate Governance and Nominating Committee The Corporate Governance and Nominating Committee: ● assists the Board in selecting nominees for election to the Board; ● monitor the composition of the Board; ● develops and recommends to the Board, and annually reviews, a set of effective corporate governance policies and procedures applicable to our company; and ● regularly review the overall corporate governance of the Company and recommends improvements to the Board as necessary. The purpose of the Corporate Governance and Nominating Committee is to assess the performance of the Board and to make recommendations to the Board from time to time, or whenever it shall be called upon to do so, regarding nominees for the Board and to ensure our compliance with appropriate corporate governance policies and procedures. The Corporate Governance and Nominating Committee is composed of two directors, each of whom has been determined by the Board to be independent within the meaning of Rule 5605 of the Nasdaq Marketplace Rules. Mr. Savas and Ms. DiClaudio are the current members of the Corporate Governance and Nominating Committee. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires our officers, directors, and stockholders owning more than ten percent of our common stock, to file reports of ownership and changes in ownership with the SEC and to furnish us with copies of such reports. Based solely on our review of Form 3, 4 and 5’s, the following table provides information regarding any of the reports which were filed late during the fiscal year ended December 31, 2021: Name of Reporting Person Type of Report and Number Filed Late No. of Transactions Reported Late Marc Savas Form 4 1 Robert Jordan Form 4 1 Colleen DiClaudio Form 4 1 Brock Pierce Form 4 1 ITEM 11. EXECUTIVE COMPENSATION. Say-on-Pay At our 2020 Annual Meeting of Stockholders held on December 31, 2020, we submitted two proposals to our stockholders regarding our executive compensation practices. 31 The first was an advisory vote on the 2019 compensation awarded to our named executive officers (commonly known as a “say-on-pay” vote). At our 2020 annual meeting, excluding broker non-votes, approximately 2,925,180 shares cast votes with regard to the say-on-pay proposal. Of those, 2,827,179 or approximately 97%, of the shares approved the compensation of named executive officers. We believe that the outcome of our say-on-pay vote signals our stockholders’ support of our compensation approach, specifically our efforts to retain and motivate our named executive officers. In light of this stockholder support, the Compensation Committee determined not to change its approach to compensation. However, even though stockholders demonstrated overwhelming support for our compensation approach in 2020, the Compensation Committee annually reviews our compensation practices to determine how they might be improved. The Compensation Committee will continue to consider the outcome of say-on-pay votes when making future compensation decisions for our named executive officers. The second proposal was a vote on the frequency of future stockholder advisory votes regarding compensation awarded to named executive officers (commonly known as a “say-when-on-pay” vote). The frequency of every three years received the highest number of votes cast. Upon review and in accordance with the foregoing results, our Board of Directors determined that we would hold our next say-on-pay vote in three years, at our 2023 Annual Meeting. Summary Compensation Table The following table summarizes all compensation recorded by us in each of the last two completed years ended December 31, for: ● all individuals serving as our principal executive officer or acting in a similar capacity; ● our two most highly compensated named executive officers, whose annual compensation exceeded $100,000; and ● up to two additional individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as a named executive officer of our company, at December 31, 2021. The value attributable to any option awards is computed in accordance with FASB ASC Topic 718. The assumptions made in the valuations of the option awards are included in Note 11 of the Notes to our Consolidated Financial Statements for the year ended December 31, 2021. Name and principal position Year Salary ($) Bonus ($) Option Awards ($)(1) All other compensation ($) Total ($) Christopher Miglino, 2021 340,000 225,000 - 32,295(2) 597,295 Chief Executive Officer 2020 340,000 50,000 648,489(3) 41,031(2) 1,079,520 Michael Malone 2021 200,000 75,000 - 9,795(2) 284,795 Chief Financial Officer 2020 200,000 75,000 - 21,554(2) 296,554 Christopher Lahiji 2021 332,423 - - 10,745(2) 343,168 President, LD Micro (4) 2020 58,749 - - 6,428(2) 65,177(5) (1) The amounts included in the “Option Awards” column represent the aggregate grant date fair value of the stock options, computed in accordance with ASC Topic 718. The assumptions made in the valuations of the option awards are included in Note 17 of the notes to our consolidated financial statements appearing in the 10-K for the year end December 31, 2021 for options awarded in 2021 or prior. (2) Healthcare benefits paid by the Company. (3) Represents and option to purchase 300,000 shares of Class A Common Stock at an exercise of $2.97 per share and a term of 5 years. The options were fully vested on the grant date. (4) Mr. Lahiji joined as president of LD Micro, the Company’s wholly owned subsidiary and as a member of the Board of Directors on September 16, 2020. (5) Does not include Cash or Class A Common Stock received as a result of the acquisition of LD Micro, Inc. that closed on September 16, 2020. 32 Employment agreements and how the executive’s compensation is determined We are a party to an employment agreement with each of Messrs. Miglino, Malone, and Lahiji which provide the compensation arrangements with these individuals. The Company has not engaged a compensation consultant or other consultant performing similar functions to advise the Company on compensation arrangements for our executive officers. Notwithstanding, as described under the heading “Director Compensation”, the Company engaged a compensation consultant to advise on the Company’s non-employee director compensation policy. Employment Agreement with Mr. Miglino We employ Christopher Miglino as our Chief Executive Officer for a term of four years pursuant to an employment agreement entered into on January 1, 2012. The employment agreement automatically renews for successive two-year terms unless either party provides notice of non-renewal not later than three (3) months before the conclusion of the then current term. As compensation for his services, Mr. Miglino was initially entitled to receive a base salary of $192,000 which is subject to an annual review. Subsequent to several amendments, effective October 1, 2018, Mr. Miglino’s salary was increased to $340,000 per annum. In addition, he is eligible to receive an annual bonus based upon the achievement of certain to-be-established goals fixed by the Board, which is payable in cash or non-cash compensation as determined by the Board, as well as a discretionary bonus as determined by the Board. Mr. Miglino is entitled to participate in all benefit plans we may offer, up to 45 days of paid vacation annually and reimbursement for out-of-pocket expenses incurred in furtherance of our business. In addition to accrued obligations (including but not limited to, reimbursements, unpaid salary, unused vacation days, etc.), the following table sets forth the payments that would be made to Mr. Miglino in accordance with his employment agreement had he been terminated by us without cause or by Mr. Miglino for Good Reason, or termination as a result of disability on December 31, 2021. Name Terminated Without Cause / For Good Reason Termination as a result of Disability Christopher Miglino Salary (1) $ 680,000 $ 680,000 Accelerated Vesting of Awards — — Health Care 43,074 — Total: $ 723,074 $ 680,000 (1) Amount equal to twenty-four (24) months of Base Salary. Amount is to be paid over a twenty-four (24) month period. Employment Agreement with Michael Malone On December 15, 2018 we entered into an Employment Agreement with Mr. Malone pursuant to which he was engaged to serve as Chief Financial Officer to be effective January 2, 2019. Under the terms of the employment agreement, Mr. Malone’s compensation includes: ● an annual base salary of $200,000; ● an annual bonus of $100,000, payable in equal quarterly installments beginning on April 1, and subject to the timely filings of our periodic reports; ● a one-time option grant to purchase 100,000 shares of Class A Common Stock with a grant date of December 15, 2018, an exercise price of $2.56 per share, a term of three (3) years that vests quarterly over a three (3) year period subject to continued employment; ● the reimbursement of up to $20,000 in expenses incurred in moving and temporary living arrangements within the first sixty (60) days following the effective date; and ● annual paid time off of 30 days per year. 33 Mr. Malone is entitled to participate in all benefit programs we offer our other executive officers and expense reimbursement. The employment agreement with Mr. Malone contains customary confidentiality, non-disclosure and noninterference provisions. The following table sets forth the payments that would be made to Mr. Malone in accordance with his employment agreement had he been terminated by us “without cause” on December 31, 2021. Name Terminated Without Cause Termination as a result of Disability Michael Malone Salary (1) $ 33,667 $ — Total: $ 33,667 $ — Employment Agreement with Christopher. Lahiji Effective September 16, 2020, we entered into an employment agreement with Christopher Lahiji pursuant to which he was engaged to serve as the president of LD Micro, Inc., our wholly owned subsidiary acquired in September 2020. Mr. Lahiji’s employment agreement is for a term of three (3) years. Under the terms of the employment agreement, Mr. Lahiji’s compensation includes: ● an annual base salary of $335,000; ● an annual bonus at the discretion of the board of directors with a target bonus of fifteen percent (15%) of his base salary; ● the right to receive equity incentive awards commensurate with those of similarly situated officers of SRAX; ● A remove office allowance of $1,000 per month; and ● annual paid time off of 30 days per year. Upon a termination of Mr. Lahiji’s employment, he will receive the following severance benefits as applicable: (i) Upon termination for death: his estate will receive (i) salary earned but not paid through termination, (ii) pay for all contractually earned but unused days off, (iii) any annual bonus earned but unpaid through the date of termination, (iv) three (3) months of remote office allowance, and (v) any previously incurred but unpaid business expenses (collectively, “Final Compensation”); (ii) Upon termination for disability: Mr. Lahiji will receive the Final Compensation; (iii) Upon termination by the Parent “for cause” or by Mr. Lahiji without “good reason” as such terms are defined in the Employment Agreement, Mr. Lahiji will receive the Final Compensation; (iv) Upon a termination by the Parent other than “for cause” or by Mr. Lahiji for “good reason”: Mr. Lahiji will receive (i) the Final Compensation, (ii) twenty four (24) months of his base salary over a twenty four (24) month period, (iii) continued COBRA coverage for twenty four (24) months, and (iv) the immediate vesting of all outstanding equity grants Mr. Lahiji is entitled to participate in all benefit programs we offer our other executive officers and expense reimbursement. The employment agreement with Mr. Lahiji contains customary confidentiality, non-disclosure and noninterference provisions. 34 The following table sets forth the payments that would be made to Mr. Lahiji in accordance with his employment agreement had he been terminated by us “without cause” or by him for “good reason” on December 31, 2021. Name Terminated Without Cause / For Good Reason Christopher Lahiji (1) Salary $ 670,000 Accelerated Vesting of Awards — Health Care 43,074 Total: $ 713,074 Equity Compensation Plans Our named executive officers participate in our equity compensation plans which are as follows: 2012 Equity Compensation Plan Our 2012 Equity Compensation Plan (“2012 Plan”) was administered by our board or any of its committees. The purposes of the 2012 Plan were to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees, Directors and Consultants, and to promote the success of our business. The issuance of awards under our 2012 Plan was at the discretion of the administrator, which has the authority to determine the persons to whom any awards were granted and the terms, conditions and restrictions applicable to any award. Under our 2012 Plan, we may grant stock options, restricted stock, stock appreciation rights, restricted stock units, performance units, performance shares and other stock-based awards. Our 2012 Plan authorized the issuance of up to 600,000 shares of Class A common stock for the foregoing awards. As of December 31, 2021, we have granted awards under the 2012 Plan equal to approximately 1,334,867 shares of our Class A common stock (with all issuances in excess of 600,000 occurring subsequent to cancellations or forfeitures of certain shares under the 2012 Plan), and 901,428 shares have been cancelled or forfeited. As of January 1, 2022, the 2012 Plan terminated pursuant to its terms. 2014 Equity Compensation Plan Our 2014 Equity Compensation Plan (“2014 Plan”) is administered by our board or any of its committees. The purposes of the 2014 Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees, Directors and Consultants, and to promote the success of our business. The issuance of awards under our 2014 Plan is at the discretion of the administrator, which has the authority to determine the persons to whom any awards shall be granted and the terms, conditions and restrictions applicable to any award. Under our 2014 Plan, we may grant stock options, restricted stock, stock appreciation rights, restricted stock units, performance units, performance shares and other stock-based awards. Our 2014 Plan authorizes the issuance of up to 1,600,000 shares of Class A common stock for the foregoing awards. As of December 31, 2021, we have granted awards under the 2014 Plan equal to approximately 1,672,694 shares of our Class A common stock (with all issuances in excess of 1,600,000 occurring subsequent to cancellations or forfeitures of certain shares under the 2014 Plan), and 335,733 shares have been cancelled or forfeited. Accordingly, there are 263,039 shares of Class A common stock available for future awards under the 2014 Plan. In the event of a change in control, awards under the 2014 Plan will become fully vested unless such awards are assumed or substituted by the successor corporation. 35 2016 Equity Compensation Plan Our 2016 Equity Compensation Plan (“2016 Plan”) is administered by our board or any of its committees. The purposes of the 2016 Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees, Directors and Consultants, and to promote the success of our business. The issuance of awards under our 2016 Plan is at the discretion of the administrator, which has the authority to determine the persons to whom any awards shall be granted and the terms, conditions and restrictions applicable to any award. Under our 2016 Plan, we may grant stock options, restricted stock, stock appreciation rights, restricted stock units, performance units, performance shares and other stock-based awards. Our 2016 Plan authorizes the issuance of up to 600,000 shares of Class A common stock for the foregoing awards. As of December 31, 2021, we have granted awards under the 2016 Plan equal to approximately 829,717 shares of our Class A common stock (with all issuances in excess of 600,000 occurring subsequent to cancellations or forfeitures of certain shares under the 2016 Plan), and 591,833 shares have been cancelled or forfeited. Accordingly, there are 362,116 shares of common stock available for future awards under the 2016 Plan. In the event of a change in control, awards under the 2016 Plan will become fully vested unless such awards are assumed or substituted by the successor corporation. Under the 2016 Plan, we made a conditional grant to our CFO that is subject to the approval of our shareholders to increase the number of shares issuable under the 2016 Plan. Outstanding Equity Awards Value at Fiscal Year-End The following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding as of December 31, 2021. OPTION AWARDS STOCK AWARDS Name Number of securities underlying unexercised options (#) exercisable Number of securities underlying unexercised options (#) unexercisable Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) Option exercise price ($) Option expiration date Number of shares or units of stock that have not vested (#) Market value of shares or units of stock that have not vested ($) Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested (#) Christopher Miglino 300,000 0 2.97 11/13/2025 Michael Malone 100,000 0 2.56 1/2/2022 36 DIRECTOR COMPENSATION Role of Compensation Consultant The Compensation Committee is authorized to retain the services of one or more compensation advisors, as it sees fit, in connection with the oversight of our non-employee director and executive compensation program and related policies and practices. During 2021, the Compensation Committee retained Aon PLC (“Aon”), a compensation consulting firm with regard to our non-employee director compensation policy. Aon was engaged to provide the Compensation Committee with information, recommendations, and other advice relating to the non-employee director compensation policy only and not with regard to any executive compensation policies. Aon was directly engaged and served at the discretion of the Compensation Committee and provided no other services to the Company. Current Director Compensation Policy On October 29, 2021, the Company’s Compensation Committee amended the Company’s non-employee director compensation policy. Effective January 1, 2022, non-employee directors will be entitled to cash compensation of: ● Annual base compensation for serving on our Board of $30,000; and ● Additional Annual Committee Compensation of: ○ Audit Committee ■ Chair — $14,000 ■ Member — $7,500 ○ Compensation Committee ■ Chair — $10,000 ■ Member - $5,000 ○ Nomination and Governance Committee ■ Chair — $7,500 ■ Member — $3,000 Cash compensation will be paid quarterly over the year. In addition, each director will be entitled to receive an annual stock option grant equal to $100,000. The number of options will be determined using the Black Scholes option pricing model. The options will vest quarterly over the grant year and have a term of seven years. Legacy Director Compensation Policy Effective April 15, 2018 and up until December 31, 2021, each non-employee director received $30,000 as an annual board fee payable as follows: ● Up to $15,000 in cash paid quarterly over the grant year; and ● The balance in Class A common stock purchase options issued on April 15 of each year and vesting quarterly over the grant year and have a term of seven (7) years. The stock options will be valued using the Black-Scholes option pricing model and are subject to customary assumptions used in the preparation of financial statements. 37 Director Compensation for 2021 The following table provides information concerning the compensation paid to our non-executive directors for their services as members of our board of directors for the year ended December 31, 2021. The information in the following table excludes any reimbursement of out-of-pocket travel and lodging expenses which we may have paid. The awards with respect to which values are provided under the column “Option Awards” below are exclusively stock options, which have realizable value only if they actually vest over time and to the extent, if any, that our stock price exceeds the applicable exercise prices. The values provided below for these awards are based on applicable accounting standards, and do not necessarily reflect the actual amounts realized or realizable pursuant to the underlying stock options. Name Fees earned or paid in cash ($) Stock awards ($) Option awards ($) Non-equity incentive plan compensation ($) Nonqualified deferred compensation earnings ($) All other compensation ($) Total ($) Colleen DiClaudio 15,000(1) 15,000(2) — — — 30,000 Marc Savas 15,000(1) 15,000(2) — — — 30,000 Brock Pierce - 24,000(3) — — — 24,000 Robert Jordan 15,000(1) 15,000(2) — — — 30,000 (1) Compensation includes (i) portion of cash payment applicable to 2021 year for Board year beginning 4/15/20 and ending 4/14/2021 and (ii) portion of cash payment applicable for 2021 year for Board year beginning 4/15/21 until 12/31/2021. (2) Compensation applicable to 2021 year includes $15,000 from the vesting of 5,730 Class A common stock purchase options. Of these options, (i) 2,809 options have an issuance date of 4/15/20, an exercise price per share of $1.95, a term of seven (7) years, and vest quarterly on 7/15/20, 10/15/20, 1/15/21, and 4/15/21, and (ii) 2,921 options have an issuance date of 4/15/21, an exercise price per share of $4.38, a term of seven (7) years, and vest quarterly on 7/15/21, 10/15/21, 1/15/22, and 4/15/22, (3) Mr. Pierce joined the Board in March of 2021. Mr. Pierce elected to receive all options. Such amount includes (i) 803 options having an issuance date of March 10, 2021, an exercise price of $4.48 per share, a term of seven (7) years, and vest quarterly on 7/15/21, 10/15/21, 1/15/22, and 4/15/22 and (ii) 5,842 options having an issuance date of 4/15/21, an exercise price of $4.38 per share, a term of seven (7) years, and vest quarterly on 7/15/21, 10/15/21, 1/15/22, and 4/15/22 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. BENEFICIAL OWNERSHIP OF SHARES OF CLASS A COMMON STOCK At August 31, 2022, we had 26,226,401 shares of Class A common stock issued and outstanding. The following table sets forth information known to us as of August 31, 2022 relating to the beneficial ownership of shares of our Class A common stock by: ● each person who is known by us to be the beneficial owner of 5% or more of any class of our voting securities; ● Each of our current directors and nominees; ● each of our current named executive officers; and ● all current named executive officers and directors as a group. Beneficial ownership is determined according to the rules of the SEC. Beneficial ownership means that a person has or shares voting or investment power of a security and includes any securities that person or group has the right to acquire within 60 days after the measurement date. This table is based on information supplied by officers, directors and principal shareholders. Except as otherwise indicated, we believe that each of the beneficial owners of the common stock listed below, based on the information such beneficial owner has given to us, has sole investment and voting power with respect to such beneficial owner’s shares, except where community property laws may apply. Common Stock Common Shares Underlying Common Convertible Percent of Name and Address of Beneficial Owner(1) Shares Securities (2) Total Class (2) Directors and named Executive Officers Christopher Miglino 887,575 330,000 1,217,575 4.57% Christopher Lahiji (3) 1,490,000 - 1,490,000 5.66% Marc Savas 11,945 43,230 55,175 * Robert Jordan 6,510 43,230 49,740 * Colleen DiClaudio 7,813 43,230 51,043 * Michael Malone (4) 27,544 27,544 * Brock Pierce 20,000 31,282 51,282 * All directors and executive officers as a group (7 persons) 2,451,387 490,971 2,942,358 10.98% Beneficial Owners of 5% or more Whitefort Capital Master Fund, LP (5) 1,713,410 - 1,713,410 6.51% Percy Rockdale LLC (6) 2,604,576 - 2,604,576 9.90% * Less than one percent. (1) Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in the footnotes to this table. Unless otherwise indicated, the address of the beneficial owner is 2629 Townsgate Rd. #215, Westlake Village, CA 91361. 38 (2) Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership includes any shares as to which a shareholder has sole or shared voting power or investment power, and also any shares which the shareholder has the right to acquire within 60 days, including upon exercise of common shares purchase options or warrants. There are 26,315,178 shares of Class A common stock issued and outstanding as of August 31, 2022. (3) Mr. Lahiji is a party to a voting agreement with SRAX whereby Mr. Lahiji appoints Mr. Miglino, or any successor designated by the Board of Directors to vote the shares of Common Stock issued in the LD Micro acquisition transaction until December 31, 2022. Mr. Lahiji is also a party to a lock-up agreement whereby Mr. Lahiji is restricted from selling the shares of Common Stock issued to him in the LD Micro acquisition transaction until September 16, 2023. (4) Does not include conditional option grant to purchase 100,000 shares issued on January 6, 2022 to Mr. Malone that is subject to shareholder approval. Assuming shareholder approval, the option vests quarterly over the grant year. (5) Disclosed pursuant to Schedule 13(g) filed with the SEC on February 3, 2022. Address of beneficial owner is 12 East 49th Street, 40th Floor, New York, New York 10017. Reporting Person is managed by Whitefort Capital Management, LP. David Salanic and Joseph Kaplan are co-managing partners at Whitefort Capital Management. (6) Disclosed pursuant to Schedule 13(g) filed with the SEC on February 4, 2022. Address of beneficial owner is 595 Madison Avenue, 29th Floor, New York, NY 10022. Shares are owned by Percy Rockdale which owns 234,540 shares and Continental General Insurance Company (“GCIC”), which owns 2,370,036 shares. Continental Insurance Group, Ltd. (“CIG”), as the sole owner of CGIC may be deemed to be the beneficial owner and Continental General Holdings LLC (“CGH”), as the sole owner of CIG may be deemed to be the beneficial owner. Michael Gorzynski, as the sole manager of Percy Rockdale and as a manager and executive chairman of CGH, may be deemed beneficially own the shares. EQUITY COMPENSATION INFORMATION Securities Authorized for Issuance under Equity Compensation Plans The following table sets forth securities authorized for issuance under any equity compensation plans approved by our shareholders as well as any equity compensation plans not approved by our stockholders as of December 31, 2021: Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights(a) Weighted average exercise price of outstanding options, warrants and rights ($) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) Plans approved by our stockholders: 2012 Equity Compensation Plan (1) 400,000 $ 2.87 166,561 2014 Equity Compensation Plan 864,127 $ 3.10 263,039 2016 Equity Compensation Plan 67,660 $ 2.84 328,783 Plans not approved by stockholders N/A (1) 2012 Equity Compensation Plan expired on January 1, 2022. 39 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Related Party Transactions Procedure We review all known relationships and transactions in which SRAX and our directors, executive officers, and significant stockholders or their immediate family members are participants to determine whether such persons have a direct or indirect interest. Our management, in consultation with our outside legal consultants, determines based on specific fact and circumstances whether SRAX or a related party has a direct or indirect interest in these transactions. In addition, our directors and executive officers are required to notify us of any potential related party transactions and provide us with the information regarding such transactions. If it is determined that a transaction is a related party transaction, the Audit Committee must review the transaction and either approve or disapprove it. In determining whether to approve or ratify a transaction with a related party, the Audit Committee will take into account all of the relevant facts and circumstances available to it, including, among any other factors it deems appropriate: ● the benefits to us of the transaction; ● the nature of the related party’s interest in the transaction; ● whether the transaction would impair the judgment of a director or executive officer to act in the best interests of SRAX and our shareholders; ● the potential impact of the transaction on a director’s independence; and ● whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances. Any member of the Audit Committee who is a related party with respect to a transaction under review may not participate in the deliberations or vote on the approval of the transaction. Related Party Transactions Summarized below are certain transactions and business relationships between SRAX and persons who are or were an executive officer, director or holder of more than five percent of any class of our securities since January 1, 2020. Information regarding disclosure of an employment relationship or transaction involving an executive officer and any related compensation solely resulting from that employment relationship or transaction is included in the Section of this Annual Report entitled “Executive Compensation.” Information regarding disclosure of compensation to a director for the year ended December 31, 2021 is included in the Section of this Annual Report entitled “Director Compensation.” ● During the fiscal year of January 1, 2020 through December 31, 2020, we paid the following compensation to our non-employee Board members: ○ an aggregate of $60,000 in cash paid in quarterly payments; ○ an aggregate of 3,237 Class A common stock purchase options that vested during 2020 out of 11,252 initial options issued on April 15, 2019, with each such option having an exercise price of $5.49 per share, a term of seven (7) years and such portion that vested in 2020 was valued at $17,260 in the aggregate; ○ an aggregate of 26,805 Class A common stock purchase options that vested during 2020 out of 37,630 initial options issued on April 15, 2020, with each such option having an exercise price of $1.95 per share, a term of seven (7) years and such vested portion was valued at $42,739 in the aggregate; ● Christopher Miglino, our CEO, served on the board of directors of one of our advertising customers, EVmo, Inc. (fka YayYo, Inc.) which purchases advertising at market rates. As of January 22, 2020, Mr. Miglino was no longer a member of the board of directors of YayYo, Inc. ● On September 4, 2020, pursuant to our agreement and plan of merger with LD Micro, Inc., we agreed to issue the shareholders of LD Micro (i) $4,000,000 with (a) $1,000,000 upon closing, (b) $1,000,000 on January 1, 2021, (c) $1,000,000 on April 1, 2021, and (d) $1,000,000 on July 1, 2021, and (ii) 1,600,000 shares of Class A Common Stock at the closing. Pursuant to his position as a shareholder of LD Micro, Christophe Lahiji, the president of LD Micro, Inc. and a member of our Board received 1,490,000 shares of Class A Common Stock and will be entitled to receive approximately 85% of the cash compensation. Mr. Lahiji is currently subject to a lock-up agreement with respect to his shares of SRAX for 36 months from the date of the closing of the merger with LD Micro and a voting agreement to vote his shares pursuant to the Board’s recommendations, which is effective until December 31, 2023 ● The Company subleased a suite at the Sofi Stadium in Los Angeles from an entity wholly owned by Christopher Miglino, our CEO. The sublease is for a period of one (1) year, at a rate of $382,500, and commenced on the date that the stadium opened to the general public. We believe that such annual rate is a discount from prevailing market rates and is less than the master lease rate. During May of 2022, the Company renewed the lease for four (4) additional National Football League seasons for average per year of approximately $496,836 over four (4) years. This amount is a pass-through of the actual expenses incurred by our affiliate without markup. The lease terminates in February 2026. ● On August 4, 2021, the Board declared a one-time bonus payment of $15,000 to all non-employee directors. As a result, the Company paid an aggregate of $60,000 in bonuses. ● On October 29, 2021, the Compensation Committee amended the Company’s non-employee director compensation policy. The policy became effective January 1, 2022 and is set forth below under the section entitled “Director Compensation”. ● On January 3, 2022, we issued four (4) common stock purchase options to our non-employee directors, pursuant to our amended non-employee director compensation policy. Each option entitled the holder to purchase 29,533 shares of Class A Common Stock at an exercise price of $4.35 per share, for an aggregate exercise amount of $128,468.55. The options vest in equal quarterly over a one (1) year period from the issuance date. The options expire on the seven (7) year anniversary of the issuance date. Each option has a Black-Scholes value of $100,000. 40 ● On January 6, 2022, we issued Michael Malone, our Chief Financial Officer, a conditional option to purchase 100,000 shares of Class A common stock. The option is subject to shareholder approval as a conditional grant. Assuming approval by the shareholders, the option has an exercise price of $4.25 per share, a term of seven (7) years and vests in equal quarterly installments over a three (3) year period from the grant date. The option had a Black-Scholes value on the grant date of $330,821. ● On January 6, 2022, we issued Christopher Miglino, our Chief Executive Officer, an option to purchase 120,000 shares of Class A common stock. The option has an exercise price of $4.25 per share, a term of seven (7) years and vests in equal quarterly installments over a three (3) year period from the grant date. The option had a Black-Scholes value on the grant date of $396,986. ● We entered into certain agreements and transactions with BIGtoken, Inc. our former subsidiary since January 1, 2020. We owned more than 50% of the outstanding common stock of BIGtoken until November 1, 2021, upon the completion of a merger by BIGtoken with a third party whereby SRAX ceased to be a majority owner of BIGtoken and Christopher Miglino and Michael Malone, were replaced as CEO and CFO respectively, by management of the target in the merger. Additionally, on December 30, 2021, SRAX converted the common stock of BIGtoken that it owned into a class of preferred stock of BIGtoken with no voting rights and a beneficial ownership limitation of 4.99%. On June 30, 2022, Christopher Miglino resigned as a board member of BIGtoken and we had no further officers or directors of SRAX performing any services for BIGtoken. The following represents transactions entered into between SRAX and BIGtoken since January 1, 2020: ○ Pursuant to the divestiture of BIGtoken on February 4, 2021, we (i) entered into a share exchange agreement whereby we received 149,562,566,584 shares of common stock of BIGtoken (fka Force Protection Video Equipment Corp.) (ii) entered into a transition services agreement with BIGtoken, (iii) entered into a master separation agreement with BIGtoken, and (iv) entered into a registration agreement with BIGtoken with respect to the shares of common stock received pursuant to the exchange agreement. ○ On December 29, 2021 we exchanged our 149,562,566,584 shares of common stock of BIGtoken for 242,079 shares of Series D Preferred Stock of BIGtoken, which (i) converts back into the same number of shares owned prior to the exchange, (ii) has a beneficial ownership limitation of 4.99% (can be increased to 9.99% on 61 days notice), and (iii) is no-voting, except as required by law. ○ On February 11, 2022, we entered into a simple agreement for future equity (“SAFE”) with BIGtoken whereby we funded $300,000 and in March of 2022, we funded an additional $700,000. Upon BIGtoken completing an offering of its securities, amounts due under the SAFE will convert, at our option, into shares of Series D Preferred Stock of BIGtoken. The SAFE additionally provides that we will receive warrants to purchase Series D Preferred Stock of BIGtoken upon the completion of an equity financing. ○ Between December 2021 and March 31, 2022, we factored receivables of approximately $1.2 million for BIGtoken. As of June 30, 2022, $0.4 million is due and payable to us from BIGtoken. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. The following table summarizes the aggregate fees billed to us by our independent auditor for 2021 and 2020. All fees were paid to RBSM LLP. 2021 2020 Audit Fees $ 342,500 $ 326,250 Audit-Related Fees - - Tax Fees - - All Other Fees 45,000 45,000 Total $ 387,500 $ 371,250 Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements. Audit-Related Fees — This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting. Tax Fees — This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice. Pre-Approval of Independent Auditor Services and Fees Our Board has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Audit Committee of the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Audit Committee. The audit and tax fees, and all other fees paid to the auditors with respect to 2021 were pre-approved by the Audit Committee. RBSM LLP did not provide any other services during 2021 except those listed above. 41 PART IV 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 F-1. (2) Exhibits Incorporated by Reference Filed/ Exhibit Furnished Exhibit Filing No. Description Herewith Form No. File No. Date 3.01(i) Certificate of Incorporation, filed on 8/3/11 S-1 3.01(i) 333-179151 1/24/12 3.02(i) Certificate of Correction to Certificate of Incorporation, filed on 8/31/11 S-1 3.01(ii) 333-179151 1/24/12 3.03(i) Certificate of Amendment to Certificate of Incorporation authorizing 1:5 reverse stock split 8-K 3.5 000-54996 9/19/16 3.04(i) Certificate of Amendment to Certificate of Incorporation as Amended, effective 8/25/19 8-K 3.01(i) 001-37916 8/15/19 3.05(ii) Amended and Restated Bylaws of Social Reality, Inc. adopted March 27, 2019 8-K 3.01(ii) 001-37916 4/2/19 3.06(i) Form of Certificate of Designation of preferences, Rights and Limitations of Series A Non-Voting Preferred Stock 8-K 3.01 001-37916 9/24/21 3.07(i) Certificate of Validation and Certificate of Increase filed on January 31, 2022 8-K/A 3.01(i) 001-37916 2/2/2022 4.01 Specimen of Class A Common Stock Certificate 8-A12B 4.1 001-37916 10/12/16 4.02 Class A Common Stock Purchase Warrant Issued to Investors in October 2014 8-K 4.7 000-54996 11/4/14 4.03 Class A Common Stock Purchase Warrant issued in Steel Media Transaction dated October 30, 2014 8-K 4.8 000-54996 11/4/14 4.04 Class A Common Stock Warrant issued in September 2016 Offering 8-K 4.6 000-54996 10/6/16 4.05 Class A Common Stock Warrant issued to October 2013 Offering 8-K 4.7 000-54996 10/24/13 4.06 Class A Common Stock Warrant issued to T.R. Winston & Company issued 8/22/13 10-Q 4.5 000-54996 11/13/13 4.07 Class A Common Stock Warrant issued to Investors in January 2014 Offering 8-K 4.6 000-54966 1/27/14 4.08 Class A Common Stock Warrant issued to Investors in September 2016 8-K 4.6 000-54966 10/6/16 4.09 Class A Common Stock Warrant issued to Investors in January 2017 Offering 8-K 4.1 001-37916 1/4/17 4.10 Class A Common Stock Warrant issued to Investors in January 2017 Offering (2nd Warrant) 8-K 4.2 001-37916 1/4/17 4.11 Class A Common Stock Placement Agent Warrant issued in January 2017 Offering 8-K 4.3 001-37916 1/4/17 4.12 Class A Common Stock Placement Agent Warrant issued in October 2016 Offering 10-K 4.12 001-37916 3/31/17 4.13 Class A Common Stock Warrant issued in Leapfrog Media Trading Acquisition 10-K 4.13 001-37916 4/2/18 4.14 Form of 12.5% Secured Convertible Debenture issued in April 2017 Offering 8-K 4.2 001-33672 4/21/17 4.15 Class A Common Stock Warrant issued in April 2017 Offering 8-K 4.1 001-33672 4/21/17 4.16 Form of Class A Common Stock Placement Agent Warrant issued in April 2017 Offering 8-K 4.3 001-33672 4/21/17 4.17** 2016 Equity Compensation Plan 1/20/17 A-1 001-37916 1/20/17 4.18** 2014 Equity Compensation Plan 8-K 10.33 000-54996 11/10/14 4.19 2012 Equity Compensation Plan S-1 4.02 333-179151 1/24/12 4.20 Form of Stock Option Agreement for 2012, 2014 and 2016 Equity Compensation Plan S-1 4.03 333-179151 1/24/12 4.21 Form of Restricted Stock Unit Agreement for 2012, 2014 and 2016 Equity Compensation Plan S-1 4.04 333-179151 1/24/12 4.22 Form of Restricted Stock Award Agreement for 2012, 2014 and 2016 Equity Compensation Plan S-1 4.05 333-179151 1/24/12 4.23 Class A Common Stock Warrant Issued to Investors and Placement Agents in October 2017 Offering 8-K 4.02 001-37916 10/27/17 4.24 Form of Placement Agent Warrant from April 2019 Offering 8-K 4.01 001-37916 4/10/19 4.25 Form of Series A Common Stock Warrant from August 2019 Offering 8-K 4.01 001-37916 8/14/19 42 4.26 Form of Series B and Series C Common Stock Warrant from August 2019 Offering 8-K 4.02 001-37916 8/14/19 4.27 Form of Placement Agent Warrant from August 2019 Offering 8-K 4.03 001-37916 8/14/19 4.28 Form of Class A common stock purchase warrant issued in February 2020 Offering 8-K 4.01 001-37916 3/5/20 4.29 Form of Original Issue Discount Senior Secured Convertible Debenture from June 2020 Offering 8-K 4.01 001-37916 6/30/20 4.30 Form of Warrant from June 2020 Offering 8-K 4.02 001-37916 6/30/20 4.31 Form of Placement Agent Warrant from June 2020 Offering S-3 4.06 333-240270 7/31/20 10.01 Purchase Agreement among Richard Steel, Steel Media, and Social Reality, dated 10/30/14 8-K 2.1 000-54996 11/4/14 10.02 Asset Purchase Agreement with LeapFrog Media Trading dated 4/20/17 10-K 10.02 001-37916 4/2/18 10.03 Amendment to Asset Purchase Agreement with Leapfrog Media Trading dated 8/17/17 10-K 10.03 001-37916 4/2/18 10.04 Transition Services Agreement in Leapfrog Media Trading Transaction 10-K 10.04 001-37916 4/2/18 10.05 Sample Leakout Agreement in Leapfrog Media Trading Transaction 10-K 10.05 001-37916 4/2/18 10.06 Form of Securities Purchase Agreement for April 2017 Offering 8-K 10.1 001-37916 4/21/17 10.07 Form of Security Agreement for April 2017 Offering 8-K 10.2 001-37916 4/21/17 10.08 Form of Registration Rights Agreement for April 2017 Offering 8-K 10.3 001-37916 4/21/17 10.09 Form of Securities Purchase Agreement for October 2017 Offering 8-K 10.01 001-37916 10/27/17 10.10** Employment Agreement with Christopher Miglino dated 1/1/12 S-1 10.01 333-179151 1/24/12 10.11** Form of Proprietary Information, Inventions and Confidentiality Agreement S-1 10.03 333-179151 1/25/12 10.12** Form of Indemnification Agreement with Officers and Directors S-1 10.04 333-179151 1/25/12 10.13 Services Agreement with Servicios y Asesorias Planic, S.A. de cv dated 1/25/13 10-K 10.9 000-54996 3/31/15 10.14 Financing and Security Agreement with FastPay Partners, LLC 8-K 10.41 000-54996 9/23/16 10.15 Securities Purchase Agreement for January 2017 Offering 8-K 10.1 001-37916 1/4/17 10.16 Placement Agent Agreement for January 2017 Offering with Chardan Capital Markets 8-K 10.2 001-37916 1/4/17 10.17 Letter Agreement dated 1/5/17 10-K 10.35 001-37916 3/31/17 10.18 Insider Trading Policy adopted as of 2/23/16 10-K 10.36 001-37916 3/31/17 10.19 Form of Securities Purchase Agreement for April 2019 Offering 8-K 10.01 001-37916 4/10/19 10.20 Form of Placement Agent Agreement from April 2019 Offering 8-K 10.02 001-37916 4/10/19 10.21 Form of Securities Purchase Agreement from August 2019 Offering 8-K 10.01 001-37916 8/14/19 10.22 Form of First Placement Agent Agreement from August 2019 Offering 8-K 10.02 001-37916 8/14/19 10.23 Form of Second Placement Agent Agreement from August 2019 Offering 8-K 10.03 001-37916 8/14/19 43 10.24 Form of Term Loan and Security Agreement from February 2020 Offering 8-K 10.01 001-37916 3/5/20 10.25 Form of Intellectual Property Security Agreement from February 2020 Offering 8-K 10.01 001-37916 3/5/20 10.26 Form of Securities Purchase Agreement from June 2020 Offering 8-K 10.01 001-37916 6/30/20 10.27 Form of Registration Rights Agreement from June 2020 Offering 8-K 10.02 001-37916 6/30/20 10.28 Form of Security Agreement from June 2020 Offering 8-K 10.03 001-37916 6/30/20 10.29 Agreement and Plan of Merger dated September 4, 2020 between SRAX, Inc., Townsgate Merger Sub 1, and LD Micro, Inc. 8-K 10.01 001-37916 9/11/20 10.30 Lock-up agreement dated September 4, 2020 between SRAX and Christopher Lahiji 8-K 10.02 001-37916 9/11/20 10.31 Voting Proxy Agreement dated September 4, 2020 between SRAX and Christopher Lahiji 8-K 10.03 001-37916 9/11/20 10.32 Employment Agreement between SRAX and Christopher Lahiji Dated September 4, 2020 8-K 10.04 001-37916 9/11/20 10.33 Unit Redemption Agreement dated October 30, 2020 between SRAX and Halyard MD, LLC 8-K 10.01 001-37916 11/3/20 10.34 Unit Redemption Agreement dated October 30, 2020 between SRAX and MD CoInvest, LLC 8-K 10.02 001-37916 11/3/20 10.35 Share Exchange Agreement between SRAX, Force Protection Video Equipment Corp, and Paul Feldman, dated September 30, 2020 8-K 10.01 001-37916 10/4/20 10.36 Exchange Agreement with FPVD dated December 29, 2021 8-K 10.01 001-37916 12/30/21 10.37 Form of Contingent Value Right Agreement dated June 13, 2022 * 10.38 Form of Bridge Note dated July 1, 2022 * 10.39 Form of Safe entered into with BIGtoken on February 11, 2022 * 10.40 Form of Revolving Note from August 2022 Senior Secured Revolving Credit Facility 8-K 4.01 001-37916 8/12/22 10.41 Form of Credit Agreement from August 2022 Senior Secured Revolving Credit Facility 8-K 10.01 001-37916 8/12/22 10.42 Form of Guaranty Agreement from August 2022 Senior Secured Revolving Credit Facility 8-K 10.02 001-37916 8/12/22 10.43 Form of Security Agreement (SRAX) from August 2022 Senior Secured Revolving Credit Facility 8-K 10.03 001-37916 8/12/22 10.44 Form of Security Agreement (LD Micro) from August 2022 Senior Secured Credit Facility 8-K 10.04 001-37916 8/12/22 10.45 Form of Patent Security Agreement from August 2022 Senior Secured Revolving Credit Facility 8-K 10.05 001-37916 8/12/22 10.46 Form of Trademark Security Agreement from August 2022 Senior Secured Revolving Credit Facility 8-K 10.06 001-37916 8/12/22 10.47 Form of Pledge and Escrow Agreement from August 2022 Senior Secured Revolving Credit Facility 8-K 10.07 001-37916 8/12/22 10,48 Form of Registration Rights Agreement from August 2022 Senior Secured Revolving Credit Facility 8-K 10.08 001-37916 8/12/22 10.49 Form of Fee Letter from August 2022 Senior Secured Revolving Credit Facility 8-K 10.09 001-37916 8/12/22 14.01 Code of Ethics and Conduct S-1/A 99.1 001-37916 6/4/12 21.01 Subsidiaries of Registrant * 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 Inline XBRL Instance Document * 101.SCH Inline XBRL Taxonomy Extension Schema * 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase * 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase * 101.LAB Inline XBRL Taxonomy Extension Label Linkbase * 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase * * Filed herein ** Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate. ITEM 16. FORM 10-K SUMMARY. None. 44 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SRAX, Inc. October 12, 2022 By: /s/ Chris Miglino Chris Miglino, Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Christopher Miglino his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post- effective amendments) and supplements to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. Name Positions Date /s/ Christopher Miglino Christopher Miglino Chairman of the Board of Directors, Chief Executive Officer; principal executive officer October 12, 2022 /s/ Michael Malone Michael Malone Chief Financial Officer, principal financial and accounting officer October 12, 2022 /s/ Marc Savas Marc Savas Director October 12, 2022 /s/ Colleen DiClaudio Colleen DiClaudio Director October 12, 2022 /s/ Robert Jordan Robert Jordan Director October 12, 2022 45 INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2021 and 2020 F-5 Consolidated Statements of Operations for the years ended December 31, 2021 and 2020 F-6 Consolidated Statements of Changes in Stockholders’ equity for the years ended December 31, 2021 and 2020 F-7 Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 F-8 Notes to Consolidated Financial Statements F-9 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of SRAX, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of SRAX, Inc. (the “Company”), as of December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2021 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has recurring losses from operations, limited cash flow, and an accumulated deficit. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. New York, NY Washington DC, Las Vegas, NV, San Francisco, CA, Athens GRE, Beijing, CHN, Mumbai and Pune IND Member of ANTEA International with affiliated offices worldwide F-2 Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Investment Valuation As described in Notes 6 and 25 to the consolidated financial statements, the Company’s consolidated investments total $19,700,000 at December 31, 2021. Investments primarily consist of common stock of publicly traded companies. We identified the valuation of marketable securities as a critical audit matter. The Company uses a third-party consultant to provide guidance and assistance to the Company’s management in developing the assumptions, inputs, pricing models utilized in the Put Option Pricing Models (POPMs) used in the calculations to determine discounts at the contracts’ inception dates and each of the respective balance sheet dates for financial statement reporting purposes in order to comply with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 320, Investments – Debt and Equity Securities and FASB Accounting Standards Update (ASU) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities, and ASC 820, Fair Values. An integral part of the Company’s fair value measurement process is the assessment of the type of securities as well as the securities’ liquidity and marketability. The Company initially classifies securities between debt securities, equity securities, warrants, convertible debt, or preferred stock. For convertible debt securities the Company evaluated the security in its current “all-in” form as convertible debt and did not use the “if converted” value. Convertible debt is valued based on an analysis of the implied call option and a discounted cash flow analysis of the debt component. Equity securities were valued using the quoted prices times the number of shares acquired. The securities are then evaluated based on their marketability (usually based on the restrictions on resale into the securities primary market) and liquidity. If the Company determines the listed securities trading market is not an active market, the Company observes other transactions reported by the listed company including private equity transactions, non-cash equity transactions, the trading price and other factors. The Company determined a fair value of the respective security’s price based on this analysis. This price is the lower of the listed price or the fair value based on the analysis. How the Critical Audit Matter Was Addressed in the Audit ● Reviewed the qualifications, independence, objectives and scope of the third-party specialist. ● Used historical average daily trading volumes in conjunction with the estimated shares that can be transacted per day in order to determine the average expected days to sell securities, and whether a discount for lack of marketability is appropriate. ● With the assistance of an internal valuation specialist, we tested the methodology and assumptions used in the valuation. This includes testing of the model that was used to determine the value of the protective put model. Specific assumptions that were tested in the model include the stock price of the securities, volatility of the securities, the risk-free rate of interest, dividend yield, and the time-to-maturity (holding period). The assumptions used in the time-adjusted analysis include the evaluation of the Company’s holdings based on historical trading data. ● Tested proper classification of investment valuations within the Fair Value Hierarchy as set forth in ASC 820. We tested management’s analysis of the securities, which considered the Company’s holdings relative to the average daily trading volume of the securities over a period of time to determine whether the investment required a discount for lack of marketability. ● Developed an independent expectation for comparison to the Company’s estimate. F-3 ● We tested information produced by the Company as audit evidence, to evaluate whether the information is sufficient and appropriate for purposes of the audit by performing procedures to (1) test the accuracy and completeness of the information, and (2) evaluate whether the information is sufficiently precise and detailed for purposes of the audit. ● We used data from an external source, and evaluated the relevance and reliability of the data, and included historical stock prices and historical trading activity. ● We identified and tested the assumptions used by the Company which were significant assumptions to the accounting estimate. These included active market or inactive market, marketability – restrictions on resale, liquidity – estimated days to liquidate, and volatility. ● Reviewed and evaluated evidence of securities acquired by agreeing to contract amount, contract date, and stock certificates or agreements. Revenue Recognition As described in Note 1 to the consolidated financial statements, the Company derives its revenues primarily from annual contracts which include subscription fees earned from customers accessing the platform and managed services. The Company accounts for revenue contracts with customers by applying the requirements of ASC 606, Revenue from Contracts with Customers. The Company’s subscription agreements generally have annual contractual terms and are billed in advance and the amounts are non-refundable. Revenues are recognized ratably over the related contractual term beginning on the date that the platform is made available to a customer. The Company recognizes revenues ratably because the customer receives and consumes the benefits of the platform throughout the contractual period. For the year ended December 31, 2021, the Company’s revenue was $26.7 million. We identified revenue recognition as a critical audit matter. The principal considerations for our determination that performing procedures relating to revenue recognition involved a high degree of audit effort in performing audit procedures and evaluating audit evidence related to the Company’s revenue recognition. The Company’s financial reporting process involves determining the estimated fair value of the marketable securities received as consideration for services rendered to the Company’s customers. The transaction price is determined based on the consideration to which the Company will be entitled to receive in exchange for transferring goods or services to the customer. In cases which the Company receives marketable securities as payment the transaction price is determined to be the lower of the fair market value of the securities received or the contract amount. How the Critical Audit Matter Was Addressed in the Audit Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures related to the Company’s determination of revenue recognition for contracts accounted for over time included the following, among others: ● Tested revenue transactions on a sample basis by tracing revenue transactions to source documents, including customer contracts, orders, invoices, marketable securities received and cash receipts, where applicable; ● Tested securities valuations at contract date. ● Tested that the deferred revenue was the lower of the contract price or the securities price. ● Tested the completeness and accuracy of data provided by management; ● Tested management’s identification of distinct performance obligations by evaluating whether the underlying goods, services, or both were highly interdependent and interrelated; ● Inquired and tested the estimates to complete with senior management to understand the service delivery process; ● Tested the contract costs through a combination of tests of details, in which we selected individual costs and obtained supporting documentation; and, ● Tested the mathematical accuracy of management’s calculation of revenue and deferred revenue for the performance obligation. ● Rolled forward activity in deferred income as a result in change in fair value. We have served as the Company’s auditor since 2011 /s/ RBSM LLP New York, NY October 12, 2022 PCAOB ID: 587 F-4 SRAX, INC. CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2021 2020 Assets Current assets Cash and cash equivalents $ 1,348,000 $ 450,000 Accounts receivable, net 821,000 1,409,000 Contracts receivable 844,000 - Marketable securities 15,617,000 8,447,000 Designated assets for return of capital 3,925,000 - Prepaid expenses and other current assets 430,000 361,000 Current assets of discontinued operations - 1,206,000 Total current assets 22,985,000 11,873,000 Notes receivable 935,000 893,000 Property and equipment, net 114,000 117,000 Intangible assets, net 1,443,000 1,492,000 Right of use assets 257,000 366,000 Other assets 36,000 2,000 Goodwill 17,906,000 17,906,000 Long-term assets of discontinued operations - 6,364,000 Total assets $ 43,676,000 $ 39,013,000 Liabilities and stockholders’ equity Current liabilities Accounts payable and accrued expenses $ 4,095,000 $ 2,708,000 Deferred revenue 12,859,000 4,842,000 Other current liabilities 763,000 3,417,000 Payroll protection loan - current portion 10,000 747,000 OID notes payable 1,164,000 6,016,000 Series A preferred stock, authorized 36,462,417 shares, $0.001 par value, 36,462,417 shares and none issued and outstanding, respectively 3,925,000 - Current liabilities of discontinued operations - 1,305,000 Total current liabilities 22,816,000 19,035,000 Right of use liability - long term 114,000 243,000 Payroll protection loan - long term - 379,000 Deferred tax liability - 131,000 Total liabilities 22,930,000 19,788,000 Commitments and contingencies (Note 19) - - Stockholders’ equity Class A common stock, authorized 250,000,000 shares, $0.001 par value, 25,995,172 and 16,145,778 shares issued and outstanding, respectively 26,000 16,000 Additional paid in capital 51,075,000 69,551,000 Accumulated deficit (30,355,000) (50,342,000) Total stockholders’ equity 20,746,000 19,225,000 Total liabilities and stockholders’ equity $ 43,676,000 $ 39,013,000 The accompanying notes are an integral part of these consolidated financial statements F-5 SRAX, INC. CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2021 2020 Revenues $ 26,707,000 $ 6,479,000 Cost and expenses Cost of revenue 6,521,000 1,789,000 Employee related costs 7,533,000 4,683,000 Marketing and selling expenses 6,330,000 1,717,000 Platform costs 214,000 960,000 Depreciation and amortization 842,000 772,000 General and administrative expenses 5,352,000 3,590,000 Total cost and expenses 26,792,000 13,511,000 Income (loss) from operations (85,000) (7,032,000) Other income (expense) Financing costs (10,295,000) (12,150,000) Realized gain on marketable securities 804,000 684,000 Unrealized gain (loss) on marketable securities (7,904,000) 261,000 Realized loss on designated assets (84,000) - Unrealized loss on designated assets (2,378,000) - Gain on sale of SRAXmd, net - 7,873,000 Interest income 42,000 - Other income 1,144,000 - Change in fair value of preferred stock 2,462,000 - Change in fair value of derivative liabilities - 321,000 Total other expense (16,209,000) (3,011,000) Loss before provision for income taxes (16,294,000) (10,043,000) Provision for income tax benefit (expense) 127,000 (21,000) Loss from continuing operations (16,167,000) (10,064,000) Discontinued operations Loss before income tax benefits (14,376,000) (4,641,000) Loss on disposal of subsidiary (10,684,000) - Income tax benefit - - Loss from discontinued operations (25,060,000) (4,641,000) Net loss (41,227,000) (14,705,000) Net loss attributable to non-controlling interest in discontinued operations 6,465,000 - Net loss attributable to SRAX, Inc. $ (34,762,000) $ (14,705,000) Basic and diluted loss per share Continuing operations $ (0.69) $ (0.69) Discontinued operations attributable to SRAX, Inc. (0.79) (0.32) Net loss per share, basic and diluted $ (1.48) $ (1.01) Weighted average shares outstanding, basic and diluted 23,550,744 14,649,788 The accompanying notes are an integral part of these consolidated financial statements F-6 SRAX, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY YEAR ENDED DECEMBER 31, 2021 AND 2020 Common Stock Additional paid-in Accumulated Noncontrolling Stockholders’ Shares Amount Capital Deficit Interest Equity Balance, December 31, 2019 13,997,452 $ 14,000 $ 48,129,000 $(35,637,000) $ - $ 12,506,000 Stock based compensation - - 1,710,000 - - 1,710,000 Relative fair value of warrants issued with notes payable - - 4,331,000 - - 4,331,000 Shares issued for extension agreement 36,700 - 71,000 - - 71,000 Shares issued for debt extinguishment 100,000 - 181,000 - - 181,000 Conversion of debt to equity 411,626 - 434,000 - - 434,000 Common stock issued for the acquisition of a subsidiary 1,600,000 2,000 4,262,000 - - 4,264,000 Reclassification of warrants from liability to equity - - 4,076,000 - - 4,076,000 Premium on debt extinguishment - - 46,000 - - 46,000 Beneficial conversion feature - - 6,311,000 - - 6,311,000 Net loss - - - (14,705,000) - (14,705,000) Balance, December 31, 2020 16,145,778 16,000 69,551,000 (50,342,000) - 19,225,000 Stock based compensation - - 1,006,000 - - 1,006,000 Shares issued for cash 53,616 - 284,000 - - 284,000 Conversion of convertible debt to equity 3,122,167 3,000 5,971,000 - - 5,974,000 Shares issued for exercise of warrants, net of offering costs 6,828,611 7,000 15,945,000 - - 15,952,000 Warrants issued as an inducement to exercise warrants - - 7,737,000 - - 7,737,000 Acquisition of noncontrolling interest of FVPD - - - - (95,000) (95,000) Warrants issued by FVPD for SRAX, Inc. debenture holders - - - - 885,000 885,000 Series B convertible preferred stock issued by FPVD - - - - 5,860,000 5,860,000 Beneficial conversion feature FPVD series B convertible preferred stock - - - - 5,860,000 5,860,000 Dividends on preferred stock - - (6,387,000) - - (6,387,000) Disposition of subsidiary - - (42,239,000) 54,749,000 (6,045,000) 6,465,000 Repurchase and retirement of shares (155,000) - (793,000) - - (793,000) Net loss attributable to SRAX, Inc. - - - (34,762,000) - (34,762,000) Net loss attributable to non controlling interest in discontinued operations - - - - (6,465,000) (6,465,000) Balance, December 31, 2021 25,995,172 $ 26,000 $ 51,075,000 $(30,355,000) $ - $ 20,746,000 The accompanying notes are an integral part of these consolidated financial statements F-7 SRAX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2021 2020 Cash flows from operating activities Net loss $ (41,227,000) $ (14,705,000) Less: Loss from discontinued operations, net of tax (25,060,000) (4,641,000) Loss from continuing operations (16,167,000) (10,064,000) Adjustments to reconcile net loss to net cash used in operating activities: Unrealized loss (gain) on marketable securities 7,904,000 (261,000) Realized gain on marketable securities (804,000) (684,000) Unrealized loss on designated assets 2,378,000 - Realized loss on designated assets 84,000 - Gain on sale of SRAXmd - (7,873,000) Interest income (42,000) - Change in fair value of preferred stock (2,462,000) - Change in fair value of derivative liabilities - (321,000) Forgiveness of payroll protection program loan (1,116,000) - Warrants issued by FVPD for SRAX, Inc. debenture holders 885,000 - Loss on extinguishment of debt - 1,103,000 Warrant inducement charge 7,737,000 - Marketable securities received for accounts receivable previously written off (409,000) - Amortization of debt issue costs 854,000 9,128,000 Stock based compensation 1,006,000 1,615,000 Provision for bad debts (20,000) 17,000 Depreciation expense 72,000 28,000 Amortization of intangibles 847,000 744,000 Net change in right of use asset and liability (20,000) (19,000) Non-cash financing expense 268,000 - Changes in operating assets and liabilities Accounts receivable 1,680,000 (1,439,000) Prepaid expenses and other current assets (820,000) 400,000 Accounts payable and accrued expenses 3,278,000 1,521,000 Deferred revenue (20,669,000) - Other current liabilities 350,000 (3,049,000) Deferred tax liability (131,000) - Net cash used in continuing operations (15,317,000) (9,154,000) Net cash used in discontinued operations (8,118,000) (4,335,000) Net cash used in operating activities (23,435,000) (13,489,000) Cash flows from investing activities Proceeds from the sale of marketable securities 8,666,000 519,000 Proceeds from the sale of designated assets 686,000 - Purchase of marketable securities (1,450,000) - Proceeds from sale of SRAXmd, net - 7,000,000 Acquisition of LD Micro, net of cash acquired - (697,000) Payment for deferred consideration to LD Micro (3,004,000) - Acquisition of property and equipment (69,000) - Acquisition of intangible assets (798,000) (633,000) Other assets (33,000) 32,000 Net cash from continuing operations 3,998,000 6,221,000 Net cash from (used in) discontinued operations 841,000 (175,000) Net cash from investing activities 4,839,000 6,046,000 Cash flows from financing activities Proceeds from the issuance of common stock units 284,000 - Proceeds from the exercise of warrants 15,952,000 - Repurchase of shares (793,000) Proceeds from OID notes payable, less issuance costs - 11,988,000 Redemption of OID notes payable - (6,070,000) Proceeds from issuance of short-term notes payable, less issuance costs - 960,000 Repayment of short-term notes payable - (100,000) Proceeds from payroll protection program - 1,084,000 Proceeds from the issuance of notes payable - 2,130,000 Repayment of notes payable - (2,130,000) Net cash from continuing operations 15,443,000 7,862,000 Net cash from discontinued operations 4,736,000 - Net cash from financing activities 20,179,000 7,862,000 Net increase in cash from continuing operations 4,124,000 4,929,000 Net decrease in cash from discontinued operations (2,541,000) (4,510,000) Cash, cash equivalents and board designated restricted cash beginning of year 451,000 32,000 Cash, cash equivalents and board designated restricted cash end of year 2,034,000 451,000 Less: Cash from discontinued operations - 1,000 Cash, cash equivalents and board designated restricted cash from continuing operations 2,034,000 450,000 Cash reserved for designated asset for return of capital (686,000) - Cash and cash equivalents $ 1,348,000 $ 450,000 Supplemental schedule of cash flow information Cash paid for interest $ - $ 176,000 Cash paid for taxes $ - $ - Supplemental schedule of noncash investing and financing activities Common stock received in lieu of cash for accounts receivable $ 27,842,000 $ 8,406,000 Convertible notes converted into shares $ 5,974,000 $ 434,000 Designation of marketable securities for dividend distribution $ 6,387,000 $ - Dividends on preferred stock $ 6,387,000 $ - Vesting of common stock award $ - $ 94,000 Relative fair value of warrants issued with term loan $ - $ 83,000 Derivative liabilities transferred to equity $ - $ 4,076,000 Shares of common stock issued for extension agreement $ - $ 71,000 Fair value of BCF for debt financings $ - $ 6,311,000 Fair value of warrants issued for debt financings $ - $ 4,248,000 Premium on debt financings $ - $ 46,000 Original issue discount recorded on OID convertible debentures $ - $ 1,931,000 Shares issued for the acquisition of a subsidiary $ - $ 4,264,000 Common stock issued to settle liability $ - $ 181,000 The accompanying notes are an integral part of these consolidated financial statements F-8 SRAX, INC. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization SRAX, Inc. (“SRAX”, “we”, “us”, “our” or the “Company”) is a Delaware corporation formed on August 2, 2011. We are headquartered in Westlake Village, California but work as a distributed virtual Company. The Consolidated Financial Statements consist of SRAX and its wholly owned subsidiary LD Micro, Inc. (“LD Micro”). We are a technology firm focused on enhancing communications between public companies and their shareholders and investors. We currently have two distinct business units, which we consider to be one reporting unit: ● Our unique SaaS platform, Sequire provides users many features which allow issuers to track their shareholders’ behaviors and trends, then use data-driven insights to engage with shareholders across marketing channels. ● Through LD Micro, we organize and host investor conferences within the micro and small- cap markets, and plan to create several more niche events for the investor community. Each of SRAX’s business units deliver valuable insights that assist our clients with their investor relations and communications initiatives. On December 29, 2021, we deconsolidated our majority owned subsidiary BIG Token, Inc. (“BIGToken”) (formerly known as Force Protection Video Equipment Corporation). After the deconsolidation, we do not beneficially own controlling interest in BIGtoken, and no longer consolidate BIGtoken into our financial results for periods ending after December 31, 2021. The financial results of BIGtoken for the years ended December 31, 2021 and 2020 are presented as income from discontinued operations, net of taxes on the consolidated statements of operations and its assets and liabilities as of December 31, 2021 are presented as assets and liabilities of discontinued operations on the consolidated balance sheets. The historical consolidated statement of cash flows has also been revised to reflect the effect of the deconsolidation. See Note 2 – Discontinued Operations. Unless noted otherwise, discussion in the notes to the consolidated financial statements pertain to continuing operations. Liquidity and Going Concern The Company has incurred significant losses since its inception and has not demonstrated an ability to generate cash in excess of its operating expenses for a sustained period of time. As of December 31, 2021, the Company had cash and cash equivalents of $1,348,000 which is not sufficient to fund the Company’s planned operations through one year after the date the consolidated financial statements are issued. These factors create substantial doubt about the Company’s ability to continue as a going concern for at least one year after the date that our audited 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. In making this assessment we performed a comprehensive analysis of our current circumstances including: our financial position, our cash flow and cash usage forecasts, and obligations and debts. Although management has a long history of successful capital raises, the analysis used to determine the Company’s ability as a going concern does not include cash sources outside the Company’s direct control that management expects to be available within the next 12 months. We expect that our existing cash and cash equivalents, our accounts receivable and marketable securities as of December 31, 2021, will not be sufficient to enable us to fund our anticipated level of operations through one year from the date these financial statements are issued. We anticipate raising additional capital through the private and public sales of our equity or debt securities and selling our marketable securities, or a combination thereof. Although management believes that such capital sources will be available, there can be no assurances 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 sufficient capital in a timely manner, among other things, we may be forced to scale back our operations or cease operations altogether. F-9 The continuing COVID-19 global pandemic has caused significant disruption to the economy and financial markets globally, and the full extent of the potential impacts of COVID-19 are not yet known. Circumstances caused by the COVID-19 pandemic are complex, and uncertain. The impact of COVID- 19 has not been significant to the Company’s results of operations, financial condition, and liquidity and capital resources. Although no material impairment or other effects have been identified to date, there is substantial uncertainty in the nature and degree of its continued effects over time. That uncertainty affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions as additional events and information become known. The Company will continue to consider the potential impact of the COVID-19 pandemic on its business operations. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. The consolidated financial statements include the accounts of the Company and its subsidiaries from the acquisition date of majority voting control of the subsidiary. Business Segments The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it has one operating segment due to business similarities and similar economic characteristics. 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. Use of Estimates The consolidated financial statements have been prepared in conformity with generally accepted accounting principles accepted in the United States of America (“GAAP”) and requires management of the Company to make estimates and assumptions in the preparation of these consolidated financial statements that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and assumptions. The most significant areas that require management judgment and which are susceptible to possible change in the near term include the Company’s revenue recognition, allowance for doubtful accounts and sales credits, valuation of marketable investment securities, stock-based compensation, income taxes, purchase price for acquisition, goodwill, other intangible assets, put rights and valuation of other assets and liabilities. Fair Value of Financial Instruments The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability. In determining fair value, the Company uses various valuation techniques. A fair value hierarchy for inputs is used in measuring fair value. It maximizes observable inputs and minimizes unobservable inputs. Valuation techniques consistent with the market or income approach are used to measure fair value. The fair value hierarchy is categorized into three levels: ● Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.; ● Level 2 - Valuations based on inputs, other than quoted prices included in Level 1, that are observable either directly or indirectly.; and ● Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Fair value is a market-based measure that is based on assumptions of prices and inputs considered from the perspective of a market participant on the measurement date. Therefore, even when market assumptions are not readily available, the fund’s own assumptions reflect those that market participants would use in pricing the asset or liability at the measurement date. The availability of valuation techniques and observable inputs can vary from investment to investment and are affected by a wide variety of factors. The determination of fair value requires prudent judgment. Due to the inherent uncertainty of valuation, estimated values may be materially different from values were a ready market available. Inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the fund’s level is based on the lowest significant level input to the fair value measurement. F-10 Valuation Techniques and Inputs Investments in securities and securities sold short that are both freely tradable and listed on major securities exchanges are valued at their last reported sales price as of the valuation date. Many over-the-counter contracts have bid and ask prices that are observable in the marketplace. Bid prices reflect the highest price that the marketplace participants are willing to pay for an asset. Ask prices represent the lowest price that the marketplace participants are willing to accept for an asset. An integral part of the Company’s fair value measurement process is the assessment of the type of securities as well as the securities’ liquidity and marketability. The Company initially classifies securities between debt securities, equity securities, warrants, convertible debt, or preferred stock. The Company does not have any debt securities as of December 31, 2021 and 2020. Warrants are initially valued at cost, if acquired for cash, or at intrinsic value. For convertible debt securities the investor generally should evaluate the security in its current “all-in” form as convertible debt and not use the “if converted” value. Convertible debt is valued based on an analysis of the implied call option and a discounted cash flow analysis of the debt component. Equity securities are valued using the quoted prices times the number of shares acquired. The securities are then evaluated based on their marketability (usually based on the restrictions on resale into the securities primary market) and liquidity. The Company considers there to be an active market based on the guidance in ASC 820-10-35-54C. In an active market, transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. An orderly transaction assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities. Whether transactions take place with sufficient frequency and volume to constitute an active market is a matter of judgement and depends on the facts and circumstances of the market for the asset or liability. If the Company determines that the trading market for a security is not an active market the Company evaluates the stock price based on other observable or unobservable inputs. A market with limited activity may still provide relevant pricing information when there is no contrary evidence that the pricing information is not relevant to the fair value of the asset. In certain situations, the Company’s security holdings represent share quantities that materially exceed the average daily trading volume of the securities in their primary market. Thus, the Company considers a discount due to the lack of liquidity. If the Company determines it can liquidate its position within 180 days based on 10% of the securities average daily trading volume, no discount is applied. Rule 144 also has an alternative volume limit for affiliates of up to 10% of the tranche (or class) outstanding for debt securities. We believe this provides a reasonable basis to suggest this 10% of trading volume should have minimal impact on market prices. Securities with a marketability holding period in excess of 180 days is subjected to a discount for marketability. If a security has both a marketability holding period over 180 days and a liquidation period of over 180 days the Company will evaluate the impact of both the marketability and liquidity discounts. The Company utilizes the quoted market price on the date of valuation calculates a discount for marketability and liquidity based on a protective put option pricing model that factors in both the lack of marketability and liquidity. Independent Valuation Expert The Company uses a third party specialist to provide guidance around the assumptions, inputs, pricing models utilized valuation calculations into the various Put Option Pricing Models (POPMs) used in the calculations to determine discounts at contract inceptions date and each of the respective balance sheet dates. If the Company has access to material non-public information regarding an investee, it will consider this information as an input for purposes of valuing the security. In these situations, the Company will consider the impact this information will have on the valuation of the securities on a case-by-case basis. These situations could arise due to the Company being an affiliate of the issuer or an officer or director of the Company is an affiliate of the issuer. These securities are categorized in Level 1 of the fair value hierarchy to the extent these securities are actively traded. Securities traded on inactive markets or valued by reference to similar instruments are generally categorized in Level 2 of the fair value hierarchy. Investments in Restricted Securities of Public Companies Investments in restricted securities of public companies cannot be offered for sale to the public until the company complies with certain statutory requirements. The valuation will not exceed the listed price on any major securities exchange. Investments in restricted securities of public companies are generally categorized in Level 2 of the fair value hierarchy. However, investments in public companies may be categorized in Level 3 of the fair value hierarchy depending on the level of observable liquidity. Specifically, if the Company determines the market activity is not sufficient to conclude the market activity represents an Active Market pursuant to ASC 820 -10 -35 36B. The Company evaluates the trading activity of each listed security to determine if the trading market is an Active Market for purposes of evaluating Fair Value under ASC 820. The Company evaluated the number of trade observations during the year, the percentage of the total trading days the security traded on its listed market during the full year or the portion of the year if the security was initially listed during the year, and at the dollar value of the trading activity for the full year as a percentage of the market capitalization of the security. If the Company determines the listed securities trading market is not an active market it looks at other transactions reported by the listed company including private equity transactions, non-cash equity transactions, the trading price and other factors. The Company determines a fair value of the stock price based on this analysis. This price is the lower of the listed price or the fair value based on the analysis. The Company also considers the marketability and liquidity discounts on the listed security in determining fair value. Cash and Cash Equivalents The Company considers all short-term highly liquid investments with a remaining maturity at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents are recorded at cost, which approximates its fair value. The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (“FDIC”) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. As of December 31, 2021 and 2020, the Company had $1,098,000 and $200,000 in excess of the federal insurance limit, respectively. F-11 Accounts Receivable Credit is extended to customers based on an evaluation of their financial condition and other factors. Management periodically assesses the Company’s accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. Accounts determined to be uncollectible are charged to operations when that determination is made. The Company usually does not require collateral. Allowance for doubtful accounts was approximately $130,000 and $15,000 as of December 31, 2021 and 2020, respectively. Concentration of Credit and Significant Customer Risk Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited with financial institutions within the United States. The balances maintained at these financial institutions are generally more than the Federal Deposit Insurance Corporation insurance limits. The Company has not experienced any loss on these accounts. As of December 31, 2021, the Company had one customer with an accounts receivable balance of approximately 11%. As of December 31, 2020, the Company had three customers with accounts receivable balances of approximately 43.41%, 11.60%, and 10.53%. For the year ended December 31, 2021, the Company had no customers that account for a significant percentage of total revenue. For the year ended December 31, 2020, the Company had one customer that accounted for 18.1% of total revenue. Long-lived Assets Management evaluates the recoverability of the Company’s identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists. Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; a significant decline in the Company’s stock price for a sustained period of time; and changes in the Company’s business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets. If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairments have been recorded regarding its identifiable intangible assets or other long-lived assets during the years ended December 31, 2021 or 2020, respectively. Property and equipment Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets of three to seven years. Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations. Management periodically reviews the carrying value of its property and equipment for impairment. Intangible assets Intangible assets consist of intellectual property, trademarks, trade names, and non-compete agreements, and internally developed software and are stated at cost less accumulated amortization. Amortization is provided for on the straight-line basis over the estimated useful lives of the assets of five years. F-12 Costs incurred to develop computer software for internal use are capitalized once: (1) the preliminary project stage is completed, (2) management authorizes and commits to funding a specific software project, and (3) it is probable that the project will be completed and the software will be used to perform the function intended. Costs incurred prior to meeting the qualifications are expensed as incurred. Capitalization of costs ceases when the project is substantially complete and ready for its intended use. Post-implementation costs related to the internal use computer software, are expensed as incurred. Internal use software development costs are amortized using the straight-line method over its estimated useful life which ranges up to three years. Software development costs may become impaired in situations where development efforts are abandoned due to the viability of the planned project becoming doubtful or due to technological obsolescence of the planned software product. For the years ended December 31, 2021, and 2020 there has been no impairment associated with internal use software. For the years ended December 31, 2021, and 2020, the Company capitalized software development costs of $798,000 and $633,000, respectively. During 2016, the Company began capitalizing the costs of developing internal-use computer software, including directly related payroll costs. The Company amortizes costs associated with its internally developed software over periods up to three years, beginning when the software is ready for its intended use. The Company capitalizes costs incurred during the application development stage of internal-use software and amortize these costs over the estimated useful life. Upgrades and enhancements are capitalized if they result in added functionality which enable the software to perform tasks it was previously incapable of performing. Software maintenance, training, data conversion, and business process reengineering costs are expensed in the period in which they are incurred. Right of Use Assets and Lease Obligations The Right of Use Asset and Lease Liability reflect the present value of the Company’s estimated future minimum lease payments over the lease term, which may include options that are reasonably assured of being exercised, discounted using a collateralized incremental borrowing rate. Typically, renewal options are considered reasonably assured of being exercised if the associated asset lives of the building or leasehold improvements exceed that of the initial lease term. Therefore, the Right of Use Asset and Lease Liability may include an assumption on renewal options that have not yet been exercised by the Company. As the rate implicit in leases are not readily determinable, the Company uses an incremental borrowing rate to calculate the lease liability that represents an estimate of the interest rate the Company would incur to borrow on a collateralized basis over the term of a lease within a particular currency environment. Goodwill Goodwill is comprised of the purchase price of business combinations in excess of the fair value assigned at acquisition to the net tangible and identifiable intangible assets acquired. Goodwill is not amortized. The Company tests goodwill for impairment for its reporting units on an annual basis, or when events occur or circumstances indicate the fair value of a reporting unit is below its carrying value. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that implied fair value of the goodwill within the reporting unit is less than its carrying value. The Company performed its most recent annual goodwill impairment test as of December 31, 2021 using market data and discounted cash flow analysis. Based on this analysis, it was determined that the fair value exceeded the carrying value of its reporting units. The Company concluded the fair value of the goodwill exceed the carrying value accordingly there were no indicators of impairment for the years ended December 31, 2021 and 2020. The Company had historically performed its annual goodwill and impairment assessment on December 31st of each year. This aligns the Company with other advertising sales companies who also generally conduct this annual analysis in the fourth quarter. F-13 When evaluating the potential impairment of goodwill, management first assess a range of qualitative factors, including but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for the Company’s products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel, and the overall financial performance for each of the Company’s reporting units. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we then proceed to the impairment testing methodology primarily using the income approach (discounted cash flow method). We compare the carrying value of the reporting unit, including goodwill, with its fair value, as determined by its estimated discounted cash flows if the carrying value of a reporting unit exceeds its fair value, then the amount by which it exceeds its fair value will be recognized as an impairment. When required, we arrive at our estimates of fair value using a discounted cash flow methodology which includes estimates of future cash flows to be generated by specifically identified assets, as well as selecting a discount rate to measure the present value of those anticipated cash flows. Estimating future cash flows requires significant judgment and includes making assumptions about projected growth rates, industry-specific factors, working capital requirements, weighted average cost of capital, and current and anticipated operating conditions. The use of different assumptions or estimates for future cash flows could produce different results. Derivatives The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, Distinguishing Liabilities From Equity and FASB ASC Topic No. 815, Derivatives and Hedging. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. The Company has adopted ASU 2017-11, Earnings per share (Topic 260), provided that when determining whether certain financial instruments should be classified as liability or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. If a down round feature on the conversion option embedded in the note is triggered, the Company will evaluate whether a beneficial conversion feature exists, the Company will record the amount as a debt discount and will amortize it over the remaining term of the debt. If the down round feature in the warrants that are classified as equity is triggered, the Company will recognize the effect of the down round as a deemed dividend, which will reduce the income available to common stockholders. Warrant Liability The Company accounts for certain common stock warrants outstanding as a liability at fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s consolidated statements of operations. The fair value of the warrants issued by the Company has been estimated using a Black-Scholes option pricing model, at each measurement date. Debt Discounts The Company accounts for debt discounts originating in connection with conversion features that remain embedded in the related notes in accordance with ASC 470-20, Debt with Conversion and Other Options. These costs are classified on the consolidated balance sheet as a direct deduction from the debt liability. The Company amortizes these costs over the term of its debt agreements as interest expense-debt discount in the consolidated statement of operations. F-14 Revenue Recognition On January 1, 2018, we adopted ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) and applied this guidance to those contracts which were not completed at the date of adoption using the modified retrospective method. The comparative information was not restated and continued to be reported under the accounting standards in effect for those periods (ASC 605). The adoption did not have a significant impact to the nature and timing of our revenues, results of operations, cash flows and statement of financial position. Revenue from all sale types is recognized at transaction price, the amount we expect to be entitled to in exchange for transferring goods or providing services. Transaction price is calculated as selling price net of variable consideration which may include estimates for future returns, sales incentives and price protection related to current period product revenue. Our standard obligation to our direct customers generally provides for a full refund in the event that such product is not merchantable or is found to be damaged or defective. In determining estimates for future returns, we estimate variable consideration at the expected value amount which is based on management’s analysis of historical data, channel inventory levels, current economic trends and changes in customer demand for our products. Sales incentives and price protection are determined based on a combination of the actual amounts committed and through estimating future expenditure based upon historical customary business practice. We continue to assess variable consideration estimates such that it is probable that a significant reversal of revenue will not occur. We enter into contracts to sell our products and services, and while some of our sales agreements contain standard terms and conditions, there are agreements that contain non-standard terms and conditions and include promises to transfer multiple goods or services. As a result, significant interpretation and judgment is sometimes required to determine the appropriate accounting for these transactions including: (1) whether performance obligations are considered distinct and required to be accounted for separately or combined, including allocation of transaction price; (2) developing an estimate of the stand-alone selling price, or SSP, of each distinct performance obligation; (3) combining contracts that may impact the allocation of the transaction price between product and services; and (4) estimating and accounting for variable consideration, including rights of return, rebates, price protection, expected penalties or other price concessions as a reduction of the transaction price. Revenue from contracts with customers is recognized when the promised goods or services is transferred to the customers, in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those goods or services. The Company derives its revenue primarily from the licensing of our Sequire Platform and Services associated with our customer’s use of the platform, consisting of data insights, marketing, creative, and paid media advertising Revenue is recognized at a point in time when control of the goods is transferred to the customer, generally occurring ratably over the contract period. The amount recognized reflects the consideration the Company expects to be entitled to in exchange for the transferred services. Licensing and Service revenue is generally recognized over time on a ratable basis over the contract term beginning on the date that the service is expected to begin. Service contracts are generally for 12 months in length, billed either monthly or annually and generally in advance. Services revenue are typically recognized using an output measure of progress by looking at the time elapsed as the contracts generally provide the customer equal benefit throughout the contract period because the Company transfers control evenly by providing a stand-ready service. Deferred Revenue Deferred revenue consists of platform and services fees that the Company has received consideration in advance of satisfying performance under the associated contract. The majority of the Company’s deferred revenue balance consists of the unrecognized portion of Service revenue that the Company has received consideration in marketable securities, which is recognized as revenue ratably over the contractual service period. F-15 ASC Topic 606 is a comprehensive revenue recognition model that requires revenue to be recognized when control of the promised goods or services are transferred to our customers at an amount that reflects the consideration that we expect to receive. Application of ASC Topic 606 requires us to use more judgment and make more estimates than under former guidance. Application of ASC Topic 606 requires a five-step model applicable to all product offering revenue streams as follows: Identification of the contract, or contracts, with a customer A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit or financial information pertaining to the customer. Identification of the performance obligations in the contract Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. When a contract includes multiple promised goods or services, we apply judgment to determine whether the promised goods or services are capable of being distinct and are distinct within the context of the contract. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation. The Company has identified three distinct services promised within its contracts: (1) subscription to the Platform for a fixed monthly fee (Platform revenue), (2) Managed Services (including, data and marketing campaigns for a fixed monthly fee (managed services), and (3) Ancillary data, which consists of various data attributes that supplement the data available within the Sequire platform. The Managed Services to be delivered to the customer are within the discretion of the Company, and there are no minimum or maximum guaranties to be delivered. Determination of the transaction price The transaction price is determined based on the consideration to which we will be entitled to receive in exchange for transferring goods or services to our customer. We estimate any variable consideration included in the transaction price using the expected value method that requires the use of significant estimates for discounts, cancellation periods, refunds and returns. In cases which the Company receives marketable securities as payment the transaction price is determined to be the lower of the fair market value of the securities received or the contract amount. Allocation of the transaction price to the performance obligations in the contract If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative Stand-Alone Selling Price (“SSP,”) basis. We determine SSP based on the price at which the performance obligation would be sold separately. During the second quarter of 2020, the Company provided its customers the ability to pay for the Sequire services with the issuance of the customers’ common stock or other securities. For contacts paid with any type of security, Management considers whether there is any marketability of liquidity discounts in determining the fair value of the security on the contract date. The Company’s contract with its customers is for a period of one year or less than one year and the Company is applying the practical expedient, therefore, the transaction price is not adjusted for any significant financing component. The Company evaluates whether there is an existence of a significant financing component in the contract. This is evaluated based on the marketability holding period and liquidity issues than can extend the ability to sale the securities. For any marketability restrictions over 180 days the Company provides a marketability discount. For any liquidity issues that would take the Company in excess of 180 days to liquidate the security the Company applies a liquidity discount. Where there is both a marketability and liquidity issue the Company provides a discount considering both. ASC 606-10-32-23 The fair value of the noncash consideration may vary after contract inception because of the form of the consideration (for example, a change in the price of a share to which an entity is entitled to receive from a customer). Changes in the fair value of noncash consideration after contract inception that are due to the form of the consideration are not included in the transaction price. F-16 Recognition of revenue when, or as, we satisfy a performance obligation We recognize revenue at the point in time that the related performance obligation is satisfied by transferring the promised goods or services to our customer. The Company has performed a limited analysis of the performance efforts and has determined that the effort for the managed services is typically front loaded and as a result of performing services for SEC reporting companies’ additional efforts are maintained throughout the year. The Company considers the services to be delivered ratably during any service period and as such is amortizing the contract price on a straight line method over the contract period. Principal versus Agent Considerations When another party is involved in providing goods or services to our customer, we apply the principal versus agent guidance in ASC Topic 606 to determine if we are the principal or an agent to the transaction. When we control the specified goods or services before they are transferred to our customer, we report revenue gross, as principal. If we do not control the goods or services before they are transferred to our customer, revenue is reported net of the fees paid to the other party, as agent. Our evaluation to determine if we control the goods or services within ASC Topic 606 includes the following indicators: We are primarily responsible for fulfilling the promise to provide the specified good or service. When we are primarily responsible for providing the goods and services, such as when the other party is acting on our behalf, we have indication that we are the principal to the transaction. We consider if we may terminate our relationship with the other party at any time without penalty or without permission from our customer. We have risk before the specified good or service have been transferred to a customer or after transfer of control to the customer. We may commit to obtaining the services of another party with or without an existing contract with our customer. In these situations, we have risk of loss as principal for any amount due to the other party regardless of the amount(s) we earn as revenue from our customer. The entity has discretion in establishing the price for the specified good or service. We have discretion in establishing the price our customer pays for the specified goods or services. Contract Liabilities Contract liabilities consist of customer advance payments and billings in excess of revenue recognized. We may receive payments from our customers in advance of completing our performance obligations. We record contract liabilities equal to the amount of payments received in excess of revenue recognized, including payments that are refundable if the customer cancels the contract according to the contract terms. Contract liabilities have been historically low historically recorded as current liabilities on our consolidated financial statements when the time to fulfill the performance obligations under terms of our contracts is less than one year. We have no long-term contract liabilities which would represent the amount of payments received in excess of revenue earned, including those that are refundable, when the time to fulfill the performance obligation is greater than one year. Practical Expedients and Exemptions We have elected certain practical expedients and policy elections as permitted under ASC Topic 606 as follows: ● We adopted the practical expedient related to not adjusting the promised amount of consideration for the effects of a significant financing component if the period between transfer of product and customer payment is expected to be less than one year at the time of contract inception; ● We made the accounting policy election to not assess promised goods or services as performance obligations if they are immaterial in the context of the contract with the customer; ● We made the accounting policy election to exclude any sales and similar taxes from the transaction price; and ● We adopted the practical expedient not to disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. F-17 Stock-Based Compensation We account for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. We use the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods. Common stock awards The Company grants common stock awards to non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided by non-employees is recorded in accordance with ASC 718 on the consolidated statement of comprehensive loss in the same manner and charged to the same account as if such settlements had been made in cash. Warrants In connection with certain financing, and consulting arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance, if there is not a service period. Income Taxes We utilize ASC 740 “Income Taxes” which requires the 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. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at year-end based on enacted laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. The Company recognizes the impact of a tax position in the financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. Earnings Per Share We use ASC 260, “Earnings Per Share” for calculating the basic and diluted earnings (loss) per share. We compute basic earnings (loss) per share by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and warrants and stock awards. For periods with a net loss, basic and diluted loss per share are the same, in that any potential common stock equivalents would have the effect of being anti-dilutive in the computation of net loss per share. There were 11,867,520 common share equivalents at December 31, 2021 and 15,366,426 at December 31, 2020. For the year ended December 31, 2021 and 2020 these potential shares were excluded from the computation of diluted net earnings per share as their effect would have been antidilutive. F-18 Recently Issued Accounting Standards In January 2020, the FASB issued ASU 2020-01, which clarifies the interactions between Topics 321, 323 and 815. This ASU clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. In addition, the amendments clarify the accounting for certain forward contracts and purchased options accounted for under Topic 815. Our adoption of this ASU did not impact our consolidated financial statements or disclosures. In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides optional expedients and exceptions for a limited period of time to ease the potential burden in accounting treatments related to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. Adoption of the expedients and exceptions is elective and is permitted upon issuance of the guidance through December 31, 2022. The adoption had no material impact on the Company’s financial position, results of operations and cash flows. In May 2020, the SEC adopted amendments to the financial disclosure requirements in Regulation S-X including the significance tests in the “significant subsidiary” definition in Rule 1-02(w), Securities Act Rule 405, and Exchange Act Rule 12b-2 to improve their application and to assist registrants in making more meaningful determinations of whether a subsidiary or an acquired or disposed business is significant. In addition, to address the unique attributes of investment companies and business development companies, the SEC updated the significance tests in Rule 1-02(w), Securities Act Rule 405, and Exchange Act Rule 12b-2 by (i) revising the investment test to compare the registrant’s investments in and advances to the acquired or disposed business to the registrant’s aggregate worldwide market value if available; (ii) revising the income test by adding a revenue component; (iii) expanding the use of pro forma financial information in measuring significance; and (iv) conforming, to the extent applicable, the significance threshold and tests for disposed businesses to those used for acquired businesses. The amendment became effective January 1, 2021. In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for convertible instruments by removing certain separation models (including the cash conversion model and the beneficial conversion feature model) for convertible instruments. As a result, for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815 or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features are no longer separated from the host contract. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, and convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost as long as no other features require bifurcation and recognition as derivatives. This ASU is effective for fiscal years beginning after December 15, 2021. In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables–Nonrefundable Fees and Other Costs, (“ASU 2020-08”). This ASU clarifies that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The adoption of ASU 2020-08 did not have a material impact on its consolidated financial statements since the Company does not have any convertible debt. On November 15, 2019, the FASB delayed the effective date of FASB ASC Topic 326 for certain small public companies and other private companies. As amended, the effective date of ASC Topic 326 was delayed until fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies and not-for-profit entities Credit Losses (Topic 326) — Measurement of Credit Losses on Financial Instruments.” This ASU amends several aspects of the measurement of credit losses on certain financial instruments, including replacing the existing incurred credit loss model and other models with the Current Expected Credit Losses (CECL) model and amending certain aspects of accounting for purchased financial assets with deterioration in credit quality since origination. Rule 2a-5 under the 1940 Act was adopted by the SEC in December 2020 and establishes requirements for determining fair value in good faith for purposes of the 1940 Act. As noted above, the if the Company were determined to be an Investment Company we would be required to comply with the rule. We are evaluating the impact of adopting Rule 2a-5 on the consolidated financial statements and intend to comply with the new rule’s requirements should we be required to do so on or before the compliance date in September 2022. The Company’s management reviewed all recently issued accounting standard updates (“ASU’s”) not yet adopted by the Company and does not believe the future adoptions of any such ASU’s may be expected to cause a material impact on the Company’s consolidated financial condition or the results of its operations. NOTE 2 – DISCONTINUED OPERATIONS On December 29, 2021, The Company’s wholly owned subsidiary BIGToken completed a merger transaction with BritePool, Inc. (“BritePool”) (the “Merger”). As a result of the Merger, BIGToken issued 183,445,351,631 shares of its common stock (“Acquisition Shares”) for all of the issued and outstanding equity shares of BritePool. On December 29, 2021, as a condition for the closing of the Merger, the Company exchanged 149,562,566,584 shares of BIGToken common stock for 242,078 shares of BIGToken’s Series D Convertible Preferred Stock (“Series D Stock”) (the “Exchange”). Simultaneously with the Exchange, the Company converted 22,162 shares of the Series D Stock into 13,692,304,136 shares of BIGToken’s common stock, or approximately 4.99% of the issued and outstanding shares of BIGToken’s common stock. The Series D Stock is non-redeemable, non-voting with liquidation preference being the same as if the Series D Stock had been converted into shares of FVPD common stock. Each share of the Series D Stock is convertible into 617,828 shares of BIGToken’s common stock, subject to a conversion limitation such that the number of shares of the BIGToken common stock outstanding immediately after giving effect to the issuance of BIGToken common stock to the Company upon conversion of the Series D Stock shall not be more than 4.99% (“Beneficial Ownership Limitation”). However, the Company upon not less than sixty-one days’ prior notice to BIGToken, may increase or decrease the Beneficial Ownership Limitation amount provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of BIGToken’s common stock outstanding immediately after giving effect to the issuance of the common stock upon conversion of the Series D Stock. As of the Exchange date, the Series D Stock and common stock of BIGtoken had a fair value of approximately $31,000. F-19 BIGToken’s issuance of the Acquisition Share and the Exchange caused the Company’s BIGToken common stock holdings to decrease from approximately 66% to approximately 4.99%; Therefore, the Company no longer controlled the operations of BIGToken. Given the Company’s loss of control over the operations of BIGToken, the Company deconsolidated BIGToken, as of December 29, 2021, in accordance with ASC 810 Consolidations. Based on the deconsolidation of BIGToken, the Company recognized a loss of $10,684,000 calculated, as follows: Consideration received $ - Fair value of Series D Stock and Common stock 31,000 Carrying amount of non-controlling interest of BIGToken 6,045,000 Previous equity adjustments of non-controlling interest (12,510,000) (6,434,000) Book basis of investment in BIGToken 4,250,000 Loss on disposal of subsidiary $ (10,684,000) As the transaction causing the deconsolidation of BIGToken, was a result of BIGToken issuing additional shares of its common stock for acquisition of BritePool, the Company received no cash or other consideration. In accordance with ASC 820 – Fair Value Measurement, the Company determined the Series D Stock would be classified as level 3 asset consistent with the account policy for determining the fair value of an asset or liability. As there is no observable market for quoted market price for an identical asset. The Company engaged an independent third party valuation expert to estimate the fair value of the Series D Stock. As of the Exchange date, the carrying basis of the non-controlling interest was approximately $6,465,000, which included approximately $12,510,000 related to BIGToken’s recording of a $5,860,000 Beneficial conversion feature for convertible preferred stock, issuance of convertible preferred stock in the amount of $5,860,000, $885,000 for the fair value of warrants issued to the Company’s debenture holders and less other amounts of approximately $95,000. These transactions were recognized in equity outside of the accumulated other comprehensive income (loss) related to ownership interest, which did not result in a loss of control, so they would not be included in the calculation of the gain or loss from deconsolidation because these amounts resulted from transactions among shareholders and are not directly attributable to the non-controlling interest. The following table presents the aggregate carrying amounts of assets and liabilities of discontinued operations of BIGToken in the consolidated balance sheet as of December 31, 2020: Carrying amounts of assets included as part of discontinued operations: Cash and cash equivalents $ 1,000 Accounts receivable, net 1,199,000 Prepaid expenses and other current assets 6,000 Property and equipment, net 1,000 Goodwill 5,445,000 Intangible assets, net 917,000 Total assets classified as discontinued operations in the consolidated balance sheet $ 7,569,000 Carrying amounts of liabilities included as part of discontinued operations: Accounts payable and accrued expenses $ 853,000 Other current liabilities 452,000 Total liabilities classified as discontinued operations in the consolidated balance sheet $ 1,305,000 F-20 The financial results of BIGToken are presented as income from discontinued operations, net of income taxes on our consolidated income through December 29, 2021, when our deconsolidation occurred. The following table presents the financial results of BIGToken: Year ended December 31, 2021 2020 Revenues $ 3,431,000 $ 2,168,000 Cost of revenue 1,090,000 800,000 Gross profit 2,341,000 1,368,000 Operating expense Employee related costs 2,419,000 3,212,000 Marketing and selling expenses 1,136,000 958,000 Platform costs 1,350,000 707,000 Depreciation and amortization 530,000 531,000 General and administrative expenses 4,152,000 530,000 Total operating expense 9,587,000 5,938,000 Loss from operations of discontinued operations (7,246,000) (4,570,000) Other expense Financing costs (5,872,000) - Realized loss on marketable securities - (71,000) Impairment of goodwill (1,258,000) - Total other expense (7,130,000) (71,000) Loss from discontinued operations before provision for income taxes (14,376,000) (4,641,000) Provision for income taxes - Loss from discontinued operations, net of income taxes $ (14,376,000) $ (4,641,000) NOTE 3 – ACQUISITIONS On September 15, 2020 (“Closing Date”), an Agreement and Plan of Merger (the “Agreement”) was entered into by and among SRAX, Inc. a Delaware corporation (“Parent”), Townsgate Merger Sub 1, Inc., a Delaware corporation and a direct wholly-owned subsidiary of Parent (“Merger Sub 1”), LD Micro, Inc., a Delaware corporation and a direct wholly-owned subsidiary of Parent (“Merger Sub 2”), LD Micro, Inc., a California corporation (the “Acquiree”, “LD Micro”), and Christopher Lahiji, the sole stockholder of the Acquiree (the “Stockholder”). Merger Sub 1 and Merger Sub 2 are sometimes collectively referred to as “Merger Sub.” The parties intend that Merger Sub 1 will be merged with and into the Acquiree (the “First Merger”), with the Acquiree surviving the First Merger, and then the Acquiree will be merged with and into Merger Sub 2 (the “Second Merger,” and together with the First Merger, the “Merger”), with Merger Sub 2 surviving the Second Merger. As consideration, the Company will pay cash payable as follows: (i) $1,000,000 at the Closing, (ii) $1,000,000 on January 1, 2021, (iii) $1,000,000 on April 1, 2021, and (iv) $1,000,000 on July 1, 2021 and subject to adjustment or off-set. Additionally, the Company issued 1,600,000 shares of its Class A common stock. The total consideration to be paid by the Company is $7,610,000, as adjusted, as follows: Calculation of the purchase price: Fair value of stock at closing $ 4,264,000 Cash at closing 1,000,000 Deferred payments 2,771,000 Less cash received (303,000) Transaction expenses 10,000 Working capital adjustment (132,000) Purchase price $ 7,610,000 The transaction was accounted for using the acquisition method. Accordingly, goodwill has been measured as the excess of the total consideration over the amounts assigned to the identifiable assets acquired and liabilities assumed. The deferred payments of $3,000,000 were discounted using the yield on a CCC rated corporate debt for 3-month, 6-month and 9-month maturities, respectively. The implied discount is approximately $229,000, which will be amortized over the term on the payments. The purchase price includes working capital adjustments that are based on our preliminary estimates and assumptions that are subject to change. F-21 The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed: Accounts receivable, net $ 30,000 Intangibles 468,000 Goodwill 7,706,000 Accounts payable and accrued liabilities (324,000) Payroll protection loan (42,000) Other current liabilities (97,000) Deferred tax liability (131,000) Net assets acquired $ 7,610,000 Intangible assets consisted of the following: Fair Value Life in Years Trademark $ 271,000 Indefinite Domain name 3,000 Indefinite Noncompete 8,000 5 years Customer list 186,000 3 years $ 468,000 The estimated fair values for the trademark and domain name were determined by using the relief-from-royalty method. The estimated fair value for the customer list and noncompete were determined using the excess earnings and differential method of comparing having an asset in-place versus not having the asset in place, respectively. The Company has estimated the preliminary purchase price allocations based on historical inputs and data as of September 15, 2020. The preliminary allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations and intangible assets acquired; (iii) finalization of the valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration. During the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these assets or liabilities as of that date. The amounts of revenue and earnings of the Acquiree since the acquisition date included in the consolidated statements of operations for the year ended December 31, 2020 follows: Revenues $ - Net loss $ (51,000) The following pro forma information presents the combined results of operations as if the acquisitions had been completed on January 1, 2020. The pro forma results include the amortization associated with the preliminary estimates for the acquired intangible assets. The pro forma results do not reflect any cost saving synergies from operating efficiencies, or the effect of the incremental costs incurred in integrating the two companies. Accordingly, these pro forma results are presented for informational purpose only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations. F-22 Pro Forma Consolidated Statements of Operations For the Year ended December 31, 2020 SRAX, Inc. LD Micro, Inc. Pro Forma Adjustment Pro Forma Combined Revenues $ 6,479,000 $ 937,000 $ - $ 7,416,000 Cost of revenues (1,789,000) (98,000) - (1,887,000) Operating expenses (11,722,000) (858,000) 171,000 (12,409,000) Other expense (3,011,000) (1,000) - (3,012,000) Provision for income taxes (21,000) - - (21,000) Net loss $ (10,064,000) $ (20,000) $ 171,000 $ (9,913,000) The following summarizes the pro forma adjustments made for the year ended December 31, 2020: Amortization of intangibles acquired $ 64,000 Employee related costs (235,000) Financing costs - Net income (loss) $ (171,000) Amortization relates to the acquired noncompete and customer list amounting to $2,000 and $62,000, respectively for the year ended December 31, 2020. Employee related cost are contracted cost amounting to $235,000 for the year ended December 31, 2020. NOTE 4 – SALE AND PURCHASE OF ACCOUNTS RECEIVABLE On January 22, 2020 and January 30, 2020, the Company entered into financing agreements, with a single unrelated purchaser to sell, with full recourse, certain accounts receivable with a face value of $454,000 and $75,000, respectively, for a purchase price of $454,000 and $56,000, respectively. Transactions under these agreements were accounted for as financing of accounts receivable and the related accounts receivable was not removed from our consolidated balance sheet at the time of the sales transactions, a liability was recorded for the proceeds received. The terms of the agreements are as follows: Pursuant to the initial purchase agreement, commencing on March 24, 2020, the purchaser may, at its sole discretion, exercise a put option, to cause the Company to purchase from purchaser, any of the outstanding January 22, 2020 receivables which were not collected by the purchaser. Effective April 9, 2020, the put option was extended until June 23, 2020. The purchase price payable by Company to the Purchaser for the receivables upon exercise of the Put Option shall be equal to one hundred and thirty-six percent (136%) of the then remaining outstanding balance of the applicable receivables. Upon the occurrence of a payment made on the applicable receivables, the Company is required to pay a true up amount as follows: a. ten percent (10%) of the portion of the receivables which are paid on or before the 30th day following the effective date of the agreement; b. twenty percent (20%) of the portion of the receivables which are paid after the 30th day but on or before the 60th day following the effective date of the agreement; and c. thirty-six percent (36%) of the portion of the receivables which are paid after the 60th day following the effective date of the agreement. In order to secure performance by the Company, the purchaser was granted a security interest in: (i) 239,029 shares of the Company’s Class A common stock in connection with the sale of the $454,000 receivable and (ii) 29,519 shares of the Company’s Class A common stock in connection with the sale of the $75,000 receivable. The shares have been issued and are being held by the Company’s transfer agent. Since the shares are not outstanding, the Company has treated them as shares reserved for collateral. F-23 Since the purchaser of the receivables has recourse, the Company accounted for the purchase price as a liability. Upon the purchaser’s election of the put option or the true up, as applicable the Company will treat the put option price or the true up amounts as interest. 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 put option date as described above to June 23, 2020 and June 30, 2020 for the sale of receivables 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, the Purchaser converted the payable of $510,000 and accrued interest of $184,000 (“Old Debt”) into approximately $788,000 of the OID Convertible Notes payable (“Debentures”) (See Note 17 - OID Convertible Debentures). The conversion was treated as an extinguishment of debt as prescribed by ASC 470-50 – Debt Modification and Extinguishment. At the date of issuance, the Debenture had a fair market value of approximately $815,000. The transaction created a loss on extinguishment of approximately $546,000, which consisted of (i) the difference of value between the Old Debt and the fair value of the new debt of approximately $95,000, (ii) the difference between the face value of the debenture and the fair value of the Debenture of approximately $27,000 and (iii) $424,000 for fair value of warrants issued with the Debenture. Also, since the Debenture was convertible into the Company’s common stock, a $27,000 premium associated with the conversion feature was recorded as additional paid in capital. Since the purchaser of the receivables has recourse, the Company accounted for the purchase price as a liability. Upon the purchaser’s election of the put option or the true up, as applicable the Company will treat the put option price or the true up amounts as interest. In December 2020, the Company entered into an agreement with a third-party lender whereby it sold the Company’s right to future subscription revenues of $570,000 for net proceeds of $528,000. Under the terms of the agreement, the Company may borrow funds collateralized by the right to the revenues from Sequire platform contracts. The third party lender receives a discount on the amount sold and remits the net amount to the Company. The Company bears the risk of credit loss on the contracts. These transactions are accounted for as secured borrowing arrangements and not as a sale of financial assets. In December 2021, the Company entered into another agreement through which it sold future subscriptions amounting to $625,000 for net proceeds of $576,000. The amount of borrowings outstanding was approximately $631,000 as of December 31, 2021 and $570,000 at December 31, 2020. As of December 31, 2021, our availability to draw additional funds through this agreement was approximately $1,000,000. These balances are included with Accounts Payable and Accrued Expenses within our consolidated balance sheet. On October 29, 2021, the Company (“Purchaser”) and BIGtoken (“Seller”) entered into a receivable purchase and sale agreement whereby BIGtoken sell, assign, transfer, convey and deliver to the Company all rights, title and interest for its receivable aggregating $352,000 for a purchase price of $327,000, sup representing a 7% discount. As of December 31, 2021, the outstanding receivable amounts to $352,000. NOTE 5 – CONTRACTS RECEIVABLE Contracts receivable represents amounts for which non-cancellable revenue contracts with customers have been finalized but the payment in the form of securities issued by the customer which could be a common stock, preferred stock or convertible debentures have not been received by the Company. Contracts receivable that will be received during the succeeding 12-month period is recorded as current contracts receivable, and the remaining portion, if any, is recorded as long-term contracts receivable. As of December 31, 2021 and 2020, contracts receivable amounted to $844,000 and none, respectively. NOTE 6 – MARKETABLE SECURITIES During the second quarter of 2020, the Company began offering customers of its Sequire segment who purchase services on the Company’s proprietary SaaS platform the option to pay the contract price in securities issued by the Customer which could be a common stock, preferred stock or convertible debentures. The customer’s securities must be trading on a United States securities exchange. In accordance with ASC 606 - Revenue Recognition, the Company will value the shares received at the fair market value of the date the contract is executed. The shares received will be accounted for in accordance with ASC 320 and ASC 321 – Investments – Debt and Equity Securities, as such the shares will be classified as available-for-sale securities and will be measured at each reporting period at fair value with the unrealized gain or (loss) as a component of other income (expense). Upon the sale of the shares, the Company will record the final gain or (loss) in the consolidated statement of operations as a component of net income (loss). F-24 The movement in this account is as follows: Balance as of December 31, Common Convertible Preferred 2021 Stock Debentures Stock Warrants Balances at beginning of year $ 8,447,000 $ 7,764,000 $ 683,000 $ - $ - Additions 34,914,000 29,281,000 4,602,000 1,031,000 - Sale of marketable securities (8,666,000) (8,156,000) (510,000) - - Designation for dividend distribution (10,790,000) (10,577,000) (213,000) - - Change in fair value (8,288,000) (7,577,000) (375,000) (432,000) 96,000 Balances at end of year $ 15,617,000 $ 10,735,000 $ 4,187,000 $ 599,000 $ 96,000 Balance as of December 31, Common Convertible 2020 Stock Debentures Balances at beginning of year $ 83,000 $ 83,000 $ — Additions 8,406,000 7,496,000 910,000 Sale of marketable securities (916,000) (916,000) — Change in fair value 874,000 1,101,000 (227,000) Balances at end of year $ 8,447,000 $ 7,764,000 $ 683,000 The Company’s sales of securities for the year ended December 31, 2021, were approximately $8,666,000, with a book basis of approximately $7,862,000 which represented a gain of $804,000, which the Company recorded as other income included in the gains from marketable securities. The Company accounts for its investments in equity securities in accordance with ASC 321-10 Investments - Equity Securities. The equity securities may be classified into two categories and accounted for as follows: ● Equity securities with a readily determinable fair value are reported at fair value, with unrealized gains and losses included in earnings. Any dividends received are recorded in interest income, the fair value of equity investments with fair values is primarily obtained from third-party pricing services. ● Equity securities without a readily determinable fair value are reported at their cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer and their impact on fair value. Any dividends received are recorded in interest income. For equity investments without readily determinable fair values, when an orderly transaction for the identical or similar investment of the same issuer is identified, we use the valuation techniques permitted under ASC 820 Fair Value Measurement to evaluate the observed transaction(s) and adjust the fair value of the equity investment. See discussion of the Company’s valuation policy in Note 1 – Fair Value of Financial Instruments. NOTE 7 – DESIGNATED ASSETS FOR RETURN OF CAPITAL On August 17, 2021, the Company announced that it will be issuing a one-time dividend consisting of a share of series A preferred stock to shareholders, debenture holders, and certain warrant holders (“Recipients”) as of record on September 20, 2021. The board designated certain of the Company’s marketable securities (“Designated Assets”) to be used when liquidated, as a return of capital to the Recipients. See Note 19 - Series A Preferred Stock for more details. As of December 31, 2021, designated assets consist of the following: Cash $ 686,000 Marketable securities 3,239,000 Balance $ 3,925,000 F-25 The movement in designated assets is as follows: Designated assets as of September 20, 2021 $ 6,387,000 Sale of designated assets (770,000) Proceeds from sale of designated assets 686,000 Change in fair value of designated assets (2,378,000) Balances as of December 31, 2021 $ 3,925,000 The Company’s sale of the designated marketable securities for the year ended December 31, 2021, were approximately $686,000, with a book basis of approximately $770,000 which represented a loss of $84,000, which the Company recorded as other expense included in the loss from designated assets. NOTE 8 – NOTES RECEIVABLE On October 30, 2020, a unit redemption agreement was entered into by and between the Company and Haylard MD, LLC (“Haylard”). The Company owns 10,000,000 Class A Units of Haylard. The Company desires to sell and transfer to Haylard, and Haylard desires to redeem and purchase from the Company. The price to be paid for all of the Units shall be $6,718,000 at closing and $960,000 upon the earlier of (a) the third anniversary of the closing and (b) a Sale of Haylard, for a total consideration of $7,678,000, provided that if Haylard consummates a Sale of Haylard within one hundred and eighty (180) calendar days after the closing, and the amount to be paid in respect of a Class A Unit in connection with such transaction after taking into account all fees, costs, expenses, escrows, indemnities, purchase price adjustments, repayments of indebtedness and other holdbacks as reasonably determined and calculated in good faith by Haylard is greater than $0.7677543, then Haylard shall pay to the Company an amount equal to such excess for each Unit redeemed and purchased hereunder by wire transfer of immediately available funds to the account specified by the Company. On October 30, 2020, a unit redemption agreement was entered into by and between the Company and MD CoInvest, LLC, (“CoInvest”). The Company owns 420,000 Units of CoInvest. The Company desires to sell and transfer to CoInvest, and CoInvest desires to redeem and purchase from the Company. The price to be paid for all of the Units shall be $282,000 at closing and $40,000 upon the earlier of (a) the third anniversary of the closing and (b) a Sale of CoInvest, for a total consideration of $322,000, provided that if CoInvest consummates a Sale of CoInvest within one hundred and eighty (180) calendar days after the closing, and the amount to be paid in respect of a Class A Unit in connection with such transaction after taking into account all fees, costs, expenses, escrows, indemnities, purchase price adjustments, repayments of indebtedness and other holdbacks as reasonably determined and calculated in good faith by CoInvest is greater than $0.7677543, then CoInvest shall pay to the Company an amount equal to such excess for each Unit redeemed and purchased hereunder by wire transfer of immediately available funds to the account specified by the Company. The deferred payments of $960,000 and $40,000 were discounted using the yield on a CCC rated corporate debt for 3-year maturity. The implied discount is approximately $107,000, which will be amortized over 3 years. Notes receivable as of December 31, 2021 and 2020 amounted to $935,000 and $893,000, respectively. NOTE 9 – PROPERTY AND EQUIPMENT Property and equipment consist of the following as of December 31: 2021 2020 Office equipment $ 471,000 $ 402,000 Accumulated depreciation (357,000) (285,000) Property and equipment, net $ 114,000 $ 117,000 Depreciation expense for the years ended December 31, 2021 and 2020 was $72,000 and $28,000, respectively. F-26 NOTE 10 – INTANGIBLE ASSETS Intangible assets consist of the following as of December 31: 2021 2020 Non-compete agreement $ 1,258,000 $ 1,258,000 Intellectual property 756,000 756,000 Acquired Software 756,000 617,000 Internally developed software 2,726,000 2,048,000 Trademark 271,000 271,000 Customer list 186,000 186,000 Domain name 17,000 36,000 Total cost 5,970,000 5,172,000 Accumulated amortization (4,527,000) (3,680,000) Intangible assets, net $ 1,443,000 $ 1,492,000 Amortization expenses amounted to $847,000 and $744,000 for the years ended December 31, 2021 and 2020, respectively. Trademark has indefinite life and not subject to amortization. The estimated future amortization expense for the years ended December 31, are as follows: 2022 $ 632,000 2023 404,000 2024 136,000 $ 1,172,000 As of December 31, 2021 and 2020, goodwill amounted to $17,906,000, an addition of $7,706,000 in 2020 was due to acquisition of LD Micro (see Note 3 - Acquisitions). There were no impairments during the years ended December 31, 2021 and 2020. NOTE 11 – RIGHT TO USE ASSET We determine whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset. Some of our leases include both lease and non-lease components which are accounted for as a single lease component as we have elected the practical expedient. Some of our operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year and, as such, are accounted for as short-term leases as we have elected the practical expedient. Operating leases are included in the right-of-use lease assets, other current liabilities and long-term lease liabilities on the Consolidated Balance Sheet. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, our incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term. We had no financing leases as of December 31, 2021. We have operating leases for office space. Our leases have remaining lease terms of approximately 1.75 years. We consider renewal options in determining the lease term used to establish our right-of-use assets and lease liabilities when it is determined that it is reasonably certain that the renewal option will be exercised. F-27 As of December 31, 2021, there were no material variable lease costs or sublease income. Cash paid for operating leases are classified in operating expenses and were $175,000 and $192,000 for the years ended December 31, 2021 and 2020, respectively. The following tables summarize the lease expense for the year ended December 31: 2021 2020 Operating lease expense $ 163,000 $ 163,000 Short-term lease expense 12,000 29,000 Total lease expense $ 175,000 $ 192,000 The below table summarizes these lease asset and liability accounts presented on our accompanying Consolidated Balance Sheets for the year ended December 31: Operating Leases* Consolidated Balance Sheet Caption 2021 2020 Operating lease right-of-use assets - non- current Right of use asset $ 257,000 $ 366,000 Operating lease liabilities – current Other current liabilities $ 130,000 $ 109,000 Operating lease liabilities - non-current Right to use liability - long term 114,000 243,000 Total operating lease liabilities $ 244,000 $ 352,000 Components of Lease Expense We recognize lease expense on a straight-line basis over the term of our operating leases, as reported within “selling, general and administrative” expense on the accompanying consolidated statement of operations. Weighted Average Remaining Lease Term and Applied Discount Rate Weighted Average Remaining Lease Term Weighted Average Discount Rate Operating leases as of December 31, 2021 1.75 years 18% Future Contractual Lease Payments as of December 31, 2021 The below table summarizes our (i) minimum lease payments over the next five years, (ii) lease arrangement implied interest, and (iii) present value of future lease payments for the years ending December 31: Operating Leases - future payments 2022 163,000 2023 123,000 Total future lease payments, undiscounted 286,000 Less: Implied interest (42,000) Present value of operating lease payments 244,000 NOTE 12 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses as of December 31, are comprised of the following: 2021 2020 Accounts payable, trade $ 1,938,000 $ 1,900,000 Accrued expenses 1,518,000 537,000 Accrued compensation 213,000 232,000 Accrued commissions 303,000 32,000 Accrued interest 123,000 7,000 Accounts payable and accrued expenses $ 4,095,000 $ 2,708,000 F-28 NOTE 13 – DEFERRED REVENUE Deferred revenue represents amounts billed for which revenue has not yet been recognized. Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current deferred revenue, and the remaining portion, if any, is recorded as long-term deferred revenue. As of December 31, 2021, deferred revenue was $12,859,000, as compared to $4,842,000 as of December 31, 2020. NOTE 14 – OTHER CURRENT LIABILITIES The following table summarizes the composition of other current liabilities presented on our accompanying Consolidated Balance Sheets: December 31, 2021 December 31, 2020 Operating lease liabilities - current $ 130,000 $ 109,000 Other current liabilities 633,000 3,308,000 Total other current liabilities $ 763,000 $ 3,417,000 As of December 31, 2021 and 2020, other current liabilities consist of amounts payable on a factoring facility amounting to $633,000 and $573,000, respectively (See Note 4 – Sale and Purchases of Accounts Receivable) and deferred payments amounting to $2,735,000 related to the acquisition of LD Micro (See Note 3 – Acquisitions) as of December 31, 2020. During the year ended December 31, 2021, the Company made $3,004,000 in deferred contractual payments related to the LD Micro acquisition. NOTE 15 - PAYCHECK PROTECTION PROGRAM LOAN On April 17, 2020, we entered into a promissory note evidencing an unsecured approximately $1,084,000 loan under the Paycheck Protection Program (PPP). The loan is being made through Cross River Bank. The term of the loan is two years with an interest rate of 1%, which shall be deferred for the first six months of the term of the loan. The promissory note evidencing the loan contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, and/or filing suit and obtaining judgment against the Company. On September 15, 2020, $42,000 of the payroll protection loan of LD Micro was assumed in connection with the acquisition. This amount is expected to be forgiven, otherwise the Company will be reimbursed by Sellers of LD Micro. This is classified under current liabilities. During the year ended December 31, 2021, the PPP loan in the of $1,116,000 was forgiven. As of December 31, 2021 and 2020, PPP loans outstanding amounted to $10,000 and $1,126,000, respectively. NOTE 16 – SHORT TERM PROMISSORY NOTES In February 2020, the Company entered into three separate short-term promissory notes with an aggregate principal value of $450,000 (the “Notes”), of which $100,000 was borrowed from the Company’s Chief Financial Officer. The notes are due and payable on May 12, 2020 (“Maturity Date”). The notes will accrue interest as follows: (i) on the origination date, ten percent (10%) of the principal amount was added to each note, (ii) on March 12, 2020, an additional ten percent (10%) of the principal amount was added to each note, and (iii) on April 12, 2020, an additional sixteen percent (16%) of the principal amount was added to each notes. F-29 The note holders were granted security interests (in amounts equal to the face value of their investments on a dollar for share basis) in an aggregate of 450,000 shares of the Company’s Class A common stock (“Security Shares”). The shares have been issued and are being held by the Company’s transfer agent. Since the shares are not outstanding, the Company has treated them as shares reserved for collateral. The interest imputed on the origination date was treated as an original issue discount with the $45,000 amortized over the term of the Notes. On each of the interest date, the Company accrued and expensed the related interest. On the Maturity Date, one of the Note’s was amended to (i) extend the maturity date to December 31, 2020 and (ii) to release 100,000 shares of the Security Shares. The modification was treated as an extinguishment of debt as prescribed by ASC 470-50 – Debt Modification and Extinguishment. Based on the amended terms the fair value of the amended note approximated the book value of the old Note. The fair value of the Security Shares was approximately $181,000, which was expensed as a loss on the extinguishment. On June 30, 2020, the short-term note payable to the Company’s Chief Financial Officer in the amount of approximately $136,000 was repaid from the proceeds of the OID Convertible Notes Payable. On June 30, 2020, the two remaining Note Holders converted the Notes of approximately $350,000 and accrued interest of approximately $126,000 (“Old Debt”) into approximately $541,000 of the OID Convertible Debentures (See Note 17 - OID Convertible Debentures). The conversion was treated as an extinguishment of debt as prescribed by ASC 470-50 – Debt Modification and Extinguishment. At the date of issuance, the Debentures had a fair market value of approximately $560,000. The transaction created a loss on extinguishment of approximately $375,000, which consisted of (i) the difference of value between the Old Debt and the fair value of the Debentures of approximately $65,000, (ii) the difference between the face value of the debenture and the fair value of the Debenture of approximately $19,000 and (iii) $291,000 for fair value of warrants issued with the Debenture. Also, since the Debenture was convertible into the Company’s common stock, a $18,000 premium associated with the conversion feature was recorded as additional paid in capital. As of December 31, 2020, there is no outstanding loan balance on this account. NOTE 17 – TERM LOAN NOTE On February 28, 2020, the Company entered into a term loan and security agreement with a BRF Finance Co. LLC as lender. Pursuant to the loan agreement, the Company can borrow up to $5,000,000, subject to the conditions described below. Under the loan: (i) the Company received an initial draw of $2,500,000 on February 28, 2020 and (ii) the Company is eligible to receive an additional $2,500,000 loan within (30) days of the Company entering into an at the market sales agreement with the lender and the filing of an at the market offering on Form S-3 with the SEC registering the shares to be sold pursuant to the at the market sales agreement. The Company agreed to file the ATM by May 1, 2020. Additionally, the Company will be required to increase the dollar amount authorized under the at the market sales agreement each time additional capacity of at least $1,000,000 is available under our shelf registration statement. The loan is secured by substantially all of the assets of the Company pursuant to the loan agreement and the intellectual property security agreement entered into in connection with the transaction. The loan bears interest at ten percent (10%) per annum and has a maturity date of March 1, 2022. Beginning on August 1, 2020 and continuing on the first day of each month thereafter until the maturity date, the Company will make monthly payments of principal and interest on an eighteen (18) month straight line amortization schedule, based on the principal outstanding on July 31, 2020. Additionally, the Company will have the option of a one (1) time payment- in-kind payment for a monthly required payment of principal and interest, which will defer such payments and result in a recalculation of the amortization schedule. In the event that the Company is late on any payments under the Loan, a late charge of three percent (3%) of the amount of the payment due will be assessed. F-30 At origination the Company paid lender: (i) an origination fee of $300,000, (ii) $35,000 in attorneys’ fees reimbursement, and (iii) certain other costs and expenses associated with the completion of the loan, including but not limited to escrow fees and recording fees. Accordingly, the Company received net proceeds of approximately $2,164,000 as of May 1, 2020. The Loan may be prepaid in whole or in part at any time at the discretion of the Company. The loan also provides for mandatory prepayments of all of the net cash received upon (i) a sale of the company’ assets, (ii) raising additional capital through the issuance of equity or debt securities, or (iii) sales under the at the market sales agreement described above. As part of the loan the Company agreed to issue to Lender: (i) 500,000 Common Stock purchase warrants on the date of the origination date and (ii) 500,000 Common Stock purchase warrants on the date of the second drawdown. The warrants have an exercise price equal to a 25% premium of the closing price of the Common Stock on their respective date of issue (provided that the exercise price of the warrants cannot be less than $2.50 per share, subject to adjustment contained therein). The initial warrant has an exercise price of $3.60. The warrants will expire on October 31, 2022. The warrants allow for cashless exercise in the event that they are not subject to a registration statement on the six (6) month anniversary of their respective issuances. The warrants do not contain any price protection or non-standard anti-dilution provisions. In accordance with ASC 470 - Debt, the Company has allocated the cash proceeds to the loan and the warrants. The relative fair value of the initial warrant issued was $83,000, which is being amortized and expensed over the term of the Notes. The Company evaluated the loan and warrant agreements in accordance with ASC 815 Derivatives and Hedging. Based on this evaluation, the Company has determined that no provisions required derivative accounting. On June 30, 2020, the principal and interest of approximately $2,585,000 was paid from the proceeds from the OID Convertible Debentures. As of December 31, 2020, there is no outstanding loan balance on this account. NOTE 18 – OID CONVERTIBLE DEBENTURES On June 25, 2020, the Company entered into a definitive securities purchase agreement (the “Securities Purchase Agreement or Transaction”) with certain accredited and institutional investors (the “Purchasers”) for the purchase and sale of an aggregate of: (i) $16,101,000 in principal amount of Original Issue Discount Senior Secured Convertible Debenture (the “Debentures”) for $14,169,000 (representing a 12% original issue discount) (“Purchase Price”) and (ii) warrants to purchase up to 6,440,561 shares of the Company’s Class A common stock (the “Warrants”) in a private placement (the “Offering”). The Purchase Price consists of (a) $13,000,000 in cash and (b) the cancellation of $1,169,000 in outstanding debt, consisting of the accounts receivable loans of $510,000 with accrued interest of $184,000, and the short-term promissory notes of $350,000 with accrued interest of $125,000. The Debentures, which mature on December 31, 2021, pay interest in cash at the rate of 12.0% per annum commencing on June 30, 2021, with such interest payable quarterly, beginning on October 1, 2021. Commencing after the six-month anniversary of the issuance of the Debentures, the Company will be required to make amortization payments (“Amortization Payments”) with each Purchaser having the right to delay such Amortization Payments by a six month period up to three separate times (each, an “Extension”) in exchange for five percent in principal being added to the balance of such applicable Debenture on each such Extension. Accordingly, upon a Purchaser exercising three Extensions, such Purchaser’s Debenture will mature and be due and payable on June 30, 2023. Beginning on the date that the first Amortization Payment is due, and on a monthly basis thereafter, the Company will be required to pay one hundred fifteen percent of the value of one-twelfth of the outstanding principal plus any additional accrued interest due. In the event a Purchaser converts a portion of its Debenture into shares of the Company’s Common Stock, such amount will be deducted from the next applicable Amortization Payment. In the event such conversion exceeds the next applicable Amortization Payment, such excess amount will be deducted, in reverse order, from future Amortization Payments. The Company’s obligations under the Debentures are secured by substantially all of the assets of the Company pursuant to a security agreement (the “Security Agreement”). F-31 The Debentures are convertible at the option of the holder into shares of the Company’s common stock at an initial conversion price of $2.69 per share, subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations. The Debentures do not have any price protection or price reset provisions with respect to future issuances of securities. Subject to the Company’s compliance with certain equity conditions, upon ten trading days’ notice to the Purchasers, the Company has the right to redeem the Debentures in cash at 115% of their outstanding principal, plus accrued interest. Additionally, in the event that (i) the Company sells or reprices any securities (each, a “Redemption Financing”), or (ii) the Company disposes of assets (except those sold or transferred in the ordinary course of business) (each, an “Asset Sale”), then the Purchasers shall have the right to cause the Company (a) in the event of a Redemption Financing at a price per Common Stock equivalent of $2.50 or less per share, the Purchasers may mandate that 100% of the proceeds be used to redeem the Debentures (b) in the event of a Redemption Financing at a price per Common Stock equivalent of greater than $2.50 per share, the Purchasers may mandate that up to 50% of the proceeds be used to redeem the Debentures, and (c) in the event of an Asset Sale, the Purchasers may mandate that up to 100% of the proceeds be used to redeem the Debentures. The Debentures also contain certain customary events of default provisions, including, but not limited to, default in payment of principal or interest thereunder, breaches of covenants, agreements, representations or warranties thereunder, the occurrence of an event of default under certain material contracts of the Company, failure to register the shares underlying the Debentures in Warrants (as described below), changes in control of the Company, delisting of its securities from its trading market, and the entering or filing of certain monetary judgments against the Company. Upon the occurrence of any such event of default, the outstanding principal amount of the Debenture plus liquidated damages, interest and other amounts owing in respect thereof through the date of acceleration, shall become, at the Purchaser’s election, immediately due and payable in cash. The Company is also subject to certain negative covenants (unless waived by 67% of the then outstanding Purchasers, and including the lead Purchaser) under the Debentures, including but not limited to, the creation of certain debt obligations, liens on Company assets, amending its charter documents, repayment or repurchase of securities or certain debt of the Company, or the payment of dividends. The Warrants are initially exercisable at 2.50 per share and, are subject to cashless exercise after six months if the shares underlying the Warrants are not subject to an effective resale registration statement. The Warrants are also subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations. The Warrants do not have any price protection or price reset provisions with respect to future issuances of securities. Pursuant to the terms of the Debentures and Warrants, a Purchaser will not have the right to convert any portion of the Debentures or exercise any portion of the Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% or 9.99% (at the Purchaser’s option) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion or exercise, as such percentage ownership is determined in accordance with the terms of the Debentures and the Warrants; provided that at the election of a holder and notice to us such percentage ownership limitation may be increased to 9.99%; provided that any increase will not be effective until the 61st day after such notice is delivered from the holder to the Company. The Company also agreed to use proceeds from the Offering to pay (i) $2,500,000 in outstanding principal plus accrued interest pursuant to the Company’s Term Loan and Security Agreement entered into on February 28, 2020 with BRF Finance Co., LLC (the “Term Loan”) and (ii) $136,000 in outstanding short-term promissory notes and accrued interest (collectively, the “Debt Repayments”). In connection with Securities Purchase Agreement, the Company will issue to the Placement Agent (as defined below), an aggregate of 478,854 Common Stock purchase warrants (“PA Warrants”). The PA Warrants are substantially similar to the Warrants, except that the PA Warrants have an exercise price of $3.3625 per share. The fair value of the PA Warrants at issuance was estimated to be $360,000 based on a risk-free interest rate of .11%, an expected term of 2.417 years, an expected volatility of 96% and a 0% dividend yield. F-32 Pursuant to a registration rights agreement (“Registration Rights Agreement”), the Company has agreed to file a registration statement registering the resale of the shares of the common stock underlying the Debentures and the Warrants within forty-five days from the date of the Registration Rights Agreement. The Company also agrees to have the registration statement declared effective within 90 days from the date of the Registration Rights Agreement and keep the registration statement continuously effective until the earlier of (i) the date after which all of the securities to be registered thereunder have been sold, or (ii) the date on which all the securities to be registered thereunder may be sold without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 under the Securities Act. The Company is also obligated to pay the Investors, as partial liquidated damages, a fee of 2.0% of each Purchaser’s subscription amount per month in cash upon the occurrence of certain events, including our failure to file and(or) have the registration statement declared effective within the time periods provided. Bradley Woods & Co. Ltd. (“Placement Agent”) acted as the placement agent, in connection with the sale of the securities pursuant to the Securities Purchase Agreement. Pursuant to an engagement agreement entered into by and between the Company and the Placement Agent, the Company agreed to pay the Placement Agent a cash commission of $1,040,000. Pursuant to the discussion above, the Company also issued an aggregate of 478,854 PA Warrants to the Placement Agent. The Company has agreed to include the shares of our common stock underlying the PA Warrants to be included in the registration statement to be filed. Additionally, upon the exercise of Warrants issued in the Offering, the Placement Agent will be entitled to eight percent (8%) of the cash proceeds received from such exercises. The Transaction closed on June 30, 2020 (the “Closing Date”), with approximately $3,800,000 cash proceeds received prior to Closing date, $4,200,000 received on the closing date and $5,000,000 received after the closing date. The gross proceeds received from the Offering were approximately $13,000,000 and net proceeds of approximately $9,100,000 after deducting the Placement Agent fees, the Debt Repayments and other offering expenses. Also, the Company reimbursed the lead Purchaser $75,000 for legal fees, which was deducted from the required subscription amount to be paid. The Company evaluated all of the associated financial instruments in accordance with ASC 815 Derivatives and Hedging. Based on this evaluation, the Company has determined that no provisions required derivative accounting. In accordance with ASC 470 - Debt, the Company first allocated the cash proceeds to the loan and the warrants on a relative fair value basis, secondly, the proceeds were allocated to the beneficial conversion feature. During the year ended December 31, 2020, the Company recognized amortization expense of $5,639,000. During the year ended December 31, 2020, holders of debenture principal converted $1,118,000 debenture into 411,626 shares of the Company’s class A common stock. As a result of these conversions and issuance of common stock, the Company wrote-off debt discount and increased additional paid in capital by $434,000. During the year ended December 31, 2020, majority of the debenture holders exercise their rights to delay amortization payment by six months in exchange for 5% additional principal. Total additional principal due to extension amounted to $472,000. During the year ended December 31, 2021, certain Debenture holders converted $8,387,000 of principal into 3,122,167 shares of the Company’s class A common stock shares. As a result of these conversions, the Company reduced the principal balance by approximately $8,387,000 and reduced the debt discount by approximately $2,413,000 for a net book value of $5,974,000, which was transferred to additional paid-in capital. During the year ended December 31, 2021, the holders of the remaining Debentures notified the Company of their election to defer the inception of amortization payments due under the Debentures until June 30, 2022. As a result of their election, the holders are entitled to a 5% increase of their then current principal balance as a fee. The Company recorded this fee as a financing cost during the year ended December 31, 2021. F-33 The table below summarizes the transactions during the year end December 31, 2021: Principal Debt discount Net book value Balance at beginning of year $ 9,386,000 $ (3,370,000) $ 6,016,000 Extension 268,000 - 268,000 Conversion (8,387,000) 2,413,000 (5,974,000) Amortization - 854,000 854,000 Total $ 1,267,000 $ (103,000) $ 1,164,000 As of December 31, 2021, the Company has classified the debt as current liability because the management intends to redeem the remaining convertible debentures within the following 12 months. The table below summarizes the transactions during the year end December 31, 2020: Principal Debt discount Net book value Issuance during the year $ 16,101,000 $ (12,731,000) $ 3,370,000 Extension 472,000 - 472,000 Redemption (6,069,000) 3,037,000 (3,032,000) Conversion (1,118,000) 685,000 (433,000) Amortization - 5,639,000 5,639,000 Total $ 9,386,000 $ (3,370,000) $ 6,016,000 NOTE 19 – COMMITMENTS AND CONTINGENCIES Other Commitments In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties. In addition, the Company has entered indemnification agreements with its directors and certain of its officers and employees that will require the Company to, among other things, indemnify them against certain liabilities that may arise due to their status or service as directors, officers or employees. The Company has also agreed to indemnify certain former officers, directors and employees of acquired companies in connection with the acquisition of such companies. The Company maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its directors and certain of its officers and employees, and former officers, directors and employees of acquired companies, in certain circumstances. It is not possible to determine the maximum potential amount of exposure under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each agreement. Such indemnification agreements may not be subject to maximum loss clauses. Employment agreements We have entered employment agreements with key employees. These agreements may include provisions for base salary, guaranteed and discretionary bonuses and option grants. The agreements may contain severance provisions if the employees are terminated without cause, as defined in the agreements. Litigation From time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. In addition, the Company may receive letters alleging infringement of patent or other intellectual property rights. The Company is not currently a party to any material legal proceedings, nor is the Company aware of any pending or threatened litigation that would have a material adverse effect on the Company’s business, operating results, cash flows or financial condition should such litigation be resolved unfavorably. Business Interruption The continuing COVID-19 global pandemic has caused significant disruption to the economy and financial markets globally, and the full extent of the potential impacts of COVID-19 are not yet known. Circumstances caused by the COVID-19 pandemic are complex, uncertain and rapidly evolving. The impact of COVID-19 has not been significant to the Company’s results of operations, financial condition, and liquidity and capital resources. Although no material impairment or other effects have been identified to date, there is substantial uncertainty in the nature and degree of its continued effects over time. That uncertainty affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions as additional events and information become known. The Company will continue to consider the potential impact of the COVID-19 pandemic on its business operations. F-34 NOTE 20 – SERIES A PREFERRED STOCK On August 17, 2021, the Company announced that it will be issuing a one-time dividend consisting of a share of series A preferred stock (“Preferred Stock”) to certain Qualified Recipients (as defined below) on a 1-for-1 as converted to common stock basis (the “Dividend”). The record date for the Dividend is September 20, 2021 (the “Record Date”). The preferred stock entitles the Qualified Recipients with the right to receive the net proceeds from sales of certain securities of issuers that the Company received through its Sequire Platform services. On September 20, 2021, the Company filed a certificate of designation (the “COD”) of preferences, rights, and limitations of Series A Non-Voting Preferred Stock (“Series A Preferred Stock”) with the Secretary of State of Delaware. Pursuant to the COD, the Company is authorized to issue up to 36,462,417 shares of Series A Preferred Stock (the “Dividend Shares”). As of the Record Date, the following holders of securities were entitled to receive the Dividend (collectively, the “Qualified Recipients): i. each outstanding share of Class A common stock (the “Common Stock”), of which 25,160,504 shares were issued and outstanding, ii. each share of Common Stock underlying outstanding common stock purchase warrants containing a contractual right to receive the Dividend (“Warrants”) of which, 10,327,645 were outstanding, and iii. each original issue discount senior convertible debenture (the “Debentures”) issued on June 30, 2021, containing a contractual right to receive the Dividend on an as converted to Common Stock basis, of which $2,486,275 of Debentures were outstanding in principal and interest, convertible into 974,268 shares of Common Stock. Accordingly, the Company issued 36,462,417 shares of Series A Preferred Stock to the Qualified Recipients on an as converted to Common Stock basis. The Dividend was delivered on September 27, 2021. The Company’s management has evaluated the Preferred Stock in accordance with ASC 480 – Distinguishing Liabilities from Equity. Management has determined that the cancellation clause of the Preferred Stock deemed it to be mandatorily redeemable and should be classified as a liability. The fair value of the Preferred stock as of December 31, 2021 amounted to $3,925,000. NOTE 21 – STOCKHOLDERS’ EQUITY Authorized Shares Preferred Stock We are authorized to issue 50,000,000 of preferred stock, par value $0.001, of which 200,000 shares were designated as Series 1 Preferred Stock. Our board of directors, without further stockholder approval, may issue preferred stock in one or more series from time to time and fix or alter the designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series. The rights, preferences, limitations and restrictions of different series of preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and other matters. Our board of directors may authorize the issuance of preferred stock, which ranks senior to our common stock for the payment of dividends and the distribution of assets on liquidation. In addition, our board of directors can fix limitations and restrictions, if any, upon the payment of dividends on both classes of our common stock to be effective while any shares of preferred stock are outstanding. F-35 Common Stock We are authorized to issue an aggregate of 259,000,000 shares of common stock. Our certificate of incorporation provides that we will have two classes of common stock: Class A common stock (authorized 250,000,000 shares, par value $0.001), which has one vote per share, and Class B common stock (authorized 9,000,000 shares, par value $0.001), which has ten votes per share. Any holder of Class B common stock may convert his or her shares at any time into shares of Class A common stock on a share-for-share basis. Otherwise, the rights of the two classes of common stock are identical. As of December 31, 2021, the Company had 25,995,172 shares issued and outstanding. As of December 31, 2020, the Company had 16,145,778 shares issued and outstanding. 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. In August 2021, our Board of Directors approved a share repurchase program pursuant to which we are authorized to repurchase up to $10,000,000 of our Class A Common Stock in privately negotiated transactions or in the open market at prices per share not exceeding the then-current market prices. The total remaining authorization for future common share repurchases under our share repurchase program was $10.0 million as of September 30, 2021. Under the program, management has discretion to determine the dollar amount of shares to be repurchased and the timing of any repurchases in compliance with applicable law and regulation. This includes purchases pursuant to Rule 10b5-1 plans, including accelerated share repurchases. The program does not have an expiration date. During the year ended December 31, 2021, the Company sold 53,616 shares of common stock, resulting in proceeds of approximately $284,000, through sales under its At the Market (ATM) offering. During the year ended December 31, 2021, the Company repurchased 155,000 shares of Common Stock, for an aggregate purchase price of $793,000 pursuant to the Company’s Share Buy-Back program. The shares were retired as of December 31, 2021. NOTE 22 – STOCK OPTIONS, AWARDS AND WARRANTS 2012, 2014 and 2016 Equity Compensation Plans In January 2012, our board of directors and stockholders authorized the 2012 Equity Compensation Plan, which we refer to as the 2012 Plan, covering 600,000 shares of our Class A common stock. On November 5, 2014, our board of directors approved the adoption of our 2014 Equity Compensation Plan (the “2014 Plan”) and reserved 600,000 shares of our Class A common stock for grants under this plan. On February 23, 2016, our board of directors approved the adoption of our 2016 Equity Compensation Plan (the “2016 Plan”) and reserved 600,000 shares of our Class A common stock for grants under this plan. The purpose of the 2012, 2014 and 2016 Plans is to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to our employees, directors and consultants and to promote the success of our company’s business. The 2012, 2014 and 2016 Plans are administered by our board of directors. Plan options may either be: ● incentive stock options (ISOs), ● non-qualified options (NSOs), ● awards of our common stock, ● stock appreciation rights (SARs), ● restricted stock units (RSUs), ● performance units, ● performance shares, and ● other stock-based awards. Any option granted under the 2012, 2014 and 2016 Plans must provide for an exercise price of not less than 100% of the fair market value of the underlying shares on the date of grant, but the exercise price of any ISO granted to an eligible employee owning more than 10% of our outstanding common stock must not be less than 110% of fair market value on the date of the grant. The plans further provide that with respect to ISOs the aggregate fair market value of the common stock underlying the options which are exercisable by any option holder during any calendar year cannot exceed $100,000. The exercise price of any NSO granted under the 2012, 2014 or 2016 Plans is determined by the Board at the time of grant but must be at least equal to fair market value on the date of grant. The term of each plan option and the manner in which it may be exercised is determined by the board of directors or the compensation committee, provided that no option may be exercisable more than 10 years after the date of its grant and, in the case of an incentive option granted to an eligible employee owning more than 10% of the common stock, no more than five years after the date of the grant. The terms of grants of any other type of award under the 2012, 2014 or 2016 Plans is determined by the Board at the time of grant. Subject to the limitation on the aggregate number of shares issuable under the plans, there is no maximum or minimum number of shares as to which a stock grant or plan option may be granted to any person. F-36 Transactions involving our stock options for the years ended December 31, 2021 and 2020, respectively, are summarized as follows: In April 2020 the Company issued 36,172 options to purchase the Company’s common stock at a price of $1.95 to our non-executive directors. Each of our four non-executive directors received 9,043 options that vest 1/4th quarterly over the next year with an expiration date of April 15, 2027. The options were valued using the Black Scholes option pricing model at a total of $60,000 based on the seven-year term, implied volatility of 100% and a risk-free equivalent yield of 0.24%, stock price of $1.95. In August 2020, 430,000 common stock options having an exercise price of $2.70 per share with an option value as of the grant date of $859,000 calculated using the Black-Scholes option pricing model were granted to several employees and members of our management team. The expense associated with this option award will be recognized in operating expenses ratably over the vesting period of five years. In November 2020, 300,000 common stock options having an exercise price of $2.97 per share with an option value as of the grant date of $649,000 calculated using the Black-Scholes option pricing model were granted to an employee. The expense associated with this option award will be recognized in operating expenses at date of grant. Number of Shares Weighted Average Strike Price/Share Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Weighted Average Grant Date Fair Value Outstanding — December 31, 2019 1,192,519 $ 4.14 2.17 $ — $ — Granted 766,172 2.77 3.00 521,000 2.72 Exercised — — — — — Forfeited (316,367) 5.14 — — 3.14 Outstanding — December 31, 2020 1,642,324 3.30 2.81 — — Vested and exercisable — December 31, 2020 844,742 3.54 2.62 333,000 3.54 Unvested and non-exercisable - December 31, 2020 797,582 2.81 3.00 207,000 2.09 Outstanding — December 31, 2020 1,642,324 3.30 2.81 — — Granted 21,627 4.38 6.29 2,000 3.60 Exercised (12,500) 2.70 3.63 — 2.00 Forfeited (319,671) 4.60 0.65 — 3.49 Outstanding — December 31, 2021 1,331,780 3.02 2.39 1,969,000 2.13 Vested and exercisable — December 31, 2021 870,750 3.05 2.27 1,265,000 2.15 Unvested and non-exercisable - December 31, 2021 461,030 $ 2.96 2.62 $ 703,000 $ 2.10 F-37 During the years ended December 31, 2021 and 2020, we recorded compensation expense of $1,006,000 and $1,615,000, respectively, related to stock- based compensation. As of December 31, 2021, compensation cost related to the unvested options not yet recognized was approximately $811,000. The weighted average period over which the $811,000 will vest is estimated to be 2.83 years. Transactions involving our warrants for the years ended December 31, 2021 and 2020, respectively, are summarized as follows: As part of the Company’s Convertible Debenture offering in June 2020 (as described in Note 17 – OID Convertible Debentures), the Company negotiated the ability to release the BIGToken business, as security for the OID Convertible Debentures, for the purposes of selling BIGToken. As consideration for the release, the Company agreed to require the purchaser of BIGToken to issue warrants in the new entity. The warrants were to represent 13% of the new entities issued and outstanding on a fully diluted basis upon closing. As disclosed in Note 3 – Acquisitions, the Company entered into an agreement to merge BIGToken with FPVD on February 4, 2021, which required the issuance of 25,568,064,462 warrants. Based on a valuation from an independent third-party, the fair-market value of the warrants required to be issued was determined to be $885,000 based on implied 3-year volatility of 92.30%, a risk- free equivalent yield of 18% and stock price of $0.00006552. On February 21, 2021 the Company entered into an agreement with the certain Debenture holders to exercise 4,545,440 of the Warrants issued in the June 2020 Debenture offering. As an inducement for the Warrant holders to exercise the Warrants, the holders receive a new registered warrant (“New Warrant”) to purchase an aggregate of 4,545,440 shares of the Company’s common stock at an exercise price of $7.50 per share. The New Warrants expire on January 31, 2022. Each holder agreed to pay $0.125 for each New Warrant. The Company received net proceeds of approximately $11,022,000, consisted of the exercise price of $11,363,000, $568,000 for the purchase of the New Warrant less solicitation fees of approximately $909,000. The New Warrants were valued using the Black Scholes option pricing model at a total of $7,737,000 based on a one-year term, implied volatility of 96%, a risk-free equivalent yield of 11%, and stock price of $5.83. The fair value of the New Warrants was expensed and included in Financing Costs. During the quarter ended March 31, 2021, the Company: (i) received cash of approximately $4,930,000, (ii) cancelled 349,197 warrants (as a result of cashless exercises) and (iii) issued an aggregate of 2,283,171 shares of Common Stock, in connection with the exercise of outstanding warrants. In total the Company issued a total of 6,828,611 shares of common stock, for the exercise of warrants, with net proceeds of $15,952,000. F-38 Number of Shares Weighted Average Strike Price/Share Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Weighted Average Grant Date Fair Value Outstanding — December 31, 2019 6,237,430 $ 3.57 2.68 $ — $ — Granted 7,421,054 2.63 1.82 3,929,000 1.38 Exercised — — — — — Forfeited (1,073,201) — — — — Outstanding — December 31, 2020 12,585,283 2.98 1.78 4,460,000 1.38 Vested and exercisable — December 31, 2020 12,285,283 2.94 1.74 4,460,000 1.38 Unvested and non-exercisable - December 31, 2020 300,000 4.75 3.37 — — Outstanding — December 31, 2020 12,585,283 2.98 1.78 4,460,000 1.38 Granted 4,582,345 7.48 0.11 — 1.70 Exercised (7,148,501) 2.74 0.78 — — Forfeited — — — — — Outstanding — December 31, 2021 10,019,127 5.21 0.47 6,779,000 1.70 Vested and exercisable — December 31, 2021 9,719,127 5.22 0.41 6,779,000 1.70 Unvested and non-exercisable - December 31, 2021 300,000 $ 4.75 2.37 $ — $ — NOTE 23 – RELATED PARTY TRANSACTIONS The Company has subleased a suite at the Sofi Stadium in Los Angeles from an entity wholly owned by Christopher Miglino, our CEO. The sublease is for a period of one (1) year, at a rate of $382,500, and commencing on the date that the stadium opens to the general public (“Sublease”). We believe that such annual rate is a discount from prevailing market rates and is less than the master lease rate. In September 2021, the Company started paying $39,000 for the monthly lease payment for the 2nd year lease. The total amount paid during 2021 pursuant to the arrangement was $477,000. The Sublease entitles the Company to game tickets, optional tickets for other stadium events, and suite and conference room access during business days. The Company determined that the sublease agreement does not meet the definition of a lease in accordance with ASC 842, Leases. NOTE 24 – INCOME TAXES Income tax (benefit) expense from continuing operations for the year ended December 31, 2021 consisted of the following: Current Deferred Total Federal $ — $ (132,000) $ (132,000) State 5,000 — 5,000 Subtotal 5,000 (132,000) (127,000) Valuation allowance — — — Total $ 5,000 $ (132,000) $ (127,000) Income tax expense from continuing operations for the year ended December 31, 2020 consisted of the following: Current Deferred Total Federal $ — $ — State 21,000 — 21,000 Subtotal 21,000 — 21,000 Valuation allowance — — — Total $ 21,000 $ — $ 21,000 A reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate is as follows: 2021 2020 Taxes calculated at federal rate 21.0% 21.0% Stock based compensation 0.0% (2.7)% Permanent differences (1.0)% (13.4)% Change in valuation allowance (15.1)% (2.1)% Fair market adjustment derivatives 0.0% 0.5% Prior year true-ups 0.0% (3.3)% Other adjustments (4.1)% (0.1)% Provision for income tax benefit (expense) 0.8% (0.1)% F-39 The tax effects, rounded to thousands, of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, are presented below: 2021 2020 Deferred Tax Assets Net operating loss carryforwards $ 10,003,000 $ 9,040,000 Bad debt expense 33,000 136,000 Fixed assets - 9,000 Accrued interest - - Stock based compensation 525,000 567,000 Interest expense limitation carryover 220,000 629,000 Contribution carryover 5,000 5,000 Lease liability 62,000 97,000 Unrealized gain on marketable securities 2,668,000 120,000 Other accruals 124,000 173,000 Total Deferred Tax Assets 13,640,000 10,776,000 Deferred Tax Liabilities Fixed assets (29,000) - Right-of-use asset (66,000) (101,000) Intangibles (455,000) (690,000) Interest expense limitation carryover (59,000) - Prepaid expenses (15,000) (17,000) Total Deferred Tax Liabilities (624,000) (808,000) Net Deferred Tax Assets 13,016,000 9,968,000 Valuation Allowance (13,016,000) (9,968,000) Net deferred tax / (liabilities) $ — $ — Deferred tax assets and liabilities are computed by applying the federal and state income tax rates in effect to the gross amounts of temporary differences and other tax attributes, such as net operating loss carry-forwards. In assessing if the deferred tax assets will be realized, the Company considers whether it is more likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which these deductible temporary differences reverse. During the years ended December 31, 2021 and 2020, the valuation allowance increased by $2,996,000 and $2,375,000, respectively. The increase for both years was attributable to the increase in our net operating loss carryforwards. The total valuation allowance results from the Company’s estimate of its inability to recover its net deferred tax assets. At December 31, 2021, the Company has federal and state net operating loss carry forwards, which are available to offset future taxable income, of approximately $34,933,000 and $73,733,000 respectively, both of which begin to expire in 2032 and 2032 respectively. These carry forwards may be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986, and similar state provisions if the Company experienced one or more ownership changes which would limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period. The Company has not completed an IRC Section 382/383 analysis. If a change in ownership were to have occurred, NOL and tax credit carryforwards could be eliminated or restricted. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s effective tax rate. The Company files income tax returns in the United States and various state jurisdictions. Due to the Company’s net operating loss posture all tax years are open and subject to income tax examination by tax authorities. The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense. As of December 31, 2021 and 2020, there are no unrecognized tax benefits, and there are no significant accruals for interest related to unrecognized tax benefits or tax penalties. The Company is in the process of analyzing their NOL and has not determined if the company has had any change of control issues that could limit the future use of NOL. NOL carryforwards that were generated after 2017 of approximately $29.4 million may only be used to offset 80% of taxable income and are carried forward indefinitely. F-40 NOTE 25 – FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of certain financial instruments, including cash and cash equivalents and accounts payable and accrued expenses, approximate their respective fair values due to the short-term nature of such instruments. Additionally, the Company has a deferred note receivable with a notional amount of $1,000,000. The deferred payments of $960,000 and $40,000 were discounted using the yield on a CCC rated corporate debt for 3-year maturity. The implied discount is approximately $107,000, which will be amortized over 3 years. Notes receivable as of December 31, 2021 and 2020 amounted to $935,000 and $893,000, respectively. Assets and Liabilities Measured at Fair Value on a Recurring Basis The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made. The Company had the following financial assets and liabilities as of December 31, 2021 and 2020: Quoted Prices Significant Balance as of in Active Markets for Other Observable Significant Unobservable December 31 Identical Assets Inputs Inputs 2021 (Level 1) (Level 2) (Level 3) Assets: Marketable securities $ 15,617,000 $ 6,134,000 $ 2,448,000 $ 7,035,000 Designated assets 3,925,000 259,000 3,666,000 — Contract assets 844,000 — — 844,000 Total assets $ 20,386,000 $ 6,393,000 $ 6,114,000 $ 7,879,000 Quoted Prices Significant Balance as of in Active Markets for Other Observable Significant Unobservable December 31, Identical Assets Inputs Inputs 2020 (Level 1) (Level 2) (Level 3) Assets: Marketable securities $ 8,447,000 $ 7,764,000 $ 683,000 $ — Total assets $ 8,447,000 $ 7,764,000 $ 683,000 $ — The Contract assets represent a forward contractual right of to receive securities pursuant to a revenue contract. As of December 31, 2021, the Company determined the value of the securities underlying the Contract asset to have a fair value of $844,000. As of Dec. 31, 2021 Level 1 Level 2 Level 3 Fair Value Liabilities: Series A Preferred Stock $ — $ 3,925,000 $ 3,925,000 Total liabilities $ — $ 3,925,000 $ 3,925,000 As of December 31, 2020 Level 1 Level 2 Level 3 Fair Value Liabilities: Series A Preferred Stock $ — $ — $ - $ - Total liabilities $ — $ — $ - $ - F-41 Changes in level 3 assets measured at fair value The following table presents additional information about Level 3 assets measured at fair value. Both observable and unobservable inputs may be used to determine the fair value of assets classified within the Level 3 category. As a result, the unrealized gains and losses for the assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable and unobservable inputs. Transfers to/from Levels 1, 2 and 3 are recognized at the beginning of the reporting period in which a change in valuation technique or methodology occurs. Changes in Level 3 assets measured at fair value for the year ended December 31, 2021 were as follows: Assets Beginning Balance January 1, 2021 Acquisitions Sales and dispositions Transfers into Level 3 Transfers out of Level 3 (a) Realized & Unrealized Gains (Losses) (b) Ending Balance Dec 31, 2021 Common stocks - $ 2,665,000 $ - $ 400,000 $(534,000) $ (377,000) $ 2,154,000 Convertible Debt - $ 4,267,000 $ - $ 410,000 $(213,000) $ (278,000) $ 4,186,000 Warrants - $ - $ - $ - $ - $ 96,000 $ 96,000 Preferred stocks - $ 1,031,000 $ (510,000) $ 500,000 $ - $ (422,000) $ 599,000 Total Investments - $ 7,963,000 $ (510,000) $ 1,310,000 $(747,000) $ (981,000) $ 7,035,000 a. Transfers out of Level 3 relate to investments that have been transferred to level 2 and designed assets for return of capital. b. Realized and unrealized gains and losses are included in the gain / (loss) line in the statement of operations. Valuation processes for Level 2 and 3 Fair Value Measurements Fair value measurement of certain of our marketable securities fall within Level 2 and 3 of the fair value hierarchy. The fair value measurements are evaluated by management to ensure that changes are consistent with expectations of management based upon the sensitivity and nature of the inputs. The Company classifies certain assets as Level 3 assets if the estimated fair value was derived from level 3 inputs. The Company utilizes a put option pricing model to arrive at a discount for lack of marketability and liquidity associated with restrictions on sales into the public market. The Company generally classifies restricted securities in public companies as level 2, however in circumstances where the observed level of liquidity is low and the quoted market price is deemed unreliable they may be categorized in Level 3 of the fair value hierarchy. The Company considers marketable securities without sufficient liquidity to sell within 6 months of the date of acquisition and securities that will not be eligible for resale in the public markets through Rule 144 for 1 year from the date acquisition to be valued with Level 2 inputs. The fair value of the Company’s Series A Preferred Stock may change significantly, impacting the Company’s assumptions used to estimate its fair value. The valuation of the Series A Preferred Stock is primarily based on the valuation of its underlying marketable securities. The marketable securities that are underlying the Series A Preferred Stock are classified as Designated Assets on the Company’s balance sheet and include Level 1 and Level 2 marketable securities and cash. The following table lists the significant unobservable inputs used to value assets classified as Level 3 of December 31, 2021. The table is not intended to be all-inclusive, but instead identifies the significant unobservable inputs relevant to the determination of fair values. The other Level 3 assets have been valued using unadjusted third-party transactions and, unadjusted historical third-party information, or the unadjusted net asset values of the securities’ issuer. No unobservable inputs internally developed by the Company have been applied to these assets, and therefore are omitted from the following table. Assets Valuation technique Unobservable inputs Range Common stocks Put option pricing model Discount for lack of marketability 0% - 54% Convertible preferred stock Put option pricing model Discount for lack of marketability 0% - 54% Convertible Debt Discounted cash flow Maturity 0 - 35 months Risk adjusted discount factor 26% Option pricing model Volatility 100% Risk-free interest rate 0.78 % 1.04% Dividend yield 0% Time to maturity 0 - 35 months Sensitivity of Level 3 measurements to changes in significant unobservable inputs The process of estimating the fair value of securities without active markets involves significant estimates and judgement on behalf of management. These estimated fair values may not be realized in a current sale or immediate settlement of the asset or liability. Additionally, there are inherent uncertainties in any fair value measurement techniques, and changes in the underlying assumptions used could significantly affect the fair value measurement amounts. Changes in each of these significant unobservable valuation inputs will impact the fair value measurement of the financial instrument generally as follows: ● An increase or decrease in the volatility of the common stock that underlies our holdings in convertible debt would result in a directionally similar change in the estimated fair value. ● An increase or decrease in the risk-free interest rate or risk adjusted discount factor would result in an inverse change in the estimated fair value of our convertible debt. ● An increase in the dividend yield would increase the estimated value of the convertible debt. ● A change in the maturity may result in either an increase or decrease in estimated fair value of the convertible debt. ● An increase or decrease in the discount for lack of marketability of our common stock holdings and the common stock that underlies our preferred stock would generally result in an inverse change in the estimated fair value. Instruments for which unobservable inputs are significant to their fair value measurement (i.e., Level 3) include securities in which we deem their market to be inactive or unreliable. The Company reviews and updates the fair value hierarchy classifications on a quarterly basis. Changes from one quarter to the next that are related to the observable inputs to a fair value measurement may result in a reclassification from one hierarchy level to another. F-42 Valuation technique refinements During the year-ended December 31, 2021, the Company refined its valuation techniques to enhance consideration of unobservable inputs for the valuation of Level 2 and Level 3 marketable securities. If quoted market prices are not available for the specific security, or if the observed quoted market price is deemed unreliable, then fair values are estimated by using pricing models, considering third-party transactions, unadjusted historical third-party information, and the unadjusted net asset values of the issuer. The pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to market information, models also incorporate transaction details, such as maturity and cash flow assumptions. Securities valued in this manner would generally be classified within Level 2 and Level 3 of the valuation hierarchy and primarily include such instruments as convertible debt. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. NOTE 26 – REVENUE DISAGGREGATION The Company has two operating units and one reportable segment. The Sequire segment includes the licensing of the Company’s proprietary SaaS platform and associated data analysis technologies. Additionally, the Sequire segment comprises consumer and investor targeted marketing solutions to allow users of our SaaS platform to act on the insights obtained through our technologies. Lastly, reported under Sequire is our business unit LD Micro, which is in the business of hosting events and conference for microcap public companies. The following table summarizes revenue by business unit: 2021 2020 Sequire platform revenue $ 24,514,000 $ 5,976,000 Conference revenue 1,229,000 503,000 Other revenues 964,000 - Total revenues $ 26,707,000 $ 6,479,000 As of December 31, 2021 and 2020, revenue contract liabilities were approximately $12,859,000 and $4,842,000, respectively. F-43 NOTE 27 – SUBSEQUENT EVENTS The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The management of the Company determined the following reportable events: SAFE agreement On February 15, 2022 The Company entered into a simple agreement for future equity (the “SAFE”) with BIGtoken, Inc. (BIGToken), its former subsidiary. Pursuant to the SAFE, SRAX has agreed to invest $1,000,000 in the SAFE. The amount funded into the SAFE at a given time is referred to herein as the “SAFE Amount”. Pursuant to the terms of the SAFE, at any time that the Company sells its securities (a “Financing”) prior to the termination of the SAFE, the Company may, at its option, convert the SAFE into: (i) the number of shares of non-voting Series D Convertible Preferred Stock (“Series D Preferred Stock”) equal to such (a) SAFE Amount divided by (b) the lowest price per share of equity securities sold in any Financing (prior to the termination of the SAFE) multiplied by eighty percent (80%) (the “Conversion Price”) and (ii) such number of warrants to purchase Series D Preferred Stock (the “Warrants”) equal to the SAFE Amount divided by the Conversion Price. Upon issuance, the Warrants will (i) have a term of five (5) years, (ii) an exercise price equal to the Conversion Price, and (iii) contain price protection provisions for subsequent financings. CVR Agreement On June 13, 2022, the Company entered into an agreement with an institutional investor whereby in exchange for the payment of $404,513.40 (the “Purchase Price”), the investor received (i) the right to receive the net proceeds upon the sale of certain securities of the Company (“CVR Payments”) with a quoted price equal to $674,190 (with a guaranteed minimum return of 120% of such Purchase Price and (ii) the right after 90 days but before 120 days to demand payment of 120% of the Purchase Price in cash less amounts previously paid from the CVR Payments. Extension of Outstanding Original Issue Discount Senior Secured Convertible Debentures On July 1, 2022, the holders (“Holders”) of $1,102,682 in principal of the Company’s Original Issue Discount Senior Secured Convertible Debentures (“Debentures”), representing all of the outstanding Debentures that were originally issued on June 30, 2020, entered into an agreement with the Company to (i) extend the maturity date of the Debentures until December 31, 2023 and (ii) extend the first date that monthly redemptions are required to be made by the Company to begin on January 1, 2023 (the “Debenture Extension”). As consideration for the Debenture Extension, the Company increased the principal amount outstanding on the Debentures by five percent (5%). Additionally, the holders of the Debentures have the unilateral right to extend the maturity date and monthly redemption period by an additional six (6) month period at any time prior to January 1, 2023 for an additional five percent (5%) to be added to the outstanding principal of such Debentures. The Debentures, including the additional principal added to the Debentures are secured by substantially all of the assets of the Company pursuant to a security agreement entered into between the Company and Holders contemporaneous with the original issuance of the Debentures (the “Security Agreement”). Bridge Note On July 1, 2022, the Company issued an original issue discount bridge note in principal amount of $650,000 (“Bridge Note”) to an institutional investor in exchange for $500,000 in cash. The bridge note was non-interest bearing and had a maturity date of August 15, 2022. The Company’s obligations pursuant to the bridge note were secured by substantially all of the assets of the Company pursuant to the terms of the Security Agreement. On August 8, 2022, as described below, the Bridge Note was exchanged for a revolving note in the Senior Secured Revolving Credit Facility. RBSM LLP Declining to Stand for Reappointment On June 30, 2022, RBSM LLP (“RBSM”), the independent registered public accounting firm to the Company, informed the Company of its decision not to stand for re-appointment as the independent registered public accounting firm of the Company. RBSM will cease its services as the Company’s independent registered accountants effective with the filing of the Company’s annual report on Form 10-K with the United States Securities and Exchange Commission. The Company’s Audit Committee accepted the resignation of RBSM and has selected a new independent public accounting firm. Revolving Credit Facility On August 8, 2022 (“Effective Date”), the Company entered into a senior secured revolving credit facility agreement (the “Credit Agreement”) with an institutional investor (the “Lender”) to initially borrow up to $9,450,000 (“Loan Amount”) in the aggregate from time to time, subject to certain conditions (each a “Revolving Loan”). The Revolving Loan is secured by all the assets of the Company and is guaranteed by LD Micro, Inc. (collectively, Company and LD Micro are referred to as the “Credit Parties”). In addition to the Credit Agreement, the Credit Parties, as applicable, also entered into a: (i) Revolving Note, (ii) Security Agreements, (iii) Fee Agreement and (iv) Registration Rights Agreement (collectively the “Loan Documents”). As part of the transaction, the Company also amended and restated Lender’s outstanding warrants to extend the maturity date of a total of 2,590,358 Common Stock purchase warrants until September 30, 2023. For the Company enter into the Credit Agreement , we were required to issue 33,000 shares of the Company’s common stock as a breakup fee to an unrelated lender as a result of a failed offering. F-44 Credit Agreement and Revolving Note On the Effective Date, the Lender advanced $5,580,000 consisting of $4,930,000 in cash and the exchange of the $650,000 bridge note entered into on June 28, 2022, which was previously disclosed on the Company’s Current Report on Form 8-K filed on July 7, 2022 with the SEC. Provided that no event of default has occurred under the Loan Documents, upon the Company becoming current with its filing obligations under the Securities Exchange Act of 1934, as amended, as well as any other obligations of its principal trading market, Lender will advance up to an additional $3,870,000. Future Revolving Loan amounts (but not in excess of the Loan Amount) are subject to a borrowing base calculation. The principal balance of each Revolving Loan will reflect an original issue discount of ten percent (10%); provided that beginning on the date that is twelve (12) months from the Effective Date, such original issue discount will increase to twelve percent (12%) in the event the Prime borrowing rate increases to 6.75%. The Revolving Loans have a maturity date of the earlier of (i) twenty-four (24) months from the Effective Date or (ii) the occurrence of an event of default, as described in the Loan Documents. Commencing on the first day of each month after the Effective Date (each a “Payment Date”), the outstanding balance of the Revolving Loan will be paid as follows: a. With respect to the first, second and third months, 10% of the monthly collections from the sale of securities received by the Company from its customers during the prior month; b. With respect to the fourth, fifth and sixth months, 15% of the monthly collections from the sale of securities received by the Company from its customers during the prior month; and c. With respect to each successive Payment Date, 20% of the monthly collections from the sale of securities received by the Company from its customers during the prior month. Additionally, with respect to any Payment Date where the applicable monthly collection from the sale of securities received by the Company from its customers during the prior month exceeds $2,000,000, the Company will make an additional payment equal to 30% of any amounts in excess of $2,000,000. The Revolving Note is initially convertible into shares of Common Stock at a conversion price of $15.00 per share (“Conversion Price”). The Conversion Price is subject to adjustment in the event of stock splits, dividends and fundamental transactions. Moreover, in the event the Company is deemed to have issued or sold shares of its Common Stock while the Revolving Loan is outstanding at a price equal to or less than $5.00 per share, the conversion price will adjust to such lower applicable price. Security Agreements In order to perfect Lender’s security interest, the Credit Parties entered into: (i) Security Agreements, (ii) Guaranty Agreements, (iii) Pledge Agreements and (iv) Security Account Control Agreements and Deposit Account Control Agreements (collectively “Security Agreements”). The Security Agreements provide for a general lien on all of the Credit Parties’ assets, including each party’s respective intellectual property. Extension of Warrants As part of the transactions contemplated by the Loan Documents, the Company additionally agreed to extend the expiration dates of the following outstanding Common Stock purchase warrants held by the Lender or its affiliated entities until September 30, 2023: (a) a warrant to purchase 1,363,636 shares of Common Stock issued on June 30, 2020, that was initially disclosed on the Company’s Current Report on Form 8-K filed with the SEC on June 30, 2020; (b) a warrant to purchase 166,667 shares of Common Stock issued on November 29, 2018, that was initially disclosed on the Company’s Current Report on Form 8-K filed with the SEC on November 30, 2018; and (c) a warrant to purchase 530,027 shares of Common Stock issued on November 29, 2018, that was initially disclosed on the Company’s Current Report on Form 8-K filed with the SEC on November 30, 2018; (d) a warrant to purchase 530,028 shares of Common Stock issued on October 27, 2017 that was initially disclosed on the Company’s Current Report on Form 8-K filed with the SEC on October 27, 2017. Fee Agreement As consideration for Lender entering into the Loan Documents, Lender will be entitled to receive, in addition to any payment made under the Credit Agreement, 10% of the net proceeds received by the Company from the sales of securities received during the term of the Revolving Loan. Common stock issue for Options and Warrants Subsequent to December 31, 2021, the Company issued approximately 287,000 shares of the Company’s common stock for the exercise of warrants and/or stock options. F-45 Exhibit 10.37 CONTINGENT VALUE RIGHT This contingent value right agreement (“Agreement”) is dated as of June 13, 2022 (“Effective Date”), by and among SRAX, Inc. (the “Seller”) and [______] (the “Purchaser”). W I T N E S S E T H: WHEREAS, the Purchaser desires to purchase from the Seller and the Seller desires to sell to the Purchaser: a contingent value right that entitles Purchaser to receive the proceeds upon the sale of the securities described on Schedule A hereto (“Securities”); NOW, THEREFORE, in consideration of the mutual covenants contained herein, and intending to be legally bound, the parties hereto agree as follows: ARTICLE I Purchase and Sale of the Common Stock Section 1.1. Purchase and Sale of the Contingent Value Right. (a) Upon the terms and subject to the conditions of this Agreement and on the basis of the representations, warranties and agreements contained herein, the Purchaser agrees to pay to Seller an amount equal to $404,513.40 in US Dollars on the Effective Date (“Purchase Price”) in exchange for the Seller selling, assigning, transferring and conveying to the Purchaser the right to receive the proceeds (less expenses and brokerage fees from the sales) from the sale of the Securities by Seller if and when sold by Seller (the “CVR”). (b) Seller further agrees that beginning on the Effective Date, if prior to the sale of any of the Securities, the Seller receives additional securities as a result of the ownership of the Securities, as applicable (“Additional Securities”), such Additional Securities will become part of the Securities and will be subject to the same terms and conditions of this Agreement upon sale. (c) Upon any sale of Securities by the Seller, the Seller shall remit payment of the amount of proceeds received from the sale of such Securities to the Purchaser, less expenses and brokerage fees incurred during such sales (“CVR Payments”). Such CVR Payments will be made by Seller to Purchaser on the first business day following each previous week in which such applicable Securities were sold. Seller will continue to make the CVR Payments to Purchaser until such time that all of the Securities have been sold. In the event that the Securities have all been sold and all CVR Payments made to Purchaser in the aggregate are less than 120% of the Purchase Price, then within five (5) business days thereafter, the Seller will pay such amount to Purchaser equal to: 120% of the Purchase Price less the total aggregate amount of the CVR Payments made. (d) Notwithstanding the foregoing, on the 90th day following the date that the Purchase Price is received by the Seller up to and until the 120th day following the date that the Purchase Price is received by the Seller, the Purchaser shall have the option to demand that the Seller pay the Purchaser the following amount (“CVR Option Amount” within five (5) business days of such notice: 120% of the initial Purchase Price less any CVR Payments previously paid by Seller to Purchaser. For purposes of clarity, upon payment of the CVR Option Amount, all future right to any payments upon sales of the Securities or Additional Securities still held by Seller shall remain the sole property of Seller and Purchaser shall have no right to receive future amounts upon the sale of Securities or any amounts further under this Agreement. Section 1.2. Closing Deliveries. At the closing, subject to the terms and conditions hereof, Purchaser shall cause Seller to pay the Purchase Price pursuant to the wire instructions to be provided by Seller and upon such payment of the Purchase Price, Seller shall confirm ownership of the CVR by Purchaser. ARTICLE II Representations and Warranties Regarding the Seller The Seller hereby represents and warrants to the Purchaser as follows: Section 2.1. Authorization. Seller is the owner and has the rights to the Securities. Seller did not offer or sell the Securities by any form of general solicitation or general advertising. Seller not an “affiliate” of the any of the issuers of the Securities, as defined in Rule 405 and Rule 144 under the Securities Act of 1933, as amended (the “1933 Act”). Seller has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder, all of which have been duly authorized by all requisite action. This Agreement has been duly authorized, executed and delivered by it and constitutes its valid and binding obligation, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. For purposes of this paragraph, the “Seller” includes any person that would be included with the Seller for purposes of Rule 144(a)(2). Section 2.2. No Consents/Advice. No notice to, filing with, or authorization, registration, consent or approval of any governmental authority or other individual, partnership, corporation, joint stock company, unincorporated organization or association, trust or joint venture, or a governmental agency or political subdivision thereof (each, a “Person”) is necessary for the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby by it. Seller has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with the terms of this Agreement. Section 2.3. Ownership of the Securities. Seller owns, or will own (with respect to the Additional Securities) the Securities beneficially and of record, free and clear of any liens, claims or encumbrances, (collectively, “Encumbrances”). Other than this Agreement, it has not entered into any agreement, arrangement or other understanding (i) granting any option, warrant or right of first refusal with respect to the Securities to any Person, (ii) restricting its right to sell the Securities, or (iii) restricting any other of its rights with respect to the Securities. Upon execution of this Agreement, the CVR will be the only Encumbrance created by the Seller with respect to the Securities and Seller further represents and warrants that it will not, without the written approval of Purchaser, create any other Encumbrances under these Securities. 2 Section 2.4. Brokers. No Person is or will be entitled to a broker’s, finder’s, investment banker’s, financial adviser’s or similar fee from it in connection with this Agreement or any of the transactions contemplated hereby. Section 2.5 No Litigation. There is no action, suit, proceeding, judgment, claim or investigation pending, or to the knowledge of the Seller, threatened against the Seller which could reasonably be expected in any manner to challenge or seek to prevent, enjoin, alter or materially delay any of the transactions contemplated hereby. Section 2.6 Bankruptcy. Seller is not under the jurisdiction of a court in a Title 11 or similar case (within the meaning of Bankruptcy Code Section 368(a)(3)(A) (or related provisions)) or involved in any insolvency proceeding or reorganization. Section 2.7 Additional Securities. Seller agrees to notify Purchaser immediately upon the issuance of any Additional Securities and to cause such Additional Securities to be subject to the terms of this Agreement, as applicable. ARTICLE III Representations and Warranties Regarding the Purchaser The Purchaser hereby represents and warrants to the Seller as follows: Section 3.1. Authorization. It has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder, all of which have been duly authorized by all requisite action. This Agreement has been duly authorized, executed and delivered by it and constitutes its valid and binding agreement, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. Section 3.2. Access to Information. It has received all information regarding the Securities that it deems necessary or advisable to evaluate the risks and merits of the purchase of the CVR. It acknowledges that neither the Seller nor any of its authorized representatives have made any representation or warranty regarding the Securities or an investment in the CVR, other than as contained herein. Purchaser has made its own investigation of the issuers of the Securities in making Purchaser’s determination to purchase the CVRs. Purchaser understands that its investment in the CVR involves a significant degree of risk. 3 Section 3.3. Brokers. No person is or will be entitled to a broker’s, finder’s, investment banker’s, financial adviser’s or similar fee from it in connection with this Agreement or any of the transactions contemplated hereby. Section 3.4. Financial Resources. It has presently available to it sufficient cash resources to enable it to pay the Purchase Price. ARTICLE IV Survival, Amendment and Waiver Section 4.1. Survival. The representations and warranties contained in this Agreement or any certificate delivered in connection herewith shall survive the sale of the Securities and payment of the CVR Payments or CVR Option Amount as contemplated hereby. Section 4.2. Amendments. This Agreement (including the provisions of this Section 4.2) may not be amended or modified except by an instrument in writing signed on behalf of all of the parties affected by such amendment or modification. Section 4.3. Extension; Waiver. The parties hereto may (i) extend the time for performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties of the other parties hereto contained herein or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements of the other parties hereto or satisfaction of any of the conditions to such party’s obligations contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of a party hereto to assert any of its rights hereunder shall not constitute a waiver of such rights. ARTICLE V Miscellaneous Section 5.1. Notices. All notices, requests, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand, when delivered by courier, three days after being deposited in the mail (registered or certified mail, postage prepaid, return receipt requested), or when received by facsimile transmission or electronic mail at the coordinates or addresses provided by the parties. Section 5.2. Expenses. Each of the parties hereto shall pay its own expenses incident to this Agreement and the transactions contemplated herein. 4 Section 5.3. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without reference to the choice of law principles thereof. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER. Section 5.4. Assignment; Successors and Assigns; No Third Party Rights. This Agreement may not be assigned by operation of law or otherwise, and any attempted assignment shall be null and void. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, permitted assigns and legal representatives. This Agreement shall be for the sole benefit of the parties to this Agreement and their respective heirs, successors, permitted assigns and legal representatives and is not intended, nor shall be construed, to give any Person, other than the parties hereto and their respective heirs, successors, assigns and legal representatives, any legal or equitable right, remedy or claim hereunder. Section 5.5. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original agreement, but all of which together shall constitute one and the same instrument. Section 5.6. Titles and Headings. The titles and headings in this Agreement are for reference purposes only, and shall not in any way affect the meaning or interpretation of this Agreement. Section 5.7. Entire Agreement. This Agreement constitute the entire agreement among the parties with respect to the matters covered hereby and thereby and supersede all previous written, oral or implied understandings among them with respect to such matters. Section 5.8. Severability. The invalidity of any portion hereof shall not affect the validity, force or effect of the remaining portions hereof. If it is ever held that any restriction hereunder is too broad to permit enforcement of such restriction to its fullest extent, such restriction shall be enforced to the maximum extent permitted by law. Section 5.9. Interpretation. Unless otherwise indicated to the contrary herein by the context or use thereof: (i) the words, “herein,” “hereto,” “hereof” and words of similar import refer to this Agreement as a whole and not to any particular Section or paragraph hereof; (ii) words importing the masculine gender shall also include the feminine and neutral genders, and vice versa; and (iii) words importing the singular shall also include the plural, and vice versa. Section 5.10. No Strict Construction. Each of the parties hereto acknowledge that this Agreement has been prepared jointly by the parties hereto, and shall not be strictly construed against either party. [Remainder of page intentionally left blank] 5 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. SELLER: SRAX, INC. By: Name: Title: PURCHASER: By: Name: Title: 6 Exhibit 10.38 NEITHER THIS NOTE NOR THE SECURITIES THAT ARE ISSUABLE TO THE COMPANY UPON CONVERSION HEREOF (COLLECTIVELY, THE “SECURITIES”) HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THE SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED: (I) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT OR APPLICABLE STATE SECURITIES LAWS; OR (II) IN THE ABSENCE OF AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR; (III) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE 1933 ACT. PROMISSORY NOTE July 1, 2022 Principal Amount: $650,000 Purchase Price: $500,000 FOR VALUE RECEIVED, SRAX, INC., a corporation incorporated under the laws of the State of Delaware (the “Company”), hereby promises to pay to the order of [_____________] (the “Holder”), the principal amount of Six Hundred Fifty Thousand and zero/100 United States Dollars (US$650,000.00), on the maturity date (the “Maturity Date”), which shall be August 15, 2022 or such other date as mutually agreed to in writing by the Company and Holder. This Promissory Note (as may be amended or supplemented from time to time, this “Note”) shall bear no interest except following an Event of Default as provided herein. The Purchase Price of this Note shall be equal to Five Hundred Thousand and zero/100 United States Dollars (US$500,000.00). The Company shall pay to the Holder an original issue discount in the amount of One-Hundred Fifty Thousand and zero/100 United States Dollars (US$150,000.00) (the “OID”). The OID has been added to the principal amount of this Note and as such the aggregate principal amount of this Note is Six Hundred Fifty Thousand and zero/100 United States Dollars (US$650,000.00). 1. Payments of Principal. (a) Payment of Principal. The principal amount of this Note shall be paid to the Holder on the Maturity Date. It is intent of the Company and the Holder to engage in good faith efforts to agree a financing of the Company by the Holder on mutually acceptable terms, subject due diligence by the parties and internal approval by Holder, on or prior the Maturity Date (the “Qualified Financing”). Upon the consummation of the Qualified Financing, provided it shall have occurred on or prior to the Maturity Date, the amounts owing hereunder shall be exchanged for indebtedness in the Qualified Financing (for clarity, inclusive of the anticipated 10% original issue discount of the Qualified Financing, the principal amount of such exchanged indebtedness shall equal $722,222.22). For the avoidance of doubt, nothing herein shall obligate the Holder to consummate the Qualified Financing. 1 (b) No Interest. The unpaid principal balance of this Note shall bear no interest. (c) General Payment Provisions. All payments on this Note shall be made in lawful money of the United States of America by certified bank check or wire transfer to such account as the Holder may designate by written notice to the Company in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding Business Day. For purposes of this Note, “Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the State of New York are authorized or required by law or executive order to remain closed. 2. Exchange of Note and Issuance of Warrant. (a) At the option of the Holder, upon an Event of Default or if upon the Maturity Date the amounts owing under this Note have not been repaid in accordance with its terms or exchanged for indebtedness in the Qualified Financing, this Note shall be extinguished in exchange for the addition of $738,637.00 to the outstanding principal balance of that certain Original Issued Discount Senior Secured Convertible Debenture, due June 25, 2023 (as amended following the issuance thereof, the “Prior Debenture”), issued by the Company to the Holder pursuant to the terms of that certain Securities Purchase Agreement, dated as of June 25, 2020 (the “Purchase Agreement”), among the Company and each purchaser identified on the signature pages thereto. (b) Upon the extinguishment of this Note and the increase of the principal balance of the Prior Debenture, the Company shall also issue a Common Stock Purchase Warrant, with substantially the same terms as the warrant issued pursuant to the Purchase Agreement and in the form attached hereto as Annex A (the “Warrant”) to purchase 295,455 shares of the Company’s Class A common stock of the Company, par value $0.001 per share (the “Common Stock”). (c) The Company by its signature hereto and the Holder by its acceptance of the Warrant acknowledges that the Warrant when issued shall have been deemed to have been issued pursuant to the terms of the Purchase Agreement (d) At the option of the Holder, upon an Event of Default or a failure by the Company to repay the amounts owing under this Note upon the Maturity Date, the principal balance of the Prior Debenture shall be deemed increased as provided in Section 2(a) hereof and the Warrant shall be deemed issued to the Holder, without any further direction, acknowledgement or action of the Company. (e) The Company hereby acknowledges, represents, warrants, and confirms to the Holder that: (i) each of this Note, the Warrant and the Transaction Documents (as defined in the Purchase Agreement) executed by the Company, are valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms; (ii) all other obligations of the Company under the Transaction Documents (as defined in the Purchase Agreement) and under the Warrant, shall be and continue to be and remain secured by and under the Security Agreement (as defined in the Purchase Agreement); and (iii) no oral representations, statements, or inducements have been made by the Holder, or any agent or representative of the Holder, with respect to this Note, the Warrant or the Transaction Documents (as defined in the Purchase Agreement). 2 3. Grant of Security. The Company hereby acknowledges that it previously granted a security interest, as that term is defined in the Uniform Commercial Code of Delaware (the “UCC”), under the Security Agreement to the Collateral (as such term is defined in the Security Agreement), as security for the payment and performance of all the obligations of the Company pursuant to the Prior Debentures. The Company agrees and acknowledges that all of its obligations under this Note, now or hereafter existing whether for principal, interest, fees, expenses or otherwise are considered part of the Obligation (as defined in the Security Agreement) and pursuant to the Security Agreement grants a Security Interest (as defined in the Security Agreement) to the Collateral. 4. Defaults and Remedies. (a) Events of Default. An “Event of Default” means: (i) a default for five (5) days in payment on this Note; (ii) failure by the Company to comply with any material provision of this Note, (iii) the Company, pursuant to or within the meaning of any Bankruptcy Law (as defined herein): (A) commence a voluntary case; (B) consent to the entry of an order for relief against it in an involuntary case; (C) consent to the appointment of a Custodian (as defined herein) of it or for all or substantially all of its property; (D) make a general assignment for the benefit of its creditors; or (E) admit in writing that it is generally unable to pay its debts as the same become due; or (iv) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company in an involuntary case; (B) appoints a Custodian of the Company for all or substantially all of its property; or (C) orders the liquidation of the Company, and the order or decree remains unstayed and in effect for sixty (60) days. “Bankruptcy Law” means Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors. The term “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. (b) Remedies. If an Event of Default occurs and is continuing, the Holder of this Note may declare all of this Note, including any interest and other amounts due that have not or will not be converted under Section 2 hereof, to be due and payable immediately. The Security Interest created by the Security Agreement shall be enforceable if an Event of Default shall have occurred and be continuing. (c) Holder Appointed Attorney-in-Fact. The Company hereby irrevocably appoints the Holder as the Company’s attorney-in-fact, with full authority in the name, place and stead of the Company, from time to time in the Holder’s discretion upon the occurrence and during the continuance of an Event of Default to take any action and to execute any document which the Holder may deem necessary or advisable to accomplish the purposes of this Note. 3 (d) Non-Interference with Remedies; Specific Performance. The Company agrees that following the occurrence and during the continuance of an Event of Default it will not at any time pledge, claim or take the benefit of any appraisal, valuation, stay, extension, moratorium or redemption law now or hereafter in force in order to prevent or delay the enforcement of this Note, or the absolute sale of the whole or any part of the Collateral or the possession thereof by any purchaser at any sale hereunder, and the Company waives the benefit of all such laws to the extent it lawfully may do so. The Company agrees that it will not interfere with any right, power or remedy of the Holder provided for in this Note now or hereafter existing at law or in equity or by statute or otherwise, or with the exercise or beginning of the exercise by the Holder of any one or more of such rights, powers or remedies. 5. Lost or Stolen Note. Upon notice to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of an indemnification undertaking by the Holder to the Company in a form reasonably acceptable to the Company and, in the case of mutilation, upon surrender and cancellation of the Note, the Company shall execute and deliver a new Note of like tenor and date and in substantially the same form as this Note. 6. Cancellation. After all principal and accrued interest at any time owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be re-issued. 7. Waiver of Notice. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note. 8. Governing Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the laws of the State of Delaware, without giving effect to provisions thereof regarding conflict of laws. Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in the Southern District of New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by sending by certified mail or overnight courier a copy thereof to such party at the address indicated in the preamble hereto and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 4 9. Indemnity and Expenses. The Company agrees: (a) To indemnify and hold harmless the Holder and each of its partners, employees, agents and affiliates from and against any and all claims, damages, demands, losses, obligations, judgments and liabilities (including, without limitation, attorneys’ fees and expenses) in any way arising out of or in connection with this Note; and (b) To pay and reimburse the Holder upon demand for all costs and expenses (including, without limitation, attorneys’ fees and expenses) that the Holder may incur in connection with (i) the exercise or enforcement of any rights or remedies (including, but not limited to, collection) granted hereunder or otherwise available to it (whether at law, in equity or otherwise), or (ii) the failure by the Company to perform or observe any of the provisions hereof. The provisions of this Section shall survive the execution and delivery of this Note, the repayment of any or all of the principal or interest owed pursuant hereto, and the termination of this Note. 10. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity 11. Usury Savings Clause. Notwithstanding any provision in this Note, the total liability for payments of interest and payments in the nature of interest, including, without limitation, all charges, fees, exactions, or other sums which may at any time be deemed to be interest, shall not exceed the limit imposed by the usury laws of the jurisdiction governing this Note or any other applicable law. In the event the total liability of payments of interest and payments in the nature of interest, including, without limitation, all charges, fees, exactions or other sums which may at any time be deemed to be interest, shall, for any reason whatsoever, result in an effective rate of interest, which for any month or other interest payment period exceeds the limit imposed by the usury laws of the jurisdiction governing this Note, all sums in excess of those lawfully collectible as interest for the period in question shall, without further agreement or notice by, between, or to any party hereto, be applied to the reduction of the outstanding principal balance of this Note immediately upon receipt of such sums by the Holder hereof, with the same force and effect as though the Company had specifically designated such excess sums to be so applied to the reduction of such outstanding principal balance and the Holder hereof had agreed to accept such sums as a penalty-free payment of principal; provided, however, that the Holder of this Note may, at any time and from time to time, elect, by notice in writing to the Company, to waive, reduce, or limit the collection of any sums in excess of those lawfully collectible as interest rather than accept such sums as a prepayment of the outstanding principal balance. It is the intention of the parties that the Company does not intend or expect to pay nor does the Holder intend or expect to charge or collect any interest under this Note greater than the highest non-usurious rate of interest which may be charged under applicable law. 12. Specific Shall Not Limit General; Construction. No specific provision contained in this Note shall limit or modify any more general provision contained herein. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any person as the drafter hereof. 5 13. Failure or Indulgence Not Waiver. No failure or delay on the part of this Note in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. 14. Notice. Any notice, request or other communication to be given or made under this Note to the parties shall be in writing. Such notice, request or other communication shall be deemed to have been duly given or made when it shall be delivered by hand, international courier (confirmed by facsimile), electronic mail or facsimile (with a hard copy delivered within two (2) Business Days) to the party to which it is required or permitted to be given or made at such party’s address specified below or at such other address as such party shall have designated by notice to the party giving or making such notice, request or other communication, it being understood that the failure to deliver a copy of any notice, request or other communication to a party to whom copies are to be sent shall not affect the validity of any such notice, request or other communication or constitute a breach of this Note. If to the Company: SRAX, Inc. 2629 Townsgate Road #215 Westlake Village, CA 91361 Attention: E-Mail: If to the Holder: [*] [*] [*] Attention: E-Mail: With a copy to (which shall not constitute Notice): [*] [*] [*] Attention: E-Mail: [signature page follows] 6 IN WITNESS WHEREOF, the Company has caused this Note to be executed on and as of the Issuance Date. SRAX, INC. By: Name: Title: Date: July 1, 2022 Principal Amount: $650,000.00 [ signature page to Note ] 7 ANNEX A WARRANT 8 Exhibit 10.39 THIS INSTRUMENT AND ANY SECURITIES ISSUABLE PURSUANT HERETO HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED IN THIS SAFE AND UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM. BIGTOKEN, INC. SAFE (Simple Agreement for Future Equity) THIS CERTIFIES THAT, in exchange for the payment by SRAX, Inc. (the “Investor”) of $[*] (the “Purchase Amount”) on or about February 10, 2022, BIGtoken, Inc., a Florida corporation (the “Company”), issues to the Investor the right to certain securities of the Company’s, subject to the terms described below. The “Discount Rate” is 80%. The “Warrant Coverage” is 100%. See Section 2 for certain additional defined terms. 1. Events (a) Financing. At any time there is a Financing prior to the termination of this Safe, this Safe may be converted, at the option of the Investor, into: (i) the number of shares of Safe Preferred Stock equal to the applicable Purchase Amount divided by the Discount Price and (ii) Warrants to purchase such number of shares of Safe Preferred Stock equal to the applicable Purchase Amount divided by the Discount Price. Provided that upon conversion of the Safe, in no event will the number of Warrants held by Investor exceed such number of shares equal to the applicable Purchase Amount divided by the Discount Price. In connection with the conversion of this Safe into shares of Safe Preferred Stock and Warrants, the Investor will execute and deliver to the Company all of the transaction documents related to the Financing; provided, that such documents (i) are the same documents to be entered into with the purchasers of the Financing, with appropriate variations for the Safe Preferred Stock if applicable, and (ii) have customary exceptions to any drag-along applicable to the Investor, including (without limitation) limited representations, warranties, liability and indemnification obligations for the Investor. (b) Liquidity Event. If there is a Liquidity Event before the termination of this Safe, this Safe will automatically be entitled (subject to the liquidation priority set forth in Section 1(d) below) to receive a portion of Proceeds, due and payable to the Investor immediately prior to, or concurrent with, the consummation of such Liquidity Event, equal to, at the election of the Investor, the greater of (i) the Purchase Amount (the “Cash-Out Amount”), (ii) the amount payable on the number of shares of Common Stock equal to the Purchase Amount divided by the Discount Price or (iii) such number of shares of Safe Preferred Stock and Warrants equal to the Purchase Amount divided by the Discount Price (the “Conversion Amount”). If any of the Company’s securityholders are given a choice as to the form and amount of Proceeds to be received in a Liquidity Event, the Investor will be given the same choice, provided that the Investor may not choose to receive a form of consideration that the Investor would be ineligible to receive as a result of the Investor’s failure to satisfy any requirement or limitation generally applicable to the Company’s securityholders, or under any applicable laws. Notwithstanding the foregoing, in connection with a Change of Control intended to qualify as a tax-free reorganization, the Company may reduce the cash portion of Proceeds payable to the Investor by the amount determined by its board of directors in good faith for such Change of Control to qualify as a tax-free reorganization for U.S. federal income tax purposes, provided that such reduction (A) does not reduce the total Proceeds payable to such Investor and (B) is applied in the same manner and on a pro rata basis to all securityholders who have equal priority to the Investor under Section 1(d). (c) Dissolution Event. If there is a Dissolution Event before the termination of this Safe, the Investor will automatically be entitled (subject to the liquidation priority set forth in Section 1(d) below) to receive a portion of Proceeds equal to the Cash-Out Amount, due and payable to the Investor immediately prior to the consummation of the Dissolution Event. (d) Liquidation Priority. In a Liquidity Event or Dissolution Event, this Safe is intended to operate like standard non-participating Preferred Stock. The Investor’s right to receive its Cash-Out Amount is: (i) Junior to payment of outstanding indebtedness and creditor claims, including contractual claims for payment and convertible promissory notes (to the extent such convertible promissory notes are not actually or notionally converted into Capital Stock); (ii) On par with payments for other Safes and/or Preferred Stock, and if the applicable Proceeds are insufficient to permit full payments to the Investor and such other Safes and/or Preferred Stock, the applicable Proceeds will be distributed pro rata to the Investor and such other Safes and/or Preferred Stock in proportion to the full payments that would otherwise be due; and (iii) Senior to payments for Common Stock. The Investor’s right to receive its Conversion Amount is (A) on par with payments for Common Stock and other Safes and/or Preferred Stock who are also receiving Conversion Amounts or Proceeds on a similar as-converted to Common Stock basis, and (B) junior to payments described in clauses (i) and (ii) above (in the latter case, to the extent such payments are Cash-Out Amounts or similar liquidation preferences). (e) Termination. This Safe will automatically terminate (without relieving the Company of any obligations arising from a prior breach of or non- compliance with this Safe) immediately following the earliest to occur of: (i) the issuance of all Safe Preferred Stock to the Investor pursuant to the conversion of the entire Purchase Price of this Safe under Section 1(a); or (ii) the payment, or setting aside for payment, of amounts due the Investor pursuant to Section 1(b) or Section 1(c). 2. Definitions “Capital Stock” means the capital stock of the Company, including, without limitation, the “Common Stock” and the “Preferred Stock.” “Change of Control” means (i) a transaction or series of related transactions in which any “person” or “group” (within the meaning of Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of more than 50% of the outstanding voting securities of the Company having the right to vote for the election of members of the Company’s board of directors, (ii) any reorganization, merger or consolidation of the Company, other than a transaction or series of related transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction or series of related transactions retain, immediately after such transaction or series of related transactions, at least a majority of the total voting power represented by the outstanding voting securities of the Company or such other surviving or resulting entity or (iii) a sale, lease or other disposition of all or substantially all of the assets of the Company. “Convertible Securities” includes this Safe and other convertible securities issued by the Company, including but not limited to: (i) other Safes; (ii) convertible promissory notes and other convertible debt instruments; and (iii) convertible securities that have the right to convert into shares of Capital Stock. “Discount Price” means the Lowest price per share of equity securities sold in any Financing (prior to the termination of this Safe) multiplied by the Discount Rate. -2- “Dissolution Event” means (i) a voluntary termination of operations, (ii) a general assignment for the benefit of the Company’s creditors or (iii) any other liquidation, dissolution or winding up of the Company (excluding a Liquidity Event), whether voluntary or involuntary. “Financing” means a bona fide transaction or series of transactions with the principal purpose of raising capital, pursuant to which the Company issues securities. “Liquidity Event” means a Change of Control or the listing of the Company’s Capital Stock on a National Securities Exchange. “National Securities Exchange” means a securities exchange that has registered with the SEC under Section 6 of the Securities Exchange Act of 1934. “Options” includes options, restricted stock awards or purchases, RSUs, SARs, warrants or similar securities, vested or unvested. “Proceeds” means cash and other assets (including without limitation stock consideration) that are proceeds from the Liquidity Event or the Dissolution Event, as applicable, and legally available for distribution. “Promised Options” means promised but ungranted Options that are the greater of those (i) promised pursuant to agreements or understandings made prior to the execution of, or in connection with, the term sheet or letter of intent for the Financing or Liquidity Event, as applicable (or the closing of any Financing or consummation of the Liquidity Event, if there is no term sheet or letter of intent), (ii) in the case of an Financing, treated as outstanding Options in the calculation of the Standard Preferred Stock’s price per share, or (iii) in the case of a Liquidity Event, treated as outstanding Options in the calculation of the distribution of the Proceeds. “Safe” means an instrument containing a future right to shares of Capital Stock or Convertible Securities, similar in form and content to this instrument, purchased by investors for the purpose of funding the Company’s business operations. References to “this Safe” mean this specific instrument. “Safe Preferred Stock” means the shares of non-voting Series D Preferred Stock issued to the Investor in an Equity Financing, having the identical rights, privileges, preferences and restrictions as contained in the certificate of designation attached hereto as Exhibit A. “SEC” means the United States Securities and Exchange Commission. “Unissued Option Pool” means all shares of Capital Stock that are reserved, available for future grant and not subject to any outstanding Options or Promised Options (but in the case of a Liquidity Event, only to the extent Proceeds are payable on such Promised Options) under any equity incentive or similar Company plan. “Warrant” means a warrant to purchase such number of shares of Safe Preferred Stock equal to the applicable Purchase Amount divided by the Discount Price. The Warrant will have: (i) an exercise price equal to the Discount Price, (ii) price protection, but will not result in additional shares underlying the Warrant, and (iii) a term of 5 years. -3- 3. Company Representations (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, and has the power and authority to own, lease and operate its properties and carry on its business as now conducted. (b) The execution, delivery and performance by the Company of this Safe is within the power of the Company and has been duly authorized by all necessary actions on the part of the Company (subject to section 3(d)). This Safe constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity. To its knowledge, the Company is not in violation of (i) its current certificate of incorporation or bylaws, (ii) any material statute, rule or regulation applicable to the Company or (iii) any material debt or contract to which the Company is a party or by which it is bound, where, in each case, such violation or default, individually, or together with all such violations or defaults, could reasonably be expected to have a material adverse effect on the Company. (c) The performance and consummation of the transactions contemplated by this Safe do not and will not: (i) violate any material judgment, statute, rule or regulation applicable to the Company; (ii) result in the acceleration of any material debt or contract to which the Company is a party or by which it is bound; or (iii) result in the creation or imposition of any lien on any property, asset or revenue of the Company or the suspension, forfeiture, or nonrenewal of any material permit, license or authorization applicable to the Company, its business or operations. (d) No consents or approvals are required in connection with the performance of this Safe, other than: (i) the Company’s corporate approvals; (ii) any qualifications or filings under applicable securities laws; and (iii) necessary corporate approvals for the authorization of Capital Stock issuable pursuant to Section 1. (e) To its knowledge, the Company owns or possesses (or can obtain on commercially reasonable terms) sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, processes and other intellectual property rights necessary for its business as now conducted and as currently proposed to be conducted, without any conflict with, or infringement of the rights of, others. 4. Investor Representations (a) The Investor has full legal capacity, power and authority to execute and deliver this Safe and to perform its obligations hereunder. This Safe constitutes valid and binding obligation of the Investor, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity. (b) The Investor is an accredited investor as such term is defined in Rule 501 of Regulation D under the Securities Act, and acknowledges and agrees that if not an accredited investor at the time of an Equity Financing, the Company may void this Safe and return the Purchase Amount. The Investor has been advised that this Safe and the underlying securities have not been registered under the Securities Act, or any state securities laws and, therefore, cannot be resold unless they are registered under the Securities Act and applicable state securities laws or unless an exemption from such registration requirements is available. The Investor is purchasing this Safe and the securities to be acquired by the Investor hereunder for its own account for investment, not as a nominee or agent, and not with a view to, or for resale in connection with, the distribution thereof, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. The Investor has such knowledge and experience in financial and business matters that the Investor is capable of evaluating the merits and risks of such investment, is able to incur a complete loss of such investment without impairing the Investor’s financial condition and is able to bear the economic risk of such investment for an indefinite period of time. -4- 5. Miscellaneous (a) Any provision of this Safe may be amended, waived or modified by written consent of the Company and the Investor. (b) Any notice required or permitted by this Safe will be deemed sufficient when delivered personally or by overnight courier or sent by email to the relevant address listed on the signature page, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, addressed to the party to be notified at such party’s address listed on the signature page, as subsequently modified by written notice. (c) The Investor is not entitled, as a holder of this Safe, to vote or be deemed a holder of Capital Stock for any purpose other than tax purposes, nor will anything in this Safe be construed to confer on the Investor, as such, any rights of a Company stockholder or rights to vote for the election of directors or on any matter submitted to Company stockholders, or to give or withhold consent to any corporate action or to receive notice of meetings, until shares have been issued on the terms described in Section 1. (d) Neither this Safe nor the rights in this Safe are transferable or assignable, by operation of law or otherwise, by either party without the prior written consent of the other; provided, however, that this Safe and/or its rights may be assigned without the Company’s consent by the Investor (i) to the Investor’s estate, heirs, executors, administrators, guardians and/or successors in the event of Investor’s death or disability, or (ii) to any other entity who directly or indirectly, controls, is controlled by or is under common control with the Investor, including, without limitation, any general partner, managing member, officer or director of the Investor, or any venture capital fund now or hereafter existing which is controlled by one or more general partners or managing members of, or shares the same management company with, the Investor; and provided, further, that the Company may assign this Safe in whole, without the consent of the Investor, in connection with a reincorporation to change the Company’s domicile. (e) In the event any one or more of the provisions of this Safe is for any reason held to be invalid, illegal or unenforceable, in whole or in part or in any respect, or in the event that any one or more of the provisions of this Safe operate or would prospectively operate to invalidate this Safe, then and in any such event, such provision(s) only will be deemed null and void and will not affect any other provision of this Safe and the remaining provisions of this Safe will remain operative and in full force and effect and will not be affected, prejudiced, or disturbed thereby. (f) All rights and obligations hereunder will be governed by the laws of the State of California, without regard to the conflicts of law provisions of such jurisdiction. (g) The parties acknowledge and agree that for United States federal and state income tax purposes this Safe is, and at all times has been, intended to be characterized as stock, and more particularly as common stock for purposes of Sections 304, 305, 306, 354, 368, 1036 and 1202 of the Internal Revenue Code of 1986, as amended. Accordingly, the parties agree to treat this Safe consistent with the foregoing intent for all United States federal and state income tax purposes (including, without limitation, on their respective tax returns or other informational statements). (Signature page follows) -5- IN WITNESS WHEREOF, the undersigned have caused this Safe to be duly executed and delivered. BIGTOKEN, INC. By: David J. Moore CEO Address: Email: INVESTOR: By: SRAX, Inc. Name: Michael Malone Title: CFO Address: Email: Exhibit 21.01 List of Subsidiaries 1. LD Micro, Inc. EXHIBIT 31.1 Rule 13a-14(a)/15d-14(a) Certification I, Christopher Miglino, certify that: 1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2021 of SRAX, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Dated: October 12, 2022 /s/ Christopher Miglino Christopher Miglino, Chief Executive Officer, principal executive officer EXHIBIT 31.2 Rule 13a-14(a)/15d-14(a) Certification I, Michael Malone, certify that: 1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2021 of SRAX, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Dated: October 12, 2022 /s/ Michael Malone Michael Malone, Chief Financial Officer, principal financial and accounting officer EXHIBIT 32.1 EXHIBIT 32.2 Section 1350 Certification In connection with the Annual Report of SRAX, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission (the “Report”), I, Christopher Miglino, Chief Executive Officer, and I, Michael Malone, the Chief Financial Officer, of the Company, do hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and 2. The information contained in the Report fairly presents, in all material respects, the financial conditions and results of operations of the Company. October 12, 2022 /s/ Christopher Miglino Christopher Miglino, Chief Executive Officer, principal executive officer October 12, 2022 /s/ Michael Malone Michael Malone, Chief Financial Officer, principal financial and accounting officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.