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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended ~~September~~March 3031, ~~2022~~2023

☐ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

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.)
1014 S. Westlake Blvd., Suite 14-29 Westlake Village, CA		91361
1014 S, Westlake Blvd., Suite 14-299 Westlake Village, CA		91361
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (323) ~~205~~694-~~6109~~9800

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

Class A Common Stock, $0.001 par value		SRAX		N/A
(Title of each class)		(Trading Symbol)		(Name of each exchange on which registered)

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of ~~October~~March 206, ~~2023~~2025, there were 29,~~438~~150,~~762~~262 shares of Class A common stock were issued and outstanding.

SRAX, Inc.

Table of Contents

		Page #
PART I -	FINANCIAL INFORMATION
PART I - FINANCIAL INFORMATION		4
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021	4
	Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	5
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited)	5
	Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)	6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Fiscal Quarters ended September 30, 2022 and 2021 (unaudited)	6-7
	Consolidated Statements of Changes in Stockholders’ Equity for the Fiscal Quarters ended March 31, 2023 and 2022 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)	8-9
	Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
	Notes to Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3084
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3695
Item 4.	Controls and Procedures	3695
PART II -	OTHER INFORMATION	38
PART II - OTHER INFORMATION		97
Item 1.	Legal Proceedings	3897
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3897
Item 3.	Defaults Upon Senior Securities	4098
Item 4.	Mine Safety Disclosure	4098
Item 5.	Other Information	4098
Item 6.	Exhibits	4199
	Signatures	44
	Certificates

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

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

We urge you to read this entire Quarterly Report on Form 10-Q, including the “Risk Factors” section, the financial statements and the related notes included therein as well as our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022, including the “Risk Factors” section contained therein. As used in this Quarterly Report, unless context otherwise requires, the words “we,” “us,” “our,” “the Company,” “SRAX,” “Registrant” refer to SRAX, Inc. and its subsidiaries. ~~Additionally~~LD Micro was divested pursuant to an Agreement and Plan of Merger that closed on March 3, ~~any~~2023. Any reference to ~~(i)~~“BIGToken” and “LDBIGToken, ~~Micro~~Inc.,” or the “BIGToken Project” refer to the Company’s previously wholly owned subsidiary, ~~“LD Micro~~BIGToken, Inc.” and the assets used in its ~~operation~~operations. BIGToken was divested pursuant to a share exchange agreement that closed on February 4, 2021. Also, any reference to “common share” or “common stock,” refers to our $0.001 par value Class A common stock.

Any reference to “BIGToken” and “BIGToken, Inc.” refer to the Company’s previously wholly owned subsidiary, BIGToken, Inc. and the assets used in its operations which we transferred into Force Protection Video Equipment, Inc. (“FPVD”), which became our majority owned subsidiary on February 4, 2021 and was subsequently disposed of on December 29, 2021.

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

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SRAX, ~~INC~~Inc. ~~AND~~and ~~SUBSIDIARIES~~Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

	Page(s)

Consolidated Balance Sheets	5

Consolidated Statements of Operations	6

Consolidated Statements of Changes in Stockholders’ Equity	7

Consolidated Statements of Cash Flows	8

Notes to Consolidated Financial Statements	9 - 83

	September 30, 2022
	(unaudited)			December 31, 2021
Assets
CURRENT ASSETS
Cash	$	116,000		$	1,348,000
Accounts receivable, net		319,000			821,000
Contracts receivable		499,000			844,000
Marketable securities		2,918,000			15,617,000
Designated assets for return of capital		221,000			3,925,000
Prepaid expenses and other current assets		352,000			430,000
TOTAL CURRENT ASSETS		4,425,000			22,985,000
Marketable securities, net of current portion		18,203,000			-
Notes receivable		-			935,000
Property and equipment, net		121,000			114,000
Intangible assets, net		-			1,443,000
Right of use assets		162,000			257,000
Other assets		8,000			36,000
Goodwill		7,706,000			17,906,000
TOTAL ASSETS	$	30,625,000		$	43,676,000
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Accounts payable and accrued expenses	$	10,099,000		$	4,095,000
Deferred revenue		12,862,000			12,859,000
Other current liabilities		844,000			763,000
Payroll protection loan		10,000			10,000
OID convertible note(s) payable		1,094,000			1,164,000
Senior secured revolving credit facility, net of OID		5,478,000			-
Series A redeemable preferred stock		1,045,000			3,925,000
TOTAL CURRENT LIABILITIES		31,432,000			22,816,000
Right of use liability, net of current portion		-			114,000
TOTAL LIABILITIES		31,432,000			22,930,000
STOCKHOLDERS’ EQUITY (DEFICIT)
Series A preferred stock, $0.001 par value, 36,462,417 shares authorized, issued and outstanding, as liability classified at September 30, 2022 and December 31, 2021		-			-
Class A common stock, $0.001 par value, 250,000,000 shares authorized, 26,355,951 and 25,995,172 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		26,000			26,000
Class B common stock, $0.0001 par value, 9,000,000 shares authorized and 0 issued and outstanding, at September 30, 2022 and December 31, 2021		-			-
Common Stock Value
Additional paid-in capital		52,643,000			51,075,000
Accumulated deficit		(53,476,000	)		(30,355,000	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		(807,000	)		20,746,000
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY(DEFICIT)	$	30,625,000		$	43,676,000

See accompanying notes to unaudited condensed consolidated financial statements.

SRAX, ~~INC~~Inc. ~~AND~~and ~~SUBSIDIARIES~~Subsidiary

~~CONDENSED~~Consolidated ~~CONSOLIDATED~~Balance ~~STATEMENTS OF OPERATIONS~~Sheets

(Unaudited)

	March 31, 2023			December 31, 2022
	(Unaudited)			(Audited)

Assets

Current Assets
Cash	$	765,000		$	7,000
Accounts receivable - net		98,000			157,000
Contracts receivable		-			328,000
Marketable securities		7,369,000			7,931,000
Designated assets for return of capital		112,000			100,000
Due from related party		-			263,000
Prepaids and other		219,000			67,000
Total Current Assets		8,563,000			8,853,000

Other Assets
Marketable securities		5,792,000			1,255,000
Designated assets for return of capital		13,000			70,000
Property and equipment - net		50,000			59,000
Operating lease - right of use asset - net		91,000			127,000
Goodwill		-			7,706,000
Total Other Assets		5,946,000			9,217,000

Total Assets	$	14,509,000		$	18,070,000

Liabilities and Stockholders’ Deficit

Current Liabilities
Accounts payable and accrued expenses	$	8,160,000		$	10,453,000
Accounts payable and accrued expenses - related party		155,000			159,000
Deferred revenue		2,984,000			7,367,000
Other		663,000			1,451,000
Operating lease liability		77,000			114,000
Convertible notes payable - net		1,198,000			1,181,000
Series A, redeemable preferred stock		953,000			994,000
Total Current Liabilities		14,190,000			21,719,000

Long Term Liabilities
Senior secured revolving credit facility - net		5,621,000			5,600,000
Total Long Term Liabilities		5,621,000			5,600,000

Total Liabilities		19,811,000			27,319,000

Stockholders’ Deficit
Series A, preferred stock, $0.001 par value, 50,000,000 shares authorized, 36,462,417 shares issued and outstanding, respectively		-			-
Series B, convertible preferred stock, $0.001 par value, 9,000,000 shares authorized, 63,743 and none issued and outstanding, respectively		-			-
Preferred stock, value		-			-
Class A, common stock, $0.001 par value, 250,000,000 shares authorized, 28,888,390 and 26,323,579 shares issued and outstanding, respectively		28,000			26,000
Additional paid-in capital		54,036,000			52,718,000
Accumulated deficit		(59,366,000	)		(61,993,000	)
Total Stockholders’ Deficit		(5,302,000	)		(9,249,000	)

Total Liabilities and Stockholders’ Equity (Deficit)	$	14,509,000		$	18,070,000

	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021
Revenues	$	5,309,000		$	6,888,000		$	20,530,000		$	18,963,000
Cost and expenses
Cost of revenues		942,000			3,354,000			9,181,000			8,541,000
Employee related costs		2,185,000			1,892,000			5,840,000			5,347,000
Selling, general and administrative		1,305,000			929,000			5,182,000			2,562,000
Depreciation and amortization		17,000			251,000			403,000			710,000
Total costs and expenses		4,449,000			6,426,000			20,606,000			17,160,000
Income (loss) from operations		860,000			462,000			(76,000	)		1,803,000
Other income (expense)
Financing costs		(2,377,000	)		(528,000	)		(3,954,000	)		(10,098,000	)
Impairment of goodwill		-			-			(10,200,000	)		-
Impairment of intangibles		-			-			(1,481,000	)		-
Loss on sale of fixed assets		-			-			(47,000	)		-
Realized gain (loss) on marketable securities		(286,000	)		286,000			(6,521,000	)		1,095,000
Current period change in fair value of marketable securities		(2,196,000	)		(3,906,000	)		1,696,000			(4,784,000	)
Current period change in fair value of contract assets		22,000			-			(1,491,000	)		-
Realized loss on designated assets		(904,000	)		2,000			(1,803,000	)		2,000
Current period change in fair value of designated assets		622,000			(134,000	)		(710,000	)		(134,000	)
Change in fair value of preferred stock		281,000			134,000			2,513,000			134,000
Interest income		-			10,000			12,000			33,000
Other income (expense)		159,000			1,130,000			(1,058,000	)		1,145,000
Total other expense, net		(4,679,000	)		(3,006,000	)		(23,044,000	)		(12,607,000	)
Income (loss) before income tax expense		(3,819,000	)		(2,544,000	)		(23,120,000	)		(10,804,000	)
Income tax expense		-			-			-			-
Income (loss) from continuing operations		(3,819,000	)		(2,544,000	)		(23,120,000	)		(10,804,000	)
Discontinued operations
Loss before income tax expense		-			(2,059,000	)		-			(11,755,000	)
Noncontrolling interest in discontinued operations		-			774,000			-			1,900,000
Income tax expense		-			-			-			-
Loss from discontinued operations		-			(1,285,000	)		-			(9,855,000	)
Net income (loss)	$	(3,819,000	)	$	(3,829,000	)	$	(23,120,000	)	$	(20,659,000	)
Basic and diluted income (loss) per share
Continuing operations	$	(0.14	)	$	(0.10	)	$	(0.88	)	$	(0.48	)
Discontinued operations		-			(0.05	)	$	-			(0.43	)
Net income (loss) per share, basic and diluted	$	(0.14	)	$	(0.15	)	$	(0.88	)	$	(0.91	)
Weighted average shares outstanding, basic and diluted		26,341,615			25,019,645			26,207,696			22,707,446

The accompanying notes are an integral part of these unaudited consolidated financial statements

See accompanying notes to unaudited condensed consolidated financial statements.

SRAX, ~~INC~~Inc. ~~AND~~and ~~SUBSIDIARIES~~Subsidiary

~~CONDENSED~~Consolidated ~~CONSOLIDATED~~Statements ~~STATEMENTS~~of ~~OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)~~Operations

(Unaudited)

	Preferred Stock						Common Stock				Additional paid-in			Accumulated			Non Controlling		Stockholders’ Equity
	2023			2022
	Shares			Amount			Shares		Amount		Capital			Deficit			Interest		(Deficit)
	For the Three Months Ended March 31,
Balance, December 31, 2021		-		$	-			25,995,172	$	26,000	$	51,075,000		$	(30,355,000	)	$	-	$	20,746,000
	2023			2022
Share based compensation		-			-			-		-		358,000			-			-		358,000
Revenues	$	4,014,000		$	7,499,000
Shares issued for exercise of employee options, net of taxes		-			-			91,981		-		(101,000	)		-			-		(101,000	)
Costs and expenses
Net income								-		-		-			3,728,000					3,728,000
Cost of revenues		149,000			2,798,000
Balance, March 31, 2022		-			-			26,087,153		26,000		51,332,000			(26,627,000	)		-		24,731,000
Depreciation and amortization		9,000			187,000
Share based compensation (benefit)		-			-			-		-		(870,000	)		-			-		(870,000	)
General and administrative expenses		2,966,000			5,842,000
Shares issued for exercise of warrants on a cashless basis		-			-			195,525		-		-			-			-		-
Total costs and expenses		3,124,000			8,827,000
Shares issued for exercise of warrants for cash								8,401		-		32,000			-			-		32,000
Income (loss) from operations		890,000			(1,328,000	)
Net loss		-			-			-		-		-			(23,030,000	)		-		(23,030,000	)
Other income (expense)
Balance, June 30, 2022		-			-			26,291,079		26,000		50,494,000			(49,657,000	)		-		863,000
Interest expense		(299,000	)		(312,000	)
Share based compensation		-			-			-		-		281,000			-			-		281,000
Realized loss - marketable securities		(3,029,000	)		(1,053,000	)
Warrant modification expense		-			-			-		-		1,788,000			-			-		1,788,000
Unrealized gain - marketable securities		2,521,000			6,366,000
Shares issued for loan breakup fee		-			-			33,000		-		80,000			-			-		80,000
Realized loss - designated assets		(7,000	)		(116,000	)
Shares issued for exercise of employee options								31,872		-		-			-			-		-
Unrealized gain (loss) - designated assets		(34,000	)		89,000
Net income (loss)		-			-			-		-		-			(3,819,000	)		-		(3,819,000	)
Change in fair value - Series A, redeemable preferred stock		41,000			126,000
Balance, September 30, 2022		-			-			26,355,951	$	26,000	$	52,643,000		$	(53,476,000	)	$	-	$	(807,000	)
Interest income		-			9,000
Gain on disposal of subsidiary (LD Micro, Inc.)		594,000			-
Other income (expense)		1,950,000			(53,000	)
Total other income (expense) - net		1,737,000			5,056,000
Net income	$	2,627,000		$	3,728,000
Net income per share - basic and diluted
Basic	$	0.09		$	0.14
Diluted	$	0.07		$	0.13
Weighted average number of shares outstanding - basic and diluted
Basic		27,863,831			26,032,055
Diluted		35,605,627			28,193,714

~~See~~The accompanying notes toare ~~unaudited~~an ~~condensed~~integral part of these unaudited consolidated financial statements.

SRAX, ~~INC~~Inc. ~~AND~~and ~~SUBSIDIARIES~~Subsidiary

~~CONDENSED~~Consolidated ~~CONSOLIDATED~~Statements ~~STATEMENTS~~of OFChanges ~~CHANGES~~in ~~IN STOCKHOLDERS~~Stockholders’ ~~EQUITY~~Equity (~~Continued~~Deficit)

For the Three Months Ended March 31, 2023

(Unaudited)

	Preferred Stock				Common Stock				Additional paid-in			Accumulated			Non Controlling			Stockholders’
	Shares		Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Deficit
	Shares		Amount		Shares		Amount		Capital			Deficit			Interest			Equity
	Series A - Preferred Stock				Series B - Convertible Preferred Stock				Common Stock - Class A						Additional Paid-in			Accumulated			Total Stockholders’
Balance, December 31,2020		-	$	-		16,145,778	$	16,000	$	69,551,000		$	(50,342,000	)	$	-		$	19,225,000
	Shares		Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Deficit
Share based compensation		-		-		-		-		253,000			-			-			253,000
December 31, 2022		-	$	-		-	$	-		26,323,579		$	26,000		$	52,718,000		$	(61,993,000	)	$	(9,249,000	)
Shares issued for cash		-		-		53,616		-		284,000			-			-			284,000
Asset purchase - DNA Holdings, Inc.		-		-		63,743		-		1,313,127			1,000			1,255,000			-			1,256,000
Conversion of convertible debt to equity		-		-		2,041,551		2,000		3,445,000			-			-			3,447,000
Cashless exercise of warrants for common stock		-		-		-		-		1,251,684			1,000			(1,000	)		-			-
Shares issued for exercise of warrants		-		-		4,945,320		5,000		12,215,000			-			-			12,220,000
Share based compensation		-		-		-		-		-			-			64,000			-			64,000
Warrants issued as inducement to exercise warrants		-		-		-		-		7,737,000			-			-			7,737,000
Net income		-		-		-		-		-			-			-			2,627,000			2,627,000
Establishment of noncontrolling interest of FVPD		-		-		-		-		-			-			(95,000	)		(95,000	)
March 31, 2023		-	$	-		63,743	$	-		28,888,390		$	28,000		$	54,036,000		$	(59,366,000	)	$	(5,302,000	)
Warrants issued by FVPD for SRAX, Inc. debenture holders		-		-		-		-		-			-			885,000			885,000
Series B convertible preferred stock issued by FPVD		-		-		-		-		-			-			5,775,000			5,775,000
Beneficial conversion feature FPVD series B convertible preferred stock		-		-		-		-		-			-			5,775,000			5,775,000
Net loss		-		-		-		-		-			(11,090,000	)		(854,000	)		(11,944,000	)
Balance, March 31,2021		-		-		23,186,265		23,000		93,485,000			(61,432,000	)		11,486,000			43,562,000
Share based compensation		-		-		-		-		253,000			-			-			253,000
Conversion of convertible debt to equity		-		-		-		-		701,000			-			-			701,000
Shares issued for exercise of warrants		-		-		350,000		-		3,575,000			-			-			3,575,000
Series B convertible preferred stock issued by FPVD		-		-		1,310,198		1,000		-			-			85,000			86,000
Beneficial conversion feature FPVD series B convertible preferred stock		-		-		-		-		-			-			85,000			85,000
Net loss		-		-		-		-		-			(5,740,000	)		(272,000	)		(6,012,000	)
Balance, June 30, 2021		-		-		24,846,463		24,000		98,014,000			(67,172,000	)		11,384,000			42,250,000
Balance		-		-		24,846,463		24,000		98,014,000			(67,172,000	)		11,384,000			42,250,000
Share based compensation		-		-		-		-		251,000			-			-			251,000
Conversion of convertible debt to equity		-		-		730,616		1,000		1,824,000			-			-			1,825,000
Shares issued for exercise of warrants		-		-		53,668		-		157,000			-			-			157,000
Dividends on preferred stock		-		-		-		-		(6,387,000	)		-			-			(6,387,000	)
Net loss		-		-		-		-		-			(3,829,000	)		(774,000	)		(4,603,000	)
Net Income (loss)		-		-		-		-		-			(3,829,000	)		(774,000	)		(4,603,000	)
Balance, September 30, 2021		-	$	-		25,630,747	$	25,000	$	93,859,000		$	(71,001,000	)	$	10,610,000		$	33,493,000
Balance		-	$	-		25,630,747	$	25,000	$	93,859,000		$	(71,001,000	)	$	10,610,000		$	33,493,000

See accompanying notes to unaudited condensed consolidated financial statements.

	Shares		Amount		Shares		Amount		Capital			Deficit			Deficit
	Series A - Preferred Stock				Common Stock - Class A				Additional Paid-in			Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Deficit
December 31, 2021		-	$	-		25,995,172	$	26,000	$	51,075,000		$	(30,355,000	)	$	20,746,000
Balance		-	$	-		25,995,172	$	26,000	$	51,075,000		$	(30,355,000	)	$	20,746,000
Share based compensation (benefit) - employees		-		-		-		-		358,000			-			358,000
Shares issued for cashless exercise of employee options - net of taxes - related party						58,124		-		(101,000	)		-			(101,000	)
Net income		-		-		-		-		-			3,728,000			3,728,000
March 31, 2022		-	$	-		26,053,296	$	26,000	$	51,332,000		$	(26,627,000	)	$	24,731,000
Balance		-	$	-		26,053,296	$	26,000	$	51,332,000		$	(26,627,000	)	$	24,731,000

The accompanying notes are an integral part of these unaudited consolidated financial statements

SRAX, ~~INC~~Inc. ~~AND~~and ~~SUBSIDIARIES~~Subsidiary

~~CONDESNED~~Consolidated ~~CONSOLIDATED~~Statements ~~STATEMENTS~~of OFCash ~~CASH FLOW~~Flows

(Unaudited)

	Nine months ended September 30,
	2023			2022
	2022			2021
	For the Three Months Ended March 31,
Cash Flows From Operating Activities:
	2023			2022
Net loss	$	(23,120,000	)	$	(20,659,000	)
Operating activities
Less: net loss from discontinued operations, net of tax		-			9,855,000
Net income	$	2,627,000		$	3,728,000
Loss from continuing operations		(23,120,000	)		(10,804,000	)
Adjustments to reconcile net income to net cash used in operations
Adjustments to reconcile net loss to net cash used in operating activities:
Realized loss - marketable securities		3,029,000			1,053,000
Impairment of goodwill		10,200,000			-
Unrealized (gain) loss - marketable securities		(2,521,000	)		(6,366,000	)
Impairment of intangibles		1,481,000			-
Realized loss - designated assets		7,000			116,000
Loss on sale of fixed assets		47,000			-
Unrealized (gain) loss - designated assets		34,000			(89,000	)
Realized gain (loss) on marketable securities		6,521,000			(1,095,000	)
Change in fair value - Series A, redeemable preferred stock		(41,000	)		(126,000	)
Current period change in fair value of marketable securities		(1,696,000	)		4,784,000
Gain on disposal of subsidiary (LD Micro, Inc.)		(594,000	)		-
Current period change in fair value of contract assets		1,491,000			-
Amortization of right-of-use assets		36,000			30,000
Realized gain (loss) on designated assets		1,803,000			(2,000	)
Amortization of debt discount/debt issue costs		108,000			17,000
Current period change in fair value of designated assets		710,000			134,000
Stock based compensation		64,000			358,000
Change in fair value of preferred stock		(2,513,000	)		(134,000	)
Bad debt expense		49,000			27,000
Warrant modification expense		1,788,000			-
Securities received in exchange for customer reset shares and other income		(865,000	)		-
Stock based compensation (benefit)		(231,000	)		757,000
Depreciation and amortization of intangible assets		9,000			203,000
Interest income		-			(33,000	)
Amortization of debt discount		154,000			799,000
Loss on settlement of note receivable		35,000			-
Fair value of warrants issued by FPVD to SRAX, Inc. debenture holders		-			885,000
Forgiveness of payroll protection program loan		-			(1,116,000	)
Warrant inducement expense		-			7,737,000
Net provision for (recovery of) bad debts		(60,000	)		(305,000	)
Depreciation expense		53,000			61,000
Amortization of intangibles		350,000			1,061,000
Amortization of right of use assets		95,000			-
Non-cash financing expense		237,000			213,000
Changes in operating assets and liabilities
Accounts receivable, net		563,000			1,537,000
(Increase) decrease in
Prepaid expenses and other current assets		105,000			(631,000	)
Accounts receivable		10,000			(247,000	)
Contracts receivable		(1328,~~146,~~000	)		-
Designated assets for return of capital		685,000			-
Due from related party		263,000			-
Accounts payable and accrued expenses		6,002,000			370,000
Prepaid and other		(152,000	)		(340,000	)
Deferred revenue		(13,711,000	)		(16,582,000	)
Designated assets for return of capital		-			(169,000	)
Other current liabilities		1,573,000			(396,000	)
Increase (decrease) in
Right of use liability		(96,000	)		(15,000	)
Accounts payable and accrued expenses		(2,293,000	)		2,432,000
Net cash used in continuing operations		(8,680,000	)		(12,775,000	)
Accounts payable and accrued expenses - related party		(4,000	)		-
Net cash used in discontinued operations		-			(5,895,000	)
Deferred revenue		(4,383,000	)		(5,924,000	)
Net cash used in operating activities		(8,680,000	)		(18,670,000	)
Other		(788,000	)		6,000
Cash flows from investing activities:
Operating lease liability		(37,000	)		(37,000	)
Proceeds from sale of marketable securities		3,385,000			7,144,000
Net cash used in operating activities		(5,114,000	)		(5,328,000	)
Proceeds from note receivable		900,000			-
Investing activities
Deferred payments to LD Micro		-			(3,004,000	)
Cash acquired in connection with sale of subsidiary (LD Micro, Inc.)		4,000,000			-
Proceeds from the sale of designated assets		506,000			-
Cash acquired in connection with asset purchase (DNA Holdings, LLC)		1,000,000			-
Purchase of marketable securities		-			(429,000	)
Proceeds from sale of digital assets (crypto) - acquired from DNA Holdings, Inc.		256,000			-
Acquisition of property and equipment		(108,000	)		(97,000	)
Proceeds from sale of marketable securities		682,000			1,277,000
Acquisition of intangible assets		(388,000	)		(541,000	)
Proceeds from sale of designated assets		4,000			268,000
Other assets		-			(33,000	)
Acquisition of property and equipment		-			(16,000	)
Net cash from continuing operations		4,295,000			3,040,000
Acquisition of intangible assets		-			(243,000	)
Net cash from discontinued operations		-			955,000
Other		-			(7,000	)
Net cash from investing activities		4,295,000			3,995,000
Net cash provided by investing activities		5,942,000			1,279,000
Cash flows from financing activities:
Financing activities
Preferred stock distributions		(365,000	)		-
Repayments on senior secured revolving facility		(70,000	)		-
Proceeds from issuance of common stock		-			284,000
Payment for taxes related to settlement of restricted stock units		-			(101,000	)
Payments of taxes related to settlement of restricted stock units		(101,000	)		-
Proceeds from factoring facilities, net of repayments		-			3,153,000
Proceeds from the exercise of warrants		32,000			15,953,000
Net cash provided by financing activities		(70,000	)		3,052,000
Proceeds from factoring facilities		5,362,000			-
Net increase (decrease) in cash		758,000			(997,000	)
Repayments of factoring facilities		(6,184,000	)		-
Cash - beginning of period		7,000			1,348,000
Repayments of OID convertible notes payable		(277,000	)		-
Cash - end of period	$	765,000		$	351,000
Proceeds from senior secured revolving credit facility		4,686,000			-
Supplemental disclosure of cash flow information
Net cash from continuing operations		3,153,000			16,237,000
Cash paid for interest	$	350,522		$	-
Net cash from discontinued operations		-			4,810,000
Cash paid for income tax	$	-		$	-
Net cash from financing activities		3,153,000			21,047,000
Supplemental disclosure of non-cash investing and financing activities
Marketable securities received in exchange for accounts receivable	$	-		$	9,787,000
Sale of subsidiary (LD Micro, Inc.)	$	594,000
Issuance of Series B, convertible preferred stock and issuance of Class A, common stock - Asset purchase - DNA Holdings, LLC	$	1,256,000		$	-

The accompanying notes are an integral part of these unaudited consolidated financial statements

SRAX, INC. AND SUBSIDIARIES

~~CONDENSED~~NOTES ~~CONSOLIDATED~~TO ~~STATEMENTS~~UNAUDITED OFCONSOLIDATED ~~CASH~~FINANCIAL ~~FLOW (Continued)~~STATEMENTS

~~(Unaudited)~~MARCH 31, 2023

	Nine months ended September 30,
	2022			2021
Net (decrease) increase in cash from continuing operations		(1,232,000	)		6,502,000
Net decrease in cash from discontinued operations		-			(130,000	)
Cash, beginning of period		1,348,000			451,000
Cash, end of period	$	116,000		$	6,823,000
Supplemental schedule of cash flow information
Cash paid for interest	$	77,000		$	14,000
Cash paid for taxes	$	-		$	-
Supplemental schedule of noncash investing and financing activities
Fair value of marketable securities received for revenue contracts, net	$	15,943,000		$	26,564,000
Convertible notes converted into shares	$	-		$	6,423,000
Designation of marketable securities for dividend distributions	$	-		$	6,387,000
Dividends on preferred stock	$	-		$	6,387,000

Note 1 - Organization and Nature of Operations

~~See~~SRAX, ~~accompanying~~Inc. ~~notes~~(“SRAX,” to“we,” ~~unaudited~~“us,” ~~condensed~~“our” ~~consolidated~~or ~~financial~~the ~~statements~~“Company”) is a Delaware corporation formed on August 2, 2011. SRAX is headquartered in Westlake Village, California but operates as a distributed virtual Company.

As of December 31, 2022, the consolidated financial statements consist of SRAX and its wholly owned subsidiary LD Micro, Inc. (“LD”, “LD Micro”, “LD Micro, Inc.” or “LDMI”). See below regarding the sale and disposition of LD.

Nature of Operations

SRAX is a technology firm focused on enhancing communications between public companies and their shareholders and investors. The Company currently has one reportable and operating segment, which consists of one reporting unit consisting of two distinct business units.

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

Sequire

The 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.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

~~September~~MARCH 3031, ~~2022~~2023

~~NOTE~~LD 1Micro –and ~~ORGANIZATION~~Related ~~AND~~Disposal ~~LIQUIDITY~~of Subsidiary

~~Organization~~Through LD Micro, Inc., the Company organized and hosted investor conferences within the micro and small cap markets.

~~SRAX,~~Deconsolidation ~~Inc.~~and ~~(“SRAX”,~~Gain ~~“we”, “us”, “our” or the “Company”) is a Delaware corporation formed~~ on ~~August~~Disposal ~~2, 2011. SRAX is headquartered in Westlake Village, California but operates as a distributed virtual Company. As~~ of ~~September~~ ~~30,~~Subsidiary ~~2022,~~- ~~the unaudited Condensed Consolidated Financial Statements consist of SRAX and its wholly owned subsidiary~~ LD Micro, Inc. ~~(“LD Micro”).~~

~~SRAX~~On isMarch a3, ~~technology~~2023 ~~firm~~(“date ~~focused~~of ondisposal”), ~~enhancing~~the ~~communications~~Company ~~between~~disposed ~~public~~of ~~companies~~its ~~and~~subsidiary ~~their~~LD ~~shareholders~~through ~~and~~a ~~investors.~~sale ~~The~~to ~~Company~~Freedom ~~currently has one reportable and operating segment~~Holding, ~~which~~Corp. ~~consists of one reporting unit consisting of two distinct business units~~(Nasdaq: “FRHC”).

●In connection ~~The 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~~the ~~across marketing channels. ● Through LD Micro~~sale, the Company ~~organizes~~received ~~and~~aggregate ~~hosts~~consideration ~~investor~~of ~~conferences within the micro and small- cap markets~~$8,300,000 ~~and~~as ~~plans to create several more niche events for the investor community.~~follows:

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

●	$4,000,000, and
●	59,763 shares of FRHC, having a fair value of $4,300,000 ($71.95/share), based upon the volume weighted average of the daily closing sales prices of FRHC for the thirty (30) consecutive trading days ending on the three (3) trading days prior to the closing.

OnAs ~~February~~a 4,result ~~2021,~~of the ~~Company~~sale ~~acquired~~of ~~FPVD~~our ~~through~~subsidiary, awe ~~reverse~~deconsolidated ~~acquisition~~our ~~involving~~entire ~~BIG~~ownership ~~Token~~interest in LD from our consolidated financial statements beginning with the quarter ended March 31, ~~Inc~~2023. OnThe ~~December~~financial ~~29,~~results ~~2021,~~of ~~the~~LD ~~Company deconsolidated~~have been included in the Company’s ~~majority~~operations ~~owned~~up to ~~subsidiary~~the ~~BIG~~date ~~Token,~~of ~~Inc~~disposal. ~~(“BIGToken”)~~Additionally, ~~formerly~~we ~~known~~recognized asa ~~Force~~gain ~~Protection Video~~on ~~Equipment~~disposal ~~Corporation~~of ~~(or~~$594,000, ~~“FPVD”).~~which ~~See~~is ~~Note~~included 3as ~~–Discontinued~~a ~~Operations.~~component of other income (expense), as follows:

~~On March~~Schedule 3,of ~~2023,~~Identifiable ~~the~~Assets ~~Company divested the LD Micro subsidiary.~~Acquired

Liquidity and Capital Resources

Consideration
Cash	$	4,000,000
Marketable securities (59,763 shares of Freedom Holding, Corp. ($71.95/share))		4,300,000

Fair value of consideration received in connection with the sale of LD Micro, Inc.		8,300,000

~~The Company~~Recognized ~~has~~amounts ~~incurred~~of ~~significant~~identifiable ~~losses~~assets ~~since~~sold ~~its inception~~ and ~~has~~liabilities ~~not~~assumed ~~demonstrated~~by anbuyer ability to generate cash in excess of its operating expenses for a sustained period of time. As of September 30, 2022, the Company had cash of $116,000 which is not sufficient to fund the Company’s planned operations through one year after the date the unaudited Condensed Consolidated Financial Statements are issued. These factors raise substantial doubt about the Company’s ability to continue as a going concern for at least one year after the date that the unaudited Condensed Consolidated Financial Statements are issued.(FRHC):

~~The~~Schedule unaudited Condensed Consolidated Financial Statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the unaudited Condensed Consolidated Financial Statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of ~~assets~~Identifiable ~~and~~Assets ~~satisfaction of liabilities and commitments in the ordinary course of business.~~Acquired

In making this assessment, the Company performed a comprehensive analysis of current circumstances including: its financial position, 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.


Goodwill (existing from prior acquisition of LD Micro, Inc.)		7,706,000
Total net assets acquired by DNA Holdings, LLC		7,706,000

Gain on disposal of LD Micro, Inc.	$	594,000

The ~~Company~~disposal ~~expects~~did ~~that~~not ~~its~~qualify ~~existing cash, accounts receivable and sale of marketable securities~~ as ofa ~~September~~discontinued ~~30,~~operation ~~2022,~~because ~~will not be sufficient to enable~~ it todid ~~fund~~not ~~the anticipated level of operations through one year from the date these financial statements are issued. The Company projects the sale of its marketable security holding will~~ represent a ~~substantial~~strategic ~~portion~~shift ofthat ~~the~~had ~~cash~~a ~~required~~major ~~for~~effect ~~operations~~on ~~for~~ the ~~foreseeable~~ ~~future. The~~ Company’s ~~sales of marketable securities are primarily through sale transactions that qualify for exemptions~~ ~~pursuant~~operations toand ~~Rule~~financial ~~144~~results, ofas ~~the~~defined ~~Securities~~by ~~Act~~ASC ~~of 1933~~205-20. ~~The~~Additionally, ~~conditions~~LD ~~required to be met to qualify for the exemptions under Rule 144 are often difficult to predict~~Micro, ~~making~~Inc. italso ~~difficult~~did tonot ~~predict~~represent ~~the~~a ~~timing~~separate ofline ~~the associated cash flows from the sales~~ of ~~these securities.~~business ~~The~~requiring ~~Company’s~~segment holdings of marketable securities are subject to risks and uncertainties such as fluctuations in pricing in the primary market, and legal restrictions that create uncertainty around realization and timing of cash flowsdisclosure.

The Company anticipates raising additional capital through the private and public sales of its equity or debt securities and selling its 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 when needed in order to allow the Company to continue its operations, or if available, on terms acceptable to it. If the Company does not raise sufficient capital in a timely manner, among other things, it may be forced to scale back its operations or cease operations altogether.

~~NOTE~~SRAX, 2INC. ~~– BASIS OF PRESENTATION~~ AND ~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~SUBSIDIARIES

~~Basis~~NOTES ofTO ~~Presentation~~UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~The~~MARCH accompanying Condensed Consolidated Financial Statements and notes thereto are unaudited. The unaudited interim Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in the Company’s annual financial statements have been condensed or omitted. The December 31, 2021 Condensed Consolidated Balance Sheet was derived from financial statements but does not include all disclosures required by GAAP. These interim unaudited Condensed Consolidated Financial Statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim nine-month periods ended September 30, 2022 and 2021. The results for the nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022 or for any future period.2023

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

~~Principles~~The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of ~~Consolidation~~America for interim financial statements (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

~~The~~In the opinion of the Company’s management, the accompanying unaudited ~~Condensed~~consolidated ~~Consolidated~~financial ~~Financial~~statements ~~Statements~~contain ~~include~~all of the ~~accounts~~adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2023 and ~~its~~the results ~~wholly~~of ~~owned~~operations ~~subsidiaries~~and cash flows for the periods presented. ~~All~~The ~~material~~results of operations for the three months ended March 31, 2023 are ~~intercompany~~not ~~transactions~~necessarily ~~and~~indicative ~~balances~~of ~~have~~the ~~been~~operating ~~eliminated~~results infor ~~consolidation~~the full fiscal year or any future period.

~~Reclassification~~These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on September 20, 2024.

~~Certain~~Management ~~prior~~acknowledges ~~period~~its ~~amounts~~responsibility ~~have~~for ~~been~~the ~~reclassified~~preparation toof ~~conform~~the toaccompanying ~~current~~unaudited ~~period~~consolidated ~~presentation~~financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the consolidated results of its operations for the periods presented.

~~Use~~The ofamounts ~~Estimates~~in the accompanying unaudited consolidated financial statements and notes are presented in thousands (except per share amounts), unless otherwise stated. As a result, certain totals may not sum due to rounding.

~~The~~Note ~~unaudited~~2 ~~Condensed~~- ~~Consolidated~~Liquidity ~~Financial Statements have been prepared in conformity with GAAP~~ and ~~require~~Going management of the Company to make estimates and assumptions in the preparation of these unaudited Condensed 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.Concern

~~The~~As ~~most~~reflected ~~significant areas that require management judgment and which are susceptible to possible change~~ in the ~~near~~accompanying ~~term~~unaudited ~~include,~~consolidated ~~among other~~financial ~~items~~statements, for the ~~Company’s~~three ~~revenue~~months ~~recognition,~~ended ~~valuation~~March ~~of marketable investment securities~~31, ~~stock-based compensation~~2023, ~~income taxes, purchase price for acquisitions, goodwill, other intangible assets, and~~ the ~~valuation~~Company ~~of redemption features and other assets and liabilities.~~had:

Fair Value of Financial Instruments

●	Net income of $2,627,000; and
●	Net cash used in operations was $5,114,000

~~The~~Additionally, 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~~March ~~measurement~~31, ~~date~~2023, ~~based on~~ the Company’s ~~principal or, in absence of a principal, most advantageous market for the specific asset or liability.~~had:

~~In determining~~● ~~fair~~Accumulated ~~value,~~deficit ~~the~~of ~~Company~~$59,366,000 ~~uses~~● ~~various~~Stockholders’ ~~valuation~~deficit ~~techniques.~~of A$5,302,000; ~~fair value hierarchy for inputs is used in measuring fair value. It maximizes observable inputs~~ and ~~minimizes~~● ~~unobservable~~Working ~~inputs.~~capital ~~Valuation~~deficit ~~techniques~~of ~~consistent with the market or income approach are used to measure fair value. The fair value hierarchy is categorized into three levels:~~$5,627,000

● 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.

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 item being valued is classified based on the hierarchy category of the lowest significant level input to the fair value measurement. See Note 12 Fair Value of Financial Instruments.

~~Cash~~SRAX, INC. AND SUBSIDIARIES

~~The~~NOTES ~~Company~~TO ~~considers~~UNAUDITED ~~all~~CONSOLIDATED ~~short-term~~FINANCIAL highly liquid investments with a remaining maturity at the date of purchase of three months or less to be cash equivalents. Cash is recorded at cost, which approximates its fair value. The Company did not have any cash equivalents as of September 30, 2022 and December 31, 2021. The Company maintains its cash 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 September 30, 2022 and December 31, 2021, the Company had $0 and $1,098,000 in excess of the federal insurance limit, respectively.STATEMENTS

~~Marketable~~MARCH ~~Securities~~31, 2023

~~Marketable~~The ~~Securities~~Company ~~consist~~anticipates ofthat ~~debt~~it ~~and~~will ~~equity~~need ~~securities.~~to ~~The~~raise ~~Company~~additional ~~accounts~~capital ~~for~~immediately ~~marketable~~in ~~equity~~order ~~securities,~~to ~~including~~continue ~~convertible~~to ~~preferred shares~~fund atits ~~fair~~operations. ~~value~~The ~~pursuant~~Company has torelied ~~ASC~~on ~~321~~third ~~Investments~~parties –for ~~Equity Securities, and marketable~~ debt ~~securities~~based atfunding ~~fair~~of ~~value~~its inoperations. ~~accordance with~~There ~~ASC~~is ~~320~~also –no ~~Investments~~assurance ~~Debt~~that ~~Securities.~~the ~~Marketable~~amount ~~securities~~of ~~were~~funds ~~approximately~~the ~~$21.1~~Company might ~~million~~raise ~~and~~will ~~$15.6~~enable ~~million~~the asCompany ofto ~~September 30,~~complete ~~2022~~its ~~and~~initiatives ~~December~~or ~~31,~~attain ~~2021,~~profitable ~~respectively~~operations.

~~Accounts~~The ~~Receivable~~Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully expand to new markets, competition, and the need to enter into collaborations with other companies or acquire other companies to enhance or complement its service offerings.

~~Credit~~There iscan ~~extended~~be tono ~~customers~~assurances ~~based~~that onfinancing anwill ~~evaluation~~be ofavailable ~~their~~on ~~financial~~terms ~~condition~~which ~~and~~are ~~other factors~~favorable, ~~and~~or ~~the~~at ~~Company usually does not require collateral~~all. ~~Management~~If ~~periodically assesses~~ the Company’s ~~accounts~~is ~~receivable~~unable ~~and,~~to ifraise ~~necessary, establishes an allowance for~~additional ~~estimated~~funding ~~uncollectible amounts. Accounts determined~~ to bemeet ~~uncollectible~~its ~~are~~working ~~charged~~capital toneeds ~~operations~~in ~~when~~the ~~that~~future, ~~determination~~it iswill ~~made.~~be ~~The allowance~~forced ~~for~~to ~~doubtful accounts was approximately $69~~delay,~~000~~ ~~and $130~~reduce,~~000~~ asor ofcease ~~September~~its ~~30, 2022 and December 31, 2021, respectively~~operations.

~~Concentration~~The ofCompany ~~Credit~~is ~~and~~heavily ~~Significant~~reliant ~~Customer~~on ~~Risk~~its ability to convert its marketable securities into cash. The ability to sell these investments have inherent limitations such as legal restrictions/holding periods and illiquid markets.

~~Financial~~In ~~instruments~~making ~~that~~this ~~potentially~~assessment ~~subject~~we ~~the~~performed ~~Company~~a tocomprehensive ~~concentration~~analysis of ~~credit~~our ~~risk~~current ~~consist~~circumstances ofincluding: ~~cash,~~our ~~accounts~~financial ~~receivable~~position, ~~and~~our ~~notes receivable.~~cash ~~Cash~~flows isand ~~deposited~~cash ~~with~~usage ~~financial~~forecasts ~~institutions~~for ~~within~~ the ~~United~~twelve ~~States.~~months ~~The~~ended ~~balances~~March ~~maintained~~31, at2024, ~~these~~and ~~financial~~our ~~institutions~~current ~~are~~capital ~~generally more~~structure ~~than~~including ~~the~~equity-based ~~FDIC~~instruments, obligations ~~insurance~~and ~~limits~~debts. ~~The~~Additionally, ~~Company~~this ~~has~~assessment ~~not~~was ~~experienced~~made ~~any~~as ~~loss~~of onthe date of these ~~accounts~~unaudited consolidated financial statements.

AsWe ofmanage ~~September~~liquidity ~~30,~~risk ~~2022~~by reviewing, ~~the~~on ~~Company~~an ~~did~~ongoing ~~not~~basis, ~~have~~our ~~any~~sources ~~customers with accounts receivable balances representing greater than 10%~~ of ~~the Company’s~~liquidity ~~aggregate~~and ~~accounts~~capital ~~receivable~~requirements. AsThe ~~of December 31, 2021, the~~ Company had ~~one~~cash ~~customer~~on ~~with~~hand of an$765,000 ~~accounts~~at ~~receivable~~March ~~balance of~~31, ~~approximately 11%~~2023.

~~For~~The ~~the~~Company ~~nine~~has ~~months~~historically ~~ended~~incurred ~~September~~significant ~~30,~~losses ~~2022~~since inception and ~~2021,~~has ~~the~~not ~~Company~~demonstrated ~~had~~an noability ~~customers~~to ~~that~~generate ~~account~~sufficient ~~for~~revenues from athe ~~significant~~sales ~~percentage~~ of ~~total~~its ~~revenues~~services to achieve profitable operations.

~~Goodwill~~These ~~and~~factors ~~Intangible~~create ~~assets~~substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that these financial statements are issued.

~~Intangible~~The ~~assets~~unaudited ~~consist~~consolidated offinancial ~~(i)~~statements ~~goodwill,~~do ~~intellectual~~not ~~property,~~include ~~trademarks,~~any ~~trade~~adjustments ~~names~~that ~~and~~might ~~non-compete~~be ~~agreements~~necessary ~~acquired~~if inthe ~~business~~Company ~~combinations and~~is ~~capitalized~~unable ~~software~~to ~~development~~continue as ~~costs~~a going concern. ~~Other~~Accordingly, ~~than~~the ~~goodwill~~financial ~~and~~statements ~~trademarks,~~have ~~intangible~~been ~~assets~~prepared ~~are~~on ~~stated~~a atbasis ~~cost~~that ~~less~~assumes ~~accumulated amortization.~~the ~~Amortization~~Company iswill ~~provided~~continue ~~for~~as ona ~~the~~going concern ~~straight-line~~and ~~basis~~which ~~over~~contemplates the ~~estimated~~realization ~~useful~~of ~~lives~~assets and satisfaction of liabilities and commitments in the ~~assets~~ordinary course of ~~five years~~business.

Impairment of Goodwill, Intangible Assets and Other Long-lived Assets

Management evaluates the recoverability of the Company’s definitive lived 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.

Management evaluates the recoverability of the Company’s goodwill annually at December 31 or more often as events or circumstances indicate the fair value of a reporting unit is below its carrying value. The Company has determined that it operates as a single reporting unit for the purposes of conducting this goodwill impairment assessment. 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.

~~An impairment in the amount of $10~~SRAX,~~200,000 to goodwill, and $1,481,000 to intangible assets was recognized for the nine months ended September~~ ~~30, 2022~~INC. ~~The~~AND impairment was determined as the carrying amount of goodwill exceeded its implied fair value based on a discounted cash flow projection. The transition to accepting only cash as compensation for services will cause a significant decrease in revenue and cash collections, which has a material negative impact on the discounted cash flow projection. No impairments of goodwill or other long-lived assets have been recognized for the nine months ended September 30, 2021.SUBSIDIARIES

~~Revenue~~NOTES ~~Recognition~~TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~The~~MARCH ~~Company~~31, recognizes revenues upon the satisfaction of its performance obligation(s) (upon transfer of control of promised goods or services to its customers) in an amount that reflects the consideration to which it expects to be entitled to in exchange for those goods or services. The Company determines the amount of revenue to be recognized through the application of the five-step process as follows:2023

~~1) identification of contracts with customers; 2) identification of the distinct performance obligations in the contract;~~ Note 3) ~~determination~~- ofSummary ~~the transaction price~~ of ~~the~~Significant ~~contract;~~Accounting ~~4) allocation of transaction price among the performance obligations in the contract; and 5) recognition of revenue as performance obligations are satisfied.~~Policies

~~The~~Principles ~~Company~~of ~~has~~Consolidation ~~elected~~and ~~the~~Non-Controlling ~~following practical expedients allowed in accounting for its revenue recognition:~~Interest

●These unaudited ~~not~~consolidated ~~adjusting~~financial ~~contract~~statements ~~consideration~~have ~~for~~been ~~the~~prepared ~~effects~~in ofaccordance ~~significant~~with ~~financing~~U.S. ~~components~~GAAP ~~if the period between transfer or service~~ and ~~customer~~include ~~payment is expected to be less than one year; ● not assessing performance obligations if they are immaterial in~~ the ~~context~~accounts of the ~~contract;~~Company ~~● excluding sales~~ and its ~~similar~~wholly ~~taxes~~owned ~~from~~subsidiary. ~~the~~All ~~transaction~~intercompany ~~price;~~transactions and ●balances ~~not~~have ~~disclosing~~been ~~the value of unsatisfied performance obligations for contracts with an original expected length of one year or less~~eliminated.

~~The~~For ~~Company~~entities ~~generates~~that ~~revenue~~are ~~primarily~~consolidated, ~~from~~but ~~its~~not ~~Sequire~~100% ~~SaaS~~owned, ~~platform~~a ~~and~~portion ~~its~~of ~~LD Micro subsidiary. Specifically,~~ the ~~Sequire~~income ~~SaaS~~or ~~platform related~~loss ~~revenue~~and ~~consists~~corresponding ofequity ~~(i)~~is ~~licensing~~allocated ~~subscriptions~~ to ~~access~~owners ~~the platform, (ii) managed services involving data and marketing initiatives~~other ~~and~~than ~~(iii)~~the ~~ancillary~~Company. ~~data~~The ~~supplementing~~aggregate ~~the use~~ of the ~~platform.~~income LDor ~~Micro~~loss ~~revenues~~and ~~consist~~corresponding ofequity ~~attendee~~that ~~fees~~is ~~and~~not ~~event~~owned ~~sponsorship~~by ~~fees related~~us ~~investor~~is ~~conferences~~included ~~organized~~in ~~and~~Non-Controlling Interests ~~hosted~~in by the ~~Company~~consolidated financial statements.

~~Sequire~~Business ~~SaaS~~Combinations ~~platform~~and Asset Acquisitions

~~Sequire~~The ~~SaaS~~Company ~~platform~~accounts ~~agreements~~for ~~are~~acquisitions ~~typically~~that ~~for~~qualify aas ~~period~~business ofcombinations ~~12-months~~by ~~and~~applying ~~provide~~the ~~for~~acquisition ~~monthly~~method oraccording ~~annual~~to ~~payments~~Accounting inStandards Codification ~~advance~~(“ASC”) 805, Business Combinations (“ASC 805”).

~~Prior~~Transaction tocosts ~~2023~~related ~~many of the Sequire SaaS platform agreements provide customers the ability~~ to ~~pay for~~ the ~~services~~acquisition ~~with the issuance~~ of ~~the~~a ~~customers’ securities~~business ~~including~~are ~~common~~expensed ~~stock.~~as ~~The~~incurred ~~amount~~and ofexcluded ~~consideration~~from ~~for these contracts is based on~~ the ~~estimated~~ fair value of ~~the~~consideration ~~underlying securities on the contract date~~transferred. See “Fair Value of Financial Instruments” for details over the calculation of fair value. In 2023 the Company transitioned to accepting only cash as compensation for services. As we transition to accepting only cash as compensation for services there will be a significant decrease in Sequire revenue.

~~When~~The ~~Sequire~~identifiable ~~SaaS~~assets ~~platform~~acquired, ~~contracts~~liabilities ~~contain~~assumed, ~~multiple~~and ~~performance~~noncontrolling ~~obligations,~~interests ~~transaction~~in ~~consideration~~an isacquired ~~allocated~~entity toare ~~each~~recognized ~~individual~~and ~~performance~~measured at ~~obligation~~their ~~based~~estimated onfair avalues. ~~relative~~The ~~Stand-Alone~~excess ~~Selling~~of ~~Price~~the ~~(“SSP~~fair value of consideration transferred over the fair values of identifiable assets acquired,”) liabilities ~~basis.~~assumed, ~~The~~and ~~Company~~noncontrolling ~~determines~~interests ~~SSP~~in ~~based~~an onacquired entity, net of the ~~price~~fair ~~at which~~value of any previously held interest in the acquired ~~performance~~entity, ~~obligation~~is ~~would~~recorded beas ~~sold~~goodwill. ~~separately~~Such valuations require management to make significant estimates and assumptions.

~~Subscription~~Purchase ~~revenue~~price isallocations ~~generally~~may ~~non-refundable~~be ~~regardless~~preliminary, ofand, during the ~~actual~~measurement ~~use~~period ~~and~~not isto ~~recognized~~exceed ~~ratably~~one ~~over~~year from the ~~non-cancellable~~date ~~contract~~of ~~term~~acquisition, ~~beginning~~changes onin ~~the~~assumptions ~~commencement~~and ~~date~~estimates ofthat ~~each~~result ~~contract,~~in ~~which~~adjustments isto the ~~date~~fair ~~the~~value ~~Company’s~~of ~~service~~assets isacquired ~~first~~and ~~made~~liabilities ~~available~~assumed toare ~~customers~~recorded in the period the adjustments are determined.

~~Managed~~Significant ~~Services~~judgments are used in determining fair values of assets acquired and ~~Ancillary~~liabilities ~~Data~~assumed, ~~revenue~~as iswell ~~typically~~as ~~recognized~~intangibles. ~~using~~Fair anvalue ~~output~~and ~~measure~~useful life determinations are based on, among other factors, estimates of ~~progress~~future byexpected ~~looking~~cash atflows, ~~the~~and ~~time~~appropriate ~~elapsed~~discount asrates ~~the~~used in ~~contracts~~computing ~~generally~~present ~~provide~~values. ~~the~~These ~~customer~~judgments ~~equal~~may ~~benefit~~materially ~~throughout~~impact the ~~contract~~estimates ~~period~~used ~~because~~in allocating acquisition date fair values to assets acquired and liabilities assumed, as well as the Company’s ~~transfers~~current ~~control~~and ~~evenly~~future byoperating results. Actual results may vary from these ~~providing~~estimates which may result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a ~~stand-ready~~measurement period ~~service~~or upon a final determination of asset and liability fair values, whichever occurs first.

LD Micro - Conference Revenue

LD Micro agreements cover a specific event and provide for payment in advance or at the time of the event. Conference revenue from attendee fees and sponsorship fees is recognized at the time of the event (i.e., at a point-in-time).

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 have not been received by the Company.

~~Deferred~~SRAX, ~~Revenue~~INC. AND SUBSIDIARIES

~~Deferred~~NOTES ~~revenue~~TO ~~resulting~~UNAUDITED ~~from~~CONSOLIDATED ~~amounts~~FINANCIAL ~~billed to, or cash received from, customers in advance of the Company satisfying its performance obligation and recognizing the applicable revenue.~~STATEMENTS

~~Preferred~~MARCH ~~stock~~31, 2023

~~Preferred~~Adjustments ~~stock liability represents amounts payable~~ to ~~holders~~fair ofvalues ~~the Preferred Stock Series A shares upon the eventual liquidation~~ of assets ~~designated~~ ~~for~~and ~~the~~liabilities ~~sole~~made ~~purpose~~after ~~of paying dividends. Accordingly,~~ the ~~Company~~end ~~classified the Series A Preferred Shares as liability instruments because in-substance, they represent a right to the payment~~ of ~~dividends upon~~ the ~~liquidation~~measurement ofperiod ~~specified assets,~~ are ~~automatically returnable~~recorded towithin the Company’s ~~after the payments are made and feature no rights to further equity or residual interests in the Company~~earnings. The Certificate of Designation of Preferences, Rights and Limitations of Series A Non-Voting Preferred Stock states dividend shall be paid conditioned upon, and subject to a determination by the Board that a distribution is not prohibited pursuant to applicable provisions of the DGCL or other applicable law.

~~Costs~~The Company evaluates acquisitions of assets and other similar transactions to ~~Obtain~~assess whether the transaction should be accounted for as a business combination or ~~Costs~~asset acquisition by first applying a screen test to ~~Fulfill~~determine whether substantially all of the fair value of the gross assets acquired is concentrated in a ~~Contract~~single identifiable asset or group of similar identifiable assets. If so, the transaction is accounted for as an asset acquisition. If not, further determination is required as to whether the Company has acquired inputs and processes that can create outputs that would meet the definition of a business. When applying the screen test, significant judgment is required to determine whether an acquisition is a business combination or an acquisition of assets.

~~The~~Accounting ~~Company~~for ~~has~~asset noacquisitions ~~costs~~falls ~~that~~under ~~qualify~~the asguidance ~~costs~~of Topic 805, Business Combinations, specifically Subtopic 805-50. A cost accumulation model is used to ~~obtain~~determine oran ~~costs~~asset acquisition’s cost. Assets acquired are based on their cost, generally allocated to ~~fulfill~~them ~~customer~~on a ~~contracts~~relative fair value basis. Direct acquisition-related costs are included in the cost of the acquired assets.

~~Net~~The ~~Loss~~distinction ~~Per~~between ~~Share~~business combinations and asset acquisitions involves judgment, particularly when applying the screen test to determine the nature of the transaction. Incorrect judgments or changes in decisions in these areas could materially affect the determination of goodwill, the recognition and measurement of acquired assets and assumed liabilities, and, consequently, our financial position and results of operations.

~~Basic~~Acquisition ~~earnings per share is calculated by dividing net loss by the weighted-average number~~ of ~~shares~~DNA ~~outstanding during the period. Diluted loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding~~Holdings, ~~after~~LLC ~~giving~~(“DNA”) ~~effect~~(Asset ~~to all~~Purchase) ~~potentially~~– ~~dilutive~~Former ~~common~~Related shares outstanding during the period. For periods with a net loss, basic and diluted earnings per share are the same, in that a potentially common stock equivalent would have the effect of being anti-dilutive in the computation of net loss per share. The number of potentially outstanding dilutive common shares excluded from the diluted net loss per calculation, as they were anti-dilutive were 911,868 for three and the nine months ended September 30, 2022, and 11,867,520 for the three months and nine months ended September 30, 2021.Party

~~Recent~~Summary ~~Accounting~~of ~~Pronouncements~~Assets Acquired from DNA

InOn ~~June~~February ~~2022~~3, ~~the FASB issued Accounting Standards Update (“ASU”) ASU 2022-03 (“Fair Value Measurements”)~~2023, ~~which~~ ~~clarifies~~ the ~~guidance~~Company inclosed ~~ASC 820 (“Fair Value Measurement”) (“ASC 820”), (1) when measuring the fair value of~~ an ~~equity~~asset ~~security~~purchase ~~subject~~agreement toand ~~contractual~~acquired ~~restrictions that prohibit~~ the ~~sale~~following ofassets anfrom ~~equity security~~DNA, ~~(2)~~having ~~to amend~~ a ~~related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at~~ fair value ~~in accordance with ASC 820. The adoption did not impact the Company’s financial position, results~~ of ~~operations or cash flows.~~$1,256,000:

~~Recent Accounting~~● ~~Pronouncements~~Cash ~~Not~~($1,000,000), ~~Yet~~● ~~Adopted~~Digital crypto assets ($256,000); and ● Equity investments in three (3) private companies accounted for under the cost method ($0).

InDNA ~~August~~is ~~2020,~~controlled ~~the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, Debt-Debt with Conversion and Other Options 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,~~former ~~for~~member ~~convertible~~of ~~instruments~~our ~~with~~Board ~~conversion features~~of that are not required to be accounted for as derivative instruments 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 contractDirectors. 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 guidance is effective on a modified retrospective or full retrospective basis for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company is currently evaluating the impact on the consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) addressing accounting for credit losses on financial instruments, which is designed to provide financial statement users with more information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. When determining such expected credit losses, the guidance requires companies to apply a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This guidance is effective on a modified retrospective basis for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact on the consolidated financial statements.

The Company’s management reviewed all recently issued 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~~SRAX, 3INC. –AND ~~DISCONTINUED OPERATIONS~~SUBSIDIARIES

~~Background~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OnMARCH ~~February 4~~31, 2021, the Company completed a share exchange agreement (“Exchange Agreement”) with FPVD. As part of the Exchange Agreement the Company transferred all of the BIGToken assets and 100% of the issued and outstanding shares of BIGToken for 149,562,566,534 shares of FPVD’s common stock and 5,000,000 shares of FPVD’s series A preferred stock. The Company accounted for the transaction as a reverse capitalization and resulted in reducing the Company’s ownership in BIGToken from 100% to 88.9% and establishment of a non-controlling interest. Subsequently, FPVD was renamed BIGToken.2023

~~Deconsolidation~~Accounting Guidance – Asset Purchase Determination

OnUnder ~~December~~the ~~29,~~business ~~2021,~~combination ~~BIGToken~~guidance ~~(formerly~~in ~~FPVD)~~ASC ~~completed a merger transaction with BritePool~~805, ~~Inc.~~an ~~(“BritePool”)~~entity ~~(the~~applies ~~“Merger”) resulting in~~ the ~~Company’s~~screen ~~ownership~~test ~~in BIGToken being reduced from 66%~~ to ~~approximately~~determine ~~4.99%.~~whether As a ~~result~~transaction ofconstitutes ~~the~~a ~~Merger, BIGToken~~business ~~issued~~combination ~~183,445,351,631~~or ~~shares~~an ofasset ~~its~~acquisition. ~~common~~According ~~stock~~to ~~(“Acquisition~~ASC ~~Shares”)~~805-10-55-3A, ~~for~~if substantially all of the ~~issued~~fair ~~and~~value ~~outstanding equity shares~~ of ~~BritePool.~~the Ongross ~~December~~assets ~~29,~~acquired is ~~2021,~~concentrated asin a ~~condition~~single ~~for~~identifiable ~~the~~asset ~~closing~~or ofa ~~the~~group ~~Merger, the Company exchanged 149,562,566,534 shares~~ of ~~BIGToken common~~similar ~~stock~~identifiable ~~for 242~~assets,~~078~~ ~~shares of BIGToken’s Series D Convertible Preferred Stock (“Series D Stock”) (~~the ~~“Exchange”). Simultaneously~~transaction ~~with~~does ~~the~~not ~~Exchange,~~meet the ~~Company converted 22,162 shares~~ definition of ~~the~~a ~~Series~~business Dand ~~Stock~~is ~~into~~instead ~~13,692,304,136~~accounted ~~shares~~for ofas ~~BIGToken’s common~~an ~~stock,~~asset ~~or approximately 4~~acquisition.~~99% of the issued and outstanding shares of BIGToken’s common stock.~~

~~Subsequent~~Based toon ~~the~~this ~~transaction~~analysis, the Company ~~now~~determined ~~owns~~that ~~220,000~~the ~~shares~~screen oftest ~~BIGToken’s~~was ~~series~~met ~~D convertible, non-redeemable, non-voting preferred stock~~ and ~~13,692,304,136~~that ~~shares of its common stock. As a result of~~ the ~~transaction,~~acquisition ~~the~~did ~~Company~~not noqualify ~~longer~~as ~~has~~ a ~~controlling~~business ~~financial~~combination ~~interest~~under inASC ~~BIGToken and deconsolidated BIGToken effective December 29~~805, ~~2021,~~Business ~~recognizing a loss of $10~~Combinations.~~7 million as follows:~~

~~SCHEDULE~~The OFCompany ~~DECONSOLIDATION~~classified OFthe ~~BUSINESS~~acquired assets into one distinct group:

Consideration	Amount
Fair value of Series D Stock and Common Stock	$	31,000
Carrying amount of non-controlling interests of BIGToken		6,045,000
Previous equity adjustments of non-controlling interest		(12,510,000	)
Total		(6,434,000	)
Book basis of investment in BIGToken		4,250,000
Loss on disposal of subsidiary	$	(10,684,000	)

Financial Assets (Cash, Crypto Assets, and Private Company Investments)

~~The~~These ~~Company~~assets ~~determined~~do ~~the~~not ~~Series~~constitute Da ~~Stock~~business ~~would~~under beASC ~~classified~~805 as athey ~~Level~~lack 3inputs ~~asset~~and asprocesses ~~there~~necessary ~~is no observable market for quoted market price for an identical asset. The Company engaged an independent third-party valuation expert~~ to ~~estimate~~generate ~~the fair value of the Series D Stock~~outputs. Specifically:

~~The financial~~● ~~results~~Cash ofacquired ~~BIGToken~~– ~~are~~Cash ~~presented~~alone asis ~~loss~~not ~~from~~considered ~~discontinued~~a ~~operations,~~business ~~net of income taxes~~ and ~~net~~was ofsubsequently ~~income~~used ~~attributable to~~for ~~non-controlling~~working ~~interests~~capital onpurposes. ~~the~~● ~~Company’s~~Private ~~unaudited~~company ~~Condensed~~investments ~~Consolidated~~(<10% ~~Statement~~ownership) of– ~~Operations~~These ~~for~~were ~~the~~classified ~~three~~as ~~and~~cost ~~nine~~method ~~months ended~~investments ~~September~~rather ~~30,~~than ~~2021~~a business. ~~The~~● ~~historical~~Digital ~~Condensed~~crypto ~~Consolidated~~assets ~~Statement~~– ofThe ~~Cash~~Company ~~Flows~~liquidated ~~has~~these ~~also~~assets ~~been~~for ~~revised~~working tocapital, ~~reflect~~and ~~the~~they ~~effect~~do ~~of the~~not ~~deconsolidation.~~function ~~The~~as ~~following~~a ~~table presents the financial results of BIGToken:~~business.

~~SCHEDULE~~Asset OFAcquisition ~~ASSET~~Accounting ~~AND LIABILITIES INCOME FROM DISCONTINUE OPERATIONS~~Treatment

	Three Months Ended September 30, 2021			Nine Months Ended September 30, 2021
Revenues	$	765,000		$	2,469,000
Cost and expenses
Cost of revenues		207,000			715,000
Employee related costs		988,000			2,649,000
Marketing and selling expenses		372,000			861,000
Platform costs		78,000			245,000
Depreciation and amortization		101,000			412,000
General and administrative expenses		1,078,000			3,483,000
Total cost and expenses		2,824,000			8,365,000
Loss from operations		(2,059,000	)		(5,896,000	)
Other expense
Deemed dividend on preferred stock		-			(5,859,000	)
Total other expense		-			(5,859,000	)
Loss from discontinued operations before income tax expense		(2,059,000	)		(11,755,000	)
Income tax expense		-			-
Loss from discontinued operations	$	(2,059,000	)	$	(11,755,000	)

Since the primary identifiable assets acquired were a group of similar assets, none of which were deemed to be a business, the Company concluded that this transaction met the screen test and should be classified as an asset acquisition under ASC 805-50.

Under ASC 805-50, asset acquisitions require the acquirer to recognize assets acquired and liabilities assumed based on the cost to the acquiring entity, allocated on a relative fair value basis, which includes consideration given.

Additionally, because this was an asset acquisition rather than a business combination, the transaction did not result in the recognition of goodwill or other identifiable intangible assets.

~~NOTE~~SRAX, 4INC. –AND ~~NOTES RECEIVABLE~~SUBSIDIARIES

InNOTES ~~October~~TO ~~2020,~~UNAUDITED ~~the~~CONSOLIDATED ~~Company~~FINANCIAL entered into unit redemption agreements with two counterparties providing for the counterparties to repurchase from the Company units of the counterparty’s securities owned by the Company. Pursuant to the redemption agreements, the counterparties repurchased the units for a combined repurchase price of $8 million with $7 million being paid on closing and the additional $1 million being deferred and due on the earlier of the three-year anniversary or upon sale of the counterparties. The Company had no cost basis in the units and as a result the note receivable has no cost basis. The Company accounts for the note receivable as a loan pursuant to ASC 310 – Loans . The $1 million in deferred payments was recorded with an implied discount of approximately $107,000, which is to be amortized over 3 years. During the nine months ended September 30, 2022, the Company accepted an offer to settle note balance for a one-time payment of $900,000. Notes receivable as of September 30, 2022 and December 31, 2021 amounted to $0 and $935,000, respectively.STATEMENTS

~~NOTE~~MARCH 531, ~~– MARKETABLE SECURITIES~~2023

~~The~~Valuation Company offers its customers the option to settle the contract price in the customer’s issued and publicly trading securities or securities convertible into publicly traded securities (e.g., convertible debt), which could be in the form of common stock, preferred stock or convertible debentures. The Company initially values the securities received at the fair market value on the date the contract is executed, which value is used for revenue recognition purposes. After receipt of the securities, the securities are accounted for as investments in debt and equity securities. The Company has concluded that all its debt securities should be classified as trading securities based on its intent to sell them in the near term. Debt securities classified as trading securities and the equity securities are measured at each reporting period at fair value with changes reported in earnings. Upon the sale of the securities, the Company recognizes the final realized gain or (loss) in the consolidated statement of operations as a component of net income (loss).Considerations

AsThe ofCompany ~~September~~paid ~~30,~~aggregate ~~2022~~consideration ~~marketable~~of ~~securities~~the ~~amounted~~following toin ~~$21,121,000,~~accordance with ~~a current portion $2,918,000, and~~ the ~~long~~asset ~~term~~purchase ~~portion of $18,203,000.~~agreement:

The following tables summarize the changes in the Company’s marketable securities during the nine months ended September 30, 2022:

●	1,313,127 shares of common stock; and
●	63,743 shares of Series B, Non-Voting, Convertible Preferred Stock

~~SCHEDULE~~The OFCompany ~~MARKETABLE~~evaluated ~~SECURITIES~~ the transaction under the guidance of Accounting Standards Codification (ASC) 820, Fair Value Measurement, and ASC 805, Business Combinations, to determine the appropriate valuation approach. Based on this assessment, the Company concluded that this asset purchase was, in substance, an equity offering of its securities at a significant discount rather than a business combination or asset acquisition for accounting purposes.

	Total			Common Stock			Convertible Debentures			Preferred Stock			Warrants
Balance as of December 31, 2021	$	15,617,000		$	10,735,000		$	4,187,000		$	599,000		$	96,000
Transfers		-			356,000			(325,000	)		(31,000	)		-
Additions		15,943,000			14,006,000			937,000			1,000,000			-
Sales proceeds		(3,385,000	)		(3,385,000	)		-			-			-
Realized loss		(6,521,000	)		(6,521,000	)		-			-			-
Current period change in fair value		(533,000	)		(3,462,000	)		4,429,000			(1,467,000	)		(33,000	)
Balance as of September 30, 2022	$	21,121,000		$	11,729,000		$	9,228,000		$	101,000		$	63,000

As a result, the Company measured the fair value of the equity securities issued based on the value of the cash and crypto assets received, as this represented the best available evidence of fair value in accordance with ASC 820-10-30 (Fair Value Measurement – Determining Fair Value in Transactions).

~~The~~Furthermore, ~~Company’s~~in ~~sales~~evaluating ~~of securities for~~ the ~~nine~~fair ~~months~~value ~~ended September 30, 2022, was approximately $3.4 million, with a book basis~~ of ~~approximately~~ ~~$9.9 million which represented a loss of approximately $6.5 million, which~~ the ~~Company~~acquired ~~recorded as other expense included in the gains from marketable securities.~~assets:

The ~~equity~~Company ~~securities~~was ~~may~~unable beto ~~accounted~~verify ~~for~~the ~~and~~fair ~~classified~~value ~~into~~of ~~two~~the ~~categories~~private ~~and~~company ~~accounted~~positions ~~for~~acquired ason ~~follows:~~the acquisition date or within one year (1) from the acquisition date.

●Given the ~~Equity~~lack ~~securities~~of ~~with~~observable amarket ~~readily~~inputs ~~determinable~~or ~~fair~~a ~~value~~reliable ~~are~~valuation ~~reported~~methodology, atmanagement ~~fair~~determined ~~value,~~that ~~with~~these ~~unrealized~~assets ~~gains~~should ~~and~~be ~~losses~~recorded at ~~included~~$0, in ~~earnings.~~accordance ~~The fair value of equity investments~~ with ~~fair~~ASC ~~values is primarily obtained from third~~820-~~party~~10-35, ~~pricing~~which ~~services.~~emphasizes ●that ~~Equity securities without a readily determinable~~ fair value ~~are~~should ~~reported~~be atbased ~~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~~market ~~value.~~participant ~~For~~assumptions equity investments without readily determinable fair values, when an orderly transaction for the identical or similar investment of the same issuer is identified, the Company uses valuation techniques to evaluate the observed transaction(s) and ~~adjust~~available observable ~~the fair value of the equity investment~~inputs.

~~Concentration~~The ~~Risk~~Company determined that this asset purchase was in substance an equity offering of its securities at a significant discount, and therefore has valued the equity securities issued equal to the value of the cash and crypto assets received, which represented the best evidence of fair value in this transaction.

The Company’s holdings in marketable securities subject the Company to concentrations of market risks. As of September 30, 2022, the Company’s top marketable security position had a fair value of $2.3 million, which represented approximately 11% of the Company’s holdings, the top five marketable security positions had an aggregate fair value of $8.7 million, which represented approximately 41% of the Company’s holdings, and the top ten marketable security positions had an aggregate fair value of $13.0 million, which represented approximately 61% of the Company’s holdings

Volatility

The Company’s holdings in marketable securities are subject to a high level of volatility, and can experience drastic price changes.

~~BIGtoken~~SRAX, ~~Investment~~INC. AND SUBSIDIARIES

OnNOTES ~~February~~TO ~~15,~~UNAUDITED ~~2022,~~CONSOLIDATED ~~the~~FINANCIAL Company entered into a simple agreement for future equity (the “SAFE”) with its former BIGToken subsidiary. Pursuant to the SAFE, the Company invested $1,000,000 in the SAFE. The amount funded into the SAFE at a given time is referred to herein as the “SAFE Amount”. The Company is accounting for the SAFE as an equity investment carried at fair value with changes recorded in earnings each period and is reflected as such in the above table. As of September 30, 2022 the SAFE had an aggregate fair value of $0, as the Company believed the SAFE to have no value due to the financial condition its former BIGToken subsidiary.STATEMENTS

~~Pursuant~~MARCH ~~to the terms of the SAFE~~31, at any time that BIGtoken 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.2023

~~NOTE~~Goodwill 6and –Intangible ~~DESIGNATED ASSETS FOR RETURN OF CAPITAL~~Assets

OnGoodwill ~~August~~represents ~~17, 2021,~~ the ~~Company~~excess ~~announced~~of ~~that~~the itpurchase ~~will~~price beof ~~issuing~~an aacquired ~~one-time~~business ~~dividend~~over ~~consisting~~the ofamount aassigned ~~share~~to ofthe ~~Series~~assets Aacquired ~~Preferred~~and ~~Stock~~liabilities assumed toand ~~shareholders,~~the ~~debenture~~fair ~~holders,~~value ~~and~~assigned ~~certain~~to ~~warrant~~identifiable ~~holders~~intangible ~~(“Recipients”)~~assets. ofGoodwill ~~record~~is onnot ~~September 20, 2021~~amortized. The ~~Board of~~Company ~~Directors~~accounts ~~designated~~for ~~certain~~goodwill ofand ~~the~~indefinite-lived intangible ~~Company’s~~assets ~~marketable~~in ~~equity~~accordance ~~securities~~with ~~(“Designated~~FASB ~~Assets”)~~ASC as350, ofIntangibles ~~September 20~~Goodwill and Other, ~~2021~~and toAccounting beStandards ~~used~~Update, ~~when~~or ~~liquidated~~ASU, as2017-04, Intangibles a– ~~return~~Goodwill ofand ~~capital~~Other to(Topic 350): Simplifying the ~~Recipients.~~Test ~~See~~for ~~Note~~Goodwill 9Impairment. -The ~~Series~~Company’s Agoodwill ~~Preferred~~and ~~Stock~~intangible assets are deductible for ~~more~~tax ~~details~~purposes.

The ~~balance~~Company ofannually ~~designated~~assesses ~~assets~~goodwill ~~consists~~for ofimpairment, ~~the~~or ~~following:~~more frequently if events or changes in circumstances indicate that goodwill might be impaired.

~~SCHEDULE~~Goodwill OFimpairment ~~DESIGNATED~~testing ~~ASSETS~~consists of an optional qualitative assessment as well as a quantitative test. The quantitative test compares the fair value of a reporting unit to its carrying value. If the carrying value of the reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the carrying value is greater than the fair value, the difference between the two values is recorded as an impairment.

	September 30, 2022		December 31, 2021
Cash	$	-	$	686,000
Marketable equity securities		221,000		3,239,000
Total	$	221,000	$	3,925,000

Indefinite-lived and finite-lived intangible assets acquired in business combinations are recorded at fair value on the acquisition date. Finite-lived intangible assets are amortized on a straight-line basis over the estimated useful life of the asset.

The ~~marketable~~Company ~~equity~~reviews ~~security~~its ~~activity~~intangible assets for impairment annually, or more frequently if events or changes in ~~designated~~circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are not recoverable, an impairment loss is asrecognized ~~follows:~~to the extent the carrying amount of the assets exceeds the fair value of the assets.

~~SCHEDULE~~For OFthe ~~MARKETABLE~~three ~~EQUITY~~months ~~SECURITY~~ended ~~ACTIVITY~~March IN31, ~~DESIGNATED~~2023 ~~ASSETS~~and 2022, the Company recorded no impairment losses, respectively.

	Total
Balance as of December 31, 2021	$	3,239,000
Sales proceeds		(505,000	)
Realized loss		(1,803,000	)
Current period change in fair value		(710,000	)
Balance as of September 30, 2022	$	221,000

Goodwill at March 31, 2023 and December 31, 2022, was $0 and $7,706,000 (solely related to the acquisition of LD Micro, Inc. prior to 2021 and sale in 2023), respectively.

~~The~~Deconsolidation ~~Company’s sale~~ of ~~marketable~~Subsidiary ~~securities~~(Gain ~~underlying~~or ~~designated~~Loss ~~assets~~on for the nine months ended September 30, 2022, were approximately $0.5 million with a cost basis of approximately $2.3 million, which resulted in a realized loss of approximately $1.8 million, which the Company recorded as other expense included in the realized loss from designated assets.Disposal)

~~NOTE~~A 7subsidiary –is ~~SALES~~deconsolidated ~~AND~~from ~~PURCHASE~~the OFCompany’s ~~ACCOUNTS~~financial ~~RECEIVABLE~~statements ~~AND~~when ~~SHORT~~the ~~TERM~~Company ~~FINANCINGS~~no longer has a controlling financial interest in the subsidiary. This generally occurs when the Company loses control through a sale, transfer, or other means, including the expiry of a contractual agreement.

Sales of Accounts Receivable

In 2020, the Company entered into certain financing agreements providing for the sale, with full recourse, of certain of its accounts receivable. These transactions were accounted for as financing of accounts receivables and the related accounts receivable were not removed from the Company’s consolidated balance sheet at the time of the transaction; rather, a liability was recorded for the proceeds received. In 2020 subsequent to the transactions, the purchaser converted the payables into approximately $788,000 of the OID Convertible Notes payable (“Debentures”) (See Note 8 - OID Convertible notes payable).

For the year ended December 31, 2021, the Company entered into agreements with a third-party lender whereby it sold the Company’s right to future subscription revenues of $625,000 for net proceeds of $576,000. 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. During the six months ended June 30, 2022 the Company entered into agreements with third party lenders to borrow against future receipts in the amount of $4,170,000 for net proceeds of $3,044,000. These borrowings have terms of less than 12 months.

In August 2022, proceeds from the Senior Secured Revolving Credit Facility were used to pay off the entire balance of outstanding borrowings. The amount of borrowings outstanding was approximately $0 and $633,000 as of September 30, 2022 and December 31, 2021, respectively, and are included in other current liabilities within our unaudited condensed consolidated balance sheets.

~~CVR~~SRAX, ~~Agreement~~INC. AND SUBSIDIARIES

~~During~~NOTES ~~the~~TO ~~nine~~UNAUDITED ~~months~~CONSOLIDATED ~~ended~~FINANCIAL September 30, 2022, the Company entered into an agreement with an institutional investor whereby in exchange for the payment of $405,000, the investor received (i) the right to receive the net proceeds upon the sale of certain marketable securities held by the Company with a guaranteed minimum return of 120% of such Purchase Price or $486,000 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 sales of such securities. As of September 30, 2022 a liability in the amount of $613,000 was recorded in other current liabilities within our unaudited condensed consolidated balance sheets.STATEMENTS

~~NOTE~~MARCH 831, ~~– OID CONVERTIBLE NOTE(S) PAYABLE~~2023

OnUpon ~~June 30~~deconsolidation, ~~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 consisted of (a) $13,000,000 in cash and (b) the cancellation of $1,169,000 in outstanding debt. The Company received net proceeds of approximately $9,100,000 after deducting the Placement Agent fees, the Debt Repayments and other offering expenses. The Company’s obligations under the Debentures are secured by substantially all of the assets of the Company.

~~The~~Derecognizes ~~Debentures pay interest in cash at~~ the ~~rate~~Assets of 12.0% per annum commencing on June 30, 2021, with such interest originally payable quarterly, beginning on October 1, 2021. Commencing after the six-month anniversary of the issuance of the Debentures, the Company was 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 (5%) in principal being added to the balance of such applicable Debenture on each such Extension. The Debentures had an original maturity date of December 31, 2021 but were extended three times and now mature 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.Liabilities:

~~The Debentures~~● ~~are~~Removes ~~convertible~~the atassets ~~the~~and ~~option~~liabilities of the ~~holder~~subsidiary ~~into~~from ~~shares of~~ the ~~Company’s~~consolidated ~~common~~balance ~~stock~~sheet at antheir ~~initial~~carrying ~~conversion~~amounts ~~price of~~at ~~$2.69 per share, subject to adjustment in~~ the ~~event~~date ofwhen ~~(i)~~control ~~stock~~is 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 reorganizationslost.

InRecognition ~~the event a Purchaser converts a portion~~ of ~~its~~Gain ~~Debenture~~or 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.Loss:

~~Pursuant to~~● ~~the~~Recognizes ~~terms of the Debentures and Warrants, a Purchaser will not have the right to convert~~ any ~~portion~~resulting ofgain ~~the Debentures~~ or ~~exercise any~~loss ~~portion~~in of the ~~Warrants~~consolidated ifstatements ~~the holder (together with its affiliates) would beneficially own in excess~~ of 4operations.~~99%~~ orThis ~~9.99%~~gain ~~(at the Purchaser’s option) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion~~ or ~~exercise,~~loss ~~as such percentage ownership~~ is ~~determined~~measured inas ~~accordance with~~ the ~~terms~~difference 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.between:

~~Subject to~~● ~~the~~The ~~Company’s~~aggregate ~~compliance with certain 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~~fair ~~that the~~value ~~Company (i) sells or reprices any securities (each, a “Redemption Financing”), or (ii) disposes~~ of ~~assets (except those sold or transferred in~~ the ~~ordinary~~consideration ~~course of business) (each~~received, anif ~~“Asset Sale”)~~any, ~~then~~and the ~~Purchasers~~fair ~~shall~~value ~~have the right to (a) in the event~~ of aany ~~Redemption~~retained ~~Financing at a price per Common Stock equivalent of $2~~investment.50 or● ~~less~~The ~~per~~carrying ~~share,~~amount ~~the Purchasers may mandate that 100%~~ of the ~~proceeds~~assets beand ~~used~~liabilities ~~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~~subsidiary, ~~and~~including ~~(c) in~~any ~~the~~noncontrolling ~~event of an Asset Sale, the Purchasers may mandate that up to 100% of the proceeds be used to redeem the Debentures~~interests.

~~The~~Measurement ~~Debentures also contain certain customary events~~ of ~~default~~Retained provisions, including, but not limited to, payment default, breaches of covenants, the occurrence of an event of default under certain material contracts of the Company, failure to register the shares underlying the Debentures and Warrants, 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 prohibited from certain activities (unless waived by 67% of the then outstanding Purchasers, and including the lead Purchaser), 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.Investment:

~~The Warrants~~● ~~are~~Any ~~initially~~retained ~~exercisable~~noncontrolling atequity ~~$2.50~~investment ~~per~~in ~~share~~the ~~and,~~former ~~are~~subsidiary ~~subject~~is remeasured to ~~cashless~~its ~~exercise~~fair ~~after~~value ~~six~~at ~~months if~~ the ~~shares~~date ~~underlying the~~control ~~Warrants~~is ~~are not subject to an effective resale registration statement~~lost. ~~The~~This ~~Warrants~~fair ~~are~~value ~~also~~becomes ~~subject to adjustment in~~ the ~~event of~~initial ~~(i)~~carrying ~~stock~~amount ~~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,~~retained ~~business combinations, and reorganizations~~investment.

See Note 1 for disposal of LD.

Business Segments and Concentrations

The Company determines its reportable segments in accordance with the “management approach” as outlined in ASC 280, Segment Reporting. Under this approach, an entity’s operating segments are identified based on the internal financial information that is regularly reviewed by the Chief Operating Decision Maker (CODM) (the Company’s Chief Executive Officer) to allocate resources and assess performance.

After evaluating the nature of the Company’s operations, the CODM has determined that the Company operates as a single reportable segment because:

	●	The Company’s business activities are managed and evaluated on a consolidated basis rather than through multiple discrete operating segments.
	●	The CODM reviews a single set of financial information to make key decisions regarding resource allocation and performance assessment.
	●	The Company offers products and services that share similar economic characteristics, customers, and distribution methods, supporting aggregation into a single reportable segment.

~~Pursuant to a registration rights agreement (“Registration Rights Agreement”)~~SRAX, ~~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~~INC. ~~The~~AND 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 the Company’s failure to file and/or have the registration statement declared effective within the time periods provided. As of June 30, 2022, the Company has continuously met its obligations under the Registration Rights Agreement.SUBSIDIARIES

~~Bradley~~NOTES ~~Woods~~TO &UNAUDITED ~~Co.~~CONSOLIDATED ~~Ltd.~~FINANCIAL (“Placement Agent”) acted as the placement agent, in connection with the sale of the securities. Pursuant to an engagement agreement, the Company agreed to pay the Placement Agent a cash commission of $1,040,000 and issue 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. Additionally, upon the exercise of the Warrants issued in the Offering, the Placement Agent will be entitled to eight percent (8%) of the cash proceeds received from such exercises. The fair value of the PA Warrants at issuance was estimated to be $360,000.STATEMENTS

~~The~~MARCH ~~Company first allocated the cash proceeds to the loan and the equity classified warrants on a relative fair value basis~~31, secondly, the proceeds were allocated to the beneficial conversion feature. The proceeds allocated to the warrants and the beneficial conversion feature resulted in a debt discount being amortized as additional interest expense using the effective interest method over the term.2023

~~Extension~~As ofa ~~Outstanding~~result, ~~Original~~the ~~Issue~~Company ~~Discount~~reports ~~Senior~~its ~~Secured~~financial ~~Convertible~~results ~~Debentures~~on a consolidated basis, and no additional segment disclosures are required under ASC 280-10-50.

OnUse ~~July 1, 2022, the holders (“Holders”)~~ of $1,197,000 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 June 30, 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”). ATW Master Fund held the nearly all of the $1,197,000 in Debenture principal on June 30, 2020.Estimates

~~Amendment~~The preparation of ~~Convertible~~financial ~~Debenture~~statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP) requires management to make significant estimates and assumptions that impact:

~~On September~~● ~~13,~~The ~~2023,~~reported ~~the~~amounts ~~remaining Debenture, solely held by ATW Master Fund was temporarily amended for a period~~ of upassets toand ~~fourteen months from the Effective date of September 11~~liabilities, ~~2023.~~● The ~~amendments~~disclosure ~~include, but are not limited to, provisions related to the payment~~ of ~~amounts owing~~contingent ~~under~~assets ~~the~~and ~~Credit~~liabilities ~~Agreement~~at ~~from~~ the ~~proceeds~~financial ofstatement ~~the~~date, ~~sale~~and of● third-party securities held by the company. Per the agreement ATW shall receive one hundred percent of the proceeds from sales from third party securities owned by the Company until such time as outstanding amounts due under the respective agreements have been repaid. The ~~Company~~recognition ~~shall maintain the rights to all proceeds from sales~~ of ~~the marketable~~revenues ~~securities once the amounts due to ATW have been satisfied. The Company also agreed to various covenants~~ and ~~conditions,~~expenses ~~including providing~~during ~~access~~the toreporting ~~certain accounts and notifying ATW Opportunities and ATW Master Fund of material changes~~period.

~~The~~These ~~table~~estimates ~~below~~are ~~summarizes~~based ~~the~~on ~~Debenture~~management’s ~~related~~best ~~activity~~judgment, ~~during~~historical ~~the~~experience, ~~three~~ and ~~nine~~various ~~months~~other ~~ended~~factors, ~~September~~including 30assumptions about future events. While management believes that these estimates are reasonable, ~~2022:~~actual results may differ from these estimates, and such differences could be material.

~~SCHEDULE~~Significant OFestimates ~~OID~~during ~~CONVERTIBLE~~the ~~DEBENTURES~~three months ended March 31, 2023 and 2022, respectively, include:

	Principal			Debt Discount			Net Book Value
Balance as of December 31, 2021	$	1,267,000		$	(103,000	)	$	1,164,000
Amortization		-			17,000			17,000
Balance as of March 31, 2022	$	1,267,000		$	(86,000	)	$	1,181,000
Amortization		-			16,000			16,000
Balance as of June 30, 2022	$	1,267,000		$	(70,000	)	$	1,197,000
Principal adjustments		74,000			-			74,000
Repayments		(195,000	)		-			(195,000	)
Amortization		-			18,000			18,000
Balance as of September 30, 2022	$	1,146,000		$	(52,000	)	$	1,094,000

●	revenue recognition (receipt of marketable securities for services to be rendered at fair value),
●	valuation of marketable securities (including impairment losses), using a third party independent valuation expert,
●	allowance for doubtful accounts and other receivables,
●	valuation of loss contingencies,
●	valuation of goodwill and intangibles and related impairments,
●	valuation of stock-based compensation (common and preferred stock, stock options and warrants),
●	estimated useful lives related to intangible assets and related impairments (including goodwill),
●	estimated useful lives related to property and equipment and related impairments,
●	implicit interest rate in right-of-use operating leases,
●	purchase price for acquisitions,
●	uncertain tax positions; and
●	valuation allowance on deferred tax assets.

~~NOTE~~SRAX, 9INC. –AND ~~SENIOR SECURED REVOLVING CREDIT FACILITY (REVOLVING NOTE)~~SUBSIDIARIES

~~Bridge~~NOTES ~~Note~~TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OnMARCH ~~July 1~~31, 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.2023

OnRisks ~~August~~and ~~8, 2022, as described below, the Bridge Note was exchanged for a revolving note in the Senior Secured Revolving Credit Facility.~~Uncertainties

~~Senior~~The ~~Secured~~Company ~~Revolving~~operates ~~Credit~~in ~~Facility~~a ~~(Revolving~~highly ~~Note)~~competitive industry that is subject to rapid changes in consumer demand, evolving market trends, and technological advancements. As a result, the Company’s operations are exposed to significant financial, operational, and strategic risks, including the potential risk of business failure.

~~On August 8~~Additionally, ~~2022,~~ the Company ~~entered~~has ~~into a senior secured revolving credit facility agreement with ATW Opportunities fund to initially borrow up to $9~~experienced,~~450,000~~ inand ~~the~~may ~~aggregate~~continue ~~from time~~ to time (each a “Revolving Note”). The loan maximum amount accessible is limited to $5.5 million until the Company is current with its reporting obligations. The loan is secured by all the assets of the Company and is guaranteed by the Company’s wholly owned subsidiaryexperience, LDvariability ~~Micro,~~in ~~Inc.~~sales ~~As part of the transaction, the Company also amended~~ and ~~restated~~earnings ~~lender’s~~due ~~outstanding warrants~~ to ~~extend~~several ~~the maturity date of a total of 2~~factors,~~590,358~~ ~~Common~~including ~~Stock purchase warrants~~but ~~until~~not ~~September~~limited ~~30, 2023.~~to:

~~On closing~~1. Industry Cyclicality – The Company operates in an industry that is inherently cyclical, ~~the~~with ~~lender~~periods ~~advanced~~of $5strong demand followed by potential downturns. 2. Macroeconomic Conditions – General economic factors,~~580~~ including inflation,~~000~~ ~~consisting~~interest ofrate $4fluctuations,~~930~~ changes in consumer spending patterns,~~000~~ and potential recessions, may adversely impact demand for the Company’s products and services. 3. Market Price Volatility – The Company’s financial performance is influenced by fluctuations in ~~cash~~pricing and competitive pressures related to the ~~exchange~~distribution of ~~the~~its ~~existing~~services. ~~outstanding~~4. ~~$650~~Regulatory and Compliance Risks – Changes in government regulations,~~000~~ ~~bridge note~~industry standards, or compliance requirements could increase operating costs or limit market opportunities. ~~Upon~~5. ~~the~~Supply Chain and Operational Disruptions – The Company’s ~~meeting~~ability ~~certain~~to ~~conditions,~~deliver ~~the~~its ~~Lender~~services ~~will~~may ~~advance~~be upaffected toby anlogistical ~~additional~~challenges, $3supplier constraints,~~870,000~~ or unforeseen external disruptions.

~~The~~Due ~~principal~~to ~~balance~~these ofand ~~each~~other ~~Revolving~~risk ~~Note~~factors, ~~will~~predicting ~~reflect~~future anoperating ~~original~~results ~~issue~~with ~~discount~~certainty ofis ~~ten~~challenging. ~~percent~~The ~~(10%);~~Company ~~provided~~continuously ~~that beginning on the~~evaluates ~~date~~market ~~that~~conditions isand ~~twelve~~implements ~~(12)~~strategic ~~months~~measures ~~from the Effective Date, such original issue discount will increase~~ to ~~twelve~~mitigate ~~percent~~these ~~(12%)~~uncertainties; ~~in the event the Prime borrowing rate increases to 6.75%~~however, ~~and~~there ~~18%~~can inbe ~~the~~no ~~event~~assurance ofthat ~~default.~~such ~~The Revolving Note have a maturity date of the earlier~~measures ofwill ~~(i)~~be ~~twenty-four~~successful ~~(24) months from the Effective Date or (ii) the occurrence of an event of default, as described~~ in ~~the~~addressing ~~Loan~~potential ~~Documents~~risks.

~~Commencing~~Fair onValue ~~the first day~~ of ~~each~~Financial month after the Effective Date, the outstanding balance of the Revolving Note will be paid as calculated based on a percentage of the Company’s collections from the sale of certain of its marketable securities.Instruments

The ~~Revolving~~Company ~~Note~~accounts isfor ~~initially~~financial ~~convertible~~instruments ~~into~~under ~~shares~~Financial ofAccounting ~~Common~~Standards ~~Stock~~Board at(“FASB”) aASC ~~conversion~~820, ~~price~~Fair ofValue ~~$15~~Measurements.00 ASC ~~per~~820 ~~share~~provides ~~(“Conversion~~a ~~Price”)~~framework for measuring fair value and requires disclosures regarding fair value measurements. ~~The~~ ~~Conversion~~Fair ~~Price~~value is ~~subject~~defined as the price that would be received to ~~adjustment~~sell inan ~~the~~asset ~~event~~or ofpaid ~~stock~~to ~~splits,~~transfer ~~dividends,~~a ~~fundamental~~liability ~~transactions~~in ~~and~~an ~~certain~~orderly ~~future~~transaction ~~sales~~between market participants ofat the measurement date, based on the Company’s ~~Common~~principal ~~Stock~~or, in absence of a principal, most advantageous market for the specific asset or liability.

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 Note.

For the Company to 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.

Amendment of Senior Secured Revolving Credit Facility

On September 13, 2023, the Revolving Note and Credit Agreement were temporarily amended for a period of up to fourteen months from the Effective date of September 11, 2023. The amendments include, but are not limited to, provisions related to the payment of amounts owing under the Credit Agreement from the proceeds of the sale of third-party securities held by the company. Per the agreement ATW shall receive one hundred percent of the proceeds from sales from third party securities owned by the Company until such time as outstanding amounts due under the respective agreements have been repaid. The Company shall maintain the rights to all proceeds from sales of the marketable securities once the amounts due to ATW have been satisfied.

The Company also agreed to various covenants and conditions, including providing access to certain accounts and notifying ATW Opportunities and ATW Master Fund of material changes.

The table below summarizes the senior secured revolving credit facility related activity during the three months ended September 30, 2022:

SCHEDULE OF SENIOR SECURED REVOLVING CREDIT FACILITY RELATED ACTIVITY

	Principal			Debt Discount			Net Book Value
Balance as of June 30, 2022	$	-		$	-		$	-
Loan proceeds		6,128,000			-			6,128,000
Original issue discount		-			(750,000	)		(750,000	)
Repayments		(4,000	)		-			(4,000	)
Amortization		-			104,000			104,000
Balance as of September 30, 2022	$	6,124,000		$	(646,000	)	$	5,478,000

~~Extension~~SRAX, ofINC. ~~Warrants~~AND SUBSIDIARIES

AsNOTES ~~part~~TO ofUNAUDITED ~~the~~CONSOLIDATED ~~transactions~~FINANCIAL contemplated by the Revolving Note, 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:STATEMENTS

~~(a)~~MARCH ~~a warrant to purchase 1~~31,~~313,636~~ ~~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;~~2023

~~(b)~~The Company uses a ~~warrant~~three-tier fair value hierarchy to ~~purchase~~classify ~~166,667~~and ~~shares~~disclose ofall ~~Common~~assets ~~Stock~~and ~~issued~~liabilities measured at fair value on ~~November~~a 29recurring basis, ~~2018,~~as ~~that~~well ~~was~~as ~~initially~~assets ~~disclosed~~and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company~~’s Current~~ ~~Report~~to onuse ~~Form~~observable ~~8-K~~inputs ~~filed~~when ~~with~~available, and to minimize the ~~SEC~~use onof ~~November~~unobservable 30inputs, ~~2018;~~when ~~and~~determining fair value.

~~(c)~~The athree ~~warrant~~tiers toare ~~purchase~~defined ~~480,027~~as ~~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;~~follows:

● Level 1 – Observable inputs that reflect quoted market prices (dunadjusted) a ~~warrant~~for toidentical ~~purchase~~assets ~~480,028~~or ~~shares~~liabilities ofin ~~Common~~active ~~Stock~~markets; ~~issued~~● onLevel ~~October~~2 ~~27,~~– ~~2017~~Observable inputs other than quoted prices in active markets that ~~was~~are ~~initially~~observable ~~disclosed~~either ondirectly or indirectly in the ~~Company’s~~marketplace ~~Current Report~~for onidentical ~~Form~~or ~~8-K~~similar ~~filed~~assets ~~with~~and ~~the~~liabilities; ~~SEC~~and on● ~~October~~Level 273 – Unobservable inputs that are supported by little or no market data, ~~2017~~which require the Company to develop its own assumptions.

~~NOTE~~The 10determination –of ~~COMMON~~fair ~~AND~~value ~~PREFERRED~~and ~~STOCK~~the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions.

~~Common~~Management’s ~~Stock~~assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods.

The Company’s ~~certificate~~may ofalso ~~incorporation~~engage ~~provides~~external ~~for~~advisors ~~two~~to ~~classes~~assist ofus ~~common~~in ~~stock:~~determining ~~Class~~fair ~~A common stock (authorized 250~~value,~~000,000~~ ~~shares, par~~as ~~value $0~~appropriate.~~001),~~ ~~which~~Although ~~has~~the ~~one~~Company ~~vote~~believes ~~per~~that the ~~share,~~recorded ~~and~~fair ~~Class~~value Bof ~~common~~our ~~stock~~financial ~~(authorized~~instruments ~~9,000,000~~is ~~shares~~appropriate, ~~par~~these ~~value~~fair ~~$0.001),~~values ~~which has ten votes per share. Any holder of Class B common stock~~ may ~~convert~~not ~~his~~be orindicative ~~her shares at any time into shares~~ of ~~Class~~net Arealizable ~~common stock~~value onor areflective ~~share-for-share basis. Otherwise, the rights~~ of ~~the~~future ~~two~~fair ~~classes of common stock are identical~~values.

InThe ~~August~~availability ~~2021,~~of ~~the~~valuation ~~Board~~techniques ofand ~~Directors~~observable ~~approved~~inputs acan ~~share~~vary ~~repurchase~~from ~~program~~investment ~~pursuant~~ to ~~which~~investment ~~the~~and ~~Company~~are isaffected ~~authorized~~by toa ~~repurchase~~wide upvariety ~~to $10,000,000~~ of ~~Class~~factors. AThe ~~Common~~determination ~~Stock~~of infair ~~privately~~value ~~negotiated~~requires ~~transactions~~prudent orjudgment. inDue to the ~~open~~inherent ~~market~~uncertainty atof ~~prices~~valuation, ~~per~~estimated ~~share not exceeding the~~values ~~then-current~~may ~~market~~be ~~prices.~~materially ~~Under~~different ~~the~~from ~~program,~~values ~~management~~were ~~has~~a ~~discretion~~ready tomarket ~~determine~~available. ~~the~~Inputs ~~dollar~~used ~~amount~~to ofmeasure ~~shares~~fair tovalue bemay ~~repurchased~~fall ~~and the~~into ~~timing~~different levels of ~~any~~the ~~repurchases~~fair invalue ~~compliance~~hierarchy. ~~with~~In ~~applicable~~such ~~law~~cases, ~~and~~the ~~regulation.~~item ~~This~~being ~~includes~~valued ~~purchases~~is ~~pursuant~~classified tobased ~~Rule~~on ~~10b5-1~~the ~~plans, including~~hierarchy ~~accelerated~~category ~~share~~of ~~repurchases.~~the ~~The~~lowest ~~program~~significant level ~~does~~input ~~not~~to ~~have~~the anfair ~~expiration~~value ~~date~~measurement.

~~During~~See ~~the~~Note ~~year~~11 ~~ended December 31, 2021, the Company repurchased 155,000 shares of Common Stock,~~ for anLevel ~~aggregate purchase price of $793~~1,000 pursuant to the Company’s Share Buy-Back program. The shares were retired as of December 31, 2021. No amounts were repurchased in the six months ended June 30, 2022. The total remaining authorization for future common share repurchases under the Company’s share repurchase program was $9.2 ~~million~~and as3 ~~of June 30, 2022~~disclosures.

~~During~~The ~~the~~Company’s ~~year~~financial ~~ended~~instruments, ~~December~~including 31cash, ~~2021,~~accounts ~~the Company sold 53~~receivable,~~616~~ ~~shares~~and ofaccounts ~~common~~payable ~~stock,~~and ~~resulting~~accrued inexpenses ~~proceeds~~are ofcarried ~~approximately $284,000, through~~at ~~sales~~historical ~~under its At the Market (ATM) offering~~cost.

On January 2, 2022, Michael Malone, our former 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.

During the month of January 2022, non-executive employees exercised a total of 227,667 stock options. These options were exercised on a cashless basis, and included 161,938 shares withheld pursuant to cashless exercise and tax withholdings. This resulted in the issuance of 65,729 shares of common stock.

During the month of July 2022, the Company issued 31,872 shares of common stock from the exercise of 100,000 stock options on a cashless basis by an executive.

During the three months ended June 30, 2022, the Company issued 203,926 shares of common stock from the exercise of 697,574 warrants, including 689,173 that were exercised on a cashless basis, and 8,401 exercised for $32,000 in cash.

Preferred Stock

The Company is authorized to issue 50,000,000 of preferred stock, par value $0.001, of which 36,462,417 shares are designated as Series A Preferred Stock (“Dividend Shares”). The Company’s 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. The Board of Directors may authorize the issuance of preferred stock, which ranks senior to the Company’s common stock for the payment of dividends and the distribution of assets on liquidation. In addition, the Board of Directors can fix limitations and restrictions, if any, upon the payment of dividends on both classes of the Company’s common stock to be effective while any shares of preferred stock are outstanding.

~~On September 20~~SRAX, ~~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~~INC. ~~Pursuant~~AND ~~to the COD, the Company is authorized to issue up to 36,462,417 shares of Series A Preferred Stock (the “Dividend Shares”).~~SUBSIDIARIES

OnNOTES ~~September~~TO ~~27,~~UNAUDITED ~~2021,~~CONSOLIDATED ~~the~~FINANCIAL Company issued a one-time dividend of 36,462,417 shares of series A preferred stock (“Preferred Stock”) to certain Qualified Recipients (the “Dividend”). The preferred stock entitles the Qualified Recipients with the right to receive the net proceeds from sales of certain marketable securities that the Company received through its Sequire Platform services. See Note 6 – Designated Assets for Return of Capital.STATEMENTS

AsMARCH ~~of the Record Date~~31, ~~the following holders of securities were entitled to receive the Dividend (collectively, the “Qualified Recipients):~~2023

i.At March ~~each outstanding share of Class A common stock (the “Common Stock”)~~31, of2023 ~~which 25,160,504 shares were issued~~ and ~~outstanding,~~December ~~ii. each share of Common Stock underlying outstanding common stock purchase warrants containing a contractual right to receive the Dividend (“Warrants”) of which~~31, 102022,~~327,645~~ ~~were outstanding~~respectively, ~~and iii. each original issue discount senior convertible debenture (~~the ~~“Debentures”)~~carrying ~~issued~~amounts onof ~~June~~these ~~30,~~instruments ~~2021,~~approximated ~~containing~~their afair ~~contractual~~values ~~right~~because of ~~to receive~~ the ~~Dividend~~short-term onnature ~~an as converted to Common Stock basis,~~ of ~~which~~these ~~$2,486,275 of Debentures were outstanding in principal and interest, convertible into 974,268 shares of Common Stock~~instruments.

~~The~~Valuation ~~Company’s~~Techniques ~~management has evaluated the Preferred Stock~~ and ~~determined~~Inputs ~~that~~(Marketable Preferred Stock is mandatorily redeemable upon the distribution of the net proceeds from the sale of the designated marketable securities. Accordingly, it is classified as a liability recorded at fair value, with changes in fair value being reflected in earnings.Securities)

~~Preferred~~Investments stock liability represents amounts payable to holders of the Preferred Stock Series A shares upon the eventual liquidation of assets designated for the sole purpose of paying dividends. Accordingly, the Company classified the Series A Preferred Shares as liability instruments because in~~-substance,~~ ~~they~~securities ~~represent~~and asecurities ~~right~~sold toshort ~~the~~that ~~payment of dividends upon the liquidation of specified assets,~~ are ~~automatically returnable~~both tofreely ~~the~~tradable ~~Company after the payments are made~~ and ~~feature~~listed noon ~~rights~~major tosecurities ~~further~~exchanges ~~equity~~are orvalued ~~residual~~at ~~interests~~their ~~in the Company. The~~last ~~Certificate~~reported ofsales ~~Designation~~price ofas ~~Preferences, Rights and Limitations~~ of ~~Series A Non-Voting Preferred Stock states dividend shall be paid conditioned upon, and subject to a determination by~~ the ~~Board~~valuation ~~that a distribution is not prohibited pursuant to applicable provisions of the DGCL or other applicable law~~date.

~~NOTE~~Many 11over-the-counter –contracts ~~EQUITY~~have ~~COMPENSATION~~bid ~~PLANS~~and ~~AND~~ask ~~WARRANTS~~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.

~~Equity~~An ~~Compensation~~integral ~~Plans~~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.

AsThe ~~of September 30, 2022, the~~ Company ~~has~~initially ~~approximately~~classifies ~~228,000~~securities ~~shares of Class A Common Stock reserved for issuance under the Company’s equity compensation plans.~~as:

~~For the~~● ~~nine~~equity ~~months~~securities, ~~ended~~● ~~September~~debt 30securities, ~~2022~~● warrants, ~~the~~● ~~Company~~convertible ~~issued~~debt; ~~the~~or ~~below~~● ~~shares~~preferred ~~and granted the following~~ stock~~-based awards:~~.

OnEquity January 2, 2022, Michael Malone, our former 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.Securities

OnEquity ~~January~~securities 3,are ~~2022,~~valued weusing ~~issued~~the ~~four~~quoted ~~(4)~~prices ~~common~~times ~~stock purchase options to our non-employee directors, pursuant to our amended non-employee director compensation policy. Each option entitled~~ the ~~holder~~number toof ~~purchase 29,533~~ shares ~~of common stock at an exercise price of $4~~acquired.~~35 per~~ ~~share, for an aggregate exercise amount of $128,500.~~ The ~~options~~securities ~~vest~~are inthen ~~equal~~evaluated ~~quarterly~~based ~~over~~on atheir ~~one~~ marketability (1)usually ~~year~~based ~~period~~on ~~from~~ the ~~issuance date.~~restrictions ~~The options expire~~ on ~~the~~resale ~~seven~~into ~~(7) year anniversary of~~ the ~~issuance~~securities ~~date.~~primary ~~Each~~market) ~~option~~and ~~has a Black-Scholes value of $100,000~~liquidity.

~~During~~Debt the month of January 2022, non-executive employees exercised a total of 227,667 stock options. These options were exercised on a cashless basis, and included 161,938 shares withheld pursuant to cashless exercise and tax withholdings. This resulted in the issuance of 65,729 shares of common stock.Securities

OnThe ~~January~~Company 6,does ~~2022,~~not wehave ~~issued~~any ~~non-executive~~debt ~~employees,~~securities ~~options~~as ~~to purchase 380,000 shares~~ of ~~Class~~March ~~A common stock. The option has an exercise price of $4.25 per share~~31, a2023 ~~term of five (5) years~~ and ~~vests~~December in31, ~~equal~~2022, ~~quarterly installments over a three (3) year period from the grant date~~respectively. ~~The option had a Black-Scholes value on the grant date of $1,038,000.~~

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 $356,000.

On January 6, 2022, we issued an employee an option to purchase 100,000 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 $296,000.

On January 6, 2022, we issued Michael Malone, our former 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 $296,000.

On January 6, 2022, we issued an employee an option to purchase an aggregate of 20,000 shares of common stock. The option is a conditional grant, subject to shareholder approval. The option has an exercise price of $4.25 per share, a term of five (5) years, and vest 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 $55,000.

During the month of July 2022, the Company issued 31,872 shares of common stock from the exercise of 100,000 warrants on a cashless basis by an executive.

The per-share fair value of each stock option with service conditions only granted in 2022 was determined on the grant date using the Black-Scholes option pricing model with the following assumptions:

SCHEDULE OF FAIR VALUE STOCK OPTION ASSUMPTIONS

	Grant date
	1/3/2022			1/6/2022			1/6/2022
Expected term (in years)		5.0			4.4			3.4
Risk-free interest rate		1.55	%		1.55	%		1.60	%
Expected volatility		90.0	%		90.0	%		90.0	%
Expected dividend yield		-	%		-	%		-	%

The following table details provides a summary of the Company’s stock option activity for the nine months ended September 30, 2022:

SCHEDULE OF STOCK OPTION ACTIVITY

	Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Term (years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2021		1,334,287		$	3.02		2.4	$	-
Granted		718,132			4.27		5.2		-
Exercised		(427,667	)		3.21		-		-
Forfeited		(110,000	)		3.42		-		-
Outstanding as of September 30, 2022		1,514,752		$	3.53		4.1	$	-
Exercisable at September 30, 2022		756,486		$	3.30		3.9	$	-

During the three months ended September 30, 2022 the Company recorded stock based compensation in the amount of $281,000. During the nine months ended September 30, 2022, the Company recorded stock based compensation expense of $908,000, which was offset by stock based compensation benefit of $1,139,000, resulting in a net stock based compensation benefit of $(231,000). The Company determined that the vesting of stock awards to a prior contractor has become improbable and as a result, in accordance with ASC 718, the Company recognized a cumulative adjustment to reverse $1,139,000 of stock based compensation that was previously recognized. The cumulative adjustment resulted in a stock based compensation benefit of $1,139,000.

During the three and nine months ended September 30, 2021, the Company recognized $253,000 and $757,000 of stock-based compensation expense, respectively.

The Company has included stock-based compensation expense in employee related costs on our unaudited Condensed Consolidated Statements of Operations. At September 30, 2022, there was $1,835,000 of unrecognized compensation expense expected to be recognized over approximately the next 2.3 years on average.

Warrants

~~During the nine months ended September 30, 2022, the Company issued 203,926 shares from the exercise of 697,574 warrants, including~~Warrants ~~689,173~~are ~~that~~initially ~~were~~valued ~~exercised~~at ~~on a cashless basis~~cost, ~~and~~if ~~8,401~~acquired ~~exercised~~ for ~~$32,000 in~~ cash~~. During the three and nine months ended September 30~~, ~~2022,~~or ~~76,190~~at ~~and~~intrinsic ~~5,177,327 warrants expired, respectively~~value.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Convertible Debt

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.

Active Market Pricing

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.

~~Extension~~SRAX, INC. ofAND ~~Warrants~~SUBSIDIARIES

~~(b)~~If athe ~~warrant~~Company has access to ~~purchase~~material ~~166~~non-public information regarding an investee,~~667~~ ~~shares~~it will consider this information as an input for purposes of ~~Common~~valuing ~~Stock~~the ~~issued~~security. onIn ~~November~~these 29situations, ~~2018,~~the ~~that~~Company ~~was~~will ~~initially~~consider ~~disclosed~~the impact this information will have on the ~~Company’s Current~~valuation ~~Report~~of the securities on ~~Form~~a 8case-Kby-case ~~filed~~basis. ~~with~~These situations could arise due to the ~~SEC~~Company onbeing ~~November~~an ~~30,~~affiliate ~~2018;~~of ~~and~~the issuer or an officer or director of the Company is an affiliate of the issuer.

~~(c)~~These asecurities ~~warrant~~are tocategorized ~~purchase~~in ~~480,027~~Level ~~shares~~1 of ~~Common~~the ~~Stock~~fair ~~issued~~value onhierarchy ~~November~~to ~~29,~~the ~~2018,~~extent ~~that~~these ~~was~~securities ~~initially~~are ~~disclosed~~actively ontraded. ~~the~~Securities ~~Company’s~~traded ~~Current~~on ~~Report~~inactive onmarkets ~~Form~~or ~~8-K~~valued ~~filed~~by ~~with~~reference ~~the~~to ~~SEC~~similar oninstruments ~~November~~are ~~30,~~generally ~~2018;~~categorized in Level 2 of the fair value hierarchy.

~~(d)~~Investments ain ~~warrant~~Restricted toSecurities ~~purchase 480,028 shares~~ of ~~Common~~Public ~~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.~~Companies

~~During~~Investments in restricted securities of public companies cannot be offered for sale to the ~~three~~public ~~months~~until ~~ended~~the ~~September~~company ~~30,~~complies ~~2022,~~with ascertain astatutory requirements. ~~result~~The ofvaluation will not exceed the ~~extension~~listed price on any major securities exchange. Investments in restricted securities of public companies are generally categorized in Level 2 of the ~~warrant~~fair ~~expiration~~value ~~dates~~hierarchy. However, ~~the~~investments ~~Company~~in ~~recorded~~public acompanies ~~warrant~~may be categorized ~~modification~~in ~~expense~~Level 3 of ~~$1,788,000~~the ~~classified~~fair asvalue ~~financing~~hierarchy ~~costs~~depending on the level of observable liquidity. Specifically, if the Company determines the market ~~condensed~~activity ~~consolidated~~is ~~statement~~not ofsufficient ~~operations~~to conclude the market activity represents an Active Market pursuant to ASC 820 -10 -35 36B.

OnThe ~~February~~Company ~~21,~~evaluates ~~2021~~ the ~~Company~~trading ~~entered~~activity ~~into~~of aneach ~~agreement~~listed ~~with~~security ~~the~~to ~~certain~~determine ~~Debenture~~if ~~holders~~the totrading ~~exercise~~market ~~4,545,440~~is ofan ~~the~~Active ~~Warrants~~Market ~~issued~~for purposes of inevaluating ~~the~~Fair ~~June~~Value ~~2020~~under ~~Debenture~~ASC ~~offering~~820. AsThe anCompany ~~inducement~~evaluated ~~for~~ the ~~Warrant~~number ~~holders~~of totrade ~~exercise~~observations during the ~~Warrants~~year, the ~~holders~~percentage ~~receive~~of athe ~~new registered~~total ~~warrant~~trading ~~(“New~~days ~~Warrant”)~~the tosecurity ~~purchase~~traded anon ~~aggregate~~its oflisted ~~4,545,440~~market ~~shares~~during of the ~~Company’s~~full ~~common~~year ~~stock~~or atthe anportion ~~exercise price~~ of ~~$7.50~~the ~~per~~year ~~share~~if ~~expiring~~the onsecurity ~~January~~was ~~31,~~initially ~~2022.~~listed ~~The~~during ~~New~~the ~~Warrants~~year, ~~expire~~and onat ~~January~~the ~~31,~~dollar ~~2022.~~value ~~Each~~of ~~holder~~the ~~agreed~~trading toactivity ~~pay~~for ~~$0.125~~the ~~for~~full ~~each~~year ~~New~~as ~~Warrant.~~a ~~The~~percentage ~~Company~~of ~~received~~the ~~net~~market ~~proceeds~~ capitalization of ~~approximately~~the security. ~~$11,022,000,~~If ~~consisted~~the ofCompany determines the ~~exercise~~listed ~~price~~securities oftrading ~~$11,363,000,~~market ~~$568,000~~is ~~for~~not ~~the~~an ~~purchase~~active ofmarket ~~the~~it ~~New~~looks ~~Warrant~~at ~~less~~other ~~solicitation~~transactions reported ~~fees~~by ofthe ~~approximately~~listed ~~$909,000.~~company ~~The~~including ~~New~~private ~~Warrants~~equity ~~were~~transactions, ~~valued~~non-cash ~~using~~equity transactions, the ~~Black~~trading ~~Scholes~~price ~~option~~and ~~pricing~~other ~~model~~factors. atThe Company determines a ~~total~~fair value of ~~$7,737,000 based~~the onstock aprice ~~one-year~~based ~~term,~~on ~~implied~~this ~~volatility~~analysis. ofThis ~~96%,~~price ais ~~risk-free~~the ~~equivalent~~lower ~~yield~~ of ~~11%,~~the ~~and~~listed ~~stock~~ price ofor ~~$5.83.~~the ~~The~~ fair value ofbased on the ~~New~~analysis. ~~Warrants~~The ~~was~~Company ~~expensed~~also ~~and~~considers ~~included~~the inmarketability ~~Financing~~and ~~Costs~~liquidity ~~for~~discounts on the ~~three~~listed ~~months~~security ~~ended~~in ~~March~~determining ~~31,~~fair ~~2021~~value.

InCash ~~addition,~~and ~~during~~Cash ~~the~~Equivalents ~~nine months ended September 30, 2021, the Company: (i) received cash of approximately $4,774,000, (ii) cancelled 349,197 warrants (as a result of cashless exercises)~~ and ~~(iii)~~Concentration ~~issued an aggregate~~ of ~~1,710,078~~Credit ~~shares of Common Stock, in connection with the exercise of outstanding warrants.~~Risk

InFor ~~total~~purposes of the consolidated statements of cash flows, the Company ~~issued~~considers aall ~~total~~highly ofliquid ~~6,309,186~~instruments ~~shares~~with a maturity of ~~common~~three ~~stock,~~months or ~~for~~less at the ~~exercise~~purchase ofdate ~~warrants,~~and ~~with~~money ~~net~~market ~~proceeds~~accounts ofto ~~$15,953,000~~be cash equivalents.

At ~~September~~March 3031, 2023 and December 31, 2022, respectively, the Company ~~had~~did ~~the~~not ~~following~~have ~~outstanding~~any ~~and~~cash ~~exercisable warrants:~~equivalents.

SUMMARY OF OUTSTANDING AND EXERCISABLE WARRANTS

Warrant Shares	Exercise Price		Weighted Average Remaining Term (years)
1,375,455	$	2.50		1.0
1,160,056		3.00		1.0
478,854		3.36		0.1
1,047,778		4.00		0.0
17,749		4.50		1.9
77,800		5.00		1.5
4,157,692	$	3.17		0.6

NOTE 12 – REVENUE

The Company has two business units, one operating segment, one reportable segment and one reporting unit. The Sequire segment includes the licensing of the Company’s proprietary SaaS platform and associated data analysis technologies, consumer and investor targeted marketing solutions to allow users of the Company’s SaaS platform to act on the insights obtained through the Company’s technologies, and LD Micro, which is in the business of hosting events and conference for microcap public companies.

The following table summarizes revenue by revenue stream for the three and nine months ended September 30:

SCHEDULE OF REVENUE BY REVENUE STREAM

	2022		2021		2022		2021
	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Sequire platform revenue	$	5,306,000	$	6,888,000	$	19,225,000	$	17,879,000
Conference revenue		3,000		-		1,305,000		390,000
Other revenue		-		-		-		694,000
Total revenue	$	5,309,000	$	6,888,000	$	20,530,000	$	18,963,000

~~The~~SRAX, ~~following~~INC. ~~table~~AND ~~summarizes revenue recognized in exchange for customer securities and cash for the three and nine months ended September 30:~~SUBSIDIARIES

~~SCHEDULE~~NOTES OFTO ~~REVENUE~~UNAUDITED ~~RECOGNIZED~~CONSOLIDATED INFINANCIAL ~~EXCHANGE FOR CUSTOMER SECURITIES AND CASH~~STATEMENTS

	2022		2021		2022		2021
	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Customer securities	$	4,589,000	$	6,409,000	$	16,663,000	$	15,035,000
Cash		720,000		479,000		3,867,000		3,928,000
Total revenue	$	5,309,000	$	6,888,000	$	20,530,000	$	18,963,000

MARCH 31, 2023

~~During~~The ~~2023 the~~ Company ~~transitioned~~is exposed to ~~accepting~~credit ~~only~~risk on its cash asand ~~compensation~~cash ~~for~~equivalents ~~services.~~in Asthe weevent ~~transition~~of todefault ~~accepting~~by ~~only~~the ~~cash~~financial asinstitutions ~~compensation~~to the extent ~~for~~account ~~services~~balances ~~there~~exceed ~~will~~the beamount ainsured ~~significant~~by ~~decrease~~the inFDIC, ~~Sequire~~which ~~revenue~~is $250,000.

~~NOTE~~At 13March –31, ~~FAIR~~2023 ~~VALUE~~and OFDecember ~~FINANCIAL~~31, ~~INSTRUMENTS~~2022, respectively, the Company did not experience any losses on cash balances in excess of FDIC insured limits.

~~The~~At ~~carrying~~March ~~amounts~~31, of2023 ~~certain~~and ~~financial~~December ~~instruments~~31, ~~including~~2022, ~~cash~~respectively, ~~and~~the ~~accounts~~Company ~~payable~~had ~~and accrued expenses~~$314,000 ~~approximate~~and ~~their~~$0 ~~respective fair~~in ~~values~~excess ~~due~~of to the ~~short-term~~federally ~~nature~~insured ~~of such instruments~~limit.

~~The~~Accounts ~~carrying amount of our debt and notes receivable approximate their fair value.~~Receivable

~~Valuation~~Accounts receivable are stated at the amount management expects to collect from outstanding customer balances. Credit is extended to customers based on an evaluation of ~~Marketable~~their ~~Securities~~financial condition and other factors. Interest is not accrued on overdue accounts receivable. The Company does not require collateral.

AnManagement ~~integral~~periodically ~~part~~assesses of the Company’s ~~fair~~accounts ~~value~~receivable ~~measurement process is the assessment of the type of securities as well as the securities’ liquidity~~ and ~~marketability. Warrants are initially valued at cost~~, if ~~acquired for cash~~necessary, orestablishes atan ~~intrinsic~~allowance ~~value.~~for ~~Convertible~~estimated ~~debt is~~uncollectible ~~valued~~amounts. ~~based~~The onCompany provides an ~~analysis~~allowance offor ~~the~~doubtful ~~implied~~accounts ~~call~~based ~~option~~upon ~~and~~ a ~~discounted~~review ~~cash flow analysis~~ of the ~~debt~~outstanding ~~component.~~accounts ~~Equity~~receivable, ~~securities are~~historical ~~valued~~collection ~~using~~information ~~the~~and ~~quoted~~existing ~~prices~~economic ~~times~~conditions. ~~the~~Accounts ~~number~~determined ofto ~~shares~~be ~~acquired.~~uncollectible ~~The securities~~ are ~~then~~charged ~~evaluated~~to ~~based~~operations onwhen ~~their marketability (usually~~that ~~based~~determination onis ~~the restrictions on resale into the securities primary market) and liquidity~~made.

~~Investments~~Accounts inreceivable ~~restricted~~at ~~securities~~March of31, ~~public~~2023 ~~companies~~and ~~cannot~~December be offered for sale to the public until the Company complies with certain statutory requirements. Investments in restricted securities of public companies are generally categorized in Level 2 of the fair value hierarchy. However31, ~~investments in public companies may be categorized in Level 3 of the fair value hierarchy depending on the level of observable liquidity. Specifically~~2022, ~~if the Company determines the market activity~~ is ~~not~~as ~~sufficient to conclude the market activity represents an Active Market.~~follows:

~~Assets and~~Schedule ~~Liabilities~~of ~~Measured~~Accounts ~~at Fair Value on a Recurring Basis~~Receivable

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made. The Company considers marketable securities 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.

	March 31, 2023		December 31, 2022

Accounts receivable	$	129,000	$	271,000
Less: allowance for doubtful accounts		31,000		114,000
Accounts receivable - net	$	98,000	$	157,000

~~The~~There ~~contracts~~was ~~receivables~~bad ~~represent~~debt aexpense ~~forward contractual right to receive securities pursuant to a revenue contract. As~~ of ~~September 30~~$49, ~~2022~~000 and ~~December 31~~$27,000 ~~2021,~~for the ~~Company~~three ~~determined~~months ~~the~~ended ~~value~~March ~~of the securities underlying the contract asset to have a fair value of $499~~31,~~000~~ 2023 and ~~$844~~2022,~~000,~~ respectively.

~~The~~Bad ~~Company~~debt ~~had~~expense ~~the~~(recoveries) ~~following~~are ~~financial~~recorded ~~assets~~as ata ~~September~~component ~~30,~~of ~~2022~~general and ~~December~~administrative ~~31,~~expenses ~~2021:~~in the accompanying consolidated statements of operations.

~~SCHEDULE OF ASSETS MEASURED AT FAIR VALUE~~Contracts Receivable

	Balance as of September 30, 2022		Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Marketable securities	$	21,121,000	$	2,164,000	$	9,483,000	$	9,474,000
Designated assets marketable securities		221,000		105,000		116,000		-
Contract assets		499,000		499,000		-		-
Total assets	$	21,841,000	$	2,768,000	$	9,599,000	$	9,474,000
Liabilities:
Series A Preferred Stock	$	1,045,000	$	-	$	1,045,000	$	-
Total liabilities	$	1,045,000	$	-	$	1,045,000	$	-

	Balance as of December 31, 2021		Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Marketable securities	$	15,617,000	$	6,134,000	$	2,448,000	$	7,035,000
Designated assets marketable securities		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
Liabilities:
Series A Preferred Stock	$	3,925,000	$	-	$	3,925,000	$	-
Total liabilities	$	3,925,000	$	-	$	3,925,000	$	-

SRAX, INC. AND SUBSIDIARIES

~~Changes~~NOTES inTO ~~Level~~UNAUDITED 3CONSOLIDATED ~~assets~~FINANCIAL ~~measured at fair value~~STATEMENTS

~~The~~MARCH 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 result31, 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 the nine months ended September 30, 2022, were as follows:2023

~~SCHEDULE~~Contracts OFreceivable ~~FAIR~~are ~~VALUE~~also ATadjusted ~~ASSETS~~ based on their fair value at each reporting period as an adjustment to the consolidated statements of operations. For the three months ended March 31, 2023 and 2022, the Company recorded a loss on fair value of $0, respectively.

	Total			Common Stock			Convertible Debentures			Preferred Stock			Warrants
Balance as of December 31, 2021	$	7,035,000		$	2,153,000		$	4,187,000		$	599,000		$	96,000
Transfers		(2,455,000	)		(2,099,000	)		(325,000	)		(31,000	)		-
Additions		2,419,000			481,000			938,000			1,000,000			-
Sales proceeds		(156,000	)		(156,000	)		-			-			-
Realized loss		(60,000	)		(60,000	)		-			-			-
Current period change in fair value		2,691,000			(238,000	)		4,429,000			(1,467,000	)		(33,000	)
Balance as of September 30, 2022	$	9,474,000		$	81,000		$	9,229,000		$	101,000		$	63,000

Allowance for doubtful contracts receivable was $0 at March 31, 2023 and December 31, 2022, respectively.

~~Valuation~~There ~~processes~~was bad debt expense (recovery) of $0 for ~~Level~~the 2years ~~and~~ended 3March ~~Fair~~31, ~~Value~~2023 ~~Measurements~~and 2022, respectively.

Bad debt expense (recoveries) is recorded as a component of general and administrative expenses in the accompanying consolidated statements of operations.

At March 31, 2023 and December 31, 2022, contracts receivables were $0 and $328,000, respectively.

Marketable Securities - Classification and Valuation

The Company may classify its marketable securities as either trading, available-for-sale, or held-to-maturity.

Trading securities are recorded at fair value with unrealized gains and losses included in earnings.

Available-for-sale securities are recorded at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income.

Held-to-maturity securities are recorded at amortized cost.

Certain marketable securities with restrictions exceeding 12 months were excluded from current asset classification.

At March 31, 2023 and December 31, 2022, the Company has classified all of its marketable securities as trading, based upon our intent to sell them in the near term.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Impairment of Marketable Securities

The Company evaluates its marketable securities for impairment at each reporting period.

An impairment is considered to be other-than-temporary if the Company (a) intends to sell the security, (b) is more likely than not to be required to sell the security before recovery of its amortized cost basis, or (c) does not expect to recover the entire amortized cost basis of the security.

If a decline in fair value is determined to be other-than-temporary, the impairment loss is recognized in earnings. For debt securities, the amount of the other-than-temporary impairment recognized in earnings depends on the extent to which the security’s fair value is less than its amortized cost and the severity and duration of the decline.

The determination of whether a decline is other-than-temporary involves significant judgment and includes an assessment of various factors including:

	●	The length of time and the extent to which the fair value has been less than the cost basis;
	●	The financial condition and near-term prospects of the issuer, including any specific events that may influence the issuer’s operations or profitability;
	●	The intent and ability of the Company to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

For the three months ended March 31, 2023 and 2022, the Company recorded an impairment loss of $0, respectively.

Marketable securities were $13,161,000 and $9,186,000 at March 31, 2023 and December 31, 2022, respectively.

See Note 6 for additional disclosure of our marketable securities at fair value.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Long-lived Assets and Related Impairments of Goodwill and Intangible 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, in accordance with the provisions of ASC 360-10-35-15 “Impairment or Disposal of Long-Lived Assets.” 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, 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; 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 to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Impairment loss for goodwill was $0, for the three months ended March 31, 2023 and 2022, respectively.

Impairment loss for intangible assets was $0, for the three months ended March 31, 2023 and 2022, respectively.

Property and Equipment and Related Impairment

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.

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 reviews the carrying value of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

Impairment loss was $0, for the three months ended March 31, 2023 and 2022, respectively.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

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, and the performance of the business remains strong. 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. The Company’s operating leases contained renewal options that expire at various dates with no residual value guarantees. Future obligations relating to the exercise of renewal options is included in the measurement if, based on the judgment of management, the renewal option is reasonably certain to be exercised. Factors in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leasehold improvements, the value of the renewal rate compared to market rates, and the presence of factors that would cause a significant economic penalty to the Company if the option is not exercised. Management reasonably plans to exercise all options, and as such, all renewal options are included in the measurement of the right-of-use assets and operating lease liabilities.

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. See Note 12 regarding operating leases.

Derivative Liabilities

The Company assessed the classification of its derivative financial instruments as of March 31, 2023 and December 31, 2022, which consist of convertible notes payable and has determined that such instruments do not qualify for treatment as derivative liabilities as they do not meet the criteria for liability classification under ASC 815.

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, (“ASC 480”), “Distinguishing Liabilities from Equity” and FASB ASC Topic No. 815, (“ASC 815”) “Derivatives and Hedging”.

Derivative liabilities are adjusted to reflect fair value at each reporting period, with any increase or decrease in the fair value recorded in the results of operations (other income/expense) as change in fair value of derivative liabilities. The Company uses a binomial pricing model to determine fair value of these instruments.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Upon conversion or repayment of a debt instrument in exchange for shares of common stock, where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records the shares of common stock at fair value, relieves all related debt, derivatives, and debt discounts, and recognizes a net gain or loss on debt extinguishment. In connection with the debt extinguishment, the Company typically records an increase to net income for debt related instruments and additional paid-in capital for any equity based instruments (i.e.: warrants) for the remaining liability balance extinguished.

Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.

The Company has adopted ASU 2017-11, Earnings per share (ASC 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.

At March 31, 2023 and December 31, 2022, respectively, the Company had no derivative liabilities.

Original Issue Discount

For certain notes issued, the Company may provide the debt holder with an original issue discount. The original issue discount is recorded as a debt discount, reducing the face amount of the note, and is amortized to interest expense over the life of the debt, in the Consolidated Statements of Operations.

Debt Issue Cost

Debt issuance cost paid to lenders, or third parties are recorded as debt discounts and amortized to interest expense over the life of the underlying debt instrument, in the Consolidated Statements of Operations.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Series A, Redeemable, Preferred Stock Liability

The preferred stock liability represents the obligation to pay dividends to holders of Series A Preferred Stock upon the liquidation of designated marketable securities held specifically for this purpose. These preferred shares do not confer any residual equity interest in the Company beyond the scheduled dividend payments.

In accordance with U.S. GAAP, the Company has classified Series A, Redeemable, Preferred Shares as liability instruments rather than equity, as they effectively represent a contractual obligation to transfer cash (or other financial assets) upon the liquidation of the designated securities. Specifically:

	●	The preferred shares entitle holders to dividend payments upon liquidation of the specified assets.
	●	Once the payments are made, the designated assets automatically return to the Company, and the holders retain no further rights to equity or residual interests.
	●	Given these characteristics, the Series A shares meet the criteria for liability classification under ASC 480, Distinguishing Liabilities from Equity.

The Certificate of Designation of Preferences, Rights, and Limitations of Series A Non-Voting Preferred Stock states that dividends shall only be paid if the Board of Directors determines that such distributions comply with the applicable provisions of the Delaware General Corporation Law (DGCL) and other governing laws.

As of March 31, 2023, and December 31, 2022, the Series A redeemable preferred stock liability was $953,000 and $994,000, respectively.

For additional details, see Note 16.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606 to align revenue recognition more closely with the delivery of the Company’s services and will provide financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

To achieve this core principle, the Company applies the following five steps:

Identify the contract with a customer

A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies 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 and financial information pertaining to the customer.

Identify the performance obligations in the contract

Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.

Determine the transaction price

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts contain a significant financing component and there are no contracts with variable consideration.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Allocate the transaction price to performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However, if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a specific part of the contract. For example, a bonus or penalty may be associated with one or more, but not all, distinct services promised in a series of distinct services that forms part of a single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

Recognize revenue when or as the Company satisfies a performance obligation

The Company satisfies performance obligations either over time or at a point in time. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.

The Company has elected the following practical expedients allowed in accounting for its revenue recognition:

●	not adjusting contract consideration for the effects of significant financing components if the period between transfer or service and customer payment is expected to be less than one year;
●	not assessing performance obligations if they are immaterial in the context of the contract;
●	excluding sales and similar taxes from the transaction price; and
●	not disclosing the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The Company generates revenue primarily from two (2) sources: its Sequire SaaS platform and its LD Micro, Inc. subsidiary (prior to the disposal of LD in March 2023 – see Note 1).

the Sequire SaaS platform related revenue consists of:

	(i)	licensing subscriptions to access the platform,
	(ii)	managed services involving data and marketing initiatives, and
	(iii)	ancillary data supplementing the use of the platform.

LD Micro, Inc. revenues consist of:

	(i)	event attendee fees, and
	(ii)	event sponsorship fees related to investor conferences which are organized and hosted by the Company

For each revenue stream we do not offer any returns, refunds or warranties, and no arrangements are cancellable. Additionally, all contract consideration is fixed and determinable at the initiation of the contract.

Sequire SaaS Platform

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.

Prior to 2023 many of the Sequire SaaS platform agreements provide customers the ability to pay for the services with the issuance of the customers’ securities including common stock. 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.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The amount of consideration for these contracts is based on the estimated fair value of the underlying securities on the contract date.

The Company’s contract with its customers is for a period of one year or less 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 indicates 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.

The Company uses significant judgment when estimating variable consideration. These estimates are based on historical data, current and anticipated customer behavior, and other qualitative and quantitative factors. Changes in these estimates can materially affect the amount and timing of revenue recognized.

See Notes 6 and 11 regarding our marketable securities and related fair value discussions.

In 2023 the Company transitioned to accepting only cash as compensation for services. As we transition to accepting only cash as compensation for services there will be a significant decrease in Sequire revenue generated from securities received after the year ended December 31, 2022.

If Sequire SaaS platform contracts contain multiple performance obligations, transaction consideration is allocated to each individual performance obligation based on a relative Stand-Alone Selling Price (“SSP,”) basis. The Company determines SSP based on the price at which the performance obligation would be sold separately.

Subscription revenue is generally non-refundable regardless of the actual use and is recognized ratably over the non-cancellable contract term beginning on the commencement date of each contract, which is the date the Company’s service is first made available to customers.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Managed Services and Ancillary Data revenue is 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.

LD Micro, Inc. – Conference Revenues

LD Micro, Inc. agreements cover a specific event and provide for payment in advance or at the time of the event. Conference revenue from attendee fees and sponsorship fees is recognized at the time of the event (i.e., at a point-in-time).

At March 31, 2023 and 2022, for each of our outstanding revenue streams we only had a distinct single performance obligation.

Contract Liabilities (Deferred Revenue)

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.

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.

At March 31, 2023 and December 31, 2022, the Company had deferred revenue of $2,984,000 and $7,367,000, respectively.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Disaggregation of Revenues

The following represents the Company’s disaggregation of revenues for the three months ended March 31, 2023 and 2022:

Schedule of Disaggregation of Revenues

	For the Three Months Ended March 31,
	2023					2022

Revenue	Revenue		% of Revenues			Revenue		% of Revenues

Sequire SaaS platform revenue	$	4,004,000		99.75	%	$	7,499,000		100.00	%
LD Micro, Inc. - conference revenue		10,000		0.25	%		-		0.00	%
Total Revenues	$	4,014,000		100	%	$	7,499,000		100	%

Geographic Concentrations

For the three months ended March 31, 2023 and 2022, the Company earned revenues from customers in various countries as follows:

Country	2023			2022
Geographic Location	Three Months Ended March 31,
Country	2023			2022
United States		99.41	%		74.80	%
Canada		0.39	%		24.20	%
Other		0.20	%		1.00	%
Percentage of revenues		100	%		100	%

Cost of Revenues

Cost of revenues consists primarily of marketing/data services as well as content hosting.

Income Taxes

The Company accounts for income tax using the asset and liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities.

As of March 31, 2023 and December 31, 2022, respectively, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.

The Company recognizes interest and penalties related to uncertain income tax positions in other expense. No interest and penalties related to uncertain income tax positions were recorded for the three months ended March 31, 2023 and 2022, respectively.

Valuation of Deferred Tax Assets

The Company’s deferred income tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

The Company reviews the likelihood that it will realize the benefit of its deferred tax assets and therefore the need for valuation allowances on a quarterly basis, or more frequently if events indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset is considered, along with all other available positive and negative evidence.

Certain categories of evidence carry more weight in the analysis than others based upon the extent to which the evidence may be objectively verified. The Company looks to the nature and severity of cumulative pretax losses (if any) in the current three-year period ending on the evaluation date, recent pretax losses and/or expectations of future pretax losses.

Other factors considered in the determination of the probability of the realization of the deferred tax assets include, but are not limited to:

	●	Earnings history;
	●	Projected future financial and taxable income;
	●	The duration of statutory carry forward periods;
	●	Prudent and feasible tax planning strategies readily available that may alter the timing of reversal of the temporary difference;
	●	Nature of temporary differences and predictability of reversal patterns of existing temporary differences; and
	●	The sensitivity of future forecasted results.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Concluding that a valuation allowance is not required is difficult when there is significant negative evidence which is objective and verifiable, such as cumulative losses in recent years. The Company utilizes a rolling twelve quarters of pre-tax income or loss as a measure of its cumulative results in recent years. However, a cumulative three year loss is not solely determinative of the need for a valuation allowance. The Company also considers all other available positive and negative evidence in its analysis.

At March 31, 2023 and December 31, 2022, respectively, the Company has recorded a full valuation allowance against its deferred tax assets resulting in a net carrying amount of $0.

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs are included as a component of cost of revenues in the consolidated statements of operations.

The Company recognized $3,000 and $21,000 in marketing and advertising costs during the three months ended March 31, 2023 and 2022, respectively.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with 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 fair value of the award and is recognized as expense over the service period, typically the vesting period.

ASC 718 establishes accounting standards for transactions in which an entity exchanges its equity instruments for goods or services, as well as for transactions in which an entity incurs liabilities based on the fair value of its equity instruments or that may be settled through the issuance of such instruments.

Fair Value Determination

The Company determines fair value for equity instruments granted to employees and non-employees using the Black-Scholes option pricing model.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The fair value of stock-based compensation is measured as of:

	●	The grant date (for employee awards), or
	●	The measurement date (for non-employee awards or awards with performance conditions, determined when service is completed).

The following key assumptions are considered when applying the Black-Scholes model:

	●	Exercise price
	●	Expected dividend yield
	●	Expected stock price volatility
	●	Risk-free interest rate
	●	Expected life of the option

Stock Warrants

The Company may issue warrants to purchase shares of common stock in connection with:

	●	Financing transactions (debt or equity issuance)
	●	Consulting agreements
	●	Collaboration arrangements

Warrants are considered standalone instruments, are not puttable or mandatorily redeemable, and are generally classified as equity awards.

The Company measures the fair value of warrants using:

	●	The Black-Scholes option pricing model, for warrants classified as equity instruments.
	●	A binomial pricing model, for warrants that meet the definition of a derivative liability under ASC 815, Derivatives and Hedging.

Accounting Treatment

	●	Warrants issued in conjunction with common stock issuance → Initially recorded at fair value as a reduction of additional paid-in capital (APIC).
	●	Warrants issued for services → Measured at fair value and expensed over the requisite service period or immediately if no service period exists.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Earnings (Loss) Per Share

The Company calculates earnings (loss) per share (EPS) in accordance with ASC 260, Earnings Per Share, specifically following the guidance outlined in ASC 260-10-45.

	●	Basic earnings (loss) per share is computed in accordance with ASC 260-10-45-10 by dividing net income (loss) attributable to common shareholders by the weighted average number of shares of common stock outstanding during the reporting period.
	●	Diluted EPS is computed in accordance with ASC 260-10-45-15, which requires that diluted EPS be calculated by dividing net income by the weighted average number of shares of common stock, common stock equivalents, and potentially dilutive securities outstanding during the period.

Potentially Dilutive Securities

In accordance with ASC 260-10-45-19, potentially dilutive securities are considered in the diluted EPS calculation if their inclusion reduces earnings per share (i.e., is dilutive). The Company’s potentially dilutive securities may include:

	●	Contingently issuable shares – Common stock that may be issued based on future events or performance conditions.
	●	Stock options and warrants – Included using the treasury stock method under ASC 260-10-45-23, which assumes that proceeds from exercised options or warrants are used to repurchase shares at the average market price during the reporting period.
	●	Convertible debt and preferred stock – Evaluated under ASC 260-10-45-21 using the if-converted method, which assumes that all convertible securities were converted into common stock at the beginning of the reporting period.

Anti-Dilution Considerations

In accordance with ASC 260-10-45-17, if a company incurs a net loss, diluted EPS is equal to basic EPS, as including potentially dilutive securities in the calculation would be anti-dilutive (i.e., would reduce the loss per share). This occurs when the convertible securities, stock options, or warrants would result in a higher loss per share if included in the diluted EPS calculation.

Accordingly, for periods in which the Company reports a net loss, all potentially dilutive common stock equivalents are excluded from the diluted EPS calculation.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Potentially Dilutive Equity Securities Outstanding

The following table summarizes the potentially dilutive securities outstanding as of March 31, 2023, and 2022 that were excluded from the computation of diluted EPS due to anti-dilution:

The following potentially dilutive equity securities outstanding as of March 31, 2023 and 2022 were as follows:

	Three Months Ended		Three Months Ended
	March 31, 2023		March 31, 2022
Warrants		1,436,534		5,187,154
Stock options		683,670		654,281
Series B, preferred stock		63,743		-
Convertible debt		7,678,053		471,004
Total common stock equivalents		9,862,000		6,312,439

Warrants and stock options included as commons stock equivalents represent those that are fully vested and exercisable. See Notes 18 and 19.

Based on the potential common stock equivalents noted above at March 31, 2023, the Company has sufficient authorized shares of common stock (250,000,000) to settle any potential exercises of its common stock equivalents.

The following table shows the computation of basic and diluted earnings per share for the three months ended March 31, 2023 and 2022:

	Three Months Ended		Three Months Ended
	March 31, 2023		March 31, 2022
Numerator
Net income (loss)	$	2,627,000	$	3,728,000

Denominator
Weighted average shares outstanding - basic		27,863,831		26,032,055
Effect of dilutive securities		7,741,796		2,161,659
Weighted average shares outstanding - diluted		35,605,627		28,193,714

Earnings loss per share - basic	$	0.09	$	0.14
Earnings loss per share - diluted	$	0.07	$	0.13

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Related Parties

The Company identifies related parties in accordance with the guidelines established by the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC). Related parties include executive officers, directors, significant shareholders, immediate family members of these individuals, and entities in which these individuals have a significant ownership or control.

The Company believes that all transactions with related parties during the three months ended March 31, 2023 and 2022, respectively, were conducted on terms equivalent to those prevailing in arm’s-length transactions with unrelated third parties.

The Company has entered into an agreement providing access to a suite at the Sofi Stadium in Los Angeles from an entity wholly owned by Christopher Miglino, our CEO. The agreement entitles the Company to game tickets, optional tickets for other stadium events, and suite and conference room access during business days. The amount charged to the Company is a pass-through of the actual expenses charged by the stadium to the related party, without markup. The agreement terminates in February 2026.

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 sub lease agreement did not meet the definition of a lease in accordance with ASC 842, Leases.

At March 31, 2023 and December 31, 2022, the Company was owed $0 and $263,000, respectively, from its former Chief Financial Officer. The amounts due related to expense reimbursements.

At March 31, 2023 and December 31, 2022, the Company owed $155,000 and $159,000, respectively, to its Chief Executive Officer. Of the total amount due, $150,000 was for bonus compensation, with the balance related to payments made for corporate expenses.

Recently Issued Financial Accounting Standards

Changes to accounting principles are established by the FASB in the form of Accounting Standards Updates (“ASU’s”) to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our consolidated financial position, results of operations, stockholders’ equity, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements issued through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the consolidated financial statements of the Company.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The standard is intended to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The standard is intended to improve reportable segment disclosure requirements for public business entities primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit (referred to as the “significant expense principle”). This guidance is effective for annual periods beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on our consolidated financial position, results of operations or cash flows.

Reclassifications

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no material effect on the consolidated results of operations, stockholders’ deficit, or cash flows.

Note 4 – Sale and Purchase of Accounts Receivable and Short Term Financings

Sales of Accounts Receivable

The third-party lender receives a discount on the amount sold and remits the net amount to the Company.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

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.

During 2022, in connection with obtaining a senior secured revolving credit facility, proceeds from that facility were used to pay off the entire balance of outstanding borrowings.

The amount of borrowings outstanding at March 31, 2023 and December 31, 2022, was $0, respectively.

Contingent Value Rights Agreement

During the year ended December 31, 2022, the Company entered into an agreement with an institutional investor whereby in exchange for the payment of $405,000, the investor received (i) the right to receive the net proceeds upon the sale of certain marketable securities held by the Company with a guaranteed minimum return of 120% of such Purchase Price or $486,000 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 sales of such securities.

For the year ended December 31, 2022, all amounts had been repaid.

Note 5 – Note Receivable

In October 2020, the Company entered into unit redemption agreements with two counterparties providing for the counterparties to repurchase from the Company units of the counterparty’s securities owned by the Company.

Pursuant to the redemption agreements, the counterparties repurchased the units for a combined repurchase price of $8 million with $7 million being paid on closing and the additional $1 million being deferred and due on the earlier of the three-year anniversary or upon sale of the counterparties.

The Company had no cost basis in the units and as a result the note receivable has no cost basis.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The Company accounts for the note receivable as a loan pursuant to ASC 310 – Loans . The $1 million in deferred payments was recorded with an implied discount of approximately $107,000, which is to be amortized over 3 years.

During the year ended December 31, 2022, the Company accepted an offer to settle the outstanding note balance of $947,000, for a one-time payment of $900,000, resulting in a loss on sale of note receivable of $47,000.

Note receivable at March 31, 2023 and December 31, 2022 was $0, respectively.

Note 6 – Marketable Securities

The Company offers its customers the option to settle the contract price (for services rendered) in the customer’s issued and publicly trading securities or securities convertible into publicly traded securities, which could be in the form of common stock, convertible debt, preferred stock or warrants (see summary table below).

The Company initially values the securities received at the fair market value on the date the contract is executed, which value is used for revenue recognition purposes.

After receipt of the securities, the securities are classified and accounted for as investments in debt and/or equity securities.

The Company’s holdings in marketable securities are subject to a high level of volatility, and can experience significant changes in pricing and related valuations.

The following tables summarize the changes in the Company’s marketable securities during the three months ended March 31, 2023 and the year ended December 31, 2022:

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Schedule of Marketable Securities

	Common			Convertible			Preferred
	Stock			Debt			Stock			Warrants			Total
Balance - December 31, 2021	$	10,735,000		$	4,187,000		$	599,000		$	96,000		$	15,617,000
Transfers		(356,000	)		325,000			31,000			-			-
Additions		14,735,000			938,000			1,600,000			-			17,273,000
Sales of marketable securities		(4,960,000	)		(261,000	)		-			-			(5,221,000	)
Realized loss on sale of marketable securities		(8,193,000	)		(606,000	)		-			-			(8,799,000	)
Impairment - marketable securities		-			(3,664,000	)		-			-			(3,664,000	)
Change in fair value of marketable securities		(4,721,000	)		453,000			(1,658,000	)		(94,000	)		(6,020,000	)
Balance - December 31, 2022		7,240,000			1,372,000			572,000			2,000			9,186,000
Reclassifications related to prior year balances		(1,138,000	)		1,200,000			(62,000	)		-			-
Acquisitions - sale of subsidiary (LD Micro, Inc.)		4,300,000			-			-			-			4,300,000
Securities received in exchange for customer reset shares and other income		661,000			-			204,000			-			865,000
Sales and dispositions		(682,000	)		-			-			-			(682,000	)
Realized Loss		(3,029,000	)		-			-			-			(3,029,000	)
Change in fair value of marketable securities		1,189,000			1,242,000			90,000			-			2,521,000
Balance - March 31, 2023	$	8,541,000		$	3,814,000		$	804,000		$	2,000		$	13,161,000

Marketable securities are classified as follows in the accompanying consolidated balance sheets:

Classification	March 31, 2023		December 31, 2022
Short-term	$	7,369,000	$	7,931,000
Long-term		5,792,000		1,255,000
Total	$	13,161,000	$	9,186,000

The Company’s sales of its marketable securities for the three months ended March 31, 2023 and 2022 was $682,000 and $1,277,000, respectively. As a result of these sales, and when comparing them to the underlying securities basis at fair value, the Company recognized losses of $3,029,000 and $1,053,000, respectively.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Concentration of Risk – Marketable Securities

The Company’s holdings in marketable securities subject the Company to concentrations of market risks since the sale of these securities are a material source of cash flow.

As of March 31, 2023 and 2022, the Company’s marketable securities holdings by significance are classified as follows:

Schedule of Concentration of Risk

Marketable Securities	Three Months Ended March 31,
Investments	2023			2022
Top 1		33	%		16	%
Top 5		73	%		41	%
Top 10		85	%		58	%

BIGtoken Investment

On February 15, 2022, the Company entered into a simple agreement for future equity (the”SAFE”) with its former BIGToken subsidiary. Pursuant to the SAFE, the Company invested $1,000,000 in the SAFE. The amount funded into the SAFE at a given time is referred to herein as the “SAFE Amount.” The Company is accounting for the SAFE as an equity investment carried at fair value with changes recorded in earnings each period and is reflected as such in the above table.

Pursuant to the terms of the SAFE, at any time that BIGtoken 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.

At December 31, 2022, the SAFE had an aggregate fair value of $0, as the Company believed the SAFE to have no value due to the financial condition its former BIGToken subsidiary.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Note 7 – Designated Assets for Return of Capital

In 2021, the Company issued a one-time dividend consisting of one share of Series A Preferred Stock to shareholders, debenture holders, and certain warrant holders.

The Board of Directors designated certain of the Company’s marketable equity securities (“Designated Assets”) to be used when liquidated, as a return of capital to these individuals.

The Company’s sales of its designated assets for the three months ended March 31, 2023 and 2022 was $4,000 and $268,000, respectively. As a result of these sales, and when comparing them to the underlying securities basis at fair value, the Company recognized losses of $7,000 and $116,000, respectively.

See Note 16 - Series A Preferred Stock for additional discussion.

The balance of designated assets consisted of the following at March 31, 2023 and December 31, 2022:

Schedule of Designated Assets

	March 31, 2023		December 31, 2022
Designate assets for return of capital	$	125,000	$	170,000
Total	$	125,000	$	170,000

Designated Assets for Return of Capital are classified as follows in the accompanying consolidated balance sheets:

Classification	March 31, 2023		December 31, 2022
Short-term	$	112,000	$	100,000
Long-term		13,000		70,000
Total	$	125,000	$	170,000

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The following represents the activity related to designated assets for the three months ended March 31, 2023 and the year ended December 31, 2022:

Balance - December 31, 2021	$	3,925,000
Distribution of cash - designated assets		(684,000	)
Sales of designated assets		(506,000	)
Realized loss		(1,803,000	)
Change in fair value of designated assets		(762,000	)
Balance - December 31, 2022		170,000
Sales of designated assets		(4,000	)
Realized loss		(7,000	)
Change in fair value of designated assets		(34,000	)
Balance - March 31, 2023	$	125,000

Note 8 - Property and Equipment

Property and equipment consisted of the following:

Schedule of Property and Equipment

Type	March 31, 2023			December 31, 2022			Estimated Useful Lives (Years)

Computer, office equipment and furniture	$	379,000		$	379,000		3 - 7
Less: accumulated depreciation/amortization		(329,000	)		(320,000	)
Property and equipment - net	$	50,000		$	59,000

During the year ended December 31, 2022, the Company determined that certain assets were no longer in service and had no future economic benefit. As a result, an impairment loss of $41,000 was recorded.

Depreciation and amortization expense for the three months ended March 31, 2023 and 2022 was as follows:

Depreciation and Amortization Expense
March 31, 2023		March 31, 2022
	9,000		187,000

These amounts are included as a component of general and administrative expenses in the accompanying consolidated statements of operations.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Note 9 – Intangibles

At December 31, 2022, the Company performed an evaluation of its intangible assets and determined that all of these assets were deemed fully impaired.

For the year ended December 31, 2022, the Company recorded an impairment loss of $1,481,000. Prior to the impairment loss, the Company recorded amortization expense of $350,000.

At December 31, 2022, the Company reflected a balance of $0 for intangible assets.

Note 10 – Debt

The following represents a summary of the Company’s convertible notes payable and revolving credit facility, key terms, and outstanding balances at March 31, 2023 and December 31, 2022, respectively:

Convertible Notes Payable

General Terms

On June 25, 2020, the Company executed 12% original issue discount notes for $16,101,000, resulting in net proceeds of $14,169,000 (debt discount of $1,932,000). The notes bear interest at 12% and was originally due eighteen (18) months from the issue date on December 31, 2021. The purchase price consisted of $13,000,000 and the cancellation of $1,169,000 in outstanding debt. The Company’s obligations under these convertible notes are secured by all of the assets of the Company.

Payments Due and Related Extensions

Six (6) months after the issuance date (December 31, 2021), the Company was required to begin making amortization payments, with each debt holder (lenders) having the right to delay these payments three (3) separate times. In exchange for these due date extensions, the Company would have to add an addition 5% to the outstanding principal. The extension dates are based on amounts due June 30, 2022, December 31, 2022 and 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 115% of the value of one-twelfth of the outstanding principal plus any additional accrued interest due.

In the event a lender converts a portion of its notes into shares of the Company’s common stock, the amount converted will be deducted from the next applicable Amortization Payment. In the event any conversions exceed the next applicable Amortization Payment, the excess amount will be deducted, in reverse order, from future Amortization Payments due.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Conversion Rights (Fixed Price) – Convertible Notes Payable

These notes were initially convertible at the option of the holder at $2.69/share (see below for related amendments). These convertible notes do not have any price protection or price reset provisions with respect to future issuances of securities.

Right of Redemption

The Company has the right to redeem the convertible notes in cash at 115% of the outstanding principal and accrued interest. In the event that the Company sells or reprices any securities or disposes of assets (except those in the ordinary course of business), the lenders have the right if the repricing is $2.50/share or less, to mandate that 50% of the proceeds be used to redeem the outstanding convertible notes. In the event of an asset sale, the mandate increases to 100% of the proceeds received.

Warrants Issued with Convertible Notes

In addition to the convertible notes that were issued, the Company also issued 6,440,561 warrants to various lenders. These warrants expired in October 2022.

Conversion Rights (Fixed Price) – Warrants

Initially exercisable at $2.50/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 do not have any price protection or price reset provisions with respect to future issuances of securities.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Equity Blocker Provision

Under the terms of the convertible notes and warrants, the lenders will not have the right to convert any portion of the convertible notes or 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 convertible notes and warrants; provided that at the election of a lender and notice to the Company, 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.

Payment Extensions for Convertible Notes and Warrants and Amended Conversion Prices

During the year ended December 31, 2021, the holders of the remaining convertible notes notified the Company of their election to defer the inception of amortization payments due under the Debentures until June 30, 2022.

Additional extensions for the Company’s convertible notes and warrants were made on February 3, 2023, September 11, 2023, and December 9, 2024, respectively. The new maturity dates were amended to June 30, 2024, November 11, 2014 and now June 30, 2025.

In connection with the September 11, 2023 extension, the lender is entitled to received 100% of the proceeds from the sale of any third party marketable securities held by the Company.

As a result of these extensions, the Company’s conversion price of its convertible notes was initially amended to $1 and now $0.25, respectively (original conversion price of convertible notes was $2.69/share).

Additionally, with these extensions, the Company’s conversion price of its warrants was initially amended to $1 and now $0.25, respectively (original conversion price of warrants was $2.50/share).

As stated previously, in connection with the loan date extensions, the holders are entitled to a 5% increase of their outstanding principal balance. The Company records the increases as a financing cost (interest expense) in the accompanying consolidated statements of operations.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Default

Subsequent to December 31, 2022, in March 2023, the convertible notes were defaulted upon since the Company failed to maintain an effective registration statement and was delisted from Nasdaq.

The extension to repay the debt in November 2024 and now August 2025 still required the Company to pay the default rate of interest. As noted above, the new maturity date is now June 30, 2025.

The following is a summary of the Company’s convertible notes payable – at March 31, 2023 and December 31, 2022:

Schedule of Convertible Notes Payable

Balance - December 31, 2021	$	1,164,000
5% principal increases		165,000
Amortization of debt discount/issue costs		67,000
Repayments		(215,000	)
Balance - December 31, 2022		1,181,000
Amortization of debt discount/issue costs		17,000
Balance - March 31, 2023	$	1,198,000

The following is a detail of the Company’s convertible notes payable – at March 31, 2023 and December 31, 2022:

Schedule of Debt

Convertible Notes Payable
Note Holders	Issue Date	Maturity Date	Interest Rate			Default Interest Rate			Collateral	March 31, 2023		December 31, 2022
Various	June 30, 2020	June 30, 2025		12.00	%		18.00	%	All assets	$	1,216,000	$	1,216,000
				Less: unamortized debt discount							18,000		35,000
										$	1,198,000	$	1,181,000

Senior Secured Revolving Credit Facility (Revolving Note)

General Terms

In August 2022, the Company entered into a two (2) year, senior secured revolving credit facility agreement (the “facility”) with a borrower to initially borrow up to $9,450,000. The facility is due at the earlier of August 2024 or event of default. On December 9, 2024, while the note was not placed into default by the lender, the revolving note was extended to August 9, 2025.

The loan maximum amount accessible is limited to $5,500,000 until the Company is current with its public reporting obligations.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The loan is secured by all the assets of the Company and is guaranteed by the Company’s wholly owned subsidiary, LD Micro, Inc. The guarantee from LD Micro, Inc. was removed after the sale in March 2023.

The lender is entitled to receive 10% of the proceeds received by the Company from the sale of its marketable securities, so long as the facility is outstanding. These payments to the lender are in addition to any repayments made by the Company under the terms of the facility.

Warrants as Amended

As part of the transaction (in 2022), the Company also amended and restated the lender’s outstanding warrants to extend the maturity date of a total of 2,590,358 common stock purchase warrants until September 30, 2023.

During the year ended December 31, 2022, in connection with the extension of the maturity date for these warrants, the Company recorded a warrant modification expense of $1,788,000. This has been recorded as a component of interest expense in the accompanying consolidated statements of operations.

The fair value of the warrants was determined using a Black-Scholes option pricing model with the following inputs:

Expected term (years)	1.14
Expected volatility	107	%
Expected dividends	0	%
Risk free interest rate	0.10	%

See Notes 19 and 20 for discussion of warrants and related exercise of 2,178,172 of these warrants.

Cash Received by Company

In 2022, upon closing, the lender advanced $5,580,000 consisting of $4,930,000 in cash and the exchange of an existing outstanding $650,000 bridge note issued in July 2022 (which was outstanding for approximately 30 days at time of transaction). Upon the Company meeting certain conditions, the lender will advance up to an additional $3,870,000.

In 2022, as a result of converting the bridge note ($650,000) into the credit facility, the Company was required to pay a one-time fee of $72,000. The fee was recorded as additional interest expense, and increased the outstanding amount due to the lender.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Original Issue Discount

The facility contains an original issue discount of 10%, however, at any time after August 2023 (one year from issue date), original issue discount will increase to twelve percent (12%) in the event the Prime borrowing rate increases to 6.75%, and 18% in the event of default.

In connection with this facility, the Company recorded a debt discount of $750,000, which is being amortized over the life the note.

Conversion Price of the Facility and Related Conversion Price Amendments

The facility balance was initially convertible into shares of common stock at a conversion price of $15/share.

Additional amendments to the conversion price were made on February 3, 2023 and September 11, 2023, respectively.

As a result of these amendments, the Company’s conversion price of its facility was initially amended to $1 and now $0.25, respectively.

In connection with the September 11, 2023 extension, the lender is entitled to received 100% of the proceeds from the sale of any third party marketable securities held by the Company.

Loan Breakup Fee

In connection with obtaining this facility (in 2022), the Company was required to issue 33,000 shares of common stock to an unrelated lender (due to a failed public offering), as a breakup fee, having a fair value of $80,000 ($2.42/share), based upon the quoted closing trading price.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Default

At March 31, 2023, the facility was not in default. However, on December 9, 2024, the facility maturity date was extended to August 9, 2025.

The following is a summary of the Facility at March 31, 2023 and December 31, 2022:

Schedule of Debt Facility

Balance - December 31, 2021	$	-
Facility principal		5,478,000
Conversion of bridge note into facility		650,000
Bridge note conversion fee (interest expense)		72,000
Debt discount		(750,000	)
Amortization of debt discount/issue costs		150,000
Balance - December 31, 2022		5,600,000
Amortization of debt discount/issue costs		91,000
Repayments		(70,000	)
Balance - March 31, 2023	$	5,621,000

The following is a detail of the Facility at March 31, 2023 and December 31, 2022:

Schedule of Debt

Senior Secured Revolving Credit Facility
Note Holder	Issue Date	Maturity Date	Interest Rate			Default Interest Rate			Collateral	March 31, 2023		December 31, 2022
Note #1	August 9, 2022	June 30, 2025		11.50	%		18.00	%	All assets	$	6,131,000	$	6,200,000
				Less: unamortized debt discount							510,000		600,000
										$	5,621,000	$	5,600,000

Debt Maturities

The following represents the gross amount of debt maturities (excluding unamortized debt discounts) for the Company’s various debt arrangements (principal balance) as follows:

Schedule of Debt Maturities

For the Year Ended December 31,		Convertible Notes Payable		Senior Secured Credit Facility		Total

	2025	$	1,216,000	$	6,131,000	$	7,347,000
	Total	$	1,216,000	$	6,131,000	$	7,347,000

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Note 11 – Fair Value of Financial Instruments

Level 1, 2 and 3 Summary

The Company’s financial assets and liabilities measured at fair value on a recurring basis consisted of the following at March 31, 2023 and December 31, 2022, respectively:

	Quoted Prices		Significant
	in Active		Other		Significant
	Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
Assets	(Level 1)		(Level 2)		(Level 3)		March 31, 2023
Marketable securities	$	5,482,000	$	3,059,000	$	4,620,000	$	13,161,000
Designated assets for return of capital		13,000		112,000		-		125,000
Total assets	$	5,495,000	$	3,171,000	$	4,620,000	$	13,286,000

	Quoted Prices		Significant
	in Active		Other		Significant
	Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
Liabilities	(Level 1)		(Level 2)		(Level 3)		March 31, 2023
Series A, redeemable preferred Stock	$	-	$	953,000	$	-	$	953,000
Total liabilities	$	-	$	953,000	$	-	$	953,000

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

		Quoted Prices		Significant
		in Active		Other		Significant
		Markets for		Observable		Unobservable
		Identical Assets		Inputs		Inputs
Assets		(Level 1)		(Level 2)		(Level 3)		December 31, 2022
Marketable securities		$	1,704,000	$	4,398,000	$	3,084,000	$	9,186,000
Designated assets for return of capital			52,000		118,000		-		170,000
Contract receivables	*		-		124,000		204,000		328,000
Total assets		$	1,756,000	$	4,640,000	$	3,288,000	$	9,684,000

Represents a forward contractual right to receive securities pursuant to a revenue contract.

	Quoted Prices		Significant
	in Active		Other		Significant
	Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
Liabilities	(Level 1)		(Level 2)		(Level 3)		December 31, 2022
Series A, redeemable preferred Stock	$	-	$	994,000	$	-	$	994,000
Total liabilities	$	-	$	994,000	$	-	$	994,000

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.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Changes in Level 3 assets measured at fair value for the three months ended March 31, 2023 and the year ended December 31, 2022 were as follows:

Schedule of Fair Value at Assets

		Common Stocks			Convertible Debt			Warrants			Preferred Stocks			Total
		Assets
		Common Stocks			Convertible Debt			Warrants			Preferred Stocks			Total
Balance - December 31, 2021		$	2,154,000		$	4,186,000		$	96,000		$	599,000		$	7,035,000
Acquisitions			481,000			938,000			-			1,600,000			3,019,000
Sales and dispositions			(223,000	)		(261,000	)		-			-			(484,000	)
Transfer out of level 3	A		(2,099,000	)		(325,000	)		-			(31,000	)		(2,455,000	)
Transfer into level 3
Realized loss			(74,000	)		(606,000	)		-			-			(680,000	)
Change in fair value	B		(239,000	)		(1,361,000	)		(94,000	)		(1,657,000	)		(3,351,000	)
Balance - December 31, 2022		$	-		$	2,571,000		$	2,000		$	511,000		$	3,084,000

		Common Stocks		Convertible Debt			Warrants		Preferred Stocks		Total
		Assets
		Common Stocks		Convertible Debt			Warrants		Preferred Stocks		Total
Balance - December 31, 2022		$	-	$	2,571,000		$	2,000	$	511,000	$	3,084,000
Acquisitions			-		-			204,000		-		204,000
Transfer into level 3			-		1,226,000			-		-		1,226,000
Transfer out of level 3	A		-		(1,226,000	)		-		-		(1,226,000	)
Change in fair value	B		-		1,242,000			90,000		-		1,332,000
Balance - March 31, 2023		$	-	$	3,813,000		$	296,000	$	511,000	$	4,620,000

– Transfers out of level 3 related to investments that have been transferred to level 2 as well as designated assets for return of capital.

– Amounts for realized and unrealized gains (losses) are included in the accompanying consolidated statements of operations.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Valuation of Process 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.

26The following table lists the significant unobservable inputs used to value assets classified as Level 3 of March 31, 2023 and December 31, 2022. 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.

The following table lists the significant unobservable inputs used to value assets classified as Level 3 of September 30, 2022. 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.61

~~SCHEDULE~~SRAX, OFINC. ~~FAIR~~AND ~~VALUE ASSETS SIGNIFICANT UNOBSERVABLE INPUTS~~SUBSIDIARIES

Assets	Valuation Technique	Unobservable inputs	Range
Common stocks	Put option pricing model	Discount for lack of marketability		0% - 32.3	%
Convertible preferred stock	Put option pricing model	Discount for lack of marketability		0% - 54	%
Convertible debt	Discounted cash flow	Maturity		0 - 28 months
		Risk adjusted discount factor		17.3	%
	Option pricing model	Volatility		64% - 224	%
		Risk-free interest rate		2.27% - 2.96	%
		Dividend yield		0	%
		Time to Maturity		0 – 28 months

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Three Months Ended March 31, 2023
Assets	Valuation Technique	Unobservable Inputs	Range

Common Stocks	Put option pricing model	Discount for lack of marketability	0% - 32%

Convertible Preferred Stock	Put option pricing model	Discount for lack of marketability	0% - 32%

Convertible Debt	Discounted cash flow	Maturity	16 - 36 months
		Risk adjusted discount factor	24% - 25%

	Put option pricing model	Volatility	65% - 86%
		Risk-free interest rate	4.19% - 4.52%
		Dividend yield	0%
		Time to maturity	14 - 21 months

Year Ended December 31, 2022
Assets	Valuation Technique	Unobservable Inputs	Range

Common Stocks	Put option pricing model	Discount for lack of marketability	0% - 32%

Convertible Preferred Stock	Put option pricing model	Discount for lack of marketability	0% - 32%

Convertible Debt	Discounted cash flow	Maturity	17 - 24 months
		Risk adjusted discount factor	19%

	Put option pricing model	Volatility	61% - 356%
		Risk-free interest rate	4.41% - 4.59%
		Dividend yield	0%
		Time to maturity	17 - 24 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.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

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.

~~NOTE~~Valuation 14Technique ~~– RELATED PARTY TRANSACTIONS~~Refinements

~~The~~During ~~Company has entered into an agreement providing access to a suite at~~ the ~~Sofi~~three ~~Stadium~~months inended ~~Los~~March ~~Angeles from an entity wholly owned by Christopher Miglino~~31, ~~our~~2023 ~~CEO.~~and ~~The agreement entitles~~ the ~~Company~~year-ended toDecember ~~game tickets~~31, ~~optional tickets for other stadium events~~2022, ~~and suite and conference room access during business days. In May of 2022~~respectively, the Company ~~renewed~~refined ~~the~~its ~~agreement~~valuation ~~for four (4) additional National Football League~~techniques ~~seasons~~to ~~for~~enhance anconsideration ~~average rate per year~~ of ~~approximately~~unobservable ~~$497,000.~~inputs ~~The~~for ~~amount charged to~~ the ~~Company~~valuation ~~is a pass-through~~ of ~~the~~Level ~~actual~~2 ~~expenses charged~~and byLevel ~~the~~3 ~~stadium~~marketable ~~to the related party, without markup~~securities. ~~The agreement terminates in February 2026.~~

27If 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.

~~NOTE 15 – SUBSEQUENT EVENTS~~63

~~DNA~~SRAX, ~~Asset~~INC. ~~Acquisition~~AND SUBSIDIARIES

~~Asset~~NOTES ~~Purchase~~TO ~~Agreement~~UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OnMARCH ~~February 3~~31, 2023 (the “Closing Date”), the Company entered into and consummated the transactions contemplated by the Asset Purchase Agreement (the “APA”) and the related Bill of Sale and Assignment and Assumption Agreement (the “Assignment Agreement,” and together with the Assignment Agreement, the “Transaction Documents”) with DNA Holdings, LLC, a limited liability company formed under the laws of the Commonwealth of Puerto Rico (the “Seller”), pursuant to which, subject to the terms and conditions of the APA, the Seller sold certain assets from its advisory company that is engaged in the business of, among other things, advising entrepreneurs in connection with capital structuring, marketing, developing decentralized ecosystems and providing introductions to strategic investors (the “Business”). Specifically, pursuant to the Transaction Documents, the Company acquired certain assets of the Business (the “Purchased Assets”), including $1,000,000 in cash, crypto assets, equity investments into three private companies and a customer database from the Seller (the “Acquisition”). The Seller is managed by The Roundtable LLC, which is managed by Brock Pierce, a member of the Company’s board of directors (the “Board”). The Acquisition was approved on February 3, 2023, by the Audit Committee of the Board and the Board. Mr. Pierce did not participate in discussions of the Board about whether to approve the Acquisition, and did not vote on the Acquisition at the Board meeting. In each case, it was considered that Mr. Pierce is an interested director of the Company. In each case, it also was determined, among other things, that, notwithstanding that Mr. Pierce is an interested director of the Company, the assets acquired in the Acquisition constitute fair and adequate consideration for the securities to be issued pursuant to the APA.

~~Pursuant~~The tomethods ~~the~~described ~~terms~~above ofmay ~~the~~produce ~~APA,~~a atfair ~~the~~value ~~closing~~calculation ofthat ~~the~~may ~~Acquisition~~not ~~(the~~be ~~“Closing”),~~indicative inof ~~exchange~~net ~~for~~realizable ~~the~~value ~~Purchased~~or ~~Assets,~~reflective ~~the~~of ~~Company~~future ~~issued~~fair ~~and~~values. ~~delivered to Seller (i) 1~~Furthermore,~~313,127~~ ~~shares~~while of the Company’s ~~Class~~believes Aits ~~common~~valuation ~~stock,~~methods ~~par~~are ~~value~~appropriate ~~$0.001 per share (the “Common Stock”),~~ and ~~(ii)~~consistent ~~63,743~~with ~~shares~~those of ~~the~~other ~~Company’s newly designated class of Series B Non-Voting Convertible Preferred Stock~~market ~~(the “Series B Preferred Stock”) convertible~~participants, ~~subject to~~ the ~~receipt~~use of ~~Stockholder~~different ~~Approval~~methodologies ~~(as~~or ~~defined~~assumptions ~~below), into an aggregate of 3,059,664 shares of Common Stock (collectively, the “Upfront Shares”). In addition~~ to ~~the~~determine ~~Upfront Shares,~~ the ~~Company~~ ~~delivered~~fair ~~into~~value ~~escrow 54,908 shares~~ of ~~Series~~certain Bfinancial ~~Preferred~~instruments ~~Stock~~could ~~convertible, subject to receipt of Stockholder Approval and the~~result ~~Deferred~~in ~~Payment~~a ~~(as~~different ~~defined~~estimate ~~below), into 2,635,591 shares~~ of ~~Common~~fair ~~Stock~~value ~~(the~~at ~~“Escrow Shares,” together with~~ the ~~Upfront Shares,~~reporting ~~the “Acquisition Shares”)~~date.

InNote ~~accordance~~12 ~~with~~– ~~applicable~~Commitments Nasdaq listing rules, the Company plans to obtain stockholder approval to issue the shares of Common Stock underlying the Series B Preferred Stock so that it may issue shares of Common Stock to the Seller in excess of 1,313,127 shares of Common Stock, the amount of shares equal to 4.99% of the issued and outstanding Common Stock on the Closing Date (“Stockholder Approval”). Within thirty (30) days, but not earlier than fifteen (15) business days after Stockholder Approval is obtained, the Seller will prepare and deliver to the Company a written determination, in the Seller’s sole and absolute discretion, of an amount equal to or less than $2,000,000 to be paid to the Company, if any (such amount to be paid to the Company, the “Deferred Payment” and such amount that will not be paid to the Company, the “Uncollected Deferred Payment”). Within five (5) business days of the delivery of such written determination, subject and upon receipt of the Deferred Payment, the Company and the Seller will instruct the Escrow Agent to release to the Company such number of Escrow Shares based upon the shares of Common Stock underlying the Series B Preferred Stock multiplied by the quotient of (i) the outstanding Uncollected Deferred Payment divided by (ii) $2,000,000. The balance of the Escrow Shares will then be released to the Seller (the “Post-Closing Adjustment”). In the event Stockholder Approval is not received on or prior to the eighteen (18) month anniversary of the Closing, the Deferred Payment will lapse and the Escrow Shares will all be released to the Company.Contingencies

~~Amendment~~Right-of-Use ~~and~~Asset ~~Waiver~~- ~~Agreements~~Operating Leases

OnWe ~~February~~have 3,entered ~~2023,~~into ~~the~~various ~~Company~~operating ~~entered~~lease ~~into~~agreements, anincluding ~~amendment~~our ~~and~~corporate ~~waiver~~headquarters. ~~agreement~~We ~~(the~~account ~~“Amendment~~for ~~and~~leases ~~Waiver~~in ~~Agreement”)~~accordance with ~~the~~ASC ~~ATW~~Topic ~~Fund~~842: ILeases, ~~L.P.,~~which ~~ATW~~requires ~~Master~~a ~~Fund~~lessee ~~II,~~to ~~L.P.~~utilize ~~and~~the ~~ATW~~right-of-use ~~Opportunities~~model ~~Master~~and ~~Fund~~to ~~II,~~record ~~LP (each,~~ a ~~“Holder”~~right-of-use asset and, ~~collectively,~~a lease liability on the ~~“Holders”),~~balance ~~pursuant~~sheet tofor ~~which~~all ~~the~~leases ~~parties~~with ~~agreed~~terms tolonger ~~amend~~than or12 ~~modify~~months. ~~certain~~Leases ~~outstanding~~are ~~agreements~~classified toas ~~permit~~either ~~the~~financing ~~consummation~~or operating, ofwith ~~the~~classification ~~Acquisition~~affecting ~~and~~the ~~avoid~~pattern ~~any~~of ~~potential~~expense ~~noncompliance~~recognition orin ~~events~~the statement of ~~default~~operations. ~~relating~~In addition, a lessor is required to classify ~~such~~leases ~~prior~~as ~~agreements.~~either ~~The~~sales-type, ~~exercise~~financing ~~and~~or ~~conversion prices~~operating. inA ~~these~~lease ~~agreements~~will ~~were~~be ~~amended~~treated toas ~~$1.00~~a ~~per~~sale ~~share.~~if Asit ~~part~~transfers all of the ~~amendment~~risks and rewards, weas ~~extended~~well as control of the ~~expiration~~underlying ~~date~~asset, ofto the ~~following warrants~~lessee. ~~until~~If ~~September~~risks ~~30,~~and ~~2023:~~rewards ~~(a)~~are ~~warrants~~conveyed towithout ~~purchase~~the 1transfer of control,~~363,636~~ the ~~shares~~lease ofis ~~Common~~treated ~~Stock~~as ~~issued~~financing. onIf ~~June~~the 30lessor does not convey risk and rewards or control, ~~2020;~~the ~~(b)~~lease ~~warrants~~is totreated as operating. We determine ~~purchase~~if ~~166,667~~an ~~shares~~arrangement ofis ~~Common~~a ~~Stock~~lease, ~~issued~~or oncontains ~~November~~a 29lease, ~~2018;~~at ~~(c)~~inception ~~warrants~~and torecord ~~purchase~~the ~~530,027~~lease ~~shares~~in ofour ~~Common~~financial ~~Stock~~statements ~~issued~~upon ~~on November~~lease 29commencement, which ~~2018~~is ~~and~~the ~~(d)~~date ~~warrants~~when tothe ~~purchase~~underlying ~~530,028~~asset ~~shares~~is ofmade ~~Common~~available ~~Stock~~for ~~issued~~use onby ~~October~~the ~~27, 2017~~lessor.

28Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over the lease term. Lease right-of-use assets and liabilities at commencement are initially measured at the present value of lease payments over the lease term. We generally use our incremental borrowing rate based on the information available at commencement to determine the present value of lease payments except when an implicit interest rate is readily determinable. We determine our incremental borrowing rate based on market sources including relevant industry data.

~~Sale~~We have lease agreements with lease and non-lease components and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception of LDdirect sales-type ~~Micro~~leases and production equipment classes embedded in supply agreements. From a lessor perspective, ~~Inc~~the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease.

On March 3, 2023, the Company entered into and consummated the transactions contemplated by the Agreement and Plan of Merger (the “Merger Agreement”) with Freedom Holding Corp., a Nevada corporation (the “Parent”), Freedom U.S. Markets, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Parent (the “Buyer”), LDM Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Buyer (“Merger Sub”), LD Micro, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“LD Micro”), to sell LD Micro. Specifically, pursuant to the terms of the Merger Agreement, at the closing of the transactions contemplated by the Merger Agreement (the “Closing”), LD Micro merged with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger (the “Surviving Corporation”), in a transaction intended to qualify for tax-free treatment under Section 368(a) of the Internal Revenue Code of 1986, as amended.64

~~At the Closing~~SRAX, ~~as consideration for the sale of LD Micro by means of the Merger, the Buyer paid the Company $8,300,000 in consideration,~~ ~~consisting of $4,000,000 in cash (the “Cash Payment”), and 59,763 shares of the Parent’s common stock, par value $0~~INC.~~001 per~~ ~~share~~AND (the “Parent Common Stock”), which is equal to the quotient obtained by dividing (x) $4,300,000 by (y) the volume weighted average of the daily closing sales prices of the Parent Common Stock, as reported on the Nasdaq Capital Market for the thirty (30) consecutive trading days ending on the three (3) trading days prior to the Closing (the “Payment Shares,” and together with the Cash Payment, the “Merger Consideration”). The Company also entered into a four (4) year Sponsorship Agreement that provides the Company certain exclusive rights as it relates to LD Micro following the Merger, as more fully described below.SUBSIDIARIES

LDNOTES ~~Micro’s~~TO ~~President,~~UNAUDITED ~~Christopher~~CONSOLIDATED ~~Lahiji,~~FINANCIAL is a member of the Company’s board of directors (the “Board”). The Merger was approved on March 2, 2023, by the Board. In such case, it was considered that Mr. Lahiji is an interested director of the Company with respect to the Merger. In such case, it also was determined, among other things, that, notwithstanding that Mr. Lahiji is an interested director of the Company, the Merger Consideration received for the sale of LD Micro, by means of the Merger, constitute fair and adequate consideration.STATEMENTS

~~Further,~~MARCH ~~in connection with the Merger~~31, the Company also entered into a sponsorship agreement with the Surviving Corporation (the “Sponsorship Agreement”), whereby the Surviving Corporation agreed to designate the Company as an exclusive sponsor of certain flagship events that will be organized by the Surviving Corporation after the consummation of the Merger for a period of four (4) years and to provide certain benefits to the Company which include (i) exclusive virtual and live streaming partner for the events; (ii) exclusive partner to provide video recording interviews; and (iii) certain exclusivity to be the only sponsor providing SAAS platform services and digital marketing and services at the events.2023

~~Creation~~We have elected not to present short-term leases on the balance sheet as these leases have a lease term of ~~Advisory~~12 ~~Board~~months or less at lease inception and ~~Stock~~do ~~Compensation~~not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.

OnOur ~~July 17~~leases, ~~2023~~where ~~the~~we ~~Company’s~~are ~~Board~~the oflessee, ~~Directors~~do ~~authorized~~not ~~the~~include ~~creation of~~ an ~~Advisory~~option ~~Board (“Advisory Board”)~~ to ~~provide strategic~~extend ~~guidance and expertise to~~ the ~~Company~~lease interm. ~~the~~For ~~financial~~purposes ~~technology~~of ~~sector.~~calculating ~~The~~lease ~~establishment~~liabilities, oflease term ~~the~~would ~~Advisory~~include ~~Board~~options isto ~~aimed at~~extend ~~enhancing~~or terminate the ~~Company’s~~lease ~~growth~~when ~~strategies~~it ~~and~~is ~~leveraging~~reasonably ~~the~~certain ~~insights~~that ~~and~~we ~~experience~~will ofexercise ~~industry~~such ~~leaders~~options.

AsLease ~~part~~expense offor ~~the~~operating ~~establishment~~leases ofis ~~the~~recognized ~~Advisory~~on ~~Board, the Company has granted~~ a ~~total~~straight-line ofbasis ~~500,000~~over ~~shares of~~ the ~~Company’s~~lease ~~common~~term ~~stock to the members of the Advisory Board~~ as ~~compensation~~an ~~for~~operating ~~their services. These grants were made on July 17~~expense, ~~2023~~included ~~and~~as ~~are~~a ~~subject to vesting~~component ~~schedules~~of general and ~~terms~~administrative asexpenses, ~~outlined~~ in ~~individual advisory agreements. The shares granted are intended to align~~ the ~~interests~~accompanying ofconsolidated ~~the~~statements ~~Advisory Board members with those~~ of ~~the Company’s shareholders and foster a collaborative approach to achieving the Company’s objectives~~operations.

~~Amendment~~Certain operating leases provide for annual increases to lease payments based on an index or rate, our lease has no stated increase, payments were fixed at lease inception. We calculate the present value of ~~Senior~~future ~~Secured~~lease ~~Revolving~~payments ~~Credit~~based ~~Facility~~on the index or rate at the lease commencement date. Differences between the calculated lease payment and ~~Senior~~actual ~~Secured~~payment ~~Convertible~~are ~~Debenture~~expensed as incurred.

~~The~~We ~~Company~~recognize ~~previously~~lease ~~entered~~expense ~~into~~on a ~~Senior~~straight-line ~~Secured~~basis ~~Revolving~~over ~~Credit~~the ~~Facility~~term ~~Agreement~~of ~~with~~our ~~ATW~~operating ~~Opportunities fund~~leases, ~~dated~~ as ofreported ~~August 8,~~within ~~2022,~~general ~~pursuant~~and toadministrative expense ~~which~~in the ~~Company~~accompanying ~~issued~~consolidated astatement ~~revolving~~of ~~note to ATW Opportunities (the “Revolving Note”)~~operations. ~~Additionally, the Company issued a Senior Secured Convertible Debenture to ATW Master Fund on June 30, 2020 (the “Debenture”).~~

OnAt ~~September~~March 1331, 2023, ~~the Revolving Note, Debenture,~~ and ~~Credit~~December ~~Agreement were temporarily amended for a period of up to fourteen months from the Effective date of September 11~~31, ~~2023. The amendments include~~2022, ~~but are not limited to~~respectively, ~~provisions related to~~ the payment of amounts owing under the Credit Agreement from the proceeds of the sale of third-party securities held by the company. Per the agreement ATW shall receive one hundred percent of the proceeds from sales from third party securities owned by the Company ~~until~~had ~~such~~no ~~time~~financing leases as ~~outstanding amounts~~defined ~~due~~in ~~under~~ASC the respective agreements have been repaid. The Company shall maintain the rights to all proceeds from sales of the marketable securities once the amounts due to ATW have been satisfied. The Company also agreed to various covenants and conditions842, ~~including providing access to certain accounts and notifying ATW Opportunities and ATW Master Fund of material changes~~“Leases.”

2965

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The tables below present information regarding the Company’s operating lease assets and liabilities at March 31, 2023 and December 31, 2022, respectively:

	March 31, 2023			December 31, 2022
Assets

Operating lease - right-of-use asset - non-current	$	91,000		$	127,000

Liabilities

Operating lease liability	$	77,000		$	114,000

Weighted-average remaining lease term (years)		0.50			0.75

Weighted-average discount rate		18	%		18	%

The components of lease expense were as follows:

Schedule of Lease Expenses

	March 31, 2023		March 31, 2022

Operating lease costs

Amortization of right-of-use operating lease asset	$	36,000	$	30,000
Lease liability expense in connection with obligation repayment		5,000		11,000
Total operating lease costs	$	41,000	$	41,000

Future minimum lease payments for the year ended December 31:


2023	$	82,000
Total undiscounted cash flows		82,000
Less: amount representing interest		(5,000	)
Present value of operating lease liability		77,000
Less: current portion of operating lease liability		77,000
Long-term operating lease liability	$	-

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

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.

Contingencies – Legal Matters

During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with Financial Accounting Standards Board (“FASB”) ASC 450-20-50, “Contingencies”. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals.

As of March 31, 2023 and the date of these financial statements, 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, other than the following matters:

Michael Malone, a former executive officer of the Company, filed a complaint in the Superior Court of the State of California for the County of Los Angeles Northwest District (Case No. 23VECVO3433) against the Company on August 7, 2023, claiming Breach of Contract, Violations of the Labor Code and Violation of the California Business and Professions Code. Mr. Malone, among other items, is seeking amounts due under an Employment Agreement entered between the parties as well as unpaid wages, and general and special damages. The Company filed an Answer on October 9, 2023, denying all claims. The Company intends to vigorously pursue its rights in this matter.

Stock Market Manager, Inc., a company believed to be owned by Carl Dilley, filed a complaint against the Company in the Circuit Court of the Sixth Circuit in and for Pinellas County, Florida (Case No. 24-002894) claiming Breach of Contract and Breach of Covenant of Good Faith and Fair Dealing seeking damages in the minimum amount of $1,246,235. The Company had the matter removed to the U.S. District Court for the Middle District of Florida. The Company intends to vigorously pursue its rights in this matter.

Subsequent to March 31, 2023, Homeland Insurance Company of New York (“Homeland”) filed a complaint on January 9, 2025 against SRAX. Homeland is seeking repayment of a deductible for the insurance policy that they made a payment for. They are seeking a repayment of $759,598. SRAX is in the process of filing a response to this complaint.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

At March 31, 2023 and December 31, 2022, the Company was not aware of any contingent liabilities that should be reflected in the accompanying unaudited consolidated financial statements.

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.

Note 13 – Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at March 31, 2023 and December 31, 2022, are as follows:

	March 31, 2023		December 31, 2022
Accounts payable	$	5,988,000	$	7,476,000
Accrued liabilities		1,800,000		2,540,000
Accrued interest payable		331,000		424,000
Accrued commissions		41,000		13,000
Accounts payable and accrued liabilities	$	8,160,000	$	10,453,000

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Note 14 – Other Current Liabilities

At March 31, 2023 and December 31, 2022, other current liabilities were $663,000 and $1,451,000, respectively. These balances consisted primarily of amounts due to third parties who purchased our marketable securities in exchange for working capital at a discount to the value of the marketable securities sold. In these arrangements, the Company is required to repay a stated amount less any proceeds received from the securities that were sold by these third parties.

Note 15 – Payroll Protection Program Loan

During the year ended December 31, 2022, the PPP loan in the amount of $10,000 was forgiven. At December 31, 2022, the balance was $0.

Note 16 – Series A, Redeemable Preferred Stock Liability

On September 27, 2021, the Company issued a one-time dividend of 36,462,417 shares of series A preferred stock (“Preferred Stock”) to certain Qualified Recipients (the “Dividend”). The preferred stock entitles the Qualified Recipients with the right to receive the net proceeds from sales of certain marketable securities that the Company received through its Sequire Platform services.

The Company’s management has evaluated its Series A, redeemable preferred stock in accordance with ASC 480 – Distinguishing Liabilities from Equity. Management has determined that the cancellation clause of the preferred stock deems it to be mandatorily redeemable and should be classified as a liability.

The preferred stock is mandatorily redeemable upon the distribution of net proceeds from the sale of the designated marketable securities. Accordingly, it is classified as a liability recorded at fair value, with changes in fair value being reflected in earnings at each reporting period.

Preferred stock liability represents amounts payable to holders of the Preferred Stock Series A shares upon the eventual liquidation of assets designated for the sole purpose of paying dividends. Accordingly, the Company classified the Series A Preferred Shares as liability instruments because in-substance, they represent a right to the payment of dividends upon the liquidation of specified assets, which are automatically returnable to the Company after the payments are made and feature no rights to further equity or residual interests in the Company. The Certificate of Designation of Preferences, Rights and Limitations of Series A Non-Voting Preferred Stock states dividend shall be paid conditioned upon, and subject to a determination by the Board that a distribution is not prohibited pursuant to applicable provisions of the DGCL or other applicable law.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The following is a summary of the Company’s Series A, Redeemable, Preferred Stock at March 31, 2023 and December 31, 2022:

Balance - December 31, 2021	$	3,925,000
Change in fair value of Series A, redeemable preferred stock		(2,566,000	)
Series A, redeemable preferred stock - cash distribution		(365,000	)
Balance - December 31, 2022		994,000
Change in fair value of Series A, redeemable preferred stock		(41,000	)
Balance - March 31, 2023	$	953,000

See Note 17.

Note 17 – Stockholders’ Deficit

At March 31, 2023 and December 31, 2022, the Company had three (3) and (2) classes of stock, respectively:

Preferred Stock and Designation of Series A, Preferred Stock

	-	50,000,000 shares authorized
	-	36,462,417 designated as Series A, redeemable preferred stock are issued and outstanding at March 31, 2023 and December 31, 2022, respectively. These shares are currently outstanding for the purpose of satisfying a dividend. See Note 16.
	-	Par value - $0.001

The Company’s 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. The Board of Directors may authorize the issuance of preferred stock, which ranks senior to the Company’s common stock for the payment of dividends and the distribution of assets on liquidation.

In addition, the Board of Directors can fix limitations and restrictions, if any, upon the payment of dividends on both classes of the Company’s common stock to be effective while any shares of preferred stock are outstanding.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Preferred Stock and Designation of Series B, Preferred Stock

	-	9,000,000 shares authorized
	-	Par value - $0.001
	-	Voting at 10 votes per share
	-	Convertible into Class A common shares on a 1 for 1 basis

On February 3, 2023, the Company’s Board of Directors adopted certain provisions related to the designation of its Series B, Preferred Stock as follows:

●	Stated value - $48/share,
●	Convertible - $1/share,
●	Voting rights – None
●	Dividends – on an if-converted basis

In September 2023, in connection with certain debt offerings, the conversion rate was reduced to $0.25/share. See Note 20.

As of March 31, 2023 and December 31, 2022, the Company had 63,743 and 0 shares issued and outstanding.

As of March 31, 2023 and December 31, 2022, the Company reflected common stock equivalents of 63,743 and 0 shares, respectively, related to its Series B, preferred stock.

Common Stock – Class A

	-	250,000,000 shares authorized
	-	Par value - $0.001
	-	Voting at 1 vote per share

As of March 31, 2023 and December 31, 2022, the Company has 28,888,390 and 26,323,579 shares issued and outstanding, respectively.

Share Repurchase Plan

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.

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.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The total remaining authorization for future common share repurchases under our share repurchase program was $10,000,000 at March 31, 2023 and December 31, 2022, respectively.

Securities and Incentive 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 (ISO’s),
	●	non-qualified stock options (NSO’s),
	●	awards of our common stock,
	●	stock appreciation rights (SAR’s),
	●	restricted stock units (RSU’s),
	●	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.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

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.

Equity Transactions for the Three Months Ended March 31, 2023

Stock issued in Asset Purchase of DNA Holdings, LLC

In February 2023, the Company issued 1,313,127 shares of Class A, common stock, along with 63,743 shares of Class B, common stock, having a fair value of $1,256,000, based upon the fair value of the consideration received.

See Note 3.

Exercise of Warrants – Cashless

In February 2023, the Company issued 1,251,684 shares of common stock in connection with the cashless exercises of 2,178,172 warrants. These exercises will have a net effect of $0 on stockholders’ deficit. These warrants were exercised by the Company’s senior secured revolving credit facility lender.

Equity Transactions for the Year Ended December 31, 2022

Exercise of Stock Options – Cashless

The Company issued 65,729 shares of common stock (on a net basis) to non-executive employees in connection with the conversion of 327,667 stock options. This transaction had a net effect of $0 on stockholders’ deficit.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Exercise of Stock Options – Cashless – Related Parties

The Company issued 26,252 shares of common stock (on a net basis) to its former Chief Executive Officer in connection with the conversion of 100,000 stock options. This transaction had a net effect of $0 on stockholders’ deficit. In connection with this transaction, the Company reflected a net amount of tax withholdings of $101,000 as a charge to additional paid-in capital.

The Company issued 31,872 shares of common stock (on a net basis) to an executive in connection with the conversion of 100,000 stock options. This transaction had a net effect of $0 on stockholders’ deficit.

Exercise of Warrants (Cashless)

The Company issued 195,525 shares of common stock in connection with cashless exercises of 689,173 warrants. These transactions had a net effect of $0 on stockholders’ deficit.

Exercise of Warrants

The Company issued 8,401 shares of common stock upon the exercise of 8,401 warrants for $32,000 ($3.75/share).

Loan Breakup Fee

In connection with obtaining its senior secured revolving credit facility, the Company was required to issue 33,000 shares of common stock to an unrelated former lender, having a fair value of $80,000 ($2.67/share), based upon the quoted closing price. See Note 12.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Note 18 - Stock Options

Stock option transactions for the three months ended March 31, 2023 and the year ended December 31, 2022 are summarized as follows:

Schedule of Stock Option Activity

						Weighted		Weighted
						Average		Average
				Weighted		Remaining		Grant
	Number			Average		Contractual		Date		Aggregate
Stock Options	of Options			Exercise Price		Term (Years)		Fair Value		Intrinsic Value
Outstanding - December 31, 2021		1,334,287		$	3.02		2.39	$	-	$	1,969,000
Vested and Exercisable - December 31, 2021		870,750		$	3.05		2.27	$	-	$	1,265,000
Unvested - December 31, 2021		461,030		$	2.96		2.62	$	-	$	703,000
Granted		718,132		$	4.27			$	3.72
Exercised		(427,667	)	$	3.21
Cancelled/Forfeited		(266,333	)	$	3.28
Outstanding - December 31, 2022		1,358,419		$	3.57		3.95	$	-	$	-
Vested and Exercisable - December 31, 2022		798,502		$	3.41		3.82	$	-	$	-
Unvested - December 31, 2022		559,917		$	3.79		4.13	$	-	$	-
Granted		-
Exercised		-
Cancelled/Forfeited		(393,415	)	$	3.64
Outstanding - March 31, 2023		965,004		$	3.54		3.89	$	-	$	-
Vested and Exercisable - March 31, 2023		683,670		$	3.45		3.74	$	-	$	-
Unvested - March 31, 2023		281,334		$	3.75		4.24	$	-	$	-

Stock Options – Related Parties

In 2022, the Company granted 120,000, seven (7) year stock options to its Chief Executive Officer for services to be rendered, having a fair value of $356,000. These options have an exercise price of $4.25/share. These options vest quarterly over a period of three (3) years.

In 2022, the Company granted 118,132, seven (7) year stock options to various non-employee directors for services to be rendered, having a fair value of $400,000. These options have an exercise price of $4.35/share. These options vested quarterly over a period of one (1) year, and were fully vested as of December 31, 2022.

Stock Options – Employees

In 2022, the Company granted 480,000, five (5) year stock options to various non-executive employees for services to be rendered, having a fair value of $1,038,000. These options have an exercise price of $4.25/share. These options vest quarterly over a period of three (3) years.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Black Scholes Option Pricing Model – Valuation

The fair value of all stock options granted during the year ended December 31, 2022 was determined using a Black-Scholes option pricing model with the following inputs:

Expected term (years)		3.4 - 5
Expected volatility		90%
Expected dividends		0%
Risk free interest rate		1.55% - 1.60%

Stock Option Vesting Expense Recognition

During the three months ended March 31, 2023 and 2022, the Company recognized compensation of $64,000 and $358,000, respectively, related to vesting of these stock options.

Stock Option Compensation

During the year ended December 31, 2022, the Company reversed $1,139,000 of previously recognized stock based compensation which had not fully vested.

Additionally, during the year ended December 31, 2022, the Company recorded stock-based compensation for the year totaling $983,000 related to the vesting of its other share based payments.

Stock-based compensation expense (benefit) – net, for the three months ended March 31, 2023 and the year ended December 31, 2022 was $0 and $(156,000), respectively.

At March 31, 2023, the weighted average period in which unrecognized stock option compensation of $471,000 will be recognized and vest is 1.90 years.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Note 19 - Warrants

Warrant activity for the three months ended March 31, 2023 and the year ended December 31, 2022 are summarized as follows:

Schedule of Warrant Activity

						Weighted
						Average
				Weighted		Remaining		Aggregate
	Number of			Average		Contractual		Intrinsic
Warrants	Warrants			Exercise Price		Term (Years)		Value
Outstanding - December 31, 2021		10,019,127		$	5.21		0.47	$	6,779,000
Vested and Exercisable - December 31, 2021		9,719,127		$	5.22		0.41	$	6,779,000
Unvested - December 31, 2021		300,000		$	4.75		2.37	$	-
Granted		-		$	-				-
Exercised		(697,574	)	$	3.09				-
Cancelled/Forfeited		(6,633,335	)	$	6.50				-
Outstanding - December 31, 2022		2,688,218		$	2.82		0.64	$	-
Vested and Exercisable - December 31, 2022		2,688,218		$	2.82		0.64	$	-
Unvested - December 31, 2022		-		$	-		-	$	-
Granted		-			-				-
Exercised		(1,251,684	)	$	2.99				-
Cancelled/Forfeited		-		$	-				-
Outstanding - March 31, 2023		1,436,534		$	2.66		0.31	$	-
Vested and Exercisable - March 31, 2023		1,436,534		$	2.66		0.31	$	-
Unvested - March 31, 2023		-		$	-		-	$	-

Warrant Transactions for the Year Ended December 31, 2022

Warrants Modification Expense

See Note 10 regarding the extension of debt and related warrant modification expense of $1,788,000 incurred in connection with the new terms.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Note 20 – Subsequent Events

Debt Arrangements

Debt Issued in 2023

Senior Secure Revolving Credit Facility – Loan Paydown

In April 2023, the Company sold 54,263 shares of Freedom Holding Corp. having a fair value of $2,657,000 to a lender. In lieu of cash proceeds, the lender reduced the outstanding balance of the outstanding senior secured revolving credit facility. See Note 10.

Original Issue Discount Convertible Notes Payable Issued with Warrants

New Note - Existing Lender

In September 2023, the Company executed a $454,000 original issue discount, convertible note payable, for net proceeds of $0. Additionally, the lender received 3,633,616, five (5) year warrants with an exercise price of $0.25/share. Since the note was already fully discounted on the issuance date, no additional debt discount was recorded in connection with the issuance of the related warrants. The note is non-interest bearing, is unsecured and was originally due November 2024. On December 9, 2024, the note was extended to September 29, 2025. There was no consideration paid in exchange for the extension of the maturity date. The warrants are due five (5) years from the date of issuance in September 2028. The holder of this note is also the senior secured revolving credit facility lender.

New Notes – Other Third Parties

During the period August 2023 – October 2023, the Company executed several convertible notes aggregating $564,000. These convertible notes issued had an original issue discount of $103,000, with the Company receiving net proceeds of up to $461,000. These notes are convertible at $0.25/share, are non-interest bearing, unsecured and mature one (1) year from the issuance date. As of the date of these financial statements, these notes are in default.

Additionally, these lenders were entitled to 200% warrant coverage on an as-converted basis, for 4,510,000 warrants. The warrants have an exercise price of $0.25/share and are due five (5) years from their date of issuance in August 2028 – October 2028.

The Company determined that in addition to the original issue discount recognized for these notes, the warrants provided an additional debt discount having a fair value of $373,000.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Black Scholes Option Pricing Model – Valuation

The fair value of these warrants ($373,000) was determined using a Black-Scholes option pricing model with the following inputs:

Expected term (years)	5
Expected volatility	207	%
Expected dividends	0	%
Risk free interest rate	4.60	%

Debt Issued in 2024

Original Issue Discount Convertible Notes Payable

In March 2024, the Company executed convertible notes for $180,000. These convertible notes had an original issue discount of $30,000, with the Company receiving net proceeds of $150,000. These notes are convertible at $0.25/share, are non-interest bearing, unsecured and mature two (2) years from the issuance date in March 2026.

Stock Option Grants and Repricings

2023 Stock Option Grants

In August 2023, the Company granted 1,180,000, three (3) year stock options. Of the total, 120,000 options were granted to our Chief Executive Officer, and the remaining 1,060,000 options were granted to various employees for services rendered, having a fair value of $282,000. These options have an exercise price of $0.25/share and vest monthly over a period of one (1) year.

Black Scholes Option Pricing Model – Valuation

The fair value of these stock options granted was determined using a Black-Scholes option pricing model with the following inputs:

Expected term (years)	3
Expected volatility	362	%
Expected dividends	0
Risk free interest rate	5.37	%

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Modification of 2023 Stock Option Grants

In February 2024, 1,130,000 of the 1,180,000 stock options granted in August 2023 were modified by reducing the exercise price from $0.25/share to $0.015/share. The Company has determined that there was no incremental fair value associated with these modified awards, and as a result, no additional compensation was recorded.

2024 Stock Option Grant

In January 2024, the Company granted 120,000, three (3) year stock options to an employee for services rendered, having a fair value of $1,000. These options have an exercise price of $0.0102/share and were fully vested on the grant date.

Black Scholes Option Pricing Model – Valuation

The fair value of these stock options granted was determined using a Black-Scholes option pricing model with the following inputs:


Expected term (years)	3
Expected volatility	427	%
Expected dividends	0
Risk free interest rate	4.12	%

Stock Issued for Services – Related Parties

In July 2023, the Company issued 500,000 shares of common stock, having a fair value of $190,000 ($0.38/share), based upon the quoted closing price, to advisory board members for future services to be rendered. The shares vest monthly over a period of one (1) year.

Share Cancellation

In March 2024, the Company cancelled 288,000 shares of common stock. This cancellation will have a net effect of $0 on stockholders’ deficit.

Reverse Acquisition, Change in Control, Anticipated Accounting Treatment and Unaudited Pro-Forma Financial Information

Reverse Acquisition and Change in Control

On May 6, 2024, DNA (“accounting acquirer,” a private company, and the entity whose equity interests will be acquired) executed an agreement and plan of merger with SRAX (“legal acquirer,” and the entity that will issue securities for financial reporting purposes), an operating public company.

SRAX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

As of the date of these unaudited consolidated financial statements, the merger transaction has not yet closed.

Prior to the completion of the merger, DNA currently holds approximately 35% of the issued and outstanding shares of common stock of the Company. In connection with this transaction, the Company will issue to the shareholders of DNA; 1,000 shares of newly created Series C, convertible preferred stock (see below), which shall be convertible into approximately 75.5% of the outstanding common stock of the Company (inclusive of the 35% already owned at the date of merger) in exchange for all issued and outstanding shares of DNA, resulting in a change in control.

Upon closing of the merger, DNA will have voting control, and this will be accounted for as a reverse acquisition. Since DNA will acquire a controlling voting interest, it will be deemed the accounting acquirer, while the Company will be deemed the legal acquirer.

Name Change and Stock Symbol Change

Upon completion of the merger, the Company will change its name to DNA and request a ticker symbol change.

Financial Accounting and Reporting

The historical financial statements of the Company will become those of DNA and of the consolidated

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