SRAX, Inc., Form 10-K, Fiscal Year Ended December 31, 2022

Summary

SRAX, Inc. filed this Form 10-K for the fiscal year ended December 31, 2022, reporting the aggregate market value of non-affiliate common equity at $78,884,807 as of June 30, 2022 and 29,150,262 Class A shares outstanding as of August 29, 2024. The company describes itself as a technology firm focused on communications between public companies and their shareholders, through its Sequire SaaS platform and investor conferences. It says LD Micro was divested in a merger that closed on March 3, 2023 and BIGToken in a share exchange that closed on February 4, 2021. The cover marks that the registrant has not filed all required reports in the preceding 12 months. The filing also describes DNA, a Web3 investment company, and Series C Convertible Preferred Stock designated in May 2024.

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“SRAX, Inc., Form 10-K, Fiscal Year Ended December 31, 2022.” Original at www.sec.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/srax-inc-form-10-k-fiscal-2022-a76ca37908/, SHA-256 1620fc1c5ce1b4972a25990d163dcdfad997606e50f3a9693a685674d185b6fe.

Full text

UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

W ashington ,
D.C. 20549

FORM 10-K

(M ark O ne )

☒ | ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

F or
the fiscal year ended DECEMBER 31 , 2022

☐ | TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

F or
the transition period from _______________ to _______________

C ommission
file number : 001-37916

SRAX,
INC.

(Exact
name of registrant as specified in its charter )

Delaware | 45-2925231
(State
or other jurisdiction of incorporation
or organization) | (I.R.S.
Employer Identification
No.)

2629
Townsgate Road #215 ,

Westlake
Village , CA 91361

(Address
of principal executive offices) (Zip Code)

Registrant’s
telephone number, including area code: (323) 694-9800

Securities
registered under Section 12(b) of the Act: None

Title
of Class | Trading
Symbol | Name
of Each Exchange on Which Registered
N/A | N/A | N/A

Securities
registered under Section 12(g) of the Act:

Class
A Common Stock, $0.001 par value

(Title
of class)

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes
☒ No

Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes
☒ No

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

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

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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

Large
accelerated filer ☐ | Accelerated
filer ☐
Non-accelerated
filer ☒ | Smaller
reporting company ☒
Emerging
Growth Company ☐

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

Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐

If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

The
aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2022 was $ 78,884,807 based on
the closing price of $3.32.

There
were 29,150,262 shares of Class A common stock outstanding as of August 29, 2024.

DOCUMENTS
INCORPORATED BY REFERENCE

None .

TABLE
OF CONTENTS

PART
I

We
urge you to read this entire Annual Report on Form 10-K, including the “Risk Factors” section, the financial statements and
the related notes included therein. As used in this Annual Report, unless context otherwise requires, the words “we,” “us,”
“our,” “the Company,” “SRAX,” “Registrant” refer to SRAX, Inc. and its subsidiaries.
Additionally, and reference to “LD Micro” refers to the Company’s previously wholly owned subsidiary, LD Micro, Inc.
and the assets used in its operations. LD Micro was divested pursuant to an Agreement and Plan of Merger that closed on March 3,
2023. Any reference to “BIGToken” and “BIGToken, Inc.”, or the “BIGToken Project” refer to the
Company’s previously wholly owned subsidiary, BIGToken, Inc. and the assets used in its operations. BIGToken was divested pursuant
to a share exchange agreement that closed on February 4, 2021.

Any
reference to “common share” or “common stock,” refers to our $0.001 par value Class A common stock. Any reference
to our Series A Preferred Stock refers to our $0.001 par value Series A Non-Voting Preferred Stock. Any reference to our Series B Preferred
Stock refers to our $0.001 par value Series B Non-Voting Preferred Stock.

SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS

The
statements contained in this Annual Report on Form 10-K that are not purely historical are considered to be “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). These forward-looking statements include, but are not limited to: any projections of revenues,
earnings, or other financial items; any statements of the strategies, plans and objectives of management for future operations; any statements
concerning proposed new products or developments; any statements regarding future economic conditions or performance; any statements
of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,”
“will,” “estimate,” “intend,” “continue,” “believe,” “expect”
or “anticipate” and any other similar words. These statements represent our expectations, beliefs, anticipations, commitments,
intentions, and strategies regarding the future and include, but are not limited to, the risks and uncertainties outlined in Item 1.A
Risk Factors and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and those discussed
in other documents we file with the Securities and Exchange Commission (SEC). Readers are cautioned that actual results could differ
materially from the anticipated results or other expectations that are expressed in forward-looking statements within this report. The
forward-looking statements included in this report speak only as of the date hereof, and we undertake no obligation to publicly update
or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.
Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

ITEM
1. | BUSINESS.

Overview

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

● | Our
unique SaaS platform, Sequire, which allows issuers to track their shareholders’ behaviors and trends, then use data driven
insights to engage with shareholders across marketing channels. Through Sequire, we offer tools and related data and insight services
to allow issuers of publicly traded securities to better understand their position in the market.
● | LD
Micro organizes and hosts investor conferences for micro and small-cap companies, which we sold following the year end December 31,
2022 during the first quarter of 2023. The Company has added its own conferences to the Sequire Platform that are separate and apart
from the LD Miro Conferences.

We
derive our revenues from the:

● | Licensing
of our proprietary SaaS platform;
● | Sales
of proprietary data;
● | Attendance
and sponsorship fees from investor conferences and events; and
● | Sales
of insight and consulting services.

Sequire

Clients
then can engage with targeted shareholder groups across marketing channels including email, social media, programmatic advertising, and
hyperlocal targeting.

When
interpreting data, clients can see gains and losses over time, buying/selling trends, total outstanding shares, new shareholders, and
shareholders broken out by percentage. Based on this data, we can assist our users in developing customized communications campaign utilizing
targeted ads and messaging.

Among
other features, the Sequire platform provides its users tools to monitor investor sentiment and activities and simplify back office administration
such as:

● | real-time
level-two trading data,
● | the
ability to monitor the activities of competitive public companies of the user,
● | news
alerts,
● | custom
survey feature to enhance shareholder communications;
● | real-time
and searchable warrant and option ledgers; and
● | integrated
communication between investor relations programs and corporate communication firms.

Data
Targeting

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

Investor
Conferences

Through
the events platform, we have the ability to host a variety of virtual events and conferences including investor conferences, earnings
calls, shareholder meetings, annual, investor/analyst days, corporate town halls, roadshows, and more. We believe that our ability to
offer users a seamless, centrally managed virtual events solution that can be customized to any industry will help transform our platform
into the premier investor event tool.

We
have also launched the Sequire Investor Conference in Puerto Rico, which brings together public companies with investors from the island
and from around the world. The conference has been held for two years and is about to be launched for the third year in January of 2025.
We collect fees from the public companies that participate at the event as well as sponsors that are looking to market to both the investors
and the companies at the event.

Marketing
and sales

We
market our services through our in-house sales and marketing team. Our team focuses on social media, including Facebook, LinkedIn and
Twitter, public relations (PR), industry events and the creation of white papers which assist in our marketing efforts and are used as
lead generation tools.

Intellectual
property

We
currently rely on a combination of patents, trade secret laws and restrictions on disclosure to protect our intellectual property rights.
Our success depends on the protection of the proprietary aspects of our technology as well as our ability to operate without infringing
on the proprietary rights of others. We also enter into proprietary information and confidentiality agreements with our employees, consultants
and commercial partners and control access to, and distribution of, our software documentation and other proprietary information. We
currently have eight (8) US patent applications filed.

Government
regulation

We
are subject to a variety of laws and regulations in the United States that involve matters central to our business. Many of these laws
and regulations are still evolving and being tested in courts and could be interpreted in ways that could harm our business. We are also
subject to many of the laws that cover the securities industry and are regulated by the Securities and Exchange Commission.

These
laws may involve privacy, data protection and personal information, rights of publicity, content, intellectual property, advertising,
marketing, distribution, data security, data retention and deletion, electronic contracts and other communications, competition, protection
of minors, consumer protection, product liability, taxation, economic or other trade prohibitions or sanctions, anti-corruption law compliance,
securities law compliance, and online payment services. In particular, we are subject to federal, state, and foreign laws regarding privacy
and protection of people’s data. Foreign data protection, privacy, content, competition, and other laws and regulations can impose
different obligations or be more restrictive than those in the United States. U.S. federal and state and foreign laws and regulations,
which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject
to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain,
particularly in the new and rapidly evolving industry in which we operate and may be interpreted and applied inconsistently from country
to country and inconsistently with our current policies and practices.

Proposed
or new legislation and regulations could also significantly affect our business. For example, the European General Data Protection
Regulation (GDPR) took effect in May 2018 and applies to all of our products and services used by people in Europe. The GDPR
includes operational requirements for companies that receive or process personal data of residents of the European Union that are
different from those previously in place in the European Union and includes significant penalties for non-compliance. The California
Consumer Privacy Act, which took effect in January 2020, also establishes certain transparency rules and creates new data privacy
rights for users. Similarly, there are a number of legislative proposals in the European Union, the United States, at both the
federal and state level, as well as other jurisdictions that could impose new obligations or limitations in areas affecting our
business, such as liability for copyright infringement. In addition, some countries are considering or have passed legislation
implementing data protection requirements or requiring local storage and processing of data or similar requirements that could
increase the cost and complexity of delivering our services. We may become the subject of investigations, inquiries, data requests,
requests for information, actions, and audits by government authorities and regulators in the United States, Europe, and around the
world, particularly in the areas of privacy, data protection, law enforcement, consumer protection, and competition, as we continue
to grow and expand our operations. We are currently, and may in the future be, subject to regulatory orders or consent decrees,
including the modified consent order we entered into in July 2019 with the U.S. Federal Trade Commission (FTC) which is pending
federal court approval and which, among other matters, will require us to implement a comprehensive expansion of our privacy
program. Orders issued by, or inquiries or enforcement actions initiated by, government or regulatory authorities could cause us to
incur substantial costs, expose us to unanticipated civil and criminal liability or penalties (including substantial monetary
remedies), interrupt or require us to change our business practices in a manner materially adverse to our business, divert resources
and the attention of management from our business, or subject us to other remedies that adversely affect our business.

Employees
and Human Capital Resources

As
of December 31, 2022, we had 122 full-time employees. Of these employees, six are engaged in executive management, 65 in information
technology including those participating in our research and development efforts, 13 in sales and marketing, 29 in integration and customer
support and 9 in administration. All employees are employed “at will.” We believe our relations with our employees are generally
positive and we have no collective bargaining agreements with any labor unions. As of August 15, 2024, the Company currently has 7 full
time employees and 13 contractors.

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

We
provide our employees and their families with access to health and wellness programs, including benefits that provide protection and
security concerning events that may require time away from work or that impact their financial well-being; and that offer choices where
possible so employees can customize their benefits to meet their needs. In response to the COVID-19 pandemic, we implemented significant
changes that we determined were in the best interest of our employees, as well as the community in which we operate, and which comply
with government regulations, including working in a remote environment where appropriate or required. As of the date of this Annual Report,
all of our employees are currently working remotely.

Our
history

We
were originally organized in August 2009 as a California limited liability company under the name Social Reality, LLC, and we
converted to a Delaware corporation effective January 1, 2012. Social Reality, LLC began business in May 2010. Upon the conversion,
we changed our name to Social Reality, Inc. On August 15, 2019, we formally changed our name to SRAX, Inc. In September 2020, we
acquired LD Micro as a wholly owned subsidiary. In February of 2021 we completed the divestiture of our BIGToken subsidiary and the
related platform. In March 2023, we completed the sale of the LD Micro business and in May 2024 we signed an agreement to acquire
DNA Holdings Venture Inc. (“DNA”). Mr. Miglino, Chief Executive Officer and sole director of the Company, serves as the Chief Executive
Officer of DNA.

Recent
Developments

Putative
Issuance – Series A

On
September 27, 2021, the Company issued 36,412,417 shares of Series A Non-voting Preferred Stock (“Series A Stock”) as a dividend
to holders of its (i) Class A common stock (“Common Stock”), (ii) certain warrants to purchase Common Stock, and (iii) the
Company’s original issue discount senior convertible debentures. The Company’s certificate of designation of preferences,
rights and limitations of Series A Non-Voting Preferred Stock (the “COD”) authorized the issuance of up to 36,412,417 shares
of Series A Stock. As a result of an oversight, the Company determined that a holder of a warrant to purchase 50,000 shares of Common
Stock (the “Warrant Holder”) that had a contractual right to receive the Series A Stock dividend was not included in such
dividend. As a result, on December 23, 2021, the Company issued an additional 50,000 shares of Series A Stock to such Warrant Holder
(the “Putative Issuance”). As a result of the Putative Issuance, the Company exceeded its authorized shares of Series A Stock
by 50,000 shares in excess of what was authorized under the COD.

Pursuant
to Section 204 of the Delaware General Corporation Law (“DGCL”), the Company’s Board of Directors adopted a resolution
ratifying the Putative Issuance on January 24, 2022. On January 31, 2022, the Company filed a Certificate of Validation (the “Validation
Certificate”) and a Certificate of Increase of the COD (“Certificate of Increase”) with the Secretary of State of the
State of Delaware (“Delaware SOS”) approving the Putative Issuance and authorizing an increase of 50,000 shares of Series
A Stock, or an aggregate of 36,462,417 shares of Series A Stock effective as of December 23, 2021, the date such Putative Issuance occurred.

Extension
of Outstanding Original Issue Discount Senior Secured Convertible Debentures

On
July 1, 2022, the holders (“2020 Holders”) of $1,102,682 in principal of the Company’s Original Issue Discount Senior
Secured Convertible Debentures (“2020 Debentures”), representing all of the outstanding 2020 Debentures that were originally
issued on June 30, 2020, entered into an agreement with the Company to (i) extend the maturity date of the 2020 Debentures until December
31, 2023 and (ii) extend the first date that monthly redemptions are required to be made by the Company to begin on January 1, 2023 (the
“Debenture Extension”). As consideration for the Debenture Extension, the Company increased the principal amount outstanding
on the 2020 Debentures by five percent (5%). Additionally, the holders of the 2020 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 2020 Debentures. The 2020 Debentures, including the additional principal
added to the 2020 Debentures are secured by substantially all of the assets of the Company pursuant to a security agreement entered into
between the Company and 2020 Holders contemporaneous with the original issuance of the Debentures.

Bridge
Note

On
June 28, 2022, we entered into a nonbinding term sheet regarding a $10 million revolving credit facility with ATW Opportunities Master
Fund II, LP (“ATW”). As part of the transaction, on July 1, 2022, the Company issued an original issue discount bridge note
in principal amount of $650,000 (“Bridge Note”) to ATW in exchange for $500,000 in cash. The Bridge Note is non-interest
bearing and has a maturity date of August 15, 2022. The Company’s obligations pursuant to the Bridge Note are secured by substantially
all of the assets of the Company pursuant to the terms of the Security Agreement.

Senior
Secured Revolving Credit Facility

On
August 8, 2022, the Company entered into a senior secured revolving credit facility agreement (the “Credit Agreement”) with
ATW to initially borrow up to $9,450,000 (“Loan Amount”) in the aggregate from time to time, subject to certain conditions
(each a “Revolving Loan”). The Revolving Loan is secured by all the assets of the Company and was guaranteed by the Company’s
former wholly owned subsidiary LD Micro, Inc. (collectively, the Company and LD Micro are the “Credit Parties”). In addition
to the Credit Agreement, the Company and/or the Credit Parties, as applicable, also entered into a: (i) Revolving Note, (ii) Security
Agreements, (iii) Fee Agreement and (iv) Registration Rights Agreement. As part of the transaction, the Company also amended and restated
ATW’s outstanding warrants to extend the maturity date until September 30, 2023. In May 2023, in connection with the sale of LD
Micro to Freedom (as defined below), ATW released the LD Micro assets from its secured interest. ATW advanced $5,580,000 consisting of
$4,930,000 in cash and the exchange of the $650,000 bridge note entered into on June 28, 2022.

The
Revolving Note was initially convertible into shares of the Company’s Class A Common Stock at a conversion price of $15.00 per
share (“Conversion Price”). The Conversion Price is subject to adjustment in the event of stock splits, dividends and fundamental
transactions. Moreover, in the event the Company is deemed to have issued or sold shares of its Common Stock while the Revolving Loan
is outstanding at a price equal to or less than $5.00 per share, the conversion price will adjust to such lower applicable price.

The
principal balance of each Revolving Loan will reflect an initial original issue discount of ten percent (10%) which will increase to
twelve percent (12%) in the event the Prime borrowing rate increases to 6.75%. Additionally, on the 12-month anniversary of the origination
date of each Revolving Loan, the principal will increase by the ten percent (10%) or twelve percent (12%) pursuant to the calculation
in the foregoing sentence. The annual interest rate on each Revolving Loans is eleven and one half percent (11.5%). The Revolving Loans
have a maturity date of the earlier of (i) twenty-four (24) months from the effective date of the Credit Agreement or (ii) the occurrence
of an event of default.

Commencing
on the first day of each month after the effective date of the Credit Agreement (each a “Payment Date”), the outstanding
balance of the Revolving Loan were required to be paid as follows:

● | With
respect to the first, second and third months, 10% of the monthly collections from the sale of securities received by SRAX from its
customers during the prior month;
● | With
respect to the fourth, fifth and sixth months, 15% of the monthly collections from the sale of securities received by SRAX from its
customers during the prior month; and
● | With
respect to each successive Payment Date, 20% of the monthly collections from the sale of securities received by SRAX from its customers
during the prior month.

Additionally,
with respect to any Payment Date where the applicable monthly collection from the sale of securities received by the Company from its
customers during the prior month exceeds $2,000,000, the Company will make an additional payment equal to 30% of any amounts in excess
of $2,000,000.

In
order to perfect ATW’s security interest, the Credit Parties entered into: (i) Security Agreements, (ii) Guaranty Agreements, (iii)
Pledge Agreements and (iv) Security Account Control Agreements and Deposit Account Control Agreements (collectively “Security Agreements”).
The Security Agreements provide for a general lien on all of the Credit Parties’ assets, including each party’s respective
intellectual property. In May 2023, in connection with the sale of LD Micro to Freedom (as defined below), ATW released the LD Micro
assets from its secured interest.

As
part of the transactions contemplated by the Loan Documents, the Company additionally agreed to extend the expiration dates of the following
outstanding Common Stock purchase warrants held by the Lender or its affiliated entities until September 30, 2023:

● | a
warrant to purchase 1,363,636 shares of Common Stock issued on June 30, 2020;
● | a
warrant to purchase 166,667 shares of Common Stock issued on November 29, 2018;
● | a
warrant to purchase 530,027 shares of Common Stock issued on November 29, 2018; and
● | a
warrant to purchase 530,028 shares of Common Stock issued on October 27, 2017.

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 SRAX from the sales of securities received during the term of the Revolving
Loan.

DNA
Holdings, LLC Asset Acquisition

On
February 3, 2023 (the “APA 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 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, who as of the APA Closing Date was 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 was an interested director of the Company. In each case, it also was determined, among other things, that,
notwithstanding that Mr. Pierce was 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
to the terms of the APA, at the closing of the Acquisition (the “APA Closing”), in exchange for the Purchased Assets, which
had an aggregate value of approximately $4,000,000 (excluding the value of the customer database, as the Company is finalizing the valuation
of such asset), the Company issued and delivered to Seller (i) 1,313,127 shares of the Company’s Class A common stock and (ii)
63,743 shares of the Company’s newly designated class of Series B Non-Voting Convertible Preferred Stock (the “Series B Preferred
Stock”) convertible into an aggregate of 3,059,664 shares of Common Stock (collectively, the “Upfront Shares”). In
addition to the Upfront Shares, the Company delivered into escrow 54,908 shares of Series B Preferred Stock convertible, subject to receipt
of APA Stockholder Approval and the Deferred Payment (as defined below), into 2,635,591 shares of Common Stock (the “Escrow Shares,”
together with the Upfront Shares, the “Acquisition Shares”).

Pursuant
to the APA, the Upfront Shares were issued and delivered at the APA Closing Date, subject to the terms of the Lock-Up Agreement (as defined
below). The Escrow Shares were delivered to the Escrow Agent at the closing of the Acquisition, and the Seller received a book-entry
confirmation in its name evidencing the Escrow Shares.

In
accordance with applicable Nasdaq listing rules, the Company had intended 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 APA Closing Date (“APA Stockholder
Approval”). Within thirty (30) days, but not earlier than fifteen (15) business days after APA Stockholder Approval is obtained,
the Seller was required to 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 APA Stockholder
Approval is not received on or prior to the eighteen (18) month anniversary of the APA Closing, the Deferred Payment will lapse and the
Escrow Shares will all be released to the Company. The Company did not receive the required APA Stockholder Approval and the Escrow Shares
were returned to the Company for cancellation.

The
powers, designations, preferences and other rights of the shares of Series B Preferred Stock are set forth in the Certificate of Designation
establishing the Series B Preferred Stock filed by the Company with the Delaware Secretary of State on February 3, 2023, in connection
with the Closing. Each share of Series B Preferred Stock shall had an initial Stated Value of $48.00 per share.

Each
share of Series B Preferred Stock is convertible at any time at the option of the holder into shares of common stock. The initial conversion
price is $1.00 per share of common stock, subject to appropriate adjustment in the event of certain stock dividends and distributions,
stock splits, stock combinations and reclassifications, and other similar events affecting the Common Stock. Except as otherwise provided
in the Certificate of Designation or as otherwise required by law, the Series B Preferred Stock has no voting rights. In the event we
effect certain mergers, consolidations, sales of substantially all of our assets, tender or exchange offers, reclassifications or share
exchanges in which our common stock is effectively converted into or exchanged for other securities, cash or property, we consummate
a business combination in which another person acquires 50% of the outstanding shares of our common stock, or any person or group becomes
the beneficial owner of 50% of the aggregate ordinary voting power represented by our issued and outstanding common stock, then, upon
any subsequent conversion of the Series B Preferred Stock, the holders of the Series B Preferred Stock will have the right to receive
any shares of the acquiring corporation or other consideration it would have been entitled to receive if it had been a holder of the
number of shares of Common Stock then issuable upon conversion in full of the Series B Preferred Stock. Holders of Series B Preferred
Stock shall be entitled to receive dividends (on an as-if-converted-to-Common-Stock basis, without regard to any conversion limitations
in the Certificate of Designation) in the same form as dividends actually paid on shares of the common stock when, as and if such dividends
are paid on shares of Common Stock.

In
connection with the Acquisition, the Seller entered into a lock-up agreement (the “Lock-Up Agreement”), whereby the Seller
is restricted for a period of 540 days after the Closing from certain sales or dispositions (including any pledge) of all of the Series
B Preferred Stock and Common Stock held by the Seller or any securities convertible into or exercisable or exchangeable for such securities,
provided, however, that the Seller may sell, in one or a series of open-market transactions, one-third (1/3) of the shares of Common
Stock, including the shares of Common Stock issuable upon conversion of Series B Preferred Stock, received pursuant to the APA as of
February 3, 2023: (i) after 180 days, and (ii) after 360 days. The foregoing restrictions will not apply to certain other transfers customarily
excepted.

ATW
Amendment

Amendment
and Waiver Agreements

On
February 3, 2023, the Company entered into an amendment and waiver agreement (the “Amendment and Waiver Agreement”) with
the ATW and its affiliates, pursuant to which the parties agreed to amend or modify certain outstanding agreements to permit the consummation
of the Acquisition and avoid any potential noncompliance or events of default relating to such prior agreements. Unless otherwise noted,
all capitalized terms used below but not defined herein shall have the meaning ascribed to such term in the Amendment and Waiver Agreement.

Series
A Warrant

Pursuant
to the Amendment and Waiver Agreement, the Company and the Holder of Series A Common Stock Purchase Warrants, issued on October 27, 2017,
agreed to amend the exercise price of such warrants from $3.00 per share to $1.00 per share.

Series
B Warrant

On
November 29, 2018, the Company issued that certain Series B Common Stock Purchase Warrant to one of the Holders.

Pursuant
to the Amendment and Waiver Agreement, the Company and the Holder of Series B Common Stock Purchase Warrants agreed to amend the exercise
price of such warrants from $3.00 per share to $1.00 per share.

Debentures

Pursuant
to the Amendment and Waiver Agreement, the Company and the Holder of that certain Original Issue Discount Senior Secured Convertible
Debenture, issued on June 30, 2020, (the “Debenture”) agreed to:

● | amend
and restate the definition of “Maturity Date” of the Debenture from June 30, 2023 to June 30, 2024;
● | amend
and restate the definition of “Conversion Price” in Section 4(b) of the Debenture from $2.69 to $1.00, subject to adjustment
as provided for in the Debenture; and
● | waive
Section 8(a)(viii) of the Debenture to avoid an Event of Default, as defined in Section 8(a)(viii) of the Debenture.

Purchase
Warrant

Pursuant
to the Amendment and Waiver Agreement, the Company and the Holder of that certain Common Stock Purchase Warrant agreed to amend the exercise
price of such warrants from $2.50 per share to $1.00 per share.

Revolving
Note

Pursuant
to the Amendment and Waiver Agreement, the Company and the Holder of that certain Revolving Note, issued on August 8, 2022 (the “Note”)
agreed to change the conversion price of such notes from $15.00 to $1.00, subject to adjustments as provided for in the Note.

Credit
Agreement

Pursuant
to the Amendment and Waiver Agreement, the Company and the Holder of that certain Senior Secured Revolving Credit Facility Agreement,
entered into on August 8, 2022 (the “Credit Agreement”) agreed to amend, modify and waive certain terms and conditions of
the Credit Agreement. Specifically, the Amendment and Waiver Agreement amends the Credit Agreement to, among other things:

● | remove
the obligation of the lender to advance up to an additional $3,870,000;
● | change
the due date of monthly revolving loan payments from the first day of each month to the fifteenth day of each month;
● | add
the amount of interest payments made in connection with the fourth and fifth revolving loan payment date to the balance of all amounts
owed under the Credit Agreement;
● | reduce
the cash proceeds amount owed in respect to the sixth monthly revolving loan payment to the Holder from the sale of any marketable
securities by the Company from 15% to 7.5% during the applicable period for such payment;
● | add
that in respect to each succeeding monthly revolving loan payment following the sixth monthly revolving loan payment, the Company
shall deliver to Holder an amount of cash proceeds from the sale of any marketable securities at an amount equal to the greater of
(1) an amount equal to 20% of the cash proceeds from any sale of marketable securities by the Company during the applicable period
for such payment and (2) the outstanding principal balance owed under the Credit Agreement as of the date of such monthly revolving
loan payment, divided by the number of remaining monthly payments under the Credit Agreement;
● | add
that a loan request approval pursuant to the Credit Agreement is further subject to the outstanding principal balance under the Credit
Agreement being less than $3,000,000; and
● | add
that the Company failing to become current with its filing obligations with the SEC by April 30, 2023, and thereafter failing to
comply with its SEC filing obligations for another sixty (60) days beyond any filing deadline will constitute an Event of Default
under the Credit Agreement.

On
February 3, 2023, pursuant to the Amendment and Waiver Agreement, the Company and one of the Holders mutually terminated the registration
rights agreement entered into on August 8, 2022.

On
September 13, 2023, the closing date, the Company and ATW and its affiliates entered into an Omnibus Amendment Agreement (the “Amendment”).
The parties have agreed to temporarily amend certain provisions of the Credit Agreement, Revolving Note, and Debenture for a period of
up to fourteen (14) months from the effective date of the Amendment. These 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 Amendment includes temporary waivers and
amendments that allow for Permitted Subsequent Offerings, subject to specified conditions. The Company has agreed to various covenants
and conditions, including providing access to certain accounts and notifying ATW of material changes.

Sale
of LD Micro, Inc.

On
March 3, 2023 (the “Freedom Closing Date”), the Company entered into and consummated the transactions contemplated by the
Agreement and Plan of Merger (the “Freedom 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, a small cap platform and conference
provider. Specifically, pursuant to the terms of the Merger Agreement, at the closing of the transactions contemplated by the Merger
Agreement (the “Freedom Closing”), LD Micro merged with and into Merger Sub (the “Freedom Merger”), with Merger
Sub surviving the Freedom 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.

At
the Freedom Closing, 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 $0.001
per share (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.

LD
Micro’s President, Christopher Lahiji, at the time of the transaction, was a member of the Company’s board of directors.
The Freedom Merger was approved on March 2, 2023, by the Board. In such case, it was considered that Mr. Lahiji was an interested director
of the Company with respect to the Freedom Merger. In such case, it also was determined, among other things, that, notwithstanding that
Mr. Lahiji was an interested director of the Company, the Merger Consideration received for the sale of LD Micro, by means of the Freedom
Merger, constitute fair and adequate consideration. In connection with the Freedom Merger, Mr. Lahiji stepped down from the board of
directors.

Consent,
Waiver and Release Agreement

The
Company and LD Micro entered into a consent, waiver and release agreement (the “Consent Agreement”) dated as of March 1,
2023, but effective as of the Freedom Closing Date, with ATW, pursuant to which ATW agreed to: (i) fully release LD Micro from its obligations
as a credit party in each of the Loan Documents LD Micro is a party of; (ii) release and terminate the Lender’s lien and security
interest in and to any assets of LD Micro granted under the respective Loan Document creating such interest; (iii) release and terminate
LD Micro’s issued and outstanding shares pledge under the respective Loan Document creating such pledge; (iv) waive any restrictions,
covenants and other obligations contained in the Loan Documents, which would otherwise be potentially breached as a result of the Freedom
Merger; and (v) waive any Events of Default (as defined in the Credit Agreement) arising under the Loan Documents as a result of or in
connection with the Freedom Merger.

The
Consent Agreement also provides that, within forty-five (45) days following the Company’s receipt of the Merger Consideration,
the Company must use 15% of the gross cash proceeds from the Cash Payment to redeem its common stock at a price per share of less than
$5.00, and pay 10% of the gross cash proceeds from the Cash Payment to pay any outstanding amounts under the Revolving Loans. Further,
to the extent permitted under applicable law, following the Company’s sale of the Payment Shares, and within forty-five (45) days
of the receipt of the proceeds from any sale of the Payment Shares, the Company will use 15% of the gross cash proceeds from the sale
of the Payment Shares (less any broker’s fees or commissions) to redeem its common stock at a price per share less than $5.00,
and 10% of such proceeds to pay any outstanding amounts under the Revolving Loans (less any broker’s fees or commissions).

On
March 3, 2023, in connection with the consummation of the Freedom Merger, Christopher Lahiji, President of LD Micro and member of our
board of directors, resigned as a member of the Board pursuant to a resignation letter, effective immediately. Mr. Lahiji did not serve
on any committees of the board of directors.

Private
Offering – November 2023

On
November 2, 2023, the Company entered into definitive securities purchase agreements with certain accredited and institutional investors
(the “November 2023 Purchasers”) for the purchase and sale of an aggregate of: (i) $552,000 in principal amount of Original
Issue Discount Convertible Debenture (the “November 2023 Debentures”) for $460,000 (representing a 20% original issue discount)
and (ii) warrants to purchase up to 3,680,000 shares of the Company’s Class A common stock (the “November 2023 Warrants”)
in a private placement.

The
Debentures, which mature on November 3, 2024, pay 0%, no interest per annum commencing on November 3, 2023. The November 2023 Debentures
are convertible at the option of the holder into shares of our Class A common stock at an initial conversion price of $0.25 per share,
subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions,
and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations
(v) subsequent equity sales.

Subject
to our compliance with certain equity conditions, (as more fully set forth in the Debentures), upon ten (5) trading days’ notice
to the November 2023 Purchasers, the Company has the right to prepay the November 2023 Debentures in cash at 120% of their outstanding
principal, plus accrued interest for the first 90 days of the note and 135% thereafter.

The
November 2023 Debentures also contain certain customary events of default provisions, including, but not limited to, default in payment
of principal, changes in control of 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 November 2023 Purchaser’s election, immediately due and payable in cash.

The
November 2023 Warrants are initially exercisable at $0.25 per share and, are subject to cashless exercise after six months if the shares
underlying the November 2023 Warrants are not subject to an effective resale registration statement. The November 2023 Warrants are also
subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions,
and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations.
(v) subsequent equity sales.

Pursuant
to the terms of the November 2023 Debentures and November 2023 Warrants, a November 2023 Purchaser will not have the right to convert
any portion of the November 2023 Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% or 9.99%
(at the November 2023 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 November 2023 Debentures
and the November 2023 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 61 st day after such notice is delivered from
the holder to the Company.

The
Offering closed on November 3, 2023.

Private
Offering – March 2024

On
March 5, 2024, the Company entered into definitive securities purchase agreements with a certain accredited and institutional investor
(the “March 2024 Purchasers”) for the purchase and sale of an aggregate of: (i) $90,000 in principal amount of Original Issue
Discount Convertible Debenture (the “March 2024 Debentures”) for $75,000 (representing a 20% original issue discount) and
(i) in a private placement.

The
March 2024 Debentures, which mature on February 28, 2026, pay 0%, no interest per annum commencing on February 29, 2024.

The
March 2024 Debentures are convertible at the option of the holder into shares of our Class A common stock at an initial conversion price
of $0.25 per share, subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata
distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations,
and reorganizations (v) subsequent equity sales.

Subject
to our compliance with certain equity conditions, (as more fully set forth in the March 2024 Debentures), upon five (5) trading days’
notice to the March 2024 Purchasers, the Company has the right to prepay the March 2024 Debentures in cash at 120% of their outstanding
principal, plus accrued interest for the first 90 days of the note and 135% thereafter.

The
Debentures also contain certain customary events of default provisions, including, but not limited to, default in payment of principal,
changes in control of the Company. Upon the occurrence of any such event of default, the outstanding principal amount of the March 2024
Debenture plus liquidated damages, interest and other amounts owing in respect thereof through the date of acceleration, shall become,
at the March 2024 Purchaser’s election, immediately due and payable in cash.

The
Offering closed on March 5, 2024.

Series
B Preferred Stock

On
March 27, 2024, the Company filed a Certificate of Amendment to its Certificate of Designation of its Series B of Preferred Stock with
the Secretary of State of Delaware, modifying certain provisions of the Certificate of Designation. The modifications include the removal
of the need for Shareholder Approval per the NASDAQ rules; the addition of OTCQB, OTCQX and OTC Pink as a trading market; the removal
of section 6 (d) removing the need for shareholder approval to issue shares to the holder; and the addition of section 7(c) Subsequent
Equity Sales.

Private
Offering – April 2024

On
March 29, 2024, the Company entered into definitive securities purchase agreements with a certain accredited and institutional investor
(the “April 2024 Purchasers”) for the purchase and sale of an aggregate of $90,000 in principal amount of Original Issue
Discount Convertible Debenture (the “April 2024 Debentures”) for $75,000 (representing a 20% original issue discount).

The
April 2024 Debentures, which mature on March 29, 2026, pay 0%, no interest per annum commencing on March 29, 2024.

The
April 2024 Debentures are convertible at the option of the holder into shares of our Class A common stock (“Common Stock”)
at an initial conversion price of $0.25 per share, subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent
rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the
Company, business combinations, and reorganizations (v) subsequent equity sales.

Subject
to our compliance with certain equity conditions, (as more fully set forth in the Debentures), upon five (5) trading days’ notice
to the April 2024 Purchasers, the Company has the right to prepay the April 2024 Debentures in cash at 120% of their outstanding principal,
plus accrued interest for the first 90 days of the note and 135% thereafter.

The
April 2024 Debentures also contain certain customary events of default provisions, including, but not limited to, default in payment
of principal, changes in control of the Company. Upon the occurrence of any such event of default, the outstanding principal amount of
the April 2024 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
Offering closed on April 2, 2024.

DNA
Merger

DNA
is a Web3 investment company which provides both advisory services and invests in Web3 infrastructure. DNA was founded by Brock Pierce,
the Chairman of the Bitcoin Foundation and Scott Walker, a Web3 investor. The DNA team has been co-founders, investors and advisors in
some of the most notable Web3 projects in the world; including Tether (USDT), Blockchain Capital (Web3 Venture Fund), Hedera Hashgraph
(HBAR) among many others. Mr. Miglino, Chief Executive Officer and sole director of the Company, serves as the Chief Executive Officer of DNA.

The
Merger Agreement contains customary representations, warranties and covenants made by SRAX and DNA, including covenants relating to obtaining
the requisite approvals of the shareholders of DNA, and the Company’s and DNA’s conduct of their respective businesses between
the date of signing of the Merger Agreement and the closing of the transaction.

The
closing is subject to satisfaction or waiver of certain conditions including, among other things, (i) the required approvals by the DNA’s
shareholders, (ii) the accuracy of the representations and warranties, subject to certain materiality qualifications, (iii) compliance
by the parties with their respective covenants, (iv) no law or order preventing the merger and related transactions, (iv) the Company
getting current in its reporting obligations with the Securities and Exchange Commission (the “SEC”), (v) the Company obtaining
all required third party consents, including the consents of its senior secured creditors and warrantholders, (vi) DNA entering into
an exchange agreement agreeing to exchange its existing securities in the Company for the Preferred Stock to be issued upon closing of
the Merger and (v) the DNA advancing the Company at least $500,000 on or prior to the closing of the Merger. The Merger Agreement also
contains certain termination rights for both the Company and DNA.

Resignations

On
March 14, 2023, the board of directors of the Company appointed Alan Urban to replace Michael Malone as the Company’s Chief Financial
Officer pursuant to an employment offer letter. On July 5, 2023, Mr. Urban resigned as Chief Financial Officer of the Company. On September
1, 2023, Randy Clark resigned as the Chief Operating Officer of the Company. On July 11 and July 13, 2023, Marc Savas, Robert Jordan,
Colleen DiClaudio and Brock Pierce resigned from the board of directors and their respective committee roles of the Company.

Changes
to Independent Registered Public Accounting Firm

On
June 30, 2022, RBSM LLP, the independent registered public accounting firm to the Company, informed the Company of its decision not to
stand for re-appointment as the independent registered public accounting firm of the Company. On October 27, 2022, the Audit Committee
of the board of directors of the Company engaged Marcum LLP as the Company’s independent registered public accounting firm for
the year ending December 31, 2022. On May 2, 2023, the Audit Committee of the board of directors of the Company approved the dismissal
of Marcum LLP (“Marcum”) as independent registered public accounting firm of the Company effective immediately. As previously
reported, Marcum was engaged as the Company’s independent registered public accounting firm on October 27, 2022. On May 2, 2023,
the audit committee approved the engagement of TAAD as its independent registered public accounting firm for the fiscal year ended December
31, 2022.

Annual
Meeting

On
December 31, 2022, the Company held its 2022 Annual Meeting. The meeting was held virtually. The director candidates and the 2016 Equity
Compensation Plan were approved and the auditors were ratified.

Additional
information

We
file annual and quarterly reports on Forms 10-K and 10-Q, current reports on Form 8-K and other information with the Securities and Exchange
Commission (“SEC” or the “Commission”). The public may read and copy any materials that we file with the Commission
at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549, on official business days during the hours of 10:00
a.m. to 3:00 p.m. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.
The Commission also maintains an Internet site at htt p ://www.sec. g ov that contains reports, proxy and information
statements, and other information regarding issuers that file electronically with the Commission.

Other
information about SRAX can be found on our website www.srax.com . Reference in this document to that website address does not constitute
incorporation by reference of the information contained on the website.

9
ITEM
1A. | RISK
FACTORS.

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

Risks
Related to our Business

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

For
the years-ended December 31, 2022 and 2021, we reported income/(loss) from operations of $(31,373,000) and ($34,762,000), respectively,
and accumulated deficit of ($61,728,000) and ($30,355,000), respectively. Our future success depends on our ability to continue to assimilate
the planned DNA acquisition, grow our revenues, contain our operating expenses and generate profits. We do not have any long-term agreements
with our customers. There are no assurances that we will be able to assimilate the proposed DNA acquisition, increase our revenues and
cash flow to a level which supports profitable operations. We may continue to incur losses in future periods until such time, if ever,
as we are successful in significantly increasing our revenues and cash flow beyond what is necessary to fund our ongoing operations and
pay our obligations as they become due. If we significantly increase our revenues in future periods, the rapid growth may strain our
organization and we may encounter difficulties in maintaining the quality of our operations. If we are not able to successfully increase
our revenues, it is unlikely we will be able to generate sufficient cash from operations to pay our operating expenses and service our
debt obligations or report profitable operations in future periods.

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

Our
auditors’ report on our December 31, 2022 consolidated financial statements expresses an opinion that our capital resources as
of the date of their audit report were not sufficient to sustain operations or complete our planned activities for the upcoming year
unless we raised additional funds. Based upon our cash position on December 31, 2022 as well as in August 2024, there is substantial
doubt about our ability to continue as a going concern through December 31, 2024. Our ability to continue as a going concern is based
on several factors; (i) our ability to sustain our current operating performance, and (ii) our ability to raise additional capital. If
we are not successful with either of these, we may no longer be able to continue as a going concern and may cease operation or seek bankruptcy
protection.

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

As
of December 31, 2022, we presently have the following indebtedness outstanding: $1,216,000 in June 2020 Convertible Debentures and $6,200,000
pursuant to the Senior Secured Revolving Credit Facility, which as of June 30, 2024 remain outstanding. In addition, during year ended
December 31, 2023 and during 2024, the Company incurred an additional $1,010,402 in indebtedness. The payment of the debentures and revolving
credit facility are secured by substantially all the assets and the intellectual property of the Company. Further, in addition to payments
required pursuant the revolving credit facility, the lender is also entitled to ten percent (10%) of the net proceeds of any sales of
securities acquired from our customers during the term of the loan. As a result, this will further negatively impact our cash flows from
operations and may require us to raise additional capital earlier than previously anticipated. Depending on our level of operations,
we may not be able to generate sufficient cash flow to repay the debentures or revolving credit facility as they come due. If we are
not able to generate enough cashflow through the operation of our business, we will need to raise additional capital through the sale
of debt or equity or the sale of assets, in order to make the required payments. If we are unable to make the required payments, or if
we fail to comply with the various requirements and covenants of the debentures and revolving credit facility, we would be in default,
which would permit the holders of the debentures and lender in the revolving credit facility to accelerate the maturity and require immediate
repayment and lead to potential foreclosure on the assets securing the debt. If we are unable to refinance or repay our indebtedness
as it becomes due, including upon an event of default, we may become insolvent and be unable to continue operations.

Our
outstanding loan obligations contain substantial covenants that may impact our business, our ability to secure additional debt financing,
and our ability to pay our debts as they become due.

Further,
we agreed to pay the lender in the credit facility, an amount equal to ten percent (10%) of the net proceeds actually received by us
from the sale any securities of a customer that we acquired during the term of the revolving note(s). Given that we have not yet achieved
profitability, and we will additionally be required to make payments upon the sales of our customer’s securities to the lender,
we may be unable to continue to meet our obligations as they become due. If we are unable to refinance or repay our indebtedness as it
becomes due or upon an event of default, we may become insolvent and be unable to continue operations.

Additionally,
the revolving loan obligations under our secured credit facility provide for variable repayment terms ranging from 10% to 30% of the
net proceeds actually received upon the sale of our customer’s securities that we receive pursuant to the provision of services.
This will further negatively impact our cash flows and may further accelerate the anticipated timeframe in which we need to raise additional
capital.

We
are not current in our SEC reporting obligations, which could have material adverse consequences for our company and shareholders.

We
are not current in our filing obligations under the Securities Exchange Act of 1934. Specifically, we have not timely filed our Form
10-K for the year ended December 31, 2023 and our Form 10-Qs for the quarters ended March 31, 2023, June 30, 2023, September 30, 2023,
March 31, 2024 and June 30, 2024. As a result of our failure to remain current in our SEC reporting obligations:

● | We
are ineligible to use certain forms of registration statements, limiting our ability to access the capital markets.
● | We
will not be able to apply to have our securities traded on a traditional exchange or to trade on a higher tier of the OTC Markets
significantly reducing the liquidity of our common stock and likely cause its price to decline.
● | Investors
lack current information about our financial condition and results of operations, impairing their ability to make informed investment
decisions.
● | We
may face enforcement action by the SEC, including potential monetary penalties and injunctions.
● | We
are at heightened risk of securities litigation from shareholders.

Until
we regain compliance with our SEC reporting obligations, we will continue to face these and other risks related to our filing delinquency.
Even after becoming current, we may continue to experience negative impacts on investor confidence and our stock price. There can be
no assurance as to when we will regain compliance or that we will be able to maintain compliance with SEC reporting requirements in the
future.

Our
proposed merger with DNA Holdings Venture, Inc. may not be completed, which could negatively impact our business, financial condition,
results of operations, and stock price.

On
May 7, 2024, the Company entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with DNA Holdings
Venture, Inc., a Puerto Rico corporation (“DNA”), and DNA Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary
of SRAX (“Merger Sub”). Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement,
Merger Sub will be merged with and into DNA (the “Merger”), with DNA surviving the Merger as a wholly-owned subsidiary of
the Company. As consideration for the Merger, SRAX shall issue to the shareholders of DNA 1,000 shares of a newly created Series C Convertible
Preferred Stock of the Company (the “Preferred Stock”), which shall be convertible into approximately 75.5% of the outstanding
shares of Common Stock of the Company upon closing of the Merger, which includes the approximately 35% of the Company which DNA owned
prior to the merger. Upon completion of the Merger, the Company will change its name to DNA Holdings Venture, Inc. Mr. Miglino, Chief Executive Officer and sole director of the Company,
serves as the Chief Executive Officer of DNA. The closing is subject
to satisfaction or waiver of certain conditions including, among other things, (i) the required approvals by the DNA’s shareholders,
(ii) the accuracy of the representations and warranties, subject to certain materiality qualifications, (iii) compliance by the parties
with their respective covenants, (iv) no law or order preventing the merger and related transactions, (iv) the Company getting current
in its reporting obligations with the Securities and Exchange Commission (the “SEC”), (v) the Company obtaining all required
third party consents, including the consents of its senior secured creditors and warrantholders, (vi) DNA entering into an exchange agreement
agreeing to exchange its existing securities in the Company for the Preferred Stock to be issued upon closing of the Merger and (v) the
DNA advancing the Company at least $500,000 on or prior to the closing of the Merger. The Merger Agreement also contains certain termination
rights for both the Company and DNA. There is no assurance that these conditions will be met or that the proposed merger will be completed.
If the merger is not consummated, we may be subject to several risks, including:

● | Negative
perception by the market, customers, suppliers, and employees
● | Distraction
of our management and employees from ongoing business operations
● | Difficulty
in developing and executing alternative business strategies
● | Potential
loss of key personnel
● | Significant
costs incurred in connection with the proposed merger without realizing the anticipated benefits

Additionally,
the current uncertainty surrounding the completion of the merger may cause or contribute to volatility in our stock price. The failure
to complete the merger could materially and adversely affect our business, financial condition, results of operations, and stock price.Even
if the merger is completed, we may not realize the anticipated benefits, and the integration process could result in significant costs
and difficulties that may disrupt our business operations.

Having
only one director, who is also the sole executive officer, limits our ability to establish effective independent corporate governance
procedures and increases the control of our president/director.

We
have only one director, who is also our sole executive officer. Accordingly, we cannot establish board committees comprised of independent
members to oversee functions like compensation, governance or audit issues.

Until
we have a larger board of directors that would include some independent members, if ever, there will be limited oversight of our CEO’s
decisions and activities and little ability for minority shareholders to challenge or reverse those activities and decisions, even if
they are not in the best interests of minority shareholders.

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

Or
management has determined that, as of December 31, 2022, we did not maintain effective internal controls over financial reporting based
on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework
as a result of identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material
misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

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

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

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

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

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

The
United States and foreign governments have enacted, considered or are considering legislation or regulations that could significantly
restrict our ability to collect, process, use, transfer and pool data collected from and about consumers and devices. Trade associations
and industry self-regulatory groups have also promulgated best practices and other industry standards relating to targeted advertising.
Various U.S. and foreign governments, self-regulatory bodies and public advocacy groups have called for new regulations specifically
directed at the digital advertising industry, and we expect to see an increase in legislation, regulation and self-regulation in this
area. The legal, regulatory and judicial environment we face around privacy and other matters is constantly evolving and can be subject
to significant change. Additionally, the interpretation and application of data protection laws in the U.S., Europe and elsewhere are
often uncertain and in flux. Legislative and regulatory authorities around the world may decide to enact additional legislation or regulations,
which could reduce the amount of data we can collect or process and, as a result, significantly impact our business. Similarly, clarifications
of and changes to these existing and proposed laws, regulations, judicial interpretations and industry standards can be costly to comply
with, and we may be unable to pass along those costs to our clients in the form of increased fees, which may negatively affect our operating
results. Such changes can also delay or impede the development of new solutions, result in negative publicity and reputational harm,
require significant incremental management time and attention, increase our risk of non-compliance and subject us to claims or other
remedies, including fines or demands that we modify or cease existing business practices, including our ability to charge per click or
the scope of clicks for which we charge. Additionally, any perception of our practices or solutions as an invasion of privacy, whether
or not such practices or solutions are consistent with current or future regulations and industry practices, may subject us to public
criticism, private class actions, reputational harm or claims by regulators, which could disrupt our business and expose us to increased
liability. Finally, our legal and financial exposure often depends in part on our clients’ or other third parties’ adherence
to privacy laws and regulations and their use of our services in ways consistent with visitors’ expectations. We rely on representations
made to us by clients that they will comply with all applicable laws, including all relevant privacy and data protection regulations.
We make reasonable efforts to enforce such representations and contractual requirements, but we do not fully audit our clients’
compliance with our recommended disclosures or their adherence to privacy laws and regulations. If our clients fail to adhere to our
contracts in this regard, or a court or governmental agency determines that we have not adequately, accurately or completely described
our own solutions, services and data collection, use and sharing practices in our own disclosures to consumers, then we and our clients
may be subject to potentially adverse publicity, damages and related possible investigation or other regulatory activity in connection
with our privacy practices or those of our clients.

Unfavorable
media coverage could negatively affect our business.

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

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

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

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

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

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

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

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

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

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

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

● | discontinues
or limits access to its platform by us and other application developers;
● | modify
terms of service or other policies, including fees charged to, or other restrictions on, us or other application developers, or changes
how the personal information of its users is made available to application developers;
● | establishes
more favorable relationships with one or more of our competitors; or
● | develops
its own competitive offerings.

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

Our
success largely depends on the efforts and abilities of our sole executive officer, Christopher Miglino. We are a party to an employment
agreement with Mr. Miglino. Although we do not expect to lose his services in the foreseeable future, the loss of any of them could materially
harm our business and operations in future periods until such time as we were able to engage a suitable replacement.

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

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

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

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

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

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

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

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

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

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

Risks
Related to receipt of Securities for Services

Many
of the securities we receive for services do not have an active trading market, and we value these securities at fair value as determined
in good faith under procedures adopted by our Board of Directors, which valuation is inherently subjective and may not reflect what we
may actually realize for the sale of these securities.

The
majority of securities comprising our stock portfolio are, and are expected to continue to be, in securities that have a limited market,
limited liquidity, high volatility, and accordingly, their market price may not accurately reflect the true value in the event that they
were traded on an active market. As of December 31, 2022, we had unrealized losses from our stock portfolio of approximately $3.8 million.
The fair value of assets whose true values are not readily ascertainable are determined in good faith under procedures adopted by our
Board of Directors. Our Board of Directors utilizes the services of independent third-party valuation firms in determining the fair value
of a portion of the securities we hold. Investment professionals from our investment adviser also prepare valuations using sources and/or
proprietary models depending on the availability of information on our assets and the type of asset being valued, all in accordance with
our valuation policy. Accordingly, the actual value of the securities we received could be substantially less than we previously estimated.

Because
fair valuations, and particularly fair valuations of securities without efficient markets are inherently uncertain, may fluctuate over
short periods of time, and are often based to a large extent on estimates, comparisons and qualitative evaluations of information, it
may be more difficult for investors to value accurately our securities and could lead to undervaluation or overvaluation of our Common
Stock. In addition, the valuation of these types of securities may result in substantial write-downs and earnings volatility.

The
value ascribed to our assets in our financial statements as of a particular date may be materially greater than or less than the value
that would be realized if our assets were to be liquidated as of such date. For example, if we were required to sell a certain asset
or all or a substantial portion of our assets on a particular date, the actual price that we would realize upon the disposition of such
asset or assets could be materially less than the value of such asset or assets as reflected in our financial statements. Volatile market
conditions could also cause reduced liquidity in the market for certain assets, which could result in liquidation values that are materially
less than the values of such assets as reflected in our financial statements.

We
run the risk of inadvertently being deemed to be an investment company that is required to register under the Investment Company Act
of 1940.

We
run the risk of inadvertently being deemed to be an investment company that is required to register under the Investment Company Act
of 1940 (the “Investment Company Act”) because a significant portion of our assets consists of securities in companies in
which we own less than a majority interest. The risk varies depending on events beyond our control, such as significant appreciation
or depreciation in the market value of certain of our publicly traded holdings, adverse developments with respect to our ownership of
certain of our subsidiaries, and transactions involving the sale of certain assets. If we are deemed to be an inadvertent investment
company, we may seek to rely on a safe-harbor under the Investment Company Act that would provide us a one-year grace period to take
steps to avoid being deemed to be an investment company. In order to ensure we avoid being deemed an investment company, we have taken,
and may need to continue to take, steps to reduce the percentage of our assets that constitute investment assets under the Investment
Company Act. These steps have included, among others, selling marketable securities that we might otherwise hold for the long-term and
deploying our cash in non-investment assets. We have recently sold marketable securities, including at times at a loss, and we may be
forced to sell our investment assets at unattractive prices or to sell assets that we otherwise believe benefit our business in the future
to remain below the requisite threshold. We may also seek to acquire additional non-investment assets to maintain compliance with the
Investment Company Act, and we may need to incur debt, issue additional equity or enter into other financing arrangements that are not
otherwise attractive to our business. Any of these actions could have a material adverse effect on our results of operations and financial
condition. Moreover, we can make no assurance that we would successfully be able to take the necessary steps to avoid being deemed to
be an investment company in accordance with the safe harbor. If we were unsuccessful, then we would have to register as an investment
company, and we would be unable to operate our business in its current form. We would be subject to extensive, restrictive, and potentially
adverse statutory provisions and regulations relating to, among other things, operating methods, management, capital structure, indebtedness,
dividends, and transactions with affiliates. If we were deemed to be an investment company and did not register as an investment company
when required to do so, there would be a risk, among other material adverse consequences, that we could become subject to monetary penalties
or injunctive relief, or both, that we would be unable to enforce contracts with third parties, and/or that third parties could seek
to obtain rescission of transactions with us undertaken during the period in which we were an unregistered investment company.

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

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

Sequire’s
services are primarily paid for in restricted shares of its customers’ stock, which are often smaller publicly traded companies
with volatile stock prices, limited liquidity, riskier operations and whose securities are frequently quoted on the OTC Markets, which
includes the OTCQX, OTCQB as well as the OTC Pink, which typically quotes securities with increased risk and less liquidity.

Payment
related to our Sequire platform and services is often made through the equity securities of our customers instead of cash. Since larger
companies typically pay in cash, the securities issued are often those of smaller public companies that often have limited operating
histories, limited operating cash, and negative cash flows. Additionally, these securities are primarily restricted, and are subject
to legal holding periods pursuant to Rule 144 or other applicable exemptions. As of December 31, 2022 approximately $11.4 million of
our holdings are issued by companies whose securities trade on the OTC Markets Inc. with a significant portion of these securities trading
on the OTC Pink. While our agreements for OTC issuers may contain certain provisions providing for the issuance of additional securities
upon certain events, the value of such securities on the date of receipt compared to the date when we are able to legally sell the securities
may decrease significantly, and the stock price of such issuers is often volatile, unpredictable, and with limited liquidity. Additionally,
the OTC Pink has less stringent requirements for listing than even other OTC Markets, such as the OTCQB or OTCQX. Often, the OTC Pink
lists companies that (i) may not be providing current information, (ii) may not have independent directors, (iii) may have little to
no trading, and (iv) may be very volatile. As a result, the value of the equity received on the date of payment may be significantly
greater than the actual revenue derived by us upon a sale of the securities. Furthermore, there is no guarantee that the companies that
we receive securities from will remain solvent or maintain “current information”, or other required criteria during the legally
required holding period under Rule 144, which would result in the loss of some or all of our anticipated revenue. These risks are significantly
increased for OTC Pink issuers. As we are not experienced traders, there can be no assurances that our personnel responsible for selling
the securities will do so at opportune times or be able to maximize profitability.

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

General
political and economic conditions and events such as U.S. fiscal and monetary policies, economic recessions, inflationary events, governmental
shutdowns, trade tensions and disputes, global economic slowdowns, widespread health epidemics or pandemics, natural disasters, terrorist
attacks, wars, changes in local and national economic and political conditions, regulatory changes or changes in the laws, or interest
rate or currency rate fluctuations could create a downturn in the U.S. and/or global securities markets. As we often receive restricted
securities of companies, a downturn in the U.S. or global markets may impact such companies and the value of the securities we receive
for services pursuant to the Sequire platform.

Risks
Related to Ownership of our Securities.

Conversions
of our convertible debentures, notes issued under our revolving credit facility, and the exercise of our common stock warrants may dilute
the ownership interest of existing stockholders or may otherwise depress the price of our common stock.

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

The
market price of our common stock may be volatile.

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

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

● | the
success of competitive products;
● | actual
or anticipated changes in our growth rate relative to our competitors;
● | announcements
by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;
● | regulatory
or legal developments in the United States and other countries;
● | the
recruitment or departure of key personnel;
● | the
level of expenses;
● | actual
or anticipated changes in estimates to financial results, development timelines or recommendations by securities analysts;
15
● | variations
in our financial results or those of companies that are perceived to be similar to us;
● | fluctuations
in the valuation of companies perceived by investors to be comparable to us
● | inconsistent
trading volume levels of our shares;
● | announcement
or expectation of additional financing efforts;
● | sales
of our common stock by us, our insiders or our other stockholders;
● | additional
issuances of securities upon the exercise of outstanding options and warrants;
● | market
conditions in the technology sectors; and
● | general
economic, industry and market conditions.

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

The
Revolving Note issued under our senior secured revolving credit facility contains an adjustment to the price at which the note can be
converted into our common stock, which may result in further dilution to our shareholders.

The
revolving note issued in our August 2022 secured revolving credit facility, of which $6,2000,000 in principal is currently outstanding,
is convertible into our common stock at a conversion price that is subject to adjustment upon certain enumerated events which includes
the sale of our common stock or equivalents at a deemed price equal to or less than $5.00 per share. On August 15, 2024, the closing
price of our common stock was $0.25 per share. In the event that we are required to raise additional capital through the sale of our
equity or debt securities, given our current market price, it is likely that the Conversion Price would be adjusted, and we may be required
to issue a significantly greater number of shares upon conversion, than currently anticipated, resulting in greater dilution to our existing
shareholders.

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

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

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

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

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

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

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

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

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

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

16
ITEM
1B. | UNRESOLVED
STAFF COMMENTS.

Not
applicable to a smaller reporting company.

ITEM
1C. | CYBERSECURITY.

The
Securities and Exchange Commission’s new cybersecurity disclosure requirements under Regulation S-K Item 106 are not applicable
to this Annual Report on Form 10-K for the fiscal year ended December 31, 2022. These new disclosure requirements become effective for
annual reports filed for fiscal years ending on or after December 15, 2023. As such, we are not required to provide the cybersecurity
risk management, strategy, and governance disclosures mandated by Item 106 in this report. We will include the required cybersecurity
disclosures in our Annual Report on Form 10-K for the fiscal year ending December 31, 2023, which we intend to file in 2024. At that
time, we will provide information on our processes for assessing, identifying, and managing material risks from cybersecurity threats,
as well as details on our board’s oversight and management’s role in cybersecurity risk management.

ITEM
2. | DESCRIPTION
OF PROPERTY.

We
our currently operating as a virtually distributed operation. We lease our principal executive offices, located in Westlake Village,
California and consisting of approximately 500 square feet on a month-to-month basis at a rate of $1,000 per month. We believe our current
locations is suitable and adequate for our current levels of operations and anticipated growth.

ITEM
3. | LEGAL PROCEEDINGS.

From
time to time, we are subject to ordinary routine litigation incidental to our normal business operations. We are not currently a party
to, and our property is not subject to, any material legal proceedings, except as set forth below.

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. In addition, on October 9, 2023, the Company filed a Cross Complaint against Mr. Malone
for Breach of Contract, Breach of Fiduciary Duty and Misappropriation of Trade Secrets seeking, among other items, general, special,
statutory and punitive damages. The Company intends to vigorously pursue its rights in this matter.

Stock
Market Manger, 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 Fauth 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.

ITEM
4. | MINE
SAFETY DISCLOSURES.

Not
applicable.

PART
II

ITEM
5. | MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market
for Our Common Equity

On
March 7, 2023, the Company received written notice (the “Delisting Notice”) from the staff of The Nasdaq Stock Market LLC
(“Nasdaq”) notifying the Company that, as a result of non-compliance with Nasdaq Listing Rule 5250(c)(1) (the “Filing
Requirement”), the staff of Nasdaq had determined that the Company’s Class A common stock (the “Securities”)
will be delisted from Nasdaq. Trading of the Securities was suspended at the opening of business on May 9, 2023 and a Form 25-NSE was
filed with the Securities and Exchange Commission, which removed the Securities from listing and registration on Nasdaq. Our common stock
is currently traded on OTC Markets Expert Market under the symbol “SRAX”. Any over-the-counter market quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Holders

On
August 29, 2024, there were 59 holders of record of our common stock. We believe a substantially greater number of beneficial owners
hold shares of common stock through brokers, banks or other nominees.

Dividend
policy

Common
Stock

We
have never paid cash dividends on either our Class A common stock or our Class B common stock. Under Delaware law, we may declare and
pay dividends on our capital stock either out of our surplus, as defined in the relevant Delaware statutes, or if there is no such surplus,
out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. If, however, the capital
of our company, computed in accordance with the relevant Delaware statutes, has been diminished by depreciation in the value of our property,
or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock
of all classes having a preference upon the distribution of assets, we are prohibited from declaring and paying out of such net profits
and dividends upon any shares of our capital stock until the deficiency in the amount of capital represented by the issued and outstanding
stock of all classes having a preference upon the distribution of assets shall have been repaired.

Series
A Preferred Stock

We
issued a one-time return of capital consisting of a total of 36,462,417 shares of our Series A Preferred Stock to Qualified Recipients
(as defined below) on a 1-for-1 as converted to common stock basis (the “Dividend”). The record date for the Dividend was
September 20, 2021 (the “Record Date”). The Series A Preferred Stock entitles the Qualified Recipients with the right to
receive the net proceeds from sales of certain securities received by SRAX as payment from its customers for access to the Sequire Platform
services (the “Designated Assets”).

The
securities and cash that underly the Designated Assets had a market value of $3,925,000 as of December 31, 2021.

During
the fourth quarter and portion of the third quarter of 2021, we sold an aggregate of approximately $680,000 of the Designated Assets.
On January 30, 2022, we distributed the net proceeds from those shares to holders of our Series A Preferred Shares. Pursuant to the distribution,
each holder of Series A Preferred Stock received approximately $0.01 per share. During the first quarter of 2022, we sold an aggregate
of $268,000 of the Designated Assets. The sale of Designated Assets did not result in sufficient proceeds to declare a distribution pursuant
to the terms of the Series A Preferred Stock. During the second quarter of 2022, we sold an aggregate of $127,000 of the Designated Assets.
The sale of Designated Assets did not result in sufficient proceeds to declare a distribution pursuant to the terms of the Series A Preferred
Stock.

As
of December 31, 2022, after taking into account the sale of the Designated Assets, the remaining Designated Assets have an aggregate
value of approximately $170,000 (pursuant to the same valuation methods that our other securities are valued in this Annual Report, with
such quoted market price potentially being greater or lesser than such value).

Securities
Authorized for Issuance under Equity Compensation Plans

See
information contained in Part III Item 12 of Annual Report entitled “Equity Compensation Plan Information.”

Recent
sales of unregistered securities

The
following information is given with regard to unregistered securities sold since January 1, 2022. The following securities were issued
in private offerings pursuant to the exemption from registration contained in the Securities Act of 1933, as amended (the “Securities
Act”) and the rules promulgated thereunder in reliance on Section 4(a)(2) thereof, relating to offers of securities by an issuer
not involving any public offering:

● | On
January 2, 2022, Michael Malone, our former Chief Financial Officer exercised an option to purchase 100,000 shares of our common
stock that were issued on December 15, 2018. The option was exercised on a cashless basis and included 57,016 shares withheld pursuant
to the cashless exercise and an additional 16,732 shares withheld for tax withholding. Accordingly, we issued Mr. Malone 26,252 shares
of common stock.
● | On
January 6, 2022, we issued Michael Malone, our 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 $331,000.
18
● | On
January 3, 2022, we issued four (4) common stock purchase options to our non-employee directors, pursuant to our amended non-employee
director compensation policy. Each option entitled the holder to purchase 29,533 shares of common stock at an exercise price of $4.35
per share, for an aggregate exercise amount of $128,468.55. The options vest in equal quarterly over a one (1) year period from the
issuance date. The options expire on the seven (7) year anniversary of the issuance date. Each option has a Black-Scholes value of
$100,000.
● | On
January 6, 2022, we issued Christopher Miglino, our Chief Executive Officer, an option to purchase 120,000 shares of common stock.
The option has an exercise price of $4.25 per share, a term of seven (7) years and vests in equal quarterly installments over a three
(3) year period from the grant date. The option had a Black-Scholes value on the grant date of $397,000.
● | On
January 6, 2022, we issued our employees, options to purchase an aggregate of 380,000 shares of common stock. Each of the options
has an exercise price of $4.25 per share, a term of five (5) years, and vests in equal quarterly installments over a three (3) year
period from the grant date. The aggregate of the 380,000 options had a Black-Scholes value on the grant date $1,126,000.
● | On
January 6, 2022, we issued our employees, options to purchase an aggregate of 120,000 shares of common stock. Each of the options
is a conditional grant, subject to shareholder approval. Each of the options has an exercise price of $4.25 per share, and 100,000
have a term of seven (7) years and 20,000 have a term of five (5) years, and each vest in equal quarterly installments over a three
(3) year period from the grant date. The aggregate of the 120,000 options had a Black-Scholes value on the grant date of $390,000.
● | During
the second quarter of 2022, warrant holders exercised 689,173 warrants on a cashless basis for an aggregate of 195,525 shares of
common stock.
● | On
June 13, 2022, we entered into an agreement with an institutional investor whereby in exchange for the payment of $404,513.40 (the
“Purchase Price”), the investor received (i) the right to receive the net proceeds upon the sale of certain securities
of the Company (“CVR Payments”) with a quoted price equal to $674,190 (with a guaranteed minimum return of 120% of such
Purchase Price and (ii) the right after 90 days but before 120 days to demand payment of 120% of the Purchase Price in cash less
amounts previously paid from the CVR Payments.
● | On
July 1, 2022, we issued an original issue discount bridge note in principal amount of $650,000 to an institutional investor in exchange
for $500,000 in cash. The Bridge Note was non-interest bearing and a maturity date of August 15, 2022. Effective August 8, 2022,
the bridge note was exchanged for revolving notes in the senior secured revolving credit facility.
● | On
August 8, 2022, we entered into a senior secured revolving credit facility agreement with an institutional investor to initially
borrow up to $9,450,000 in the aggregate from time to time, subject to certain conditions. The loans are secured by all of our assets.
There is currently $6,200,000 in principal outstanding on the revolving loans, which are convertible into our common stock, subject
to adjustment for stock splits, dividends, fundamental transactions, and upon sales of our equity securities at $5.00 per share or
less. In addition, as part of the transaction we extended the maturity dates of 2,590,358 outstanding common stock purchase warrants
held by the lender until September 30, 2023.
● | On
November 2, 2023, the Company entered into definitive securities purchase agreements with the November 2023 Purchasers for the purchase
and sale of the November 2023 Debentures and the November 2023 Warrants in a private placement. The November 2023 Debentures, which
mature on November 3, 2024, pay 0%, no interest per annum commencing on November 3, 2023. The November 2023 Debentures are convertible
at the option of the holder into shares of our Class A common stock at an initial conversion price of $0.25 per share, subject to
adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv)
certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations
(v) subsequent equity sales. The November 2023 Warrants are initially exercisable at $0.25 per share and, are subject to cashless
exercise after six months if the shares underlying the November 2023 Warrants are not subject to an effective resale registration
statement. The November 2023 Warrants are also subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent
rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale
of the Company, business combinations, and reorganizations. (v) subsequent equity sales.
● | On
March 5, 2024, the Company entered into definitive securities purchase agreements with the March 2024 Purchasers for the purchase
and sale of an aggregate of the March 2024 Debentures. The March 2024 Debentures, which mature on February 28, 2026, pay 0%, no interest
per annum commencing on February 29, 2024. The March 2024 Debentures are convertible at the option of the holder into shares of our
Class A common stock at an initial conversion price of $0.25 per share, subject to adjustment in the event of (i) stock splits and
dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but
not limited to the sale of the Company, business combinations, and reorganizations (v) subsequent equity sales. The March 2024 Debentures
also contain certain customary events of default provisions, including, but not limited to, default in payment of principal, changes
in control of the Company. Upon the occurrence of any such event of default, the outstanding principal amount of the March 2024 Debenture
plus liquidated damages, interest and other amounts owing in respect thereof through the date of acceleration, shall become, at the
March 2024 Purchaser’s election, immediately due and payable in cash.
● | On
March 29, 2024, the Company entered into definitive securities purchase agreements with a certain accredited and institutional investor
April 2024 Purchasers for the purchase and sale of the April 2024 Debentures. The April 2024 Debentures, which mature on March 29,
2026, pay 0%, no interest per annum commencing on March 29, 2024. The April 2024 Debentures are convertible at the option of the
holder into shares of our Class A common stock (“Common Stock”) at an initial conversion price of $0.25 per share, subject
to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and
(iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations
(v) subsequent equity sales. The April 2024 Debentures also contain certain customary events of default provisions, including, but
not limited to, default in payment of principal, changes in control of the Company. Upon the occurrence of any such event of default,
the outstanding principal amount of the April 2024 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.

Purchases
of equity securities by the issuer and affiliated purchasers.

None.

19
ITEM
6. | SELECTED
FINANCIAL DATA.

Not
applicable to a smaller reporting company.

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

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

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

Executive
Overview

For
the years ended December 31, 2022 and 2021, total revenue was $27,859,000 and $26,707,000, respectively. Revenues increased from the
prior year by $1,152,000 or 4.31%.

Cash,
cash equivalents, and marketable securities at December 31, 2022 and 2021, were $9,193,000 and $16,965,000, respectively. Cash, cash equivalents
and marketable securities decreased from the prior year by $7,772,000 or 45.81%. The Company continues to sell its marketable securities
to meet working capital requirements.

Reportable
Segments

We
have a single operating and business segment, Sequire, which is comprised of two reporting units; Sequire and LD Micro.

Our
Sequire segment includes the licensing of our SaaS based Sequire platform and related services, and our LD Micro, Inc. event and conference
operations. The segment amounts included in MD&A are presented on a basis consistent with our internal management reporting. All
differences between our internal management reporting basis and accounting principles generally accepted in the United States of America
(“GAAP”), along with certain corporate-level and other activity, are included in Corporate and Other. Our management, along
with our Chief Executive Officer, who acts as our Chief Operating Decision Maker (as such term is defined accounting segment reporting
guidance), review financial information presented on a consolidated basis for purposes of allocating resources and evaluating performance
and do not evaluate using asset information.

Deconsolidation
of BIGToken, Inc.

On
December 29, 2021, we deconsolidated our majority owned subsidiary BIG Token, Inc. (“BIGToken”) (formerly known as Force
Protection Video Equipment Corporation). After the deconsolidation, we did not beneficially own a controlling interest in BIGToken, and
no longer consolidated BIGToken into our financial results for periods ending after December 31, 2021.

The
financial results of BIGToken for the year ended December 31, 2021 are presented as income (loss) from discontinued operations, net of
taxes on the consolidated statements of operations and its assets and liabilities as of December 31, 2021 are presented as assets and
liabilities of discontinued operations on the consolidated balance sheets. The historical consolidated statement of cash flows reflects
the effect of the deconsolidation.

Unless
noted otherwise, discussion in the notes to the consolidated financial statements pertain to continuing operations.

See
Note 4 – Discontinued Operations.

Business
Focus

During
2022, we have focused on: (i) the continued growth of our Sequire platform’s functionality and user base and (ii) the expansion
of LD Micro events and offerings. Subsequent to year end, we disposed of LD Micro.

Business

We
are a technology firm focused on enhancing communications between public companies and their shareholders and investors. We currently
have two distinct business units; however we operate in one business segment:

● | Our
unique SaaS platform, Sequire, which allows issuers to track their shareholders’ behaviors and trends, then use data-driven
insights to engage with shareholders across marketing channels. Through Sequire, we offer tools and related data and insight services
to allow issuers of publicly traded securities to better understand their position in the market.
● | LD
Micro, Inc. organizes and hosts investor conference for micro and small-cap companies. LD Micro, Inc. was disposed of on March 3,
2023. See the accompanying financial consolidated financial statements for additional information.

We
derive our revenues from the following sources:

Sequire

The
Sequire platform is a central hub where companies can manage certain administrative functions, reach out and engage with shareholders
as well as identify potential new investors. The platform utilizes machine learning and advanced analytics to bring our clients actionable
information that we believe can be used to maximize ROI through better investor and stockholder communications. Clients then can engage
with targeted shareholder groups across marketing channels including email, social media, programmatic, and hyperlocal.

Among
other features, the Sequire platform provides its users tools to monitor investor sentiment and activities and simplify back office administration
such as:

● | real-time
level-two trading data,
● | the
ability to monitor the activities of competitive public companies of the user,
● | news
alerts,
● | custom
survey feature to enhance shareholder communications,
● | real-time
and searchable warrant and option ledgers; and
● | integrated
communication between investor relations programs and corporate communication firms.

Data
Targeting

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

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

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

Virtual
Events and LD Micro

LD
Micro is the premier event platform for micro-cap and small cap companies. We are currently planning to expand the number and subject
matter of our conferences and events. Through the events platform, we have the ability to host a variety of virtual events and conferences
including investor conferences, earnings calls, shareholder meetings, annual, investor/analyst days, corporate town halls, roadshows,
and more. We believe that our ability to offer users a seamless, centrally managed virtual events solution that can be customized to
any industry will help transform our platform into the premier investor event tool. LD Micro, Inc. was disposed of on March 3, 2023.
See the accompanying financial consolidated financial statements for additional information.

Marketing
and sales

Intellectual
property

Financial
Condition

Liquidity
and Going Concern

As
reflected in the accompanying consolidated financial statements, for the year ended December 31, 2022, the Company had:

● | Net
loss of $31,638,000; and
● | Net
cash used in operations was $12,327,000

Additionally,
at December 31, 2022, the Company had:

● | Accumulated
deficit of $61,993,000
● | Stockholders’
deficit of $9,294,000; and
● | Working
capital deficit of $12,866,000

The
Company anticipates that it will need to raise additional capital immediately in order to continue to fund its operations. The Company
has relied on third parties for debt based funding of its operations. There is no assurance that the Company will be able to obtain additional
funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable
the Company to complete its initiatives or attain profitable operations.

The
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 product and service offerings.

There
can be no assurances that financing will be available on terms which are favorable, or at all. If the Company is unable to raise additional
funding to meet its working capital needs in the future, it will be forced to delay, reduce, or cease its operations.

The
Company is heavily reliant on 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.

In
making this assessment we performed a comprehensive analysis of our current circumstances including: our financial position, our cash
flows and cash usage forecasts for the twelve months ended December 31, 2023, and our current capital structure including equity-based
instruments, obligations and debts. Additionally, this assessment was made as of the date of these consolidated financial statements.

We
manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and capital requirements. The Company had cash on hand
of $7,000 at December 31, 2022.

The
Company has historically incurred significant losses since inception and has not demonstrated an ability to generate sufficient revenues
from the sales of its products and services to achieve profitable operations.

These
factors create 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.

The
consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going
concern. Accordingly, the financial statements have been prepared on a basis that assumes the Company will continue as a going concern
and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Cash,
cash equivalents and marketable securities

Cash
consist primarily of highly liquid investments such as money market funds and deposits held at major banks. Certain of such unused amounts
are subject to satisfying specified conditions prior to draw-down (such as pledging to our lenders sufficient subscriptions and customer
contracts).

Our
cash, cash equivalents and marketable securities were as follows for the years ended December 31, 2022 and 2021 as follows:

For
the Year Ended December 31,
2022 | 2021 | Year
over Year Changes
Cash, cash
equivalents and marketable securities | $ | 9,193,000 | $ | 16,965,000 | $ | (7,772,000 | ) | -45.81 | %

Results
of Operations

Revenues

Sequire
Platform: We recognize revenue from the licensing of our Sequire platform, data, marketing and insight services performed in conjunction
with the Sequire platform. We recognize revenue using the percentage of completion method based primarily on time.

Conference
Revenue: We recognize revenue from hosting conferences and associated sponsorships. We receive payment from presenting companies and
sponsors of the conferences.

The
following table presents revenues by type for the years ended December 31, 2022 and 2021 as follows:

For
the Year Ended December 31,
2022 | 2021 | Year
over Year Changes
Revenue | Revenue | %
of Revenues | Revenue | %
of Revenues | $
Amount | %
Change
Sequire SaaS platform revenue | $ | 25,110,000 | 90.13 | % | $ | 25,478,000 | 95.40 | % | $ | (368,000 | ) | -1.44 | %
LD Micro - conference
revenue | 2,749,000 | 9.87 | % | 1,229,000 | 4.60 | % | 1,520,000 | 123.68 | %
Total Revenues | $ | 27,859,000 | 100 | % | $ | 26,707,000 | 100 | % | $ | 1,152,000 | 4.31 | %

Sequire
SaaS platform revenues remained consistent year over year as operations for this portion of the business were relatively unchanged. Sequire’s
customer base did not grow further in 2022, this primarily has to do with the Company switching to cash as compensation for services
rendered as compared to accepting marketable securities, which was the more common form of payment earlier in 2022 and 2021.

LD
Micro conference revenues increased primarily due to additional events in 2022.

Operating
Costs and Expenses

Cost
of revenue. Our cost of revenue consists primarily of expenses associated with the cost of media from third parties, such as costs
we incur to market our products, data service fees and third-party selling costs as well as certain employee related and platform costs
(salaries, technology and content hosting for Sequire). If the estimated consideration expected to be received under a revenue contract
less than the estimated cost to fulfill our obligations under the contract, the Company will record a liability for the estimated cost
in excess of estimated consideration in the period this is known.

Depreciation
and Amortization. Depreciation and Amortization cost represent an allocation of the costs incurred to acquire the long-lived assets
used in our business over their estimated useful lives. Our long-lived assets consist of computers, office equipment, and furniture.

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

The
following table represents our operating expenses for the years ended December 31, 2022 and 2021, respectively.

For
the Year Ended December 31,
2022 | 2021 | Year
over Year Changes
Operating
Expenses | Amount | %
of Revenues | Amount | %
of Revenues | $
Amount | %
Change
Cost of revenues | $ | 9,413,000 | 39.46 | % | $ | 6,521,000 | 24.42 | % | $ | 2,892,000 | 44.35 | %
Depreciation and amortization | 417,000 | 1.75 | % | 842,000 | 3.15 | % | (425,000 | ) | -50.48 | %
General and administrative
expenses | 14,026,000 | 58.79 | % | 19,429,000 | 72.75 | % | (5,403,000 | ) | -27.81 | %
Total Operating Expenses | $ | 23,856,000 | 85.63 | % | $ | 26,792,000 | 100.32 | % | $ | (2,936,000 | ) | -10.96 | %

Cost
of revenues increased in 2022 from 2021 primarily due to an increase in data and media costs required to support the Company’s
growth and expected expansion.

Depreciation
and amortization decreased in 2022 from 2021 primarily due to property and equipment having a lower net book value as well as an impairment
loss of $41,000 sustained in 2022.

General
and administrative expenses decreased due to employee benefits, officer compensation, professional fees and advertising as well as other
general corporate overhead expenses.

Other
Income (Expense)

During
the years ended December 31, 2022 and 2021, the Company incurred various one-time charges related to impairments, as well as changes
to the Company’s marketable securities related to realized losses and changes in fair value (unrealized gains/losses).

The
following table represents our operating expenses for the years ended December 31, 2022 and 2021, respectively.

For
the Year Ended December 31,
2022 | 2021 | Year
over Year Changes
Other
income (expense) | Amount | %
of Revenues | Amount | %
of Revenues | $
Amount | %
Change
Interest expense | $ | (4,391,000 | ) | 12.32 | % | $ | (10,295,000 | ) | 63.51 | % | $ | 5,904,000 | -57.35 | %
Impairment - goodwill | (10,200,000 | ) | 28.62 | % | - | 0.00 | % | (10,200,000 | ) | 0.00 | %
Impairment - intangibles | (1,481,000 | ) | 4.16 | % | - | 0.00 | % | (1,481,000 | ) | 0.00 | %
Impairment - property and equipment | (41,000 | ) | 0.12 | % | - | 0.00 | % | (41,000 | ) | 0.00 | %
Impairment - marketable securities | (3,664,000 | ) | 10.28 | % | - | 0.00 | % | (3,664,000 | ) | 0.00 | %
Loss on sale of note receivable | (47,000 | ) | 0.13 | % | - | 0.00 | % | (47,000 | ) | 0.00 | %
Realized gain (loss) - marketable securities | (8,799,000 | ) | 24.69 | % | 804,000 | -4.96 | % | (9,603,000 | ) | -1194.40 | %
Unrealized gain (loss) - marketable securities | (3,792,000 | ) | 10.64 | % | (7,904,000 | ) | 48.76 | % | 4,112,000 | -52.02 | %
Change in fair value - contract assets | (1,504,000 | ) | 4.22 | % | - | 0.00 | % | (1,504,000 | ) | 0.00 | %
Realized gain (loss) - designated assets | (1,803,000 | ) | 5.06 | % | (84,000 | ) | 0.52 | % | (1,719,000 | ) | 2046.43 | %
Unrealized loss - designated assets | (762,000 | ) | 2.14 | % | (2,378,000 | ) | 14.67 | % | 1,616,000 | -67.96 | %
Change in fair value - preferred stock | 2,566,000 | -7.20 | % | 2,462,000 | -15.19 | % | 104,000 | 4.22 | %
Make-whole provision | (240,000 | ) | 0.67 | % | - | 0.00 | % | (240,000 | ) | 0.00 | %
Interest income | 12,000 | -0.03 | % | 42,000 | -0.26 | % | (30,000 | ) | -71.43 | %
Other income (expense) | (1,495,000 | ) | 4.19 | % | 1,144,000 | -7.06 | % | (2,639,000 | ) | -230.68 | %
Total Operating Expenses | $ | (35,641,000 | ) | 100 | % | $ | (16,209,000 | ) | 100 | % | $ | (19,432,000 | ) | 119.88 | %

Interest
expense decreased to ($4,391,000) in 2022 from ($10,295,000) in 2021 with less debt outstanding. Additionally, the majority of the change
in interest costs related to a warrant inducement expense totalling $7,737,000.

Impairment
of goodwill ($10,200,000) and intangible assets ($1,481,000) in 2022 related to the disposal and related discontinued operations of the Company’s legacy businesses Steel Media and Five Delta.

Impairment
of property and equipment ($41,000) in 2022 related to certain items of equipment identified as no longer having any future economic
benefit.

Impairment
of marketable securities of $3,664,000 in 2022 relate to those securities whose fair value has declined on an other than temporary basis
and deemed permanent. The Company analyzes all of its holdings at least annually, or sooner if circumstances require an assessment to
ascertain fair value, and with the assistance of a third party independent valuation specialist concluded that there was sufficient evidence
to support the impairment loss.

Loss
on note receivable of $47,000 in 2022 related to an investment that the Company elected to receive cash proceeds for, which were less
than the carrying amount of the note receivable, in order to settle the outstanding amount due.

Realized
gains and losses on marketable securities are determined by comparing the basis of these financial instruments to their exit price. The
sale of these securities may be influenced by market timing as well as the Company’s need for additional capital.

Unrealized
gains and losses on marketable securities is a measure of the change in fair value at each reporting period.

Contract
assets represent securities that are due to the Company as payment for services to be rendered, but have not yet been sent to the Company
for deposit. The value of these securities is known on the commitment date, and are subject to mark to market adjustments while held.

Realized
gains and losses on designated assets for return of capital are determined by comparing the basis of these financial instruments to their
exit price. The sale of these securities may be influenced by market timing as well as the Company’s need for additional capital.
Additionally,

Unrealized
gains and losses on designated assets for return of capital is a measure of the change in fair value at each reporting period.

Change
in fair value of preferred stock is a measure of the change in fair value at each reporting period.

Make-whole
provision of $240,000 in 2022 related to an additional amount due to a vendor in connection with an agreement requiring payment in the
event certain conditions of that agreement were not satisfied timely.

Interest
income for both 2022 and 2021 are insignificant.

Other
income (expense) relates to items not otherwise classified above.

Net
Loss

The
following table represents our net loss (including non-controlling interest) for the years ended December 31, 2022 and 2021, respectively.

For
the Year Ended December 31,
2022 | 2021 | Year
over Year Changes
Amount | Amount | $
Amount | %
Change
Net Loss | $ | (31,638,000 | ) | $ | (41,227,000 | ) | $ | 9,589,000 | -23.26 | %

As
further discussed above, the net loss decreased by $9,589,000 or 23.26% from 2021 to 2022. The decrease primarily included significant
amounts for impairment of goodwill, intangibles, property and equipment, and marketable securities aggregating $15,386,000, offset largely
by a reduction of interest expense of $5,904,000. However, in 2022, the Company had income from operations of $4,003,000 compared to
a loss from operations of ($85,000) in 2021.

Finally,
in 2022, the Company had a net loss of $31,638,000. In 2021, and the largest component of the change from 2021 to 2022 was the Company
reflected a net loss of $41,227,000, which included a loss from discontinued operations of $25,060,000 (See Note 2 to the consolidated
financial statements). This loss was comprised of a loss on discontinued operations of $14,376,000 combined with a loss on disposal of
subsidiary of $10,684,000.

Discontinued
Operations represent the results from operations of BIGToken. Upon the deconsolidation of BIGToken, its operating results, assets, liabilities
and cash flows for all periods presented have been classified as discontinued operations within the Consolidated Financial Statements.

Cash
Flows

Our
cash, cash equivalents and marketable securities on hand at December 31, 2022 and 2021 were as follows:

For
the Year Ended December 31,
2022 | 2021 | Year
over Year Changes
Cash, cash
equivalents and marketable securities | $ | 9,193,000 | $ | 16,965,000 | $ | (7,772,000 | ) | -45.81 | %

The
Company actively liquidates its marketable securities to meet its current obligations.

The
following table represents our net cash flows for the years ended December 31, 2022 and 2021, respectively.

For
the Year Ended December 31,
2022 | 2021 | Year
over Year Changes
Increase (Decrease)
Net
Cash Provided by (Used in) | Amount | Amount | $
Amount | %
Change
Operating activities | $ | (12,327,000 | ) | $ | (23,435,000 | ) | $ | 11,108,000 | -47.40 | %
Investing activities | 6,186,000 | 4,839,000 | 1,347,000 | 27.84 | %
Financing activities | 4,800,000 | 20,179,000 | (15,379,000 | ) | -76.21 | %
Net change in cash and
cash equivalents | $ | (1,341,000 | ) | $ | 1,583,000 | $ | (2,924,000 | ) | -184.71 | %

Cash
Flows from Operating Activities

The
primary use of cash used in operations is to pay our media, data and platform vendors, employees, and others for a wide range of services.
Cash flows used in continuing operating activities decreased by 11,108,000 in 2022 to $12,327,000 from 2021 net cash used in operations
of $23,435,000.

Net
cash used in operations decreased for one time charges related to impairments of goodwill, intangibles, property and equipment, and marketable
securities aggregating $15,386,000.

Other
significant changes include:

● | net
increases in 2022 of realized and unrealized losses of marketable securities totaling $7,719,000,
● | net
decrease in forgiveness of payroll protection loan of $1,106,000,
● | net
decrease in stock based compensation of $1,162,000,
● | net
decrease in depreciation and amortization of intangible assets of $502,000,
● | the
net change in cash used in operations in 2022 was $12,327,000, a decrease of $2,990,000 from 2021 and consisted of changes affecting
items previously mentioned as well as operating assets and liabilities as follows:
● | accounts
receivable ($1,135,000),
● | contracts
receivable (988,000),
● | due
from related party ($263,000),
● | prepaid
and other current assets of $1,219,000,
● | designated
assets for return of capital of $684,000,
● | note
receivable (accrued interest receivable) of $30,000,
● | accounts
payable and accrued expenses of $2,815,000,
● | accounts
payable and accrued expenses – related party of $159,000,
● | deferred
revenue ($2,096,000),
● | deferred
income tax liability of $131,000,
● | other
current liabilities of $468,000; and
● | operating
lease liability of $53,000.

In
2021, the Company had net cash used in discontinued operations of $8,118,000 as compared to $0 in 2022.

Total
net cash used in operating activities for 2022 was $12,327,000 as compared to $23,435,000 in 2021.

The
Company expects to continue to use cash in excess of receipts generated from operations for the foreseeable future as accepting cash
in lieu of marketable securities for services rendered is lower, with no potential for capital appreciation.

Cash
Flows from Investing Activities

For
the year ended December 31, 2022, we generated $6,186,000 of net cash provided by investing activities as compared to $4,839,000 in 2021.

The
primary driver of our investing activities relates to our proceeds from the sale of marketable securities of $5,221,000 in 2022 as compared
to $8,666,000 in 2021. Additionally, in 2021 we purchased marketable securities of $1,450,000 as well as made our deferred payments in
connection with the acquisition of LD Micro totaling $3,004,000. There were no such comparative amounts in 2022. In 2022, we received
proceeds from the sale of a note receivable for $900,000 as compared to $0 in 2021.

Cash
Flows from Financing Activities

For
the year ended December 31, 2022 we generated net cash from financing activities of $4,800,000 as compared to $15,443,000 in 2021.

The
primary reasons for the change were as follows:

In
2022, we received net proceeds of $5,450,000 from a senior secured revolving credit facility as compared to $0 in 2021.

In
2021, we received net proceeds of $15,952,000 from the exercise of commons stock warrants, as compared to $0 in 2022.

Off
Balance Sheet Arrangements

As
of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or
future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.

The
term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which
an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument
or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as
credit, liquidity or market risk support for such assets.

Liquidity
and Capital Resource Requirements

We
believe that our current sources of funds will not provide us with adequate liquidity including the ability to repay our remaining debt
obligations within one year from the issuance date of these consolidated financial statements.

Our
future capital requirements will depend on many factors; however, the Company’s current primary source of capital is the sale of
marketable securities it has received as consideration for the licensing of our Sequire platform and the associated services.

The
Company’s sales of marketable securities are primarily through sale transactions that qualify for exemptions pursuant to Rule 144
of the Securities Act of 1933. The conditions required to be met to qualify for the exemptions under Rule 144 are often difficult to
predict, making it difficult to predict the timing of the associated cash flows from the sales of these securities.

The
Company’s 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 flows.

Additionally,
other factors contribute to uncertainty of our cash flows, such as our subscription growth rate, subscription renewal activity, including
the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of
spending to support development efforts, the introduction of new and enhanced products, the continuing market adoption of Sequire.

The
Company projects the sale of its marketable security holding will represent a substantial portion of the cash required for operations
for the foreseeable future, consequently creating substantial doubt about the Company’s ability to continue as a going concern.

We
continually evaluate our cash needs and may decide it is best to raise additional capital or seek alternative financing sources to fund
our operations. However, due to our delisting from NASDAQ, raising capital through the sale of our equity or debt securities will be
more challenging as investors are historically less likely to purchase securities that are not listed on a national exchange.

Financing
Arrangements

See
Notes 6, 12 and 20 in the accompanying consolidated financial statements for a discussion of relevant financing arrangements.

Capital
Allocation Framework

As
noted above, after cash utilization required for working capital, capital expenditures, and required debt service, we expect that our
primary usage of cash will be for business combinations, repayment of outstanding indebtedness, and/or stock repurchases under repurchase
programs that may be in place from time to time (subject to the terms of our 2020 Credit Agreement). For further information regarding
our recent stock repurchase program, see above.

Critical
Accounting Policies and Estimates

There
have been no changes to our critical accounting policies during the year ended December 31, 2022. Critical accounting policies and the
significant estimates in accordance with such policies are regularly discussed with our Audit Committee.

Those
policies are discussed under Note 3—Summary of Significant Accounting Policies, in the notes to Consolidated Financial Statements
included in Part II, Item 8, “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K filed with the
SEC on September 20, 2024 for the fiscal year ended December 31, 2022.

Recently
Issued Accounting Pronouncements

For
further information on recently issued accounting pronouncements, see Note 3—Summary of Significant Accounting Policies in the
accompanying notes to Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data”
of our Annual Report on Form 10-K filed with the SEC.

34
ITEM
7A. | QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not
applicable for a smaller reporting company.

ITEM
8. | FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.

Please
see our consolidated financial statements beginning on page F-1 of this annual report.

ITEM
9. | CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

RBSM
LLP Declining to Stand for Reappointment

On
June 30, 2022, RBSM LLP (“RBSM”), the independent registered public accounting firm to the Company, informed the Company
of its decision not to stand for re-appointment as the independent registered public accounting firm of the Company.

During
the Company’s most recent two fiscal years prior to RBSM’s decision to not stand for reelection and any subsequent interim
period prior to RBSM’s notice to not stand for re-appointment, there were not any disagreements on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure except for an explanatory paragraph in the report regarding
substantial doubt about the Company’s ability to continue as a going concern as described below.

Marcum
LLP

On
October 27, 2022, the Audit Committee of the board of directors of the Company engaged Marcum LLP (“Marcum”) as the Company’s
independent registered public accounting firm for the year ending December 31, 2022. On May 2, 2023 (the “Marcum Dismissal”),
the Audit Committee approved the dismissal of Marcum as independent registered public accounting firm of the Company effective immediately.
Marcum did not issue an audit report on the Company’s consolidated financial statements for the fiscal year ended December 31,
2022 or any interim period.

For
the year ended December 31, 2022 and through the Marcum Dismissal, the Company had (i) no “disagreements” (as described in
Item 304(a)(1)(iv) of Regulation S-K) with Marcum on any matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Marcum, would have caused it to make reference
to the subject matter of such disagreements in any of its future audit reports; and (ii) no “reportable events” (as described
in Item 304(a)(1)(v) of Regulation S-K), except that Marcum concurred with the Company’s assessment of material weaknesses related
to the Company’s internal control over financial reporting.

Prior
to the Marcum Dismissal, Marcum advised the Audit Committee and the Company’s management of certain material weaknesses related
to the Company’s internal control over financial reporting, which constitute a “reportable event” (as defined in Item
304(a)(1)(v) of Regulation S-K). Accordingly, the Company reported such material weaknesses in its internal control over financial reporting
in Management’s Report on Internal Control Over Financial Reporting, as set forth in Part I, Item 4 “Controls and Procedures”
of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

TAAD

On
May 2, 2023, the Audit Committee approved the engagement of TAAD as its independent registered public accounting firm for the fiscal
year ended December 31, 2022.

ITEM
9A. | CONTROLS
AND PROCEDURES.

Evaluation
of Disclosure Controls and Procedures

Our
management, consisting of our Principal Executive Officer and Chief Financial Officer has evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2022. This evaluation
included consideration of the controls, processes and procedures that are designed to ensure that information required to be disclosed
by the Company in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that such information is accumulated
and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate
to allow timely decisions regarding required disclosure. Management has identified material weaknesses in the Company’s internal
control over financial reporting. Based on that evaluation, management concluded that our disclosure controls and procedures as of December
31, 2022 were ineffective.

Inherent
Limitations over Internal Controls

The
Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles
(“GAAP”). The Company’s internal control over financial reporting includes those policies and procedures that:

(i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the Company’s assets;

(ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s
management and directors; and

(iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s
assets that could have a material effect on the financial statements.

(iv)
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management’s
Annual Report on Internal Control Over Financial Reporting

The
Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined
in Rule 13a-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision
of the Chief Executive Officer and Chief Financial Officer and effected by our board of directors, management and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Management conducted an assessment of the effectiveness of the
Company’s internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013).

Based
on the Company’s assessment, management has concluded that, our internal control over financial reporting was ineffective as of
December 31, 2022 because of the following material weaknesses in internal controls over financial reporting:

● | a
lack of internal valuation experts
● | a
lack of sufficient in-house qualified accounting staff;
● | a
lack of validation of completeness and accuracy of internally prepared data, including key reports generated from systems, utilized
in the operations of controls, leading to delays in the Company’s closing process;
● | inadequate
controls and segregation of duties due to limited resources and number of employees;
● | Lack
of internal personnel to properly evaluate the fair value and the associated revenue recognition related to our non-cash revenue
contracts;
● | substantial
reliance on manual reporting processes and spreadsheets external to the accounting system for financial reporting leading to delays
in the Company’s closing process;
● | lack
of adequate controls in the accounting for internally developed software costs.,
● | products
and services; and the recording of sophisticated, material financing transactions which are heavily dependent upon the use of estimates
and assumptions and require us using consultants;
● | and
our lack of experience in monitoring and administering, the Company’s internal control over financial reporting

To
mitigate the items identified in the assessment, we rely heavily on direct management oversight of transactions, along with the use of
legal and accounting professionals/consultants. As we grow, we expect to increase the number of employees, which would enable us to implement
adequate segregation of duties within the internal control framework.

Remediation

We
are continuing to seek ways to remediate these weaknesses, which stem from our small workforce and limited resources. The Company plans
to hire an independent valuation expert to value the securities it receives as consideration for its services.

Changes
in Internal Control over Financial Reporting

No
change in our internal control over financial reporting occurred during the quarter ended December 31, 2022 that materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting. This annual report does not include an attestation
report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not
subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that
permit us to provide only management’s report in this annual report.

ITEM
9B. | OTHER
INFORMATION.

None.

ITEM 9C. | DISCLOSURE REGARING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not
applicable.

PART
III

ITEM
10. | DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The
names of our directors and executive officers and their ages, positions, and biographies as of August 15, 2024 (except as expressly stated)
are set forth below. Our executive officers are appointed by, and serve at the discretion of the Board. There are no family relationships
among any of our directors or executive officers.

Named
Executive Officers and Directors

Name | Age | Positions | Position Since
Christopher
Miglino | 55 | Chairman
of the Board, Chief Executive Officer, Chief Financial Officer and President | 2010

The
following is biographical information on the current members of our executive officers and board of directors:

Christopher
Miglino . Since co-founding our company in April 2010, Mr. Miglino has served as our Chief Executive Officer and a member
of our board of directors. He was appointed President of our company in January 2017. He also served as our Chief Financial Officer from
April 2010 until November 2014 and again was appointed as Chief Financial Officer on July 5, 2023. Mr. Miglino has spent the past 20
years working in the digital advertising space and has successfully launched and sold two internet companies. Both of these companies
were sold to publicly-traded companies on the NASDAQ. He has a detailed understanding of the relationship between technology and brands.
Mr. Miglino previously served as a Board member for EVmo, Inc. (fka YaYYo, Inc) [OTC: YAYO] and served on their compensation committee
until January 2020. Mr. Miglino also served as chairman of the Board and as interim chief executive officer of BIGtoken, Inc., a former
majority owned subsidiary of SARX [OTC: BGTK]. In evaluating Mr. Miglino’s specific experience, attributes and skills in connection
with his appointment to our board, we took into account his role as a co-founder of our company, his operational experience in our company
as well as his professional experience in our business sector.

Code
of Ethics

We
are committed to maintaining the highest standards of honest and ethical conduct in running our business efficiently, serving our stockholders
interests and maintaining our integrity in the marketplace. To further this commitment, we have adopted our Code of Conduct and Business
Code of Ethics, which applies to all our directors, officers and employees. To assist in its governance, our Board has formed three standing
committees composed entirely of independent directors, Audit, Compensation and Corporate Governance and Nominating committees. A discussion
of each committee’s function is set forth below.

Bylaws

Our
bylaws, the charters of each Board committee, the independent status of a majority of our board of directors, our Code of Conduct and
Business Code of Ethics provide the framework for our corporate governance. Copies of our Bylaws, Committee Charters, Code of Conduct
and Business Code of Ethics may be found on our website at www.SRAX.com under the tab Investors – Governance. Copies of
these materials also are available without charge upon written request to our Corporate Secretary at 1014 S. Westlake Blvd., Suite 14-299,
Westlake Village, CA 91361.

Board
of directors

The
Board of Directors oversees our business affairs and monitors the performance of management. In accordance with our corporate governance
principles, the board of directors does not involve itself in day-to-day operations. The directors keep themselves informed through discussions
with the Chairman and Chief Executive Officer and our Chief Financial Officer and by reading the reports and other materials that we
send them and by participating in board of directors and committee meetings. Directors are elected for a term of one year. Our directors
hold office until their successors have been elected and duly qualified unless the director resigns or by reason of death or other cause
is unable to serve in the capacity of director. If any director resigns, dies or is otherwise unable to serve out his or her term, or
if the Board increases the number of directors, the Board may fill any vacancy by a vote of a majority of the directors then in office,
although less than a quorum exists. A director appointed to fill a vacancy shall serve for the unexpired term of his or her predecessor.
Vacancies occurring by reason of the removal of directors without cause may only be filled by vote of the stockholders.

The
Board currently holds regularly scheduled meetings and calls for special meetings or acts through unanimous written consents as necessary.
Meetings of the Board may be held telephonically or via electronic video format. Directors are expected to attend all Board meetings
and meetings of the committees of the Board on which they serve and to spend the time needed and meet as frequently as necessary to properly
discharge their duties. Information with regard to committee meetings is provided for below. Although attendance of meetings is encouraged,
we do not have a formal policy regarding attendance by directors at Board and committee meetings.

Board
leadership structure and Board’s role in risk oversight

Mr.
Miglino serves as both the Chairman of our Board of Directors, sole director and our Chief Executive Officer. We do not have a lead independent
director. Due to the fact that Mr. Miglino is the sole director, the Board has determined that a lead independent director is currently
not necessary.

Risk
is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks,
including credit risk, liquidity risk, operational risk, strategic risk and reputation risk. Management is responsible for the day-to-day
management of the risks we face, while the Board, as a whole and through its committees, has responsibility for the oversight of risk
management. In its risk oversight role, the Board has the responsibility to satisfy itself that the risk management processes designed
and implemented by management are adequate and functioning as designed. To do this, the Board meets regularly to review SRAX’s
risks. Our Chief Financial Officer generally attends the Board meetings and is available to address any questions or concerns raised
by any member of the Board on risk management and any other matter. The independent members of the Board work together to provide strong,
independent oversight of our management and affairs through the Board’s standing committees and, when necessary, special meetings
of independent directors. Our independent directors may meet at any time in their sole discretion without any other directors or representatives
of management present. Each independent director has access to the members of our management team or other employees as well as full
access to our books and records. We have no policy limiting, and exert no control over, meetings of our independent directors.

Board
committees

The
Board of Directors has standing Audit, Compensation, Compensation and Corporate Governance and Nominating committees. Each committee
has a written charter. The charters are available on our website at www.SRAX.com . Due to the fact that Mr. Miglino is the sole
director, we presently do not have board members appointed to committees.

Independence

Our
Class A common stock trades on the OTC Markets – Expert Market. Although we are not listed on Nasdaq, we apply the Nasdaq director
independence standards in determining independence. In accordance with these standards, in determining independence the Board affirmatively
determines whether a director has a “material relationship” with SRAX that would compromise his or her independence from
management or would cause him or her to fail to meet the Nasdaq’s specific independence criteria. When assessing the “materiality”
of a director’s relationship with SRAX, the Board considers all relevant facts and circumstances, not merely from the director’s
standpoint, but from that of the persons or organizations with which the director has an affiliation, and, where applicable, the frequency
and regularity of the services, and whether the services are being carried out at arm’s length in the ordinary course of business.
Material relationships can include commercial, consulting, charitable, familial and other relationships. A relationship is not material
if, in the Board’s judgment, it is not inconsistent with the Nasdaq’s director independence standards and it does not compromise
a director’s independence from management.

Applying
the Nasdaq’s standards, the Board has determined that Mr. Miglino, our sole director, is not “independent” as that
term is defined by the Nasdaq’s independence standards.

Committees
of the Board of Directors

Our
Board of Directors is comprised of one individual. who is also integral to the operations of our company. As a result, we do not have
a majority of independent directors as that term is defined under Rule 4200(a)(15) of the NASDAQ Marketplace Rules, even though that
definition does not currently apply to us, because we are not listed on the NASDAQ. We anticipate that if we expand our Board of Directors
in the future, that we will seek to include members who are independent. Our securities are not quoted on an exchange that has requirements
that a majority of our Board members be independent, and we are not currently otherwise subject to any law, rule or regulation requiring
that all or any portion of our Board of Directors include “independent” directors.

Although
our Board of Directors has established committees, including an Audit Committee, a Compensation Committee or a Nominating Committee,
the committees are not currently staffed as there is only one director, who is not independent. The functions of those committees are
being undertaken by the sole director.

None
of our directors is an “audit committee financial expert” within the meaning of Item 407(d)(5) of Regulation S-K. In general,
an “audit committee financial expert” is an individual member of the audit committee or Board of Directors who:

a) | understands generally accepted accounting principles and financial
statements,
b) | is able to assess the general application of such principles
in connection with accounting for estimates, accruals and reserves,
c) | has experience preparing, auditing, analyzing or evaluating
financial statements comparable to the breadth and complexity to our financial statements,
d) | understands internal controls over financial reporting, and
e) | understands audit committee functions.

We
believe that the members of our sole director is collectively capable of analyzing and evaluating our financial statements and understanding
internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an “audit
committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances.

Audit
Committee

We
have a designated audit committee in accordance with section 3(a)(58)(A) of the Exchange Act. However, due to the fact that we presently
only have one director who is an affiliate, the audit committee presently does not have members. We intend to appoint additional directors
and, at which time, we will appoint directors to the Audit Committee. The main function of our Audit Committee is to oversee our accounting
and financial reporting processes. The Audit Committee assists the Board in fulfilling its oversight and monitoring responsibility of
reviewing the financial information provided to shareholders and others, appoints SRAX’s independent registered public accounting
firm, reviews the services performed by the independent registered public accounting firm and SRAX’s finance department, evaluates
SRAX’s accounting policies and the system of internal controls established by management and the Board, reviews significant financial
transactions, and oversees enterprise risk management.

Compensation
Committee

We
have formed a Compensation Committee but due to the fact that we presently only have one director who is an affiliate, the Compensation
Committee presently does not have members. The Compensation Committee, once staffed, will assist the Board in:

● | Recommending,
in executive session at which our chief executive officer is not present, the compensation and awards / bonuses for our CEO or president,
if such person is acting as the CEO, as well as other executive officers;
● | discharging
its responsibilities for approving and evaluating our officer compensation plans, policies and programs;
38
● | reviewing
and recommending to the Board, compensation to be provided to our employees and directors; and
● | administering
our equity compensation plan(s).

The
Compensation Committee is charged with ensuring that our compensation programs are competitive, designed to attract and retain highly
qualified directors, officers and employees, encourage high performance, promote accountability and assure that employee interests are
aligned with the interests of our stockholders.

Corporate
Governance and Nominating Committee

We
have formed a Corporate Governance and Nominating Committee but due to the fact that we presently only have one director who is an affiliate,
the Corporate Governance and Nominating Committee presently does not have members. The Corporate Governance and Nominating Committee:

● | assists
the Board in selecting nominees for election to the Board;
● | monitor
the composition of the Board;
● | develops
and recommends to the Board, and annually reviews, a set of effective corporate governance policies and procedures applicable to
our company; and
● | regularly
review the overall corporate governance of the Company and recommends improvements to the Board as necessary.

The
purpose of the Corporate Governance and Nominating Committee is to assess the performance of the Board and to make recommendations to
the Board from time to time, or whenever it shall be called upon to do so, regarding nominees for the Board and to ensure our compliance
with appropriate corporate governance policies and procedures.

Delinquent
Section 16(a) Reports

Section
16(a) of the Exchange Act requires our officers, directors, and stockholders owning more than ten percent of our common stock, to file
reports of ownership and changes in ownership with the SEC and to furnish us with copies of such reports. Based solely on our review
of Form 3, 4 and 5’s, there were no reports that were filed late during the fiscal year ended December 31, 2022:

ITEM
11. | EXECUTIVE
COMPENSATION.

Summary
Compensation Table

The
following table summarizes all compensation recorded by us in each of the last two completed years ended December 31, for:

● | all
individuals serving as our principal executive officer or acting in a similar capacity;
● | our
two most highly compensated named executive officers, whose annual compensation exceeded $100,000; and
● | up
to two additional individuals for whom disclosure would have been made in this table but for the fact that the individual was not
serving as a named executive officer of our company, at December 31, 2022.

The
value attributable to any option awards is computed in accordance with FASB ASC Topic 718. The assumptions made in the valuations of
the option awards are included in Note 11 of the Notes to our Consolidated Financial Statements for the year ended December 31, 2022.

Executive Name | Year | Salary | Bonus | 1 Option Awards | 2 All Other Compensation | Total
Christopher Miglino | 2022 | $ | 340,000 | $ | 150,000 | $ | 396,986 | $ | 32,540 | $ | 919,526
Chief Executive Officer | 2021 | $ | 340,000 | $ | 225,000 | $ | - | $ | 32,295 | $ | 597,295
Michael Malone | 2022 | $ | 200,000 | $ | 75,000 | $ | 193,000 | $ | 9,795 | $ | 477,795
Chief Financial Officer | 2021 | $ | 200,000 | $ | 75,000 | $ | - | $ | 9,795 | $ | 284,795
Christopher Lahiji | 2022 | $ | 335,000 | $ | - | $ | - | $ | 8,829 | $ | 343,829
President, LD Micro, Inc. | 2021 | $ | 332,423 | $ | - | $ | - | $ | 10,745 | $ | 343,168
Randall Clark | 2022 | $ | 250,000 | $ | - | $ | 330,821 | $ | 8,142 | $ | 588,963
Chief Operating Officer | 2021 | $ | - | $ | - | $ | - | $ | - | $ | -

1
- Represents the aggregate grant date fair value of stock options, accounted for in accordance with ASC 718. The assumptions
made in the valuations of these option awards are included in the accompanying consolidated financial statements.

2
- Represents healthcare benefits.

Employment
agreements and how the executive’s compensation is determined

We
are a party to an employment agreement with Mr. Miglino. Prior to our separation with Messrs Malone, and Lahiji following December 31,
2022, each had entered into an employment agreement with the Company. The employment agreements provide the compensation arrangements
with these individuals. The Company has not engaged a compensation consultant or other consultant performing similar functions to advise
the Company on compensation arrangements for our executive officers. Notwithstanding, as described under the heading “Director
Compensation”, the Company engaged a compensation consultant to advise on the Company’s non-employee director compensation
policy.

Employment
Agreement with Mr. Miglino

We
employ Christopher Miglino as our Chief Executive Officer for a term of four years pursuant to an employment agreement entered into on
January 1, 2012. The employment agreement automatically renews for successive two-year terms unless either party provides notice of non-renewal
not later than three (3) months before the conclusion of the then current term. As compensation for his services, Mr. Miglino was initially
entitled to receive a base salary of $192,000 which is subject to an annual review. Subsequent to several amendments, effective October
1, 2018, Mr. Miglino’s salary was increased to $340,000 per annum. In addition, he is eligible to receive an annual bonus based
upon the achievement of certain to-be-established goals fixed by the Board, which is payable in cash or non-cash compensation as determined
by the Board, as well as a discretionary bonus as determined by the Board. Mr. Miglino is entitled to participate in all benefit plans
we may offer, up to 45 days of paid vacation annually and reimbursement for out-of-pocket expenses incurred in furtherance of our business.

In
addition to accrued obligations (including but not limited to, reimbursements, unpaid salary, unused vacation days, etc.), the following
table sets forth the payments that would be made to Mr. Miglino in accordance with his employment agreement had he been terminated by
us without cause or by Mr. Miglino for Good Reason, or termination as a result of disability on December 31, 2022.

39
Name | Terminated Without Cause / For Good Reason | Termination as a result of Disability
Christopher Miglino
Salary (1) | $ | 680,000 | $ | 680,000
Accelerated Vesting of Awards | — | —
Health Care | 43,074 | —
Total: | $ | 723,074 | $ | 680,000
(1) | Amount
equal to twenty-four (24) months of Base Salary. Amount is to be paid over a twenty-four (24) month period.

Employment
Agreement with Michael Malone

On
December 15, 2018 we entered into an Employment Agreement with Mr. Malone pursuant to which he was engaged to serve as Chief Financial
Officer to be effective January 2, 2019. Mr. Malone is no longer employed by the Company.

Employment
Agreement with Christopher Lahiji

Effective
September 16, 2020, we entered into an employment agreement with Christopher Lahiji pursuant to which he was engaged to serve as the
president of LD Micro, Inc., our wholly owned subsidiary acquired in September 2020. The Company sold LD Micro, Inc. on March 3, 2023.
Mr. Lahiji is no longer employed by the Company.

Equity
Compensation Plans

Our
named executive officers participate in our equity compensation plans which are as follows:

2012
Equity Compensation Plan

Our
2012 Equity Compensation Plan (“2012 Plan”) was administered by our board or any of its committees. The purposes of the 2012
Plan were to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive
to Employees, Directors and Consultants, and to promote the success of our business. The issuance of awards under our 2012 Plan was at
the discretion of the administrator, which has the authority to determine the persons to whom any awards were granted and the terms,
conditions and restrictions applicable to any award. Under our 2012 Plan, we may grant stock options, restricted stock, stock appreciation
rights, restricted stock units, performance units, performance shares and other stock-based awards. Our 2012 Plan authorized the issuance
of up to 600,000 shares of Class A common stock for the foregoing awards. As of January 1, 2022, the 2012 Plan terminated pursuant to
its terms.

2014
Equity Compensation Plan

Our
2014 Equity Compensation Plan (“2014 Plan”) is administered by our board or any of its committees. The purposes of the 2014
Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive
to Employees, Directors and Consultants, and to promote the success of our business. The issuance of awards under our 2014 Plan is at
the discretion of the administrator, which has the authority to determine the persons to whom any awards shall be granted and the terms,
conditions and restrictions applicable to any award. Under our 2014 Plan, we may grant stock options, restricted stock, stock appreciation
rights, restricted stock units, performance units, performance shares and other stock-based awards. Our 2014 Plan authorizes the issuance
of up to 1,600,000 shares of Class A common stock for the foregoing awards. As of December 31, 2022, we have outstanding granted awards under the 2014
Plan equal to approximately 819,259 shares of our Class A common stock (with all issuances in excess of 1,600,000 occurring subsequent
to cancellations or forfeitures of certain shares under the 2014 Plan). Accordingly, there are 780,741 shares of Class A common stock available for future awards under the 2014 Plan. In the event of a change in control, awards
under the 2014 Plan will become fully vested unless such awards are assumed or substituted by the successor corporation.

2016
Equity Compensation Plan

Our
2016 Equity Compensation Plan (“2016 Plan”) is administered by our board or any of its committees. The purposes of the 2016
Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive
to Employees, Directors and Consultants, and to promote the success of our business. The issuance of awards under our 2016 Plan is at
the discretion of the administrator, which has the authority to determine the persons to whom any awards shall be granted and the terms,
conditions and restrictions applicable to any award. Under our 2016 Plan, we may grant stock options, restricted stock, stock appreciation
rights, restricted stock units, performance units, performance shares and other stock-based awards. Our 2016 Plan authorizes the issuance
of up to 600,000 shares of Class A common stock for the foregoing awards. As of December 31, 2022, we have outstanding granted awards under the 2016 Plan equal to approximately
239,160 shares of our Class A common stock (with all issuances in excess of 600,000 occurring subsequent to cancellations or forfeitures
of certain shares under the 2016 Plan). Accordingly, there are 2,392,357 shares
of common stock available for future awards under the 2016 Plan. In the event of a change in control, awards under the 2016 Plan will
become fully vested unless such awards are assumed or substituted by the successor corporation. Under the 2016 Plan, we made a conditional
grant to our former CFO that was subject to the approval of our shareholders to increase the number of shares issuable under the 2016
Plan. On November 29, 2022, our Compensation Committee recommended and our Board approved the amended and restated 2016 Plan and as a
result, the number of shares of class A common stock eligible for issuance under the Plan was 2,631,517 subject to an automatic increase
on the first day of each calendar year by four percent (4%) of the total shares of Common Stock issued and outstanding on such date.
On December 31, 2022, the shareholders of the Company approved the restated Plan.

Outstanding
Equity Awards Value at Fiscal Year-End

The
following table presents information regarding outstanding equity awards held by the Company’s Named Executive Officers at December
31, 2022:

Option Awards | Stock Awards
Name | Grant Date | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Equity incentive plan awards: Number of securities underlying unexercised unearned options | Option Exercise Price ($) | Option Expiration Date | Number of shares of stock that have not vested | Market value of shares of stock that have not vested ($) | Equity incentive plan awards: number of unearned shares that have not vested (#) | Equity incentive plan awards: market or payout value of unearned shares that have not vested ($)
Chris Miglino | 1 | November 13, 2020 | 300,000 | - | - | $ | 2.97 | November 13, 2025 | - | - | - | -
Chris Miglino | 2 | January 3, 2022 | 40,000 | 80,000 | - | $ | 4.25 | January 3, 2029 | - | - | - | -
Michael Malone | 3 | December 31, 2018 | - | - | - | $ | 2.56 | January 3, 2022 | - | - | - | -
Christopher Lahiji | 4 | N/A | - | - | - | $ | - | N/A | - | - | - | -
Randall Clark | 5 | March 27, 2019 | - | - | - | $ | 3.42 | March 27, 2022 | - | - | - | -
Randall Clark | 6 | August 18, 2020 | 22,500 | 27,500 | - | $ | 2.70 | August 18, 2025 | - | - | - | -
Randall Clark | 7 | January 3, 2022 | 33,333 | 66,667 | - | $ | 4.25 | January 3, 2025 | - | - | - | -
1 | The Company granted 100,000 stock options on November 13, 20202, having a fair value of $648,000. The Company determined the fair value of these options (on the grant date) using a Black-Scholes option pricing model. The shares vested on the grant date. Mr. Miglino is the Company’s Chief Executive Officer.
2 | The Company granted 120,000 stock options on January 3, 2022, having a fair value of $396,986. The Company determined the fair value of these options (on the grant date) using a Black-Scholes option pricing model. The shares vest quarterly over a period of three (3) years. Mr. Miglino is the Company’s Chief Executive Officer.
3 | The Company granted 100,000 stock options on December 18, 2020, having a fair value of $168,000. The Company determined the fair value of these options (on the grant date) using a Black-Scholes option pricing model. The shares vested quarterly over a period of three (3) years and expired unexercised on January 2, 2022. On March 14, 2023, Mr. Malone resigned as the Company’s Chief Financial Officer.
4 | No
awards were granted to Mr. Lahiji. Mr. Lahiji resigned on March 3, 2023 as the President of LD Micro, Inc.
5 | The Company granted 50,000 stock options on March 27, 2019, having a fair value of $110,500. The Company determined the fair value of these options (on the grant date) using a Black-Scholes option pricing model. The shares vested quarterly over a period of three (3) years and expired unexercised on March 27, 2022. Mr. Clark is the Company’s Chief Operating Officer. On September 1, 2023, Mr. Clark resigned as the Company’s Chief Operating Officer.
6 | The Company granted 50,000 stock options on August 18, 2020, having a fair value of $100,000. The Company determined the fair value of these options (on the grant date) using a Black-Scholes option pricing model. The shares vested quarterly over a period of three (3) years and expired unexercised on September 1, 2023. Mr. Clark is the Company’s Chief Operating Officer. On September 1, 2023, Mr. Clark resigned as the Company’s Chief Operating Officer.
7 | The Company granted 100,000 stock options on January 3, 2022, having a fair value of $331,000. The Company determined the fair value of these options (on the grant date) using a Black-Scholes option pricing model. The shares vested quarterly over a period of three (3) years and expired unexercised on September 1, 2023. Mr. Clark is the Company’s Chief Operating Officer. On September 1, 2023, Mr. Clark resigned as the Company’s Chief Operating Officer.
40

DIRECTOR
COMPENSATION

Role
of Compensation Consultant

The
Compensation Committee is authorized to retain the services of one or more compensation advisors, as it sees fit, in connection with
the oversight of our non-employee director and executive compensation program and related policies and practices. During 2022, the Compensation
Committee retained Aon PLC (“Aon”), a compensation consulting firm with regard to our non-employee director compensation
policy. Aon was engaged to provide the Compensation Committee with information, recommendations, and other advice relating to the non-employee
director compensation policy only and not with regard to any executive compensation policies. Aon was directly engaged and served at
the discretion of the Compensation Committee and provided no other services to the Company.

Current
Director Compensation Policy

On
October 29, 2021, the Company’s Compensation Committee amended the Company’s non-employee director compensation policy. Effective
January 1, 2022, non-employee directors will be entitled to cash compensation of:

Cash
compensation will be paid quarterly over the year.

In
addition, each director will be entitled to receive an annual stock option grant equal to $100,000. The number of options will be determined
using the Black Scholes option pricing model. The options will vest quarterly over the grant year and have a term of seven years.

Legacy
Director Compensation Policy

Effective
April 15, 2018 and up until December 31, 2021, each non-employee director received $30,000 as an annual board fee payable as follows:

● | Up
to $15,000 in cash paid quarterly over the grant year; and
● | The
balance in Class A common stock purchase options issued on April 15 of each year and vesting quarterly over the grant year and have
a term of seven (7) years. The stock options will be valued using the Black-Scholes option pricing model and are subject to customary
assumptions used in the preparation of financial statements.

Director
Compensation for 2022

The
following table provides information concerning the compensation paid to our non-executive directors for their services as members of
our board of directors for the year ended December 31, 2022. The information in the following table excludes any reimbursement of out-of-pocket
travel and lodging expenses which we may have paid.

The
awards with respect to which values are provided under the column “Option Awards” below are exclusively stock options, which
have realizable value only if they actually vest over time and to the extent, if any, that our stock price exceeds the applicable exercise
prices. The values provided below for these awards are based on applicable accounting standards, and do not necessarily reflect the actual
amounts realized or realizable pursuant to the underlying stock options.

Name | Fees earned or paid in cash (1) | Stock Awards ($) | Option Awards ($) (2) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All other Compensation ($) | Total ($)
Colleen DiClaudio | $ | 30,000 | $ | - | $ | 29,533 | $ | - | $ | - | $ | - | 59,533
Marc Savas | $ | 30,000 | $ | - | $ | 29,533 | $ | - | $ | - | $ | - | 59,533
Brock Pierce | $ | 30,000 | $ | - | $ | 29,533 | $ | - | $ | - | $ | - | 59,533
Robert Jordan | $ | 30,000 | $ | - | $ | 29,533 | $ | - | $ | - | $ | - | 59,533
1 | Reflects annual payment related
to board services rendered.
2 | Each member was granted 100,000
stock options, having a fair value of $29,533. The Company determined the fair value of these options (on the grant date) using a Black-Scholes
option pricing model. All options were fully vested in 2022. Each member resigned on July 13, 2023. All related options expired unexercised.
ITEM
12. | SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

BENEFICIAL
OWNERSHIP OF SHARES OF CLASS A COMMON STOCK

At
August 29, 2024, we had 29,150,262 shares of Class A common stock issued and outstanding. The following table sets forth information
known to us as of August 15, 2024 relating to the beneficial ownership of shares of our Class A common stock by:

● | each
person who is known by us to be the beneficial owner of 5% or more of any class of our voting securities;
● | Each
of our current directors and nominees;
41
● | each
of our current named executive officers; and
● | all
current named executive officers and directors as a group.

Beneficial
ownership is determined according to the rules of the SEC. Beneficial ownership means that a person has or shares voting or investment
power of a security and includes any securities that person or group has the right to acquire within 60 days after the measurement date.
This table is based on information supplied by officers, directors and principal shareholders. Except as otherwise indicated, we believe
that each of the beneficial owners of the common stock listed below, based on the information such beneficial owner has given to us,
has sole investment and voting power with respect to such beneficial owner’s shares, except where community property laws may apply.

Common Stock
Common Shares
Underlying
Common | Convertible | Percent of
Name and Address of Beneficial Owner(1) | Shares | Securities (2) | Total | Class (2)
Directors and named Executive Officers
Christopher Miglino | 967,575 | 330,000 | 1,297,575 | 4.45 | %
All directors and executive officers as a group (1 person) | 967,575 | 330,000 | 1,297,575 | 4.45 | %
Beneficial Owners of 5% or more
Percy Rockdale LLC (4) | 2,274,816 | - | 2,274,816 | 7.70 | %
* | Less
than one percent.
(1) | Except
as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in
the footnotes to this table. Unless otherwise indicated, the address of the beneficial owner is 1014 S. Westlake Blvd., Suite 14-299,
Westlake Village, CA 91361.
(2) | Pursuant
to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership includes any shares as to which a shareholder has sole or shared
voting power or investment power, and also any shares which the shareholder has the right to acquire within 60 days, including upon
exercise of common shares purchase options or warrants.
(3) | Disclosed
pursuant to Schedule 13(g) filed with the SEC on February 14, 2024. Address of beneficial owner is 595 Madison Avenue, 29 th Floor, New York, NY 10022. Shares are owned by Continental General Insurance Company (“GCIC”). Continental Insurance
Group, Ltd. (“CIG”), as the sole owner of CGIC may be deemed to be the beneficial owner and Continental General Holdings
LLC (“CGH”), as the sole owner of CIG may be deemed to be the beneficial owner. Michael Gorzynski, as the sole manager
of Percy Rockdale and as a manager and executive chairman of CGH, may be deemed beneficially own the shares.

EQUITY
COMPENSATION INFORMATION

Securities
Authorized for Issuance under Equity Compensation Plans

The
following table sets forth securities authorized for issuance under any equity compensation plans approved by our shareholders as well
as any equity compensation plans not approved by our stockholders as of December 31, 2022:

Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights(a) | Weighted average exercise price of outstanding options, warrants and rights ($) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
Plans approved by our stockholders (1):
2014 Equity Compensation Plan | 819,259 | $ | 2.39 | 780,741
2016 Equity Compensation Plan | 239,160 | $ | 1.99 | 2,392,357
Plans not approved by stockholders
N/A
(1) | 2012
Equity Compensation Plan expired on January 1, 2022.
42
ITEM
13. | CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Related
Party Transactions Procedure

We
review all known relationships and transactions in which SRAX and our directors, executive officers, and significant stockholders or
their immediate family members are participants to determine whether such persons have a direct or indirect interest. Our management,
in consultation with our outside legal consultants, determines based on specific fact and circumstances whether SRAX or a related party
has a direct or indirect interest in these transactions. In addition, our directors and executive officers are required to notify us
of any potential related party transactions and provide us with the information regarding such transactions.

If
it is determined that a transaction is a related party transaction, the Audit Committee must review the transaction and either approve
or disapprove it. In determining whether to approve or ratify a transaction with a related party, the Audit Committee will take into
account all of the relevant facts and circumstances available to it, including, among any other factors it deems appropriate:

● | the
benefits to us of the transaction;
● | the
nature of the related party’s interest in the transaction;
● | whether
the transaction would impair the judgment of a director or executive officer to act in the best interests of SRAX and our shareholders;
● | the
potential impact of the transaction on a director’s independence; and
● | whether
the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar
circumstances.

Any
member of the Audit Committee who is a related party with respect to a transaction under review may not participate in the deliberations
or vote on the approval of the transaction. As we presently only have one director, all related party transactions are reviewed by such
director.

Related
Party Transactions

Summarized
below are certain transactions and business relationships between SRAX and persons who are or were an executive officer, director or
holder of more than five percent of any class of our securities since January 1, 2021.

Information
regarding disclosure of an employment relationship or transaction involving an executive officer and any related compensation solely
resulting from that employment relationship or transaction is included in the Section of this Annual Report entitled “ Executive
Compensation .”

Information
regarding disclosure of compensation to a director for the year ended December 31, 2022 is included in the Section of this Annual Report
entitled “ Director Compensation. ”

● | The
Company subleased a suite at the Sofi Stadium in Los Angeles from an entity wholly owned by Christopher Miglino, our CEO. The sublease
is for a period of one (1) year, at a rate of $382,500, and commenced on the date that the stadium opened to the general public.
We believe that such annual rate is a discount from prevailing market rates and is less than the master lease rate. During May of
2022, the Company renewed the lease for four (4) additional National Football League seasons for average per year of approximately
$496,836 over four (4) years. This amount is a pass-through of the actual expenses incurred by our affiliate without markup. The
lease terminates in February 2026.
● | On
August 4, 2021, the Board declared a one-time bonus payment of $15,000 to all non-employee directors. As a result, the Company paid
an aggregate of $60,000 in bonuses.
● | On
October 29, 2021, the Compensation Committee amended the Company’s non-employee director compensation policy. The policy became
effective January 1, 2022 and is set forth below under the section entitled “Director Compensation”.
● | On
January 3, 2022, we issued four (4) common stock purchase options to our non-employee directors, pursuant to our amended non-employee
director compensation policy. Each option entitled the holder to purchase 29,533 shares of Class A Common Stock at an exercise price
of $4.35 per share, for an aggregate exercise amount of $128,468.55. The options vest in equal quarterly over a one (1) year period
from the issuance date. The options expire on the seven (7) year anniversary of the issuance date. Each option has a Black-Scholes
value of $100,000.
● | 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 has an exercise price of $4.25 per share, a term of seven (7) years and vests in equal quarterly
installments over a three (3) year period from the grant date. The option had a Black-Scholes value on the grant date of $330,821.
● | On
January 6, 2022, we issued Christopher Miglino, our Chief Executive Officer, an option to purchase 120,000 shares of Class A common
stock. The option has an exercise price of $4.25 per share, a term of seven (7) years and vests in equal quarterly installments over
a three (3) year period from the grant date. The option had a Black-Scholes value on the grant date of $396,986.
● | We
entered into certain agreements and transactions with BIGtoken, Inc. our former subsidiary since January 1, 2020. We owned more than
50% of the outstanding common stock of BIGtoken until November 1, 2021, upon the completion of a merger by BIGtoken with a third
party whereby SRAX ceased to be a majority owner of BIGtoken and Christopher Miglino and Michael Malone, were replaced as CEO and
CFO respectively, by management of the target in the merger. Additionally, on December 30, 2021, SRAX converted the common stock
of BIGtoken that it owned into a class of preferred stock of BIGtoken with no voting rights and a beneficial ownership limitation
of 4.99%. On June 30, 2022, Christopher Miglino resigned as a board member of BIGtoken and we had no further officers or directors
of SRAX performing any services for BIGtoken. The following represents transactions entered into between SRAX and BIGtoken since
January 1, 2021:
○ | Pursuant
to the divestiture of BIGtoken on February 4, 2021, we (i) entered into a share exchange agreement whereby we received 149,562,566,584
shares of common stock of BIGtoken (fka Force Protection Video Equipment Corp.) (ii) entered into a transition services agreement
with BIGtoken, (iii) entered into a master separation agreement with BIGtoken, and (iv) entered into a registration agreement with
BIGtoken with respect to the shares of common stock received pursuant to the exchange agreement.
○ | On
December 29, 2021 we exchanged our 149,562,566,584 shares of common stock of BIGtoken for 242,079 shares of Series D Preferred Stock
of BIGtoken, which (i) converts back into the same number of shares owned prior to the exchange, (ii) has a beneficial ownership
limitation of 4.99% (can be increased to 9.99% on 61 days notice), and (iii) is no-voting, except as required by law.
43
○ | On
February 11, 2022, we entered into a simple agreement for future equity (“SAFE”) with BIGtoken whereby we funded $300,000
and in March of 2022, we funded an additional $700,000. Upon BIGtoken completing an offering of its securities, amounts due under
the SAFE will convert, at our option, into shares of Series D Preferred Stock of BIGtoken. The SAFE additionally provides that we
will receive warrants to purchase Series D Preferred Stock of BIGtoken upon the completion of an equity financing.
○ | Between
December 2021 and March 31, 2022, we factored receivables of approximately $1.2 million for BIGtoken. As of June 30, 2022, $0.4 million
is due and payable to us from BIGtoken.
● | On
May 7, 2024, the Company entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with DNA Holdings
Venture, Inc., a Puerto Rico corporation (“DNA”), and DNA Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary
of SRAX (“Merger Sub”). Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement,
including approval of the transaction by DNA’s shareholders, Merger Sub will be merged with and into DNA (the “Merger”),
with DNA surviving the Merger as a wholly-owned subsidiary of the Company. Subject to the terms and conditions of the Merger Agreement,
as consideration for the Merger, SRAX shall issue to the shareholders of DNA 1,000 shares of a newly created Series C Convertible Preferred
Stock of the Company (the “Preferred Stock”), which shall be convertible into approximately 75.5% of the outstanding shares
of Common Stock of the Company upon closing of the Merger, which includes the approximately 35% of the Company which DNA owned prior
to the merger. Upon completion of the Merger, the Company will change its name to DNA Holdings Venture, Inc. Mr. Miglino, Chief Executive
Officer and sole director of the Company, serves as the Chief Executive Officer of DNA.
ITEM
14. | PRINCIPAL
ACCOUNTING FEES AND SERVICES.

The
following table summarizes the aggregate fees billed to us by our independent auditor for 2022 and 2021. All fees were paid to RBSM LLP
for the year ended December 31, 2021 and TAAD for the year ended December 31, 2022.

2021 | 2022
Audit Fees | $ | 342,500 | $ | 206,000
Audit-Related Fees | -
Tax Fees | -
All Other Fees | 45,000 | 123,600
Total | $ | 387,500 | $ | 329,600

Audit
Fees — This category includes the audit of our annual financial statements, review of financial statements included in our
Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection
with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as
a result of, the audit or the review of interim financial statements.

Audit-Related
Fees — This category consists of assurance and related services by the independent registered public accounting firm that are
reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit
Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities
and Exchange Commission and other accounting consulting.

Tax
Fees — This category consists of professional services rendered by our independent registered public accounting firm for tax
compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.

Pre-Approval
of Independent Auditor Services and Fees

Our
Board has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure,
the Audit Committee of the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject
to pre-approval by the Audit Committee. The audit and tax fees, and all other fees paid to the auditors with respect to 2021 and 2022
were pre-approved by the Audit Committee. RBSM LLP and TAAD did not provide any other services during 2021 and 2022, respectively, except
those listed above.

PART
IV

ITEM
15. | EXHIBITS,
FINANCIAL STATEMENT SCHEDULES.

Documents
filed as part of this report:

(1) | Financial
Statements. See Index to Consolidated Financial Statements appearing on page F-1.
(2) | Exhibits
Incorporated
by Reference
Filed/
Exhibit | Furnished | Exhibit | Filing
No. | Description | Herewith | Form | No. | File
No. | Date
2.01 | Asset Purchase Agreement dated February 3, 2023, by and between SRAX, Inc. and DNA Holdings, LLC | 8-K | 2.1 | 001-37916 | 2/9/2023
2.02
(1) | Agreement and Plan of Merger dated March 3, 2023 by and between SRAX, Inc., LD Micro, Inc., Freedom Holding Corp, Freedom US Markets, LLC and LDM Merger Sub, Inc. | 8-K | 2.1 | 001-37916 | 3/7/2023
2.03 | Agreement and Plan of Merger between SRAX, Inc., DNA Holdings Venture, Inc. and DNA Merger Sub, Inc. dated May, 2024 | 8-K | 1.01 | 001-37916 | 5/13/2024
3.01 | Certificate of Incorporation, filed on 8/3/11 | S-1 | 3.01(i) | 333-179151 | 1/24/12
3.02 | Certificate of Correction to Certificate of Incorporation, filed on 8/31/11 | S-1 | 3.01(ii) | 333-179151 | 1/24/12
3.03 | Certificate of Amendment to Certificate of Incorporation authorizing 1:5 reverse stock split | 8-K | 3.5 | 000-54996 | 9/19/16
3.04 | Certificate of Amendment to Certificate of Incorporation as Amended, effective 8/25/19 | 8-K | 3.01(i) | 001-37916 | 8/15/19
3.05 | Amended and Restated Bylaws of Social Reality, Inc. adopted March 27, 2019 | 8-K | 3.01(ii) | 001-37916 | 4/2/19
3.06 | Form of Certificate of Designation of preferences, Rights and Limitations of Series A Non-Voting Preferred Stock | 8-K | 3.01 | 001-37916 | 9/24/21
3.07 | Certificate of Validation and Certificate of Increase filed on January 31, 2022 | 8-K | 3.01(i) | 001-37916 | 2/2/2022
3.08 | Certificate of Designation of the Series B Non-Voting Convertible Preferred Stock | 8-K | 3.1 | 001-37916 | 2/9/2023
3.09 | Amended and Restated Certificate of Designation Series B Preferred Stock | 8-K | 3.1 | 001-37916 | 4/2/2024
3.10 | Certificate of Designation of the Series C Preferred Stock | 8-K | 5.03 | 001-37916 | 5/13/2024
4.01 | Specimen of Class A Common Stock Certificate | 8-A12B | 4.1 | 001-37916 | 10/12/16
4.02 | Class A Common Stock Purchase Warrant Issued to Investors in October 2014 | 8-K | 4.7 | 000-54996 | 11/4/14
4.03 | Warrant to Purchase Class A Common Stock issued October 30, 2014 | 8-K | 4.8 | 000-54996 | 11/4/14
4.04 | Class A Common Stock Warrant issued in September 2016 Offering | 8-K | 4.6 | 000-54996 | 10/6/16
4.05 | Form of Class A Common Stock Warrant | 8-K | 4.4 | 000-54996 | 10/24/13
4.06 | Class A Common Stock Warrant issued to T.R. Winston & Company issued 8/22/13 | 10-Q | 4.5 | 000-54996 | 11/13/13
4.07 | Form of Series B Common Stock Purchase Warrant issued in the January 2014 private placement | 8-K | 4.6 | 000-54966 | 1/27/14
4.08 | Class A Common Stock Warrant issued to Investors in September 2016 | 8-K | 4.6 | 000-54966 | 10/6/16
4.09 | Class A Common Stock Warrant issued to Investors in January 2017 Offering | 8-K | 4.1 | 001-37916 | 1/4/17
4.10 | Class A Common Stock Warrant issued to Investors in January 2017 Offering (2nd Warrant) | 8-K | 4.2 | 001-37916 | 1/4/17
4.11 | Class A Common Stock Placement Agent Warrant issued in January 2017 Offering | 8-K | 4.3 | 001-37916 | 1/4/17
4.12 | Class A Common Stock Placement Agent Warrant issued in October 2016 Offering | 10-K | 4.12 | 001-37916 | 3/31/17
4.13 | Class A Common Stock Warrant issued in Leapfrog Media Trading Acquisition | 10-K | 4.13 | 001-37916 | 4/2/18
4.14 | Form of 12.5% Secured Convertible Debenture issued in April 2017 Offering | 8-K | 4.2 | 001-33672 | 4/21/17
4.15 | Class A Common Stock Warrant issued in April 2017 Offering | 8-K | 4.1 | 001-33672 | 4/21/17
4.16 | Form of Class A Common Stock Placement Agent Warrant issued in April 2017 Offering | 8-K | 4.3 | 001-33672 | 4/21/17
45
4.17** | 2016 Equity Compensation Plan | Def 14A | A | 001-37916 | 1/20/17
4.18** | 2014 Equity Compensation Plan | 8-K | 10.33 | 000-54996 | 11/10/14
4.19** | 2012 Equity Compensation Plan | S-1 | 4.02 | 333-179151 | 1/24/12
4.20 | Intentionally Left Blank
4.21 | Intentionally Left Blank
4.22 | Intentionally Left Blank
4.23 | Class A Common Stock Warrant Issued to Investors and Placement Agents in October 2017 Offering | 8-K | 4.02 | 001-37916 | 10/27/17
4.24 | Form of Placement Agent Warrant from April 2019 Offering | 8-K | 4.01 | 001-37916 | 4/10/19
4.25 | Form of Series A Common Stock Warrant from August 2019 Offering | 8-K | 4.01 | 001-37916 | 8/14/19
4.26 | Form of Series B and Series C Common Stock Warrant from August 2019 Offering | 8-K | 4.02 | 001-37916 | 8/14/19
4.27 | Form of Placement Agent Warrant from August 2019 Offering | 8-K | 4.03 | 001-37916 | 8/14/19
4.28 | Form of Class A common stock purchase warrant issued in February 2020 Offering | 8-K | 4.01 | 001-37916 | 3/5/20
4.29 | Form of Original Issue Discount Senior Secured Convertible Debenture from June 2020 Offering | 8-K | 4.01 | 001-37916 | 6/30/20
4.30 | Form of Warrant from June 2020 Offering | 8-K | 4.02 | 001-37916 | 6/30/20
4.31 | Form of Placement Agent Warrant from June 2020 Offering | S-3 | 4.06 | 333-240270 | 7/31/20
4.32 | Form of Original Issue Discount Convertible Debenture dated November 2, 2023 | 8-K | 4.01 | 001-37916 | 11/6/2023
4.33 | Form of Stock Purchase Warrant dated November 2, 2023 | 8-K | 4.02 | 001-37916 | 11/6/2023
4.34 | Form of Original Issue Discount Convertible Debenture dated March 5, 2024 | 8-K | 4.01 | 001-37916 | 3/6/2024
4.35 | Form of Original Issue Discount Convertible Debenture dated dated March 29, 2024 | 8-K | 4.01 | 001-37916 | 4/3/2024
10.01 | Purchase Agreement among Richard Steel, Steel Media, and Social Reality, dated 10/30/14 | 8-K | 2.1 | 000-54996 | 11/4/14
10.02 | Asset Purchase Agreement with LeapFrog Media Trading dated 4/20/17 | 10-K | 10.02 | 001-37916 | 4/2/18
10.03 | Amendment to Asset Purchase Agreement with Leapfrog Media Trading dated 8/17/17 | 10-K | 10.03 | 001-37916 | 4/2/18
10.04 | Transition Services Agreement in Leapfrog Media Trading Transaction | 10-K | 10.04 | 001-37916 | 4/2/18
10.05 | Sample Leakout Agreement in Leapfrog Media Trading Transaction | 10-K | 10.05 | 001-37916 | 4/2/18
10.06 | Form of Securities Purchase Agreement for April 2017 Offering | 8-K | 10.1 | 001-37916 | 4/21/17
10.07 | Form of Security Agreement for April 2017 Offering | 8-K | 10.2 | 001-37916 | 4/21/17
10.08 | Form of Registration Rights Agreement for April 2017 Offering | 8-K | 10.3 | 001-37916 | 4/21/17
10.09 | Form of Securities Purchase Agreement for October 2017 Offering | 8-K | 10.01 | 001-37916 | 10/27/17
46
10.10** | Employment Agreement with Christopher Miglino dated 1/1/12 | S-1 | 10.01 | 333-179151 | 1/24/12
10.11** | Form of Proprietary Information, Inventions and Confidentiality Agreement | S-1 | 10.03 | 333-179151 | 1/25/12
10.12** | Form of Indemnification Agreement with Officers and Directors | S-1 | 10.04 | 333-179151 | 1/25/12
10.13 | Services Agreement with Servicios y Asesorias Planic, S.A. de cv dated 1/25/13 | 10-K | 10.9 | 000-54996 | 3/31/15
10.14 | Financing and Security Agreement with FastPay Partners, LLC | 8-K | 10.41 | 000-54996 | 9/23/16
10.15 | Securities Purchase Agreement for January 2017 Offering | 8-K | 10.1 | 001-37916 | 1/4/17
10.16 | Placement Agent Agreement for January 2017 Offering with Chardan Capital Markets | 8-K | 10.2 | 001-37916 | 1/4/17
10.17 | Letter Agreement dated 1/5/17 | 10-K | 10.35 | 001-37916 | 3/31/17
10.18 | Insider Trading Policy adopted as of 2/23/16 | 10-K | 10.36 | 001-37916 | 3/31/17
10.19 | Form of Securities Purchase Agreement for April 2019 Offering | 8-K | 10.01 | 001-37916 | 4/10/19
10.20 | Form of Placement Agent Agreement from April 2019 Offering | 8-K | 10.02 | 001-37916 | 4/10/19
10.21 | Form of Securities Purchase Agreement from August 2019 Offering | 8-K | 10.01 | 001-37916 | 8/14/19
10.22 | Form of First Placement Agent Agreement from August 2019 Offering | 8-K | 10.02 | 001-37916 | 8/14/19
10.23 | Form of Second Placement Agent Agreement from August 2019 Offering | 8-K | 10.03 | 001-37916 | 8/14/19
10.24 | Form of Term Loan and Security Agreement from February 2020 Offering | 8-K | 10.01 | 001-37916 | 3/5/20
10.25 | Form of Intellectual Property Security Agreement from February 2020 Offering | 8-K | 10.01 | 001-37916 | 3/5/20
10.26 | Form of Securities Purchase Agreement from June 2020 Offering | 8-K | 10.01 | 001-37916 | 6/30/20
10.27 | Form of Registration Rights Agreement from June 2020 Offering | 8-K | 10.02 | 001-37916 | 6/30/20
10.28 | Form of Security Agreement from June 2020 Offering | 8-K | 10.03 | 001-37916 | 6/30/20
10.29 | Agreement and Plan of Merger dated September 4, 2020 between SRAX, Inc., Townsgate Merger Sub 1, and LD Micro, Inc. | 8-K | 10.01 | 001-37916 | 9/11/20
10.30 | Lock-up agreement dated September 4, 2020 between SRAX and Christopher Lahiji | 8-K | 10.02 | 001-37916 | 9/11/20
10.31 | Voting Proxy Agreement dated September 4, 2020 between SRAX and Christopher Lahiji | 8-K | 10.03 | 001-37916 | 9/11/20
10.32 | Employment Agreement between SRAX and Christopher Lahiji Dated September 4, 2020 | 8-K | 10.04 | 001-37916 | 9/11/20
10.33 | Unit Redemption Agreement dated October 30, 2020 between SRAX and Halyard MD, LLC | 8-K | 10.01 | 001-37916 | 11/3/20
10.34 | Unit Redemption Agreement dated October 30, 2020 between SRAX and MD CoInvest, LLC | 8-K | 10.02 | 001-37916 | 11/3/20
10.35 | Share Exchange Agreement between SRAX, Force Protection Video Equipment Corp, and Paul Feldman, dated September 30, 2020 | 8-K | 10.01 | 001-37916 | 10/4/20
10.36 | Exchange Agreement with FPVD dated December 29, 2021 | 8-K | 10.01 | 001-37916 | 12/30/21
10.37 | Form of Contingent Value Right Agreement dated June 13, 2022 | 10-K | 10.37 | 001-37916 | 10/12/2022
10.38 | Form of Bridge Note dated July 1, 2022 | 10-K | 10.38 | 001-37916 | 10/12/2022
10.39 | Form of Safe entered into with BIGtoken on February 11, 2022 | 10-K | 10.39 | 001-37916 | 10/12/2022
47
10.40 | Form of Revolving Note from August 2022 Senior Secured Revolving Credit Facility | 8-K | 4.01 | 001-37916 | 8/12/22
10.41 | Form of Credit Agreement from August 2022 Senior Secured Revolving Credit Facility | 8-K | 10.01 | 001-37916 | 8/12/22
10.42 | Form of Guaranty Agreement from August 2022 Senior Secured Revolving Credit Facility | 8-K | 10.02 | 001-37916 | 8/12/22
10.43 | Form of Security Agreement (SRAX) from August 2022 Senior Secured Revolving Credit Facility | 8-K | 10.03 | 001-37916 | 8/12/22
10.44 | Form of Security Agreement (LD Micro) from August 2022 Senior Secured Credit Facility | 8-K | 10.04 | 001-37916 | 8/12/22
10.45 | Form of Patent Security Agreement from August 2022 Senior Secured Revolving Credit Facility | 8-K | 10.05 | 001-37916 | 8/12/22
10.46 | Form of Trademark Security Agreement from August 2022 Senior Secured Revolving Credit Facility | 8-K | 10.06 | 001-37916 | 8/12/22
10.47 | Form of Pledge and Escrow Agreement from August 2022 Senior Secured Revolving Credit Facility | 8-K | 10.07 | 001-37916 | 8/12/22
10.48 | Form of Registration Rights Agreement from August 2022 Senior Secured Revolving Credit Facility | 8-K | 10.08 | 001-37916 | 8/12/22
10.49 | Form of Fee Letter from August 2022 Senior Secured Revolving Credit Facility | 8-K | 10.09 | 001-37916 | 8/12/22
10.50 | Bill of Sale and Assignment and Assumption Agreement dated February 3, 2023, by and between SRAX, Inc. and DNA Holdings, LLC | 8-K | 10.1 | 001-37916 | 2/9/2023
10.51 | Lock Up Agreement dated February 3, 2023 by and between SRAX, Inc. and DNA Holdings, LLC | 8-K | 10.2 | 001-37916 | 2/9/2023
10.52 | Amendment
and Waiver Agreement dated February 2, 2023 by and between SRAX, Inc. and the Signatories Thereto | 8-K | 10.3 | 001-37916 | 2/9/2023
10.53
(2) | Sponsorship Agreement dated March 3, 2023 by and between SRAX, Inc. and LD Micro, Inc. | 8-K | 10.1 | 001-37916 | 3/7/2023
10.54 | Consent, Waiver and Release Agreement dted March 1, 2023 by and between SRAX, Inc., LD Micro, Inc. and ATW Oppurtunities Master Fund II, LP | 8-K | 10.2 | 001-37916 | 3/7/2023
10.55 | Offer Letter entered with Alan Urban dated March 14, 2023 | 8-K | 10.1 | 001-37916 | 3/21/2023
10.56 | Form of Securities Purchase Agreement dated November 6, 2023 | 8-K | 10.01 | 001-37916 | 11/6/2023
10.57 | Form of Securities Purchase Agreement dated March 5, 2024 | 8-K | 10.01 | 001-37916 | 3/6/2024
10.58 | Form of Securities Purchase Agreement dated March 29, 2024 | 8-K | 10.01 | 001-37916 | 4/3/2024
14.01 | Code of Ethics and Conduct | S-1/A | 99.1 | 001-37916 | 6/4/12
21.01 | Subsidiaries of Registrant | 10-K | 21.1 | 001-37916 | 10/12/2022
31.1 | Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | *
32.1 | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. § 1350 | *
101.INS | Inline
XBRL Instance Document | *
101.SCH | Inline
XBRL Taxonomy Extension Schema | *
101.CAL | Inline
XBRL Taxonomy Extension Calculation Linkbase | *
101.DEF | Inline
XBRL Taxonomy Extension Definition Linkbase | *
101.LAB | Inline
XBRL Taxonomy Extension Label Linkbase | *
101.PRE | Inline
XBRL Taxonomy Extension Presentation Linkbase | *
* | Filed
herein
** | Management
contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.
(1) | The
schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K and the Company agrees to furnish supplementally
to the SEC a copy of any omitted schedules or exhibits upon request
(2) | In
accordance with Item 601(b)(10)(iv) of Regulation S-K, certain information (indicated by “[***]”) has been excluded from
this exhibit.
ITEM
16. | FORM
10-K SUMMARY.

None.

SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

SRAX,
Inc.
September
20, 2024 | By: | /s/
Chris Miglino
Chris
Miglino, Chief Executive Officer and Chief Financial Officer

POWER
OF ATTORNEY

Each
person whose signature appears below hereby constitutes and appoints Christopher Miglino his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) and supplements to this report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact
and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or
his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.

SRAX,
Inc. and Subsidiaries

Page(s)
Report of Independent Registered Public Accounting Firm | F-2
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 5854 ) | F-3
Consolidated Balance Sheets | F-6
Consolidated Statements of Operations | F-7
Consolidated Statements of Changes in Stockholders’ Equity | F-8
Consolidated Statements of Cash Flows | F-9
Notes to Consolidated Financial Statements | F-11 - F-83
F- 1

REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Shareholders of SRAX, Inc.

Opinion
on the Financial Statements

We
have audited the accompanying consolidated balance sheet of SRAX, Inc. (the “Company”), as of December 31, 2021, and the
related consolidated statements of operations, stockholders’ equity and cash flows for each of the year ended December 31, 2021
and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the
results of its operations and its cash flows for each of the year ended December 31, 2021, in conformity with accounting principles generally
accepted in the United States of America.

Substantial
Doubt about the Company’s Ability to Continue as a Going Concern

The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the consolidated financial statements, the Company has recurring losses from operations, limited cash flow, and an accumulated
deficit. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s
plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustment that
might result from the outcome of this uncertainty. Our opinion was not modified with respect to that matter.

Basis
for Opinion

These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The company
is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. As
part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose
of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express
no such opinion.

Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.

/s/
RBSM, LLP

We
served as the Company’s auditor from 2011 till 2022

RBSM
LLP

New
York, NY October 12, 2022

PCAOB
ID: 587

New
York, NY Washington DC, Las Vegas, NV, San Francisco, CA,

Athens GRE, Beijing, CHN, Mumbai and Pune IND

Member
of ANTEA International with affiliated offices worldwide

F- 2

REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and

Stockholders of SRAX, Inc.

Opinion
on the Financial Statements

We
have audited the accompanying consolidated balance sheet of SRAX, Inc. (the Company) as of December 31, 2022, and the related consolidated
statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2022, and the related
notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the
year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Substantial
Doubt about the Company’s Ability to Continue as a Going Concern

The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
2 to the financial statements, the Company has an accumulated deficit, a working capital deficit and negative cash flows from operations.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s
plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.

Basis
for Opinion

These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose
of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express
no such opinion.

Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.

Critical
Audit Matters

The
critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

F- 3

Valuation of Transaction Price

The Company’s financial reporting
process involves determining the estimated fair value of the marketable securities received as consideration for services rendered
to the Company’s customers. The transaction price is determined based on the consideration to which the Company will be
entitled to receive in exchange for transferring goods or services to the customer. We
identified the valuation of transaction pricing for marketable securities and convertible debts as a critical audit
matter.

For
marketable securities, the Company used an external consultant (the “Company’s specialist”) to provide guidance
and assistance to the Company’s management in developing the assumptions, inputs, discounted cash flow, pricing models
utilized in the Put Option Pricing Models (POPMs) used in the calculations to determine the conversion features and discounts at the
contracts’ inception dates and each of the respective balance sheet dates for financial statement reporting purposes in order
to comply with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 320, Investments
– Debt and Equity Securities and FASB Accounting Standards Update (ASU) No. 2016-01, Financial Instruments – Overall
(Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities, and ASC 820, Fair Values.

For
convertible debt securities the Company valued the debt component and the stock option component separately and summed the results to
arrive at the fair value of the convertible debts. The Company utilized Damodaran’s Synthetic Credit Rating as of January 2022
as published by New York University to determine the appropriate market yield for each company. This publication provides a credit spread
for different levels of interest coverage. The yield derived through this analysis was utilized to discount the expected cash flows of
the debt to determine the Fair Value of the debt component of the Convertible Debenture. To determine the Fair Value of the embedded
options in the convertible debts and warrants, the Company utilized Black-Scholes Option Pricing model as the method is generally accepted
and is well understood. Like the valuation of the warrants as described in the previous section, the Black-Scholes Option Pricing model
requires certain inputs in order to calculate an indicated value of an option or warrant.

Equity
securities were valued using the quoted prices times the number of shares acquired. The securities are then evaluated based on their
marketability (usually based on the restrictions on resale into the securities primary market) and liquidity. For convertible
preferred stock with no dividends, and an expiration date the Company converts them at the closing market price on the day
of conversion. As a result of these features, these securities were valued as if converted and are subject to appropriate discounts
for lack of marketability applied at the relevant dates of value.

How
the Critical Audit Matter Was Addressed in the Audit

Addressing
the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. Our audit procedures related to the Company’s determination of the investment valuation included the following,
among others:

● | Assessed the knowledge, skill, and ability of the Company's specialist and the specialist's relationship to the Company. Reviewed the objectives and scope and evaluated the work of the Company’s specialist.
● | Evaluated appropriateness of a discount for lack of marketability using historical average daily trading volumes in conjunction with the estimated shares that can be transacted per day in order to determine the average expected days to sell securities. We used data from an external source, and evaluated the relevance and reliability of such data, and included historical stock prices and historical trading activity.
● | With the assistance of an auditor-engaged valuation specialist, we tested the methodology and assumptions used in the valuation provided by the Company such as reasonableness of their methodology to determine the discount for lack of marketability and performed independent recalculations.
F- 4
● | Tested
proper classification of investment valuations within the Fair Value Hierarchy as set forth
in ASC 820.
● | We
tested the specific assumptions that were in the model including the stock price of the securities,
volatility of the securities, the risk-free rate of interest, dividend yield, and the time-to-maturity
(holding period). The assumptions used in the time-adjusted analysis include the evaluation
of the Company’s holdings based on historical trading data.
● | With
the assistance of an external valuation specialist, we identified and tested the assumptions
used by the Company which were significant assumptions to the accounting estimate. These
included active market or inactive market, marketability – restrictions on resale,
liquidity – estimated days to liquidate, and volatility.
● | We
evaluated the collectability of the convertible debts and appropriateness of Company’s
impairment policy.

Revenue
Recognition

As
described in Note 3 to the consolidated financial statements, the Company derives its revenues primarily from annual contracts which
include subscription fees earned from customers accessing the platform and managed services. The Company accounts for revenue contracts
with customers by applying the requirements of ASC 606, Revenue from Contracts with Customers. The Company’s subscription agreements
generally have annual contractual terms and are billed in advance and the amounts are non-refundable. Revenues are recognized ratably
over the related contractual term beginning on the date that the platform is made available to a customer. The Company recognizes revenues
ratably because the customer receives and consumes the benefits of the platform throughout the contractual period. For the year ended
December 31, 2022, the Company’s revenue was $27.9 million.

We
identified revenue recognition as a critical audit matter. The principal considerations for our determination that performing procedures
relating to revenue recognition involved a high degree of audit effort in performing audit procedures and evaluating audit evidence related
to the Company’s revenue recognition.

How
the Critical Audit Matter Was Addressed in the Audit

Addressing
the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. Our audit procedures related to the Company’s determination of revenue recognition for contracts accounted
for over time included the following, among others:

● | Performed
inquiry and walkthrough to understand the service delivery process.
● | Tested
revenue transactions on a sample basis by tracing revenue transactions to source documents,
including customer contracts, orders, invoices, marketable securities received and cash receipts,
where applicable.
● | Tested
management’s identification of distinct performance obligations in the contract and
determined whether they are highly interdependent and interrelated.
● | Tested
the completeness and accuracy of data provided by management.
● | Tested
the mathematical accuracy of management’s calculation of revenue and deferred revenue
for the performance obligation.
/s/ TAAD LLP
We
have served as the Company’s auditor since 2023.
Diamond
Bar, CA
September
20, 2024
F- 5

CONSOLIDATED
BALANCE SHEETS

December
31, 2022 | December
31, 2021
Assets
Current
Assets
Cash and cash
equivalents | $ | 7,000 | $ | 1,348,000
Accounts receivable - net | 157,000 | 821,000
Contracts receivable | 328,000 | 844,000
Marketable securities | 7,931,000 | 15,617,000
Designated assets for return
of capital | 100,000 | 3,925,000
Due from related party | 263,000 | -
Prepaids and other | 67,000 | 430,000
Total Current
Assets | 8,853,000 | 22,985,000
Other Assets
Marketable securities | 1,255,000 | -
Designated assets for return
of capital | 70,000 | -
Note receivable | - | 935,000
Property and equipment - net | 59,000 | 114,000
Intangible assets - net | - | 1,443,000
Operating lease - right of
use asset - net | 127,000 | 257,000
Other | - | 36,000
Goodwill | 7,706,000 | 17,906,000
Total Other
Assets | 9,217,000 | 20,691,000
Total Assets | $ | 18,070,000 | $ | 43,676,000
Liabilities
and Stockholders’ Equity (Deficit)
Current
Liabilities
Accounts payable and accrued
expenses | $ | 10,453,000 | $ | 4,095,000
Accounts payable and accrued
expenses - related party | 159,000 | -
Deferred revenue | 7,367,000 | 12,859,000
Other current liabilities | 1,451,000 | 633,000
Payroll protection loan payable | - | 10,000
Operating lease liability | 114,000 | 130,000
Convertible notes payable
- net | 1,181,000 | 1,164,000
Series A, redeemable preferred
stock | 994,000 | 3,925,000
Total Current
Liabilities | 21,719,000 | 22,816,000
Long Term
Liabilities
Senior secured revolving credit
facility - net | 5,600,000 | -
Operating lease liability | - | 114,000
Total Long
Term Liabilities | 5,600,000 | 114,000
Total Liabilities | 27,319,000 | 22,930,000
Stockholders’
Equity (Deficit)
Series A, Preferred stock,
$ 0.001 par value, 50,000,000 shares authorized, 36,462,417 shares issued and outstanding, respectively | - | -
Class A, common stock, $ 0.001 par value, 250,000,000 shares authorized, 26,323,579 and 25,995,172 shares issued and outstanding, respectively | 26,000 | 26,000
Class B, common stock, $ 0.001 par value, 9,000,000 shares authorized, none issued and outstanding,
respectively | - | -
Additional paid-in capital | 52,718,000 | 51,075,000
Accumulated deficit | ( 61,993,000 | ) | ( 30,355,000 | )
Total Stockholders’
Equity (Deficit) | ( 9,249,000 | ) | 20,746,000
Total Liabilities
and Stockholders’ Equity (Deficit) | $ | 18,070,000 | $ | 43,676,000

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

F- 6

CONSOLIDATED
STATEMENTS OF OPERATIONS

For
the Year Ended December 31,
2022 | 2021
Revenues | $ | 27,859,000 | $ | 26,707,000
Costs and
expenses
Cost of revenues | 9,413,000 | 6,521,000
Depreciation and amortization | 417,000 | 842,000
General and administrative
expenses | 14,026,000 | 19,429,000
Total costs
and expenses | 23,856,000 | 26,792,000
Income
(loss) from operations | 4,003,000 | ( 85,000 | )
Other income
(expense)
Interest expense | ( 4,391,000 | ) | ( 10,295,000 | )
Impairment - goodwill | ( 10,200,000 | ) | -
Impairment - intangibles | ( 1,481,000 | ) | -
Impairment - property and
equipment | ( 41,000 | ) | -
Impairment - marketable securities | ( 3,664,000 | ) | -
Loss on sale of note receivable | ( 47,000 | ) | -
Realized gain (loss) - marketable
securities | ( 8,799,000 | ) | 804,000
Unrealized gain (loss) - marketable
securities | ( 3,792,000 | ) | ( 7,904,000 | )
Change in fair value - contract
assets | ( 1,504,000 | ) | -
Realized gain (loss) - designated
assets | ( 1,803,000 | ) | ( 84,000 | )
Unrealized loss - designated
assets | ( 762,000 | ) | ( 2,378,000 | )
Change in fair value - preferred
stock | 2,566,000 | 2,462,000
Make-whole provision | ( 240,000 | ) | -
Interest income | 12,000 | 42,000
Other income (expense) | ( 1,495,000 | ) | 1,144,000
Total other
income (expense) - net | ( 35,641,000 | ) | ( 16,209,000 | )
Loss from
continuing operations before provision for income tax benefit (expense) | ( 31,638,000 | ) | ( 16,294,000 | )
Provision for income tax benefit
(expense) | - | 127,000
Loss from
continuing operations | ( 31,638,000 | ) | ( 16,167,000 | )
Discontinued
operations
Loss on discontinued operations
- net of tax benefits | - | ( 14,376,000 | )
Loss on disposal of subsidiary | - | ( 10,684,000 | )
Loss from
discontinued operations | - | ( 25,060,000 | )
Net loss including non-controlling
interest | ( 31,638,000 | ) | ( 41,227,000 | )
Net loss attributable to non-controlling
interest in discontinued operations | - | ( 6,465,000 | )
Net loss attributable to SRAX,
Inc. | $ | ( 31,638,000 | ) | $ | ( 34,762,000 | )
Net loss
per share attributable to SRAX, Inc. - basic and diluted
Continuing operations | $ | ( 1.21 | ) | $ | ( 0.69 | )
Discontinued operations | - | ( 1.06 | )
Net loss
per share - basic and diluted | $ | ( 1.21 | ) | $ | ( 1.75 | )
Weighted average number of
shares outstanding - basic and diluted | 26,247,709 | 23,550,744

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

F- 7

CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

YEAR
ENDED DECEMBER 31, 2022

Series
A Preferred Stock | Common
Stock - Class A | Common
Stock - Class B | Additional Paid-in | Accumulated | Total
Stockholders’
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity
(Deficit)
December 31,
2021 | - | $ | - | 25,995,172 | $ | 26,000 | - | $ | - | $ | 51,075,000 | $ | ( 30,355,000 | ) | $ | 20,746,000
Share based compensation (benfit)
- employees | - | - | - | - | - | - | ( 156,000 | ) | - | ( 156,000 | )
Shares issued for exercise of employee options | - | - | 65,729 | - | - | - | - | - | -
Shares issued for cashless
exercise of employee options - net of taxes - related party | 58,124 | - | - | - | ( 101,000 | ) | - | ( 101,000 | )
Exercise of warrants (cashless) | - | - | 195,525 | - | - | - | - | - | -
Exercise of warrants | - | - | 8,401 | - | - | - | 32,000 | - | 32,000
Warrant modification expense | - | - | - | - | - | - | 1,788,000 | - | 1,788,000
Stock issued for loan breakup
fee | - | - | 33,000 | - | - | - | 80,000 | - | 80,000
True up adjustment related
to actual shares cancelled | - | - | ( 32,372 | ) | - | - | - | - | - | -
Net loss | - | - | - | - | - | - | - | ( 31,638,000 | ) | ( 31,638,000 | )
December
31, 2022 | - | $ | - | 26,323,579 | $ | 26,000 | - | $ | - | $ | 52,718,000 | $ | ( 61,993,000 | ) | $ | ( 9,249,000 | )

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

F- 8

CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

YEAR
ENDED DECEMBER 31, 2021

Series
A Preferred Stock | Common
Stock - Class A | Common
Stock - Class B | Additional Paid-in | Accumulated | Non-Controlling | Total Stockholder’
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Equity
December
31, 2020 | - | $ | - | 16,145,778 | $ | 16,000 | - | $ | - | $ | 69,551,000 | $ | ( 50,342,000 | ) | $ | - | $ | 19,225,000
Stock based compensation | - | - | - | - | - | - | 1,006,000 | - | - | 1,006,000
Stock issued for cash | - | - | 53,616 | - | - | - | 284,000 | - | - | 284,000
Conversion of debt to equity | - | - | 3,122,167 | 3,000 | - | - | 5,971,000 | - | - | 5,974,000
Stock issued in connection
with exercise of warrants - net of offering costs | - | - | 6,828,611 | 7,000 | - | - | 15,945,000 | - | - | 15,952,000
Warrants issued as an inducement
to exercise warrants | - | - | - | - | - | - | 7,737,000 | - | - | 7,737,000
Acquisition of non-controlling
interest of FPVD | - | - | - | - | - | - | - | - | ( 95,000 | ) | ( 95,000 | )
Warrants issued by FPVD for
SRAX, Inc. debt | - | - | - | - | - | - | - | - | 885,000 | 885,000
Series B convertible preferred
stock issued by FPVD | - | - | - | - | - | - | - | - | 5,860,000 | 5,860,000
Beneficial converstion feature
- FPVD Series B convertible preferred stock | - | - | - | - | - | - | - | - | 5,860,000 | 5,860,000
Dividends on preferred stock | - | - | - | - | - | - | ( 6,387,000 | ) | - | - | ( 6,387,000 | )
Disposition of subsidiary | - | - | - | - | - | - | ( 42,239,000 | ) | 54,749,000 | ( 6,045,000 | ) | 6,465,000
Repurchase and retirement
of shares | - | - | ( 155,000 | ) | - | - | - | ( 793,000 | ) | - | - | ( 793,000 | )
Net loss attributable to SRAX,
Inc. | - | - | - | - | - | - | - | ( 34,762,000 | ) | - | ( 34,762,000 | )
Net loss
attributable to noncontrolling interest in discontinued operations | - | - | - | - | - | - | - | - | ( 6,465,000 | ) | ( 6,465,000 | )
December
31, 2021 | - | $ | - | 25,995,172 | $ | 26,000 | - | $ | - | $ | 51,075,000 | $ | ( 30,355,000 | ) | $ | - | $ | 20,746,000

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

F- 9

CONSOLIDATED
STATEMENTS OF CASH FLOWS

For
the Year Ended December 31,
2022 | 2021
Operating
activities
Net loss | $ | ( 31,638,000 | ) | $ | ( 41,227,000 | )
Less: net loss from discontinued
operations - net of tax | - | ( 25,060,000 | )
Loss from continuing operations | ( 31,638,000 | ) | ( 16,167,000 | )
Adjustments to reconcile net
loss to net cash used in operations
Impairment
- goodwill | 10,200,000 | -
Impairment
- intangibles | 1,481,000 | -
Impairment
- property and equipment | 41,000 | -
Impairment
- marketable securities | 3,664,000 | -
Loss on
sale of note receivable | 47,000 | -
Realized
gain (loss) - marketable securities | 8,799,000 | ( 804,000 | )
Unrealized
gain (loss) - marketable securities | 6,020,000 | 7,904,000
Change
in fair value - contract assets | 1,504,000 | -
Realized
loss - designated assets | 1,803,000 | 84,000
Unrealized
loss - designated assets | 762,000 | 2,378,000
Change
in fair value - preferred stock | ( 2,566,000 | ) | ( 2,462,000 | )
Forgiveness
of payroll protection loan | ( 10,000 | ) | ( 1,116,000 | )
Warrants
issued by FPVD for SRAX, Inc. debt | - | 885,000
Warrants
issued as an inducement to exercise warrants | - | 7,737,000
Marketable
securities received for accounts receivable previously written off | - | ( 409,000 | )
Amortization
of right-of-use assets | 130,000 | 163,000
Amortization
of debt discount/debt issue costs | 218,000 | 854,000
Stock
based compensation | ( 156,000 | ) | 1,006,000
Bad debt
expense (recovery) | 119,000 | ( 20,000 | )
Depreciation
and amortization of intangible assets | 417,000 | 919,000
Interest
expense incurred in connection with non-cash increase of debt | 165,000 | 268,000
Stock
issued for loan breakup fee | 80,000 | -
Warrant
modification expense | 1,788,000
Changes in operating assets
and liabilities
(Increase)
decrease in
Accounts
receivable | 545,000 | 1,680,000
Contracts
receivable | ( 988,000 | ) | -
Due from
related party | ( 263,000 | ) | -
Prepaid
and other | 399,000 | ( 820,000 | )
Designated
assets for return of capital | 684,000 | -
Note receivable | ( 12,000 | ) | ( 42,000 | )
Increase
(decrease) in
Accounts
payable and accrued expenses | 6,358,000 | 3,278,000
Accounts
payable and accrued expenses - related party | 159,000 | -
Deferred
revenue | ( 22,765,000 | ) | ( 20,669,000 | )
Deferred
income tax liability | - | ( 131,000 | )
Other | 818,000 | 350,000
Operating
lease liability | ( 130,000 | ) | ( 183,000 | )
Net cash used in operating
activities - continuing operations | ( 12,327,000 | ) | ( 15,317,000 | )
Net cash used in operating
activities - discontinued operations | - | ( 8,118,000 | )
Net cash
used in operating activities | ( 12,327,000 | ) | ( 23,435,000 | )
Investing
activities
Proceeds from sale of marketable
securities | 5,221,000 | 8,666,000
Proceeds from sale of designated
assets | 506,000 | 686,000
Proceeds from sale of note
receivable | 900,000 | -
Purchase of marketable securities | - | ( 1,450,000 | )
Payment for deferred consideration
to LD Micro, Inc. | - | ( 3,004,000 | )
Acquisition of property and
equipment | ( 53,000 | ) | ( 69,000 | )
Acquisition of intangible
assets | ( 388,000 | ) | ( 798,000 | )
Other | - | ( 33,000 | )
Net cash used provided by
investing activities - continuing operations | 6,186,000 | 3,998,000
Net cash provided by investing
activities - discontinued operations | - | 841,000
Net cash
provided by investing activities | 6,186,000 | 4,839,000
Financing
activities
Proceeds from senior secured
revolving facility | 5,450,000 | -
Repayments of convertible
notes payable | ( 216,000 | ) | -
Proceeds from common stock
units issued for cash | - | 284,000
Proceeds from exercise of
common stock warrants | 32,000 | 15,952,000
Payment of shares - cashless
exercise of employee options - net of taxes - related party | ( 101,000 | ) | -
Repurchase of common stock | - | ( 793,000 | )
Payment of Series A, preferred
stock distribution | ( 365,000 | ) | -
Net cash provided by financing
activities - continuing operations | 4,800,000 | 15,443,000
Net cash provided by financing
activities - discontinued operations | - | 4,736,000
Net cash
provided by financing activities | 4,800,000 | 20,179,000
Net increase in cash, cash
equivalents and restricted cash | ( 1,341,000 | ) | 1,583,000
Cash, cash equivalents and
board designated restricted cash - beginning of year | 1,348,000 | 451,000
Cash, cash equivalents and
board designated restricted cash - end of year | 7,000 | 2,034,000
Cash reserved for designated
asset return of capital | - | ( 686,000 | )
Cash and
cash equivalents | $ | 7,000 | $ | 1,348,000
Supplemental
disclosure of cash flow information
Cash paid for interest | $ | 222,326 | $ | -
Cash paid for income tax | $ | - | $ | -
Supplemental
disclosure of non-cash investing and financing activities
Marketable securities received
in exchange for accounts receivable | $ | 17,273,000 | $ | 27,842,000
Debt discount in connection
with senior secured revolving credit facility | $ | 750,000 | $ | -
Conversion of debt into equity | $ | - | $ | 5,974,000
Designation of marketable
securities for dividend distribution | $ | - | $ | 6,387,000
Dividends on Series A, redeemable
preferred stock | $ | - | $ | 6,387,000

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

F- 10

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Note
1 - Organization and Nature of Operations

SRAX,
Inc. (“SRAX,” “we,” “us,” “our” or the “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
Micro”, “LD Micro, Inc.” or “LDMI”).

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.

LD
Micro

Through
LD Micro, Inc. (“LD”), the Company organizes and hosts investor conferences within the micro and small cap markets.

Subsequent
to year end, on March 3, 2023, the Company divested LD through a sale and will account for this as a deconsolidation and gain on
disposal. See Note 22.

F- 11

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Force
Protection Video Equipment Corporation

On
February 4, 2021, the Company acquired FPVD through a reverse acquisition involving BIG Token, Inc.

BIG
Token, Inc. (“BIGToken”)

The
financial results of BIGToken for the year ended December 31, 2021 are presented as income from discontinued operations, net of taxes
on the consolidated statements of operations and its assets and liabilities as of December 31, 2021 are presented as assets and liabilities
of discontinued operations on the consolidated balance sheets. The historical consolidated statement of cash flows reflects the effect
of the deconsolidation.

Unless
noted otherwise, discussion in the notes to the consolidated financial statements pertain to continuing operations.

See
Note 4 – Discontinued Operations.

See
Note 20 - Warrants

Basis
of Presentation and Rounding

The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”).

The
amounts in the accompanying 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.

F- 12

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Note
2 - Liquidity and Going Concern

As
reflected in the accompanying consolidated financial statements, for the year ended December 31, 2022, the Company had:

● | Net loss of $ 31,638,000 ; and
● | Net cash used in operations
was $ 12,327,000

Additionally,
at December 31, 2022, the Company had:

● | Accumulated deficit of $ 61,993,000
● | Stockholders’ deficit
of $ 9,249,000 ; and
● | Working capital deficit of
$ 12,866,000

F- 13

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

We
manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and capital requirements. The Company had cash on hand
of $ 7,000 at December 31, 2022.

These
factors create 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.

Note
3 - Summary of Significant Accounting Policies

Principles
of Consolidation and Non-Controlling Interest

These
consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its wholly
owned subsidiaries. All intercompany transactions and balances have been eliminated.

For
entities that are consolidated, but not 100% owned, a portion of the income or loss and corresponding equity is allocated to owners other
than the Company. The aggregate of the income or loss and corresponding equity that is not owned by us is included in Non-Controlling
Interests in the consolidated financial statements.

Business
Combinations and Asset Acquisitions

The
Company accounts for acquisitions that qualify as business combinations by applying the acquisition method according to Accounting Standards
Codification (“ASC”) 805, Business Combinations (“ASC 805”).

Transaction
costs related to the acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred.

F- 14

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

The
identifiable assets acquired, liabilities assumed, and noncontrolling interests in an acquired entity are recognized and measured at
their estimated fair values. The excess of the fair value of consideration transferred over the fair values of identifiable assets acquired,
liabilities assumed, and noncontrolling interests in an acquired entity, net of the fair value of any previously held interest in the
acquired entity, is recorded as goodwill. Such valuations require management to make significant estimates and assumptions.

Purchase
price allocations may be preliminary, and, during the measurement period not to exceed one year from the date of acquisition, changes
in assumptions and estimates that result in adjustments to the fair value of assets acquired and liabilities assumed are recorded in
the period the adjustments are determined.

Significant
judgments are used in determining fair values of assets acquired and liabilities assumed, as well as intangibles. Fair value and useful
life determinations are based on, among other factors, estimates of future expected cash flows, and appropriate discount rates used in
computing present values. These judgments may materially impact the estimates used in allocating acquisition date fair values to assets
acquired and liabilities assumed, as well as the Company’s current and future operating results. Actual results may vary from these
estimates which may result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement
period or upon a final determination of asset and liability fair values, whichever occurs first. Adjustments to fair values of assets
and liabilities made after the end of the measurement period are recorded within the Company’s earnings.

The
Company evaluates acquisitions of assets and other similar transactions to assess whether the transaction should be accounted for as
a business combination or asset acquisition by first applying a screen test to determine whether substantially all of the fair value
of the gross assets acquired is concentrated in a 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.

Accounting
for asset acquisitions falls under the guidance of Topic 805, Business Combinations, specifically Subtopic 805-50. A cost accumulation
model is used to determine an asset acquisition’s cost. Assets acquired are based on their cost, generally allocated to them on
a relative fair value basis. Direct acquisition-related costs are included in the cost of the acquired assets.

F- 15

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

The
distinction between 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.

See
Note 22 for discussion of asset purchase from DNA Holdings, LLC on February 3, 2023.

Goodwill
and Intangible Assets

Goodwill
represents the excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed
and the fair value assigned to identifiable intangible assets. Goodwill is not amortized. The Company accounts for goodwill and indefinite-lived
intangible assets in accordance with FASB ASC 350, Intangibles Goodwill and Other, and Accounting Standards Update, or ASU, 2017-04,
Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The Company’s goodwill and intangible
assets are deductible for tax purposes.

The
Company annually assesses goodwill for impairment, or more frequently if events or changes in circumstances indicate that goodwill might
be impaired.

Goodwill
impairment testing 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.

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
Company reviews its intangible assets for impairment annually, or more frequently if events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. If such assets are not recoverable, an impairment loss is recognized to the extent
the carrying amount of the assets exceeds the fair value of the assets.

For
the years ended December 31, 2022 and 2021, the Company recorded an impairment loss of $ 10,200,000 and $ 0 , respectively. The impairment
loss during the year ended December 31, 2022 was related to the disposal of the Company’s legacy businesses Steel Media and Five Delta.

Goodwill
at December 31, 2022 and 2021, was $ 7,706,000 (solely related to the acquisition of LD Micro, Inc. prior to 2021) and $ 17,906,000 , respectively.

F- 16

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Deconsolidation
of Subsidiary (Gain or Loss on Disposal)

A
subsidiary is deconsolidated from the Company’s financial statements when the Company 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.

Upon
deconsolidation, the Company:

Derecognizes
the Assets and Liabilities:

● | Removes
the assets and liabilities of the subsidiary from the consolidated balance sheet at their
carrying amounts at the date when control is lost.

Recognition
of Gain or Loss:

● | Recognizes
any resulting gain or loss in the consolidated statements of operations. This gain or loss
is measured as the difference between:
● | The
aggregate of the fair value of the consideration received, if any, and the fair value of
any retained investment.
● | The
carrying amount of the assets and liabilities of the subsidiary, including any noncontrolling
interests.

Measurement
of Retained Investment:

● | Any
retained noncontrolling equity investment in the former subsidiary is remeasured to its fair
value at the date control is lost. This fair value becomes the initial carrying amount of
the retained investment.

See
Note 22 for discussion regarding the sale of LD Micro, Inc. in 2023.

Business
Segments and Concentrations

The
Company uses the “management approach” to identify its reportable segments. The management approach requires companies to
report segment financial information consistent with information used by management for making operating decisions and assessing performance
as the basis for identifying the Company’s reportable segments. The Company manages its business as a single reportable segment.

F- 17

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Use
of Estimates

Preparing
financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions 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 revenues
and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.

Significant
estimates during the years ended December 31, 2022 and 2021, respectively, include:

● | 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,
● | uncertain tax positions;
and
● | valuation allowance on deferred
tax assets.

Risks
and Uncertainties

The
Company operates in an industry that is subject to intense competition and changes in consumer demand. The Company’s operations
are subject to significant risk and uncertainties including financial and operational risks including the potential risk of business
failure.

The
Company has experienced, and in the future may experience, variability in sales and earnings. The factors expected to contribute to this
variability include, among others, (i) the cyclical nature of the industry, (ii) general economic conditions in the various local markets
in which the Company competes, including a potential general downturn in the economy, and (iii) the volatility of prices in connection
with the Company’s distribution of the product. These factors, among others, make it difficult to project the Company’s operating
results on a consistent basis.

F- 18

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Fair
Value of Financial Instruments

The
Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements .
ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined
as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific
asset or liability.

The
Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring
basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement.
The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining
fair value.

The
three tiers are defined as follows:

● | Level
1 – Observable inputs that reflect quoted market prices (unadjusted) for identical
assets or liabilities in active markets;
● | Level
2 – Observable inputs other than quoted prices in active markets that are observable
either directly or indirectly in the marketplace for identical or similar assets and liabilities;
and
● | Level
3 – Unobservable inputs that are supported by little or no market data, which require
the Company to develop its own assumptions.

The
determination of fair value and 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.

Management’s
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 may also engage external advisors to assist us in determining fair value, as appropriate. Although the Company believes that
the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value
or reflective of future fair values.

F- 19

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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 13 for Level 1,2 and 3 disclosures.

The
Company’s financial instruments, including cash, accounts receivable, and accounts payable and accrued expenses are carried at
historical cost.

At
December 31, 2022 and 2021, respectively, the carrying amounts of these instruments approximated their fair values because of the short-term
nature of these instruments.

Valuation
Techniques and Inputs (Marketable Securities)

Investments
in securities and securities sold short that are both freely tradable and listed on major securities exchanges are valued at their last
reported sales price as of the valuation date.

Many
over-the-counter contracts have bid and ask prices that are observable in the marketplace. Bid prices reflect the highest price that
the marketplace participants are willing to pay for an asset. Ask prices represent the lowest price that the marketplace participants
are willing to accept for an asset.

An
integral part of the Company’s fair value measurement process is the assessment of the type of securities as well as the securities’
liquidity and marketability.

The
Company initially classifies securities as:

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Equity
Securities

Equity
securities are valued using the quoted prices times the number of shares acquired. The securities are then evaluated based on their marketability
(usually based on the restrictions on resale into the securities primary market) and liquidity.

Debt
Securities

The
Company does not have any debt securities as of December 31, 2022 and 2021, respectively.

Warrants

Warrants
are initially valued at cost, if acquired for cash, or at intrinsic value.

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.

F- 21

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Securities
with a marketability holding period in excess of 180 days is subjected to a discount for marketability. If a security has both a marketability
holding period over 180 days and a liquidation period of over 180 days the Company will evaluate the impact of both the marketability
and liquidity discounts. The Company utilizes the quoted market price on the date of valuation calculates a discount for marketability
and liquidity based on a protective put option pricing model that factors in both the lack of marketability and liquidity.

Independent
Valuation Expert

The
Company uses a third party specialist to provide guidance around the assumptions, inputs, pricing models utilized valuation calculations
into the various Put Option Pricing Models (POPMs) used in the calculations to determine discounts at contract inceptions date and each
of the respective balance sheet dates.

If
the Company has access to material non-public information regarding an investee, it will consider this information as an input for purposes
of valuing the security. In these situations, the Company will consider the impact this information will have on the valuation of the
securities on a case-by-case basis. These situations could arise due to the Company being an affiliate of the issuer or an officer or
director of the Company is an affiliate of the issuer.

These
securities are categorized in Level 1 of the fair value hierarchy to the extent these securities are actively traded. Securities traded
on inactive markets or valued by reference to similar instruments are generally categorized in Level 2 of the fair value hierarchy.

Investments
in Restricted Securities of Public Companies

Investments
in restricted securities of public companies cannot be offered for sale to the public until the company complies with certain statutory
requirements. The valuation will not exceed the listed price on any major securities exchange. Investments in restricted securities of
public companies are generally categorized in Level 2 of the fair value hierarchy. However, investments in public companies may be categorized
in Level 3 of the fair value hierarchy depending on the level of observable liquidity. Specifically, if the Company determines the market
activity is not sufficient to conclude the market activity represents an Active Market pursuant to ASC 820 -10 -35 36B.

F- 22

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

The
Company evaluates the trading activity of each listed security to determine if the trading market is an Active Market for purposes of
evaluating Fair Value under ASC 820. The Company evaluated the number of trade observations during the year, the percentage of the total
trading days the security traded on its listed market during the full year or the portion of the year if the security was initially listed
during the year, and at the dollar value of the trading activity for the full year as a percentage of the market capitalization of the
security. If the Company determines the listed securities trading market is not an active market it looks at other transactions reported
by the listed company including private equity transactions, non-cash equity transactions, the trading price and other factors. The Company
determines a fair value of the stock price based on this analysis. This price is the lower of the listed price or the fair value based
on the analysis. The Company also considers the marketability and liquidity discounts on the listed security in determining fair value.

Cash
and Cash Equivalents and Concentration of Credit Risk

For
purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months
or less at the purchase date and money market accounts to be cash equivalents.

At
December 31, 2022 and 2021, respectively, the Company did not have any cash equivalents.

The
Company is exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent
account balances exceed the amount insured by the FDIC, which is $ 250,000 .

At
December 31, 2022 and 2021, respectively, the Company did not experience any losses on cash balances in excess of FDIC insured limits.

At
December 31, 2022 and 2021, respectively, the Company had $ 0 and $ 1,098,000 in excess of the federally insured limit.

Accounts
Receivable

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 their financial condition and other factors. Interest is not accrued on overdue accounts receivable. The Company
does not require collateral.

F- 23

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Management
periodically assesses the Company’s accounts receivable and, if necessary, establishes an allowance for estimated uncollectible
amounts. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical
collection information and existing economic conditions. Accounts determined to be uncollectible are charged to operations when that
determination is made.

Accounts
receivable at December 31, 2022 and 2021, is as follows:

December
31, 2022 | December
31, 2021
Accounts receivable | $ | 271,000 | $ | 951,000
Less: allowance for doubtful accounts | 114,000 | 130,000
Accounts receivable - net | $ | 157,000 | $ | 821,000

There
was bad debt expense (recovery) of $ 119,000 and ($ 20,000 ) for the years ended December 31, 2022 and 2021, respectively.

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

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.

Contracts
receivable are also adjusted based on their fair value at each reporting period as an adjustment to the consolidated statements of operations.
For the years ended December 31, 2022 and 2021, the Company recorded a loss on fair value of $ 1,504,000 and $ 0 , respectively.

Allowance
for doubtful contracts receivable was $ 0 at December 31, 2022 and 2021, respectively.

There
was bad debt expense (recovery) of $ 0 for the years ended December 31, 2022 and 2021, respectively.

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

At
December 31, 2022 and 2021, contracts receivables were $ 328,000 and $ 844,000 , respectively.

F- 24

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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.

At
December 31, 2022 and 2021, the Company has classified all of its marketable securities as trading, based upon our intent to sell them
in the near term.

Certain marketable securities with restrictions exceeding
12 months were excluded from the current assets.

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 year ended December 31, 2022, the Company recorded an impairment loss of $ 3,664,000 related to certain marketable securities that
had sustained other-than-temporary losses as they were no longer saleable and whose value was determined to be $ 0 .

F- 25

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

For
the year ended December 2021, the Company did not record any impairment losses.

Marketable
securities were $ 9,186,000 and $ 15,617,000 as of December 31, 2022 and 2021, respectively.

See
Note 8 for additional disclosure of our marketable securities at fair value.

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 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; 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 $ 10,200,000 and $ 0 , for the years ended December 31, 2022 and 2021, respectively.

Impairment
loss for intangible assets was $ 1,481,000 and $ 0 , for the years ended December 31, 2022 and 2021, 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.

F- 26

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Impairment
loss for the years ended December 31, 2022 and 2021, were $ 41,000 and $ 0 , respectively.

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 14 regarding operating leases.

Derivative
Liabilities

The
Company assessed the classification of its derivative financial instruments as of December 31, 2022 and 2021, 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” .

F- 27

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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.

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
December 31, 2022 and 2021, 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.

F- 28

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Series
A, Redeemable, Preferred Stock Liability

Preferred
stock liability represents amounts payable to holders of the Preferred Stock Series A shares upon the eventual liquidation of certain
assets (marketable securities) designated for the sole purpose of paying dividends.

Accordingly,
the Company classified the Series A, Redeemable, Preferred Shares as liability instruments because in-substance, they represent a right
to the payment of dividends upon the liquidation of these specified assets, 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.

At
December 31, 2022 and 2021, Series A, redeemable, preferred stock liability was $ 994,000 and $ 3,925,000 , respectively.

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. 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.

F- 29

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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.

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.

F- 30

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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.

The
Company generates revenue primarily from two (2) sources: its Sequire SaaS platform and its LD Micro, Inc. subsidiary.

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

See
Note 22 regarding the sale and deconsolidation of LD Micro, Inc. in 2023.

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.

F- 31

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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.

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.

F- 32

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

See
Notes 8 and 13 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.

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
December 31, 2022 and 2021, for each of our outstanding revenue streams we only had a 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
December 31, 2022 and 2021, the Company had deferred revenue of $ 7,367,000 and $ 12,859,000 , respectively.

F- 33

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Disaggregation
of Revenues

The
following represents the Company’s disaggregation of revenues for the years ended December 31, 2022 and 2021:

For
the Year Ended December 31,
2022 | 2021
Revenue | Revenue | %
of Revenues | Revenue | %
of Revenues
Sequire SaaS platform revenue | $ | 25,110,000 | 90.13 | % | $ | 25,478,000 | 95.40 | %
LD Micro, Inc. - conference
revenue | 2,749,000 | 9.87 | % | 1,229,000 | 4.60 | %
Total Revenues | $ | 27,859,000 | 100 | % | $ | 26,707,000 | 100 | %

Geographic
Concentrations

For
the years ended December 31, 2022 and 2021, the Company earned revenues from customers in various countries as follows:

Geographic
Location | Year
Ended December 31,
Country | 2022 | 2021
United States | 78 | % | 74 | %
Canada | 14 | % | 23 | %
Other | 8 | % | 3 | %
100 | % | 100 | %

Cost
of Revenues

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

F- 34

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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.

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 December 31, 2022 and 2021, 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 years ended December 31, 2022 and 2021, 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.

F- 35

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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.

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
December 31, 2022 and 2021, 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 $ 83,000 and $ 225,000 in marketing and advertising costs during the years ended December 31, 2022 and 2021, respectively.

Stock-Based
Compensation

The
Company accounts for our stock-based compensation under ASC 718 “Compensation – Stock Compensation” using the
fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized
over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions
in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities
in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by
the issuance of those equity instruments.

The
Company uses the fair value method for equity instruments granted to non-employees and uses the Black-Scholes model for measuring the
fair value of options.

F- 36

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

The
fair value of stock-based compensation is determined as of the date of the grant or the date at which the performance of the services
is completed (measurement date) and is recognized over the vesting periods.

When
determining fair value of stock-based compensation, the Company considers the following assumptions in the Black-Scholes model:

Stock
Warrants

In
connection with certain financing (debt or equity), consulting and collaboration arrangements, the Company may issue warrants to purchase
shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the
holder and are classified as equity awards. The Company measures the fair value of warrants issued for compensation using the Black-Scholes
option pricing model as of the measurement date. However, for warrants issued that meet the definition of a derivative liability, fair
value is determined based upon the use of a binomial pricing model.

Warrants
issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital
of the common stock issued. All other warrants (for services) are recorded at fair value and expensed over the requisite service period
or at the date of issuance if there is not a service period.

Basic
and Diluted Earnings (Loss) per Share

Pursuant
to ASC 260-10-45, basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of
shares of common stock outstanding for the periods presented.

Diluted
earnings per share is computed 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 common shares may consist of contingently issuable shares, common stock issuable upon the conversion of stock options and warrants
(using the treasury stock method), and convertible debt. These common stock equivalents may be dilutive in the future.

F- 37

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

In
the event of a net loss, diluted loss per share is the same as basic loss per share since the effect of the potential common stock equivalents
upon conversion would be anti-dilutive.

The
following potentially dilutive equity securities outstanding as of December 31, 2022 and 2021 were as follows:

December
31, 2022 | December
31, 2021
Warrants | 2,688,218 | 9,719,127
Stock options | 798,502 | 870,750
Total common stock equivalents | 3,486,720 | 10,589,877

Warrants
and stock options included as commons stock equivalents represent those that are fully vested and exercisable. See Note 20.

Based
on the potential common stock equivalents noted above at December 31, 2022, the Company has sufficient authorized shares of common stock
( 250,000,000 ) to settle any potential exercises of its common stock equivalents.

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 years ended December 31, 2022 and 2021, 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. In May 2022, the Company renewed the agreement for four (4) additional National Football League seasons
for an average rate per year of approximately $ 497,000 . 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 .

F- 38

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

At
December 31, 2022 and 2021, the Company was owed $ 263,000 and $ 0 , respectively, from its former Chief Financial Officer. The amounts
due related to expense reimbursements.

At
December 31, 2022 and 2021, the Company owed $ 159,000 and $ 0 , respectively, to its Chief Executive Officer. Of the total amount due,
$ 150,000 was for bonus compensation and $ 9,000 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.

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.

F- 39

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Note
4 – Discontinued Operations (Year Ended December 31, 2021)

Acquisition
(BIGToken)

On
February 4, 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.

Deconsolidation
and Loss on Disposal (BIGToken)

On
December 29, 2021, The Company’s wholly owned subsidiary BIGToken completed a merger transaction with BritePool, Inc. (“BritePool”)
(the “Merger”). As a result of the Merger, BIGToken issued 183,445,351,631 shares of its common stock (“Acquisition
Shares”) for all of the issued and outstanding equity shares of BritePool. On December 29, 2021, as a condition for the closing
of the Merger, the Company exchanged 149,562,566,584 shares of BIGToken common stock for 242,078 shares of BIGToken’s Series D
Convertible Preferred Stock (“Series D Stock”) (the “Exchange”). Simultaneously with the Exchange, the Company
converted 22,162 shares of the Series D Stock into 13,692,304,136 shares of BIGToken’s common stock, or approximately 4.99 % of
the issued and outstanding shares of BIGToken’s common stock.

Subsequent
to the transaction, the Company owned 220,000 shares of BIGToken’s series D convertible, non-redeemable, non-voting preferred stock
and 13,692,304,136 shares of its common stock.

The
Series D Stock is non-redeemable, non-voting with liquidation preference being the same as if the Series D Stock had been converted into
shares of FVPD common stock. Each share of the Series D Stock is convertible into 617,828 shares of BIGToken’s common stock, subject
to a conversion limitation such that the number of shares of the BIGToken common stock outstanding immediately after giving effect to
the issuance of BIGToken common stock to the Company upon conversion of the Series D Stock shall not be more than 4.99 % (“Beneficial
Ownership Limitation”). However, the Company upon not less than sixty-one days’ prior notice to BIGToken, may increase or
decrease the Beneficial Ownership Limitation amount provided that the Beneficial Ownership Limitation in no event exceeds 9.99 % of the
number of shares of BIGToken’s common stock outstanding immediately after giving effect to the issuance of the common stock upon
conversion of the Series D Stock. As of the Exchange date, the Series D Stock and common stock of BIGToken had a fair value of approximately
$ 31,000 .

F- 40

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

BIGToken’s
issuance of the Acquisition Share and the Exchange caused the Company’s BIGToken common stock holdings to decrease from approximately
66% to approximately 4.99% ; Therefore, the Company no longer controlled the operations of BIGToken. Given the Company’s loss of
control over the operations of BIGToken, the Company deconsolidated BIGToken, as of December 29, 2021, in accordance with ASC 810 Consolidations.

As
a result of the transaction, the Company no longer has a controlling financial interest in BIGToken and deconsolidated BIGToken effective
December 29, 2021, recognizing a loss on disposal of $ 10,684,000 as follows:

Consideration | Amount
Fair value of Series D stock and
common stock | $ | 31,000
Carrying amount of non-controlling interest
of BIGToken | 6,045,000
Previous equity adjustments
of non-controlling interest | ( 12,510,000 | )
( 6,434,000 | )
Basis of investment in
BIGToken | 4,250,000
Loss on disposal of
subsidiary | $ | ( 10,684,000 | )

As
the transaction causing the deconsolidation of BIGToken, was a result of BIGToken issuing additional shares of its common stock for acquisition
of BritePool, the Company received no cash or other consideration.

In
accordance with ASC 820 – Fair Value Measurement, the Company determined the Series D Stock would be classified as level 3 asset
consistent with the account policy for determining the fair value of an asset or liability. As there is no observable market for quoted
market price for an identical asset. The Company engaged an independent third party valuation expert to estimate the fair value of the
Series D Stock.

As
of the Exchange date, the carrying basis of the non-controlling interest was approximately $ 6,465,000 , which included approximately $ 12,510,000 related to BIGToken’s recording of a $ 5,860,000 Beneficial conversion feature for convertible preferred stock, issuance of convertible
preferred stock in the amount of $ 5,860,000 , $ 885,000 for the fair value of warrants issued to the Company’s debenture holders
and less other amounts of approximately $ 95,000 . These transactions were recognized in equity outside of the accumulated other comprehensive
income (loss) related to ownership interest, which did not result in a loss of control, so they would not be included in the calculation
of the gain or loss from deconsolidation because these amounts resulted from transactions among shareholders and are not directly attributable
to the non-controlling interest.

F- 41

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

The
financial results of BIGToken are presented as income from discontinued operations, net of income taxes on our consolidated income through
December 29, 2021, when our deconsolidation occurred. The following table presents the financial results of BIGToken:

Revenues | $ | 3,431,000
Cost of revenues | 1,090,000
Gross profit | 2,341,000
General and administrative expenses | 9,587,000
Loss from operations of discontinued operations | ( 7,246,000 | )
Other expenses
Interest expense | ( 5,872,000 | )
Impairment of goodwill | ( 1,258,000 | )
Total other expenses | ( 7,130,000 | )
Loss from discontinued operations | $ | ( 14,376,000 | )

Note
5 – Acquisition of LD Micro, Inc .

On September 15, 2020 (“Closing Date”), an Agreement and Plan of Merger (the “Agreement”) was entered into by and
among SRAX, Inc. a Delaware corporation (“Parent”), Townsgate Merger Sub 1, Inc., a Delaware corporation and a direct wholly-owned
subsidiary of Parent (“Merger Sub 1”), LD Micro, Inc., a Delaware corporation and a direct wholly-owned subsidiary of Parent
(“Merger Sub 2”), LD Micro, Inc., a California corporation (the “Acquiree”, “LD Micro”), and Christopher
Lahiji, the sole stockholder of the Acquiree (the “Stockholder”). Merger Sub 1 and Merger Sub 2 are sometimes collectively
referred to as “Merger Sub.”

The
parties intend that Merger Sub 1 will be merged with and into the Acquiree (the “First Merger”), with the Acquiree surviving
the First Merger, and then the Acquiree will be merged with and into Merger Sub 2 (the “Second Merger,” and together with
the First Merger, the “Merger”), with Merger Sub 2 surviving the Second Merger.

F- 42

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

As
consideration, the Company will pay cash payable as follows: (i) $ 1,000,000 at the Closing, (ii) $ 1,000,000 on January 1, 2021, (iii)
$ 1,000,000 on April 1, 2021, and (iv) $ 1,000,000 on July 1, 2021 and subject to adjustment or off-set. Additionally, the Company issued 1,600,000 shares of its Class A common stock. The total consideration to be paid by the Company is $ 7,610,000 , as adjusted, as follows:

The
transaction was accounted for using the acquisition method. Accordingly, goodwill has been measured as the excess of the total consideration
over the amounts assigned to the identifiable assets acquired and liabilities assumed.

The
deferred payments of $ 3,000,000 were discounted using the yield on a CCC rated corporate debt for 3-month, 6-month and 9-month maturities,
respectively ($ 2,771,000 as calculated). The implied discount is approximately $ 229,000 , which will be amortized over the term on the
payments.

The
purchase price includes working capital adjustments that are based on our preliminary estimates and assumptions that are subject to change.

The
following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed:

Calculation
of the Purchase Price at Closing: | Amount
Accounts receivable - net | $ | 30,000
Intangibles | 468,000
Goodwill | 7,706,000
Accounts payable and accrued expenses | ( 324,000 | )
Payroll protection loan | ( 42,000 | )
Other current liabilities | ( 97,000 | )
Deferred tax liability | ( 131,000 | )
Purchase price at closing | $ | 7,610,000
F- 43

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Intangible
assets of $ 468,000 , consisted of the following:

Description | Fair
Value | Estimated
Useful Life (Years)
Trademark | $ | 271,000 | Indefinite
Domain name | 3,000 | Indefinite
Noncompete | 8,000 | 5
Customer list | 186,000 | 3
Purchase price at closing | $ | 468,000

The
estimated fair values for the trademark and domain name were determined by using the relief-from-royalty method. The estimated fair value
for the customer list and noncompete were determined using the excess earnings and differential method of comparing having an asset in-place
versus not having the asset in place, respectively.

The
Company had estimated the preliminary purchase price allocations based on historical inputs and data as of September 15, 2020. The preliminary
allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the finalization
of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations and intangible
assets acquired; (iii) finalization of the valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value
of non-cash consideration.

During
the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to
conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there
could be changes to the amounts of assets or liabilities previously recognized on a preliminary basis, if new information is obtained
about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of these
assets or liabilities as of that date.

See
Note 22 regarding the deconsolidation and gain on disposal related to the sale of LD Micro, Inc.

F- 44

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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

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.

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
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 was approximately $ 0 and $ 631,000 as of December 31, 2022 and 2021, respectively, and are included as
a component of other current liabilities in the accompanying consolidated balance sheets.

On
October 29, 2021, the Company (“Purchaser”) and BIGtoken (“Seller”) entered into a receivable purchase and sale
agreement whereby BIGtoken sell, assign, transfer, convey and deliver to the Company all rights, title and interest for its receivable
aggregating $ 352,000 for a purchase price of $ 327,000 , representing a 7 % discount. As of December 31, 2021, the outstanding receivable
amounts to $ 352,000 .

F- 45

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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
7 – 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.

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 December 31, 2022 and 2021 was $ 0 and $ 935,000 , respectively.

Note
8 – 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 (e.g., convertible debt), which could be in the form of
common stock, preferred stock, warrants or convertible debentures.

F- 46

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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 years ended December 31, 2022 and 2021:

Common | Convertible | Preferred
Stock | Debt | Stock | Warrants | Total
Balance - December 31, 2020 | $ | 7,764,000 | $ | 683,000 | $ | - | $ | - | $ | 8,447,000
Additions | 29,281,000 | 4,602,000 | 1,031,000 | - | 34,914,000
Sales of marketable securities | ( 8,156,000 | ) | ( 510,000 | ) | - | - | ( 8,666,000 | )
Designation for dividend distributions | ( 10,577,000 | ) | ( 213,000 | ) | - | - | ( 10,790,000 | )
Change in fair value of
marketable securities | ( 7,577,000 | ) | ( 375,000 | ) | ( 432,000 | ) | 96,000 | ( 8,288,000 | )
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

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

Classification | December
31, 2022 | December
31, 2021
Short-term | $ | 7,931,000 | $ | 15,617,000
Long-term | 1,255,000 | -
Total | $ | 9,186,000 | $ | 15,617,000

The
Company’s sales of its marketable securities for the years ended December 31, 2022 and 2021 were $ 5,221,000 and $ 8,666,000 , respectively.
As a result of these sales, and when comparing them to the underlying securities basis at fair value, the Company recognized gains (losses)
of ($ 8,799,000 ) and $ 804,000 , respectively.

F- 47

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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 December 31, 2022 and 2021, the Company’s marketable securities holdings by significance are classified as follows:

Marketable
Securities | Year
Ended December 31,
Investments | 2022 | 2021
Top 1 | 20 | % | 16 | %
Top 5 | 55 | % | 41 | %
Top 10 | 71 | % | 61 | %

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.

F- 48

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Note
9 – 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 marketable securities for the years ended December 31, 2022 and 2021 were $ 506,000 and $ 686,000 , respectively.
As a result of these sales, and when comparing them to the underlying securities basis at fair value, the Company recognized gains (losses)
of ($ 1,803,000 ) and $ 84,000 , respectively.

See
Note 19 - Series A Preferred Stock for additional discussion.

The
balance of designated assets consisted of the following at December 31, 2022 and 2021:

December
31, 2022 | December
31, 2021
Designate assets for return of
capital | $ | 170,000 | $ | 3,239,000
Cash | - | 686,000
$ | 170,000 | $ | 3,925,000

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

Classification | December
31, 2022 | December
31, 2021
Short-term | $ | 100,000 | $ | 3,925,000
Long-term | 70,000 | -
Total | $ | 170,000 | $ | 3,925,000
F- 49

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

The
following represents the activity related to designated assets for the years ending December 31, 2022 and 2021:

Balance - December 31, 2020 | $ | -
Designated assets | 6,387,000
Sales of designated assets | ( 770,000 | )
Proceeds from sale of designated assets | 686,000
Change in fair value of
designated assets | ( 2,378,000 | )
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

Note
10 - Property and Equipment

Property
and equipment consisted of the following:

Type | December
31, 2022 | December
31, 2021 | Estimated
Useful Lives (Years)
Computer, office equipment and
furniture | $ | 379,000 | $ | 471,000 | 3 - 7
Less: accumulated depreciation/amortization | ( 320,000 | ) | ( 357,000 | )
Property and equipment
- net | $ | 59,000 | $ | 114,000

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 in the accompanying consolidated statements of operations.

During
the year ended December 31, 2021, there were no impairment losses.

Depreciation
and amortization expense for the years ended December 31, 2022 and 2021 was $ 417,000 and $ 842,000 , respectively.

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

F- 50

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Note
11 – Intangibles

Intangibles
consisted of the following:

Type | December
31, 2022 | December
31, 2021 | Estimated
Useful Lives
(Years)
Internally
developed software | $ | - | $ | 2,726,000 | 5
Noncompetition
agreement | - | 1,258,000 | 3
Intellectual
property | - | 756,000 | 3
Acquired
software | - | 756,000 | 3
Trademark | - | 271,000 | Indefinite
Customer
list | - | 186,000 | 3
Domain
name | - | 17,000 | Indefinite
- | 5,970,000
Less:
accumulated amortization | - | ( 4,527,000 | )
Intangibles
- net | $ | - | $ | 1,443,000

Amortization
expense for the years ended December 31, 2022 and 2021 was $ 350,000 and $ 919,000 , respectively.

During
the years ended December 31, 2022 and 2021, the Company recorded an impairment loss of $ 1,481,000 and $ 0 , respectively.

Note
12 – Debt

The
following represents a summary of the Company’s convertible notes payable and revolving credit facility, key terms, and outstanding
balances at December 31, 2022 and December 31, 2021, 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 is 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.

F- 51

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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.

Conversion
Rights (Fixed Price) – Convertible Notes Payable

These
notes are convertible at the option of the holder at $ 2.69 /share. 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.

F- 52

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

The
warrants do not have any price protection or price reset provisions with respect to future issuances of securities.

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.

Conversion
of Notes Payable

In
2021, certain note holders converted $ 8,337,000 of note principal into 3,122,167 shares of common stock. The remaining unamortized debt
discount associated with these conversions was $ 2,413,000 . The net carrying amount of $ 5,974,000 was transferred to additional paid-in
capital.

See
Note 20.

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 and September 11, 2023, respectively.
The new maturity dates were amended to June 30, 2024 and now November 11, 2014.

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).

F- 53

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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.

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 still required the Company to pay the default rate of interest.

The
following is a summary of the Company’s convertible notes payable –at December 31, 2022 and 2021:

The
following is a detail of the Company’s convertible notes payable –at December 31, 2022 and 2021:

Convertible Notes Payable
Note
Holders | Issue
Date | Maturity
Date | Interest
Rate | Default
Interest Rate | Collateral | December
31, 2022 | December
31, 2021
Various | June
30, 2020 | November
11, 2014 | 12.00 | % | 18.00 | % | All
assets | $ | 1,216,000 | $ | 1,267,000
Less:
unamortized debt discount | 35,000 | 103,000
$ | 1,181,000 | $ | 1,164,000
F- 54

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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. As of the
date of these financial statements, the facility is in default.

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

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 on March 2023. See Note 22.

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, 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 .

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
Note 20 for discussion of warrants.

See
Note 22 regarding exercise of 2,178,172 of these warrants.

F- 55

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Cash
Received by Company

On
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 .

As
a result of converting the bridge note, the Company was required to pay a one-time fee of $ 72,000 . The fee was recorded as additional
interest expense in the accompanying consolidated statements of operations, and increased the outstanding amount due to the lender.

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 .

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 amendment, the Company’s conversion price of its facility was initially amended to $1 and now $0.25, respectively
(original conversion price of facility was $15/share).

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, 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.

See
Note 20.

F- 56

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Default

At
December 31, 2022 the facility was not in default. Subsequent to December 31, 2022, and as of the date of these financial statements,
the facility is in default.

The
following is a summary of the Facility at December 31, 2022 and 2021:

The
following is a detail of the Facility at December 31, 2022 and 2021:

Senior
Secured Revolving Credit Facility
Note
Holder | Issue
Date | Maturity
Date | Interest
Rate | Default
Interest Rate | Collateral | December
31, 2022 | December
31, 2021
Note
#1 | August
9, 2022 | August
9, 2024 | 11.50 | % | 18.00 | % | All
assets | $ | 6,200,000 | $ | -
Less:
unamortized debt discount | 600,000 | -
$ | 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) for each of the two (2) succeeding years as follows:

For
the Year Ended December 31, | Convertible
Notes Payable | Senior
Secured Credit Facility | Total
2023 | $ | 1,216,000 | $ | - | $ | 1,216,000
2024 | $ | - | $ | 6,200,000 | $ | 6,200,000
Total | $ | 1,216,000 | $ | 6,200,000 | $ | 7,416,000
F- 57

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Note
13 – Fair Value of Financial Instruments

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.

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 December 31,
2022 and 2021, respectively:

Quoted
Prices
in
Active | Significant
Markets
for | Other | Significant
Identical Assets | Observable Inputs | Unobservable Inputs | December 31,
Assets | (Level
1) | (Level
2) | (Level
3) | 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
in
Active | Significant
Markets
for | Other | Significant
Identical Assets | Observable Inputs | Unobservable Inputs | December 31,
Liabilities | (Level
1) | (Level
2) | (Level
3) | 2022
Series
A, redeemable preferred Stock | $ | - | $ | 994,000 | $ | - | $ | 994,000
Total
liabilities | $ | - | $ | 994,000 | $ | - | $ | 994,000
F- 58

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Quoted Prices
in
Active | Significant
Markets
for | Other | Significant
Identical Assets | Observable Inputs | Unobservable Inputs | December 31,
Assets | (Level
1) | (Level
2) | (Level
3) | 2021
Marketable
securities | $ | 6,134,000 | $ | 2,448,000 | $ | 7,035,000 | $ | 15,617,000
Designated
assets for return of capital | 259,000 | 3,666,000 | - | 3,925,000
Contract
receivables | * | - | - | 844,000 | 844,000
Total
assets | $ | 6,393,000 | $ | 6,114,000 | $ | 7,879,000 | $ | 20,386,000
* | Represents a forward
contractual right to receive securities pursuant to a revenue contract.
Quoted Prices
in
Active | Significant
Markets
for | Other | Significant
Identical Assets | Observable Inputs | Unobservable Inputs | December
31,
Liabilities | (Level
1) | (Level
2) | (Level
3) | 2021
Series
A, redeemable preferred Stock | $ | - | $ | 3,925,000 | $ | - | $ | 3,925,000
Total
liabilities | $ | - | $ | 3,925,000 | $ | - | $ | 3,925,000

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.

F- 59

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Changes
in Level 3 assets measured at fair value for the years ended December 31, 2022 and 2021 were as follows:

Assets
Common
Stocks | Convertible
Debt | Warrants | Preferred
Stocks | Total
Balance
- December 31, 2020 | $ | - | $ | - | $ | - | $ | - | $ | -
Acquisitions | 2,665,000 | 4,267,000 | - | 1,031,000 | 7,963,000
Sales
and dispositions | - | - | - | ( 510,000 | ) | ( 510,000 | )
Transfer
into level 3 | 400,000 | 410,000 | - | 500,000 | 1,310,000
Transfer
out of level 3 | A | ( 534,000 | ) | ( 213,000 | ) | - | - | ( 747,000 | )
Realized
and unrealized gains
(losses) | B | ( 377,000 | ) | ( 278,000 | ) | 96,000 | ( 422,000 | ) | ( 981,000 | )
Balance
- December 31, 2021 | $ | 2,154,000 | $ | 4,186,000 | $ | 96,000 | $ | 599,000 | $ | 7,035,000
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
into level 3 | - | - | - | - | -
Transfer
out of level 3 | A | ( 2,099,000 | ) | ( 325,000 | ) | - | ( 31,000 | ) | ( 2,455,000 | )
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
A | – Transfers
out of level 3 related to investments that have been transferred to level 2 and designated assets for return of capital.
B | – Amounts
for realized and unrealized gains (losses) are included in the accompanying consolidated statements of operations.

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.

F- 60

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

The
Company classifies certain assets as Level 3 assets if the estimated fair value was derived from level 3 inputs. The Company utilizes
a put option pricing model to arrive at a discount for lack of marketability and liquidity associated with restrictions on sales into
the public market. The Company generally classifies restricted securities in public companies as level 2, however in circumstances where
the observed level of liquidity is low and the quoted market price is deemed unreliable they may be categorized in Level 3 of the fair
value hierarchy. The Company considers marketable securities without sufficient liquidity to sell within 6 months of the date of acquisition
and securities that will not be eligible for resale in the public markets through Rule 144 for 1 year from the date acquisition to be
valued with Level 2 inputs.

The
fair value of the Company’s Series A Preferred Stock may change significantly, impacting the Company’s assumptions used to
estimate its fair value. The valuation of the Series A Preferred Stock is primarily based on the valuation of its underlying marketable
securities. The marketable securities that are underlying the Series A Preferred Stock are classified as Designated Assets on the Company’s
balance sheet and include Level 1 and Level 2 marketable securities and cash.

The
following table lists the significant unobservable inputs used to value assets classified as Level 3 of December 31, 2022 and 2021. The
table is not intended to be all-inclusive, but instead identifies the significant unobservable inputs relevant to the determination of
fair values. The other Level 3 assets have been valued using unadjusted third-party transactions and, unadjusted historical third-party
information, or the unadjusted net asset values of the securities’ issuer. No unobservable inputs internally developed by the Company
have been applied to these assets, and therefore are omitted from the following table.

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.

F- 61

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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.

Valuation
Technique Refinements

During
the year-ended December 31, 2022 and 2021, respectively, the Company refined its valuation techniques to enhance consideration of unobservable
inputs for the valuation of Level 2 and Level 3 marketable securities.

If
quoted market prices are not available for the specific security, or if the observed quoted market price is deemed unreliable, then fair
values are estimated by using pricing models, considering third-party transactions, unadjusted historical third-party information, and
the unadjusted net asset values of the issuer. The pricing models primarily use market-based or independently sourced market parameters
as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to market
information, models also incorporate transaction details, such as maturity and cash flow assumptions. Securities valued in this manner
would generally be classified within Level 2 and Level 3 of the valuation hierarchy and primarily include such instruments as convertible
debt.

F- 62

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

The
methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future
fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with those of other market
participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result
in a different estimate of fair value at the reporting date.

Note
14 – Commitments and Contingencies

Right-of-Use
Asset - Operating Leases

We
have entered into various operating lease agreements, including our corporate headquarters. We account for leases in accordance with
ASC Topic 842: Leases, which requires a lessee to utilize the right-of-use model and to record a right-of-use asset and a lease
liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either financing or operating,
with classification affecting the pattern of expense recognition in the statement of operations. In addition, a lessor is required to
classify leases as either sales-type, financing or operating. A lease will be treated as a sale if it transfers all of the risks and
rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control,
the lease is treated as financing. If the lessor does not convey risk and rewards or control, the lease is treated as operating. We determine
if an arrangement is a lease, or contains a lease, at inception and record the lease in our financial statements upon lease commencement,
which is the date when the underlying asset is made available for use by the lessor.

Right-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.

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 direct
sales-type leases and production equipment classes embedded in supply agreements. From a lessor perspective, 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.

F- 63

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

We
have elected not to present short-term leases on the balance sheet as these leases have a lease term of 12 months or less at lease inception
and do 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.

Our
leases, where we are the lessee, do not include an option to extend the lease term. For purposes of calculating lease liabilities, lease
term would include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

Lease
expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, included as a component
of general and administrative expenses, in the accompanying consolidated statements of operations.

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 future lease payments based on the index or rate at the lease commencement
date. Differences between the calculated lease payment and actual payment are expensed as incurred.

We
recognize lease expense on a straight-line basis over the term of our operating leases, as reported within general and administrative
expense in the accompanying consolidated statement of operations.

At
December 31, 2022 and 2021, respectively, the Company had no financing leases as defined in ASC 842, “Leases.”

The
tables below present information regarding the Company’s operating lease assets and liabilities at December 31, 2022 and 2021,
respectively:

December
31, 2022 | December
31, 2021
Assets
Operating
lease - right-of-use asset - non-current | $ | 127,000 | $ | 257,000
Liabilities
Operating
lease liability | $ | 114,000 | $ | 244,000
Weighted-average
remaining lease term (years) | 0.75 | 1.75
Weighted-average
discount rate | 18 | % | 18 | %

The
components of lease expense were as follows:

December
31, 2022 | December
31, 2021
Operating
lease costs
Amortization
of right-of-use operating lease asset | $ | 130,000 | $ | 163,000
Lease
liability expense in connection with obligation repayment | 33,000 | 12,000
Total
operating lease costs | $ | 163,000 | $ | 175,000

Future
minimum lease payments for the year ended December 31:

2023 | $ | 123,000
Total
undiscounted cash flows | 123,000
Less:
amount representing interest | ( 9,000 | )
Present
value of operating lease liability | 114,000
Less:
current portion of operating lease liability | 114,000
Long-term
operating lease liability | $ | -
F- 64

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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 December 31, 2022, 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. In addition, on October 9, 2023, the Company filed a Cross Complaint against Mr. Malone
for Breach of Contract, Breach of Fiduciary Duty and Misappropriation of Trade Secrets seeking, among other items, general, special,
statutory and punitive damages. The Company intends to vigorously pursue its rights in this matter.

Stock
Market Manger, 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 Fauth
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.

At
December 31, 2022, the Company is not aware of any contingent liabilities that should be reflected in the accompanying 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.

F- 65

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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
16 – Accounts Payable and Accrued Expenses

Accounts
payable and accrued expenses at December 31, 2022 and 2021, are as follows:

December
31, 2022 | December
31, 2021
Accounts
payable | $ | 7,476,000 | $ | 1,938,000
Accrued
liabilities | 2,540,000 | 1,731,000
Accrued interest
payable | 424,000 | 123,000
Accrued commissions | 13,000 | 303,000
Accounts
payable and accrued liabilities | $ | 10,453,000 | $ | 4,095,000

Note
17 – Other Current Liabilities

At
December 31, 2022 and 2021, other current liabilities were $ 1,451,000 and $ 633,000 , 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
18 – Payroll Protection Program Loan

On
April 17, 2020, we entered into a promissory note evidencing an unsecured approximately $ 1,084,000 loan under the Paycheck Protection
Program (PPP). The loan was made through Cross River Bank.

The
term of the loan was two years with an interest rate of 1 %, which was deferred for the first six months of the term of the loan. The
promissory note evidencing the loan contains customary events of default relating to, among other things, payment defaults, breach of
representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in the repayment
of all amounts outstanding, collection of all amounts owing from the Company, and/or filing suit and obtaining judgment against the Company.

On
September 15, 2020, $ 42,000 of the payroll protection loan of LD Micro, Inc. was assumed in connection with the acquisition. The balance
at this time was $ 1,126,000 .

F- 66

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

During
the years ended December 31, 2022 and 2021 respectively, the PPP loan in the amount of $ 10,000 and $ 1,116,000 was forgiven.

As
of December 31, 2022 and 2021, PPP loans outstanding amounted to $ 0 and $ 10,000 , respectively.

Note
19 – Series A, Redeemable Preferred Stock Liability

On
August 17, 2021, the Company announced that it will be issuing a one-time dividend consisting of a share of series A preferred stock
(“Preferred Stock”) to certain Qualified Recipients (as defined below) on a 1-for-1 as converted to common stock basis (the
“Dividend”). The record date for the Dividend is September 20, 2021 (the “Record Date”). The preferred stock
entitles the Qualified Recipients with the right to receive the net proceeds from sales of certain securities of issuers that the Company
received through its Sequire Platform services.

On
September 20, 2021, the Company filed a certificate of designation (the “COD”) of preferences, rights, and limitations of
Series A Non-Voting Preferred Stock (“Series A Preferred Stock”) with the Secretary of State of Delaware. Pursuant to the
COD, the Company is authorized to issue up to 36,462,417 shares of Series A Preferred Stock (the “Dividend Shares”).

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

i. | each
outstanding share of Class A common stock (the “Common Stock”), of which 25,160,504 shares were issued and outstanding,
ii. | each
share of common stock underlying outstanding common stock purchase warrants containing a
contractual right to receive the dividend (“warrants”) of which, 10,327,645 were
outstanding, and
iii. | each
original issue discount senior convertible debenture (the “Debentures”) issued
on June 30, 2021, containing a contractual right to receive the dividend on an as converted
to common stock basis, of which $ 2,486,275 of convertible notes payable and related accrued
interest were outstanding, convertible into 974,268 shares of Common Stock.

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.

F- 67

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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, 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.

The
following is a summary of the Company’s Series A, Redeemable, Preferred Stock at December 31, 2022 and 2021:

Balance - December
31, 2020 | $ | -
Dividends
on Series A, redeemable preferred stock | 6,387,000
Change
in fair value of Series A, redeemable preferred stock | ( 2,462,000 | )
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

See
Note 20.

F- 68

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Note
20 – Stockholders’ Deficit

At
December 31, 2022, the Company had three (3) classes of stock:

Preferred
Stock

- | 50,000,000 shares authorized
- | 36,462,417 designated as Series A, redeemable preferred stock are issued and outstanding at December
31, 2022 and 2021, respectively. These shares are currently outstanding for the purpose of
satisfying a dividend. See Note 19.
- | 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.

Common
Stock – Class A

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

As
of December 31, 2022 and 2021, the Company has 26,323,579 and 25,995,172 shares issued and outstanding.

F- 69

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Common
Stock – Class B

- | 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

As
of December 31, 2022 and 2021, the Company has no shares issued and outstanding.

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.

The
total remaining authorization for future common share repurchases under our share repurchase program was $ 10,000,000 at December 31,
2022 and 2021.

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.

F- 70

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Plan
options may either be:

Any
option granted under the 2012, 2014 and 2016 Plans must provide for an exercise price of not less than 100 % of the fair market value
of the underlying shares on the date of grant, but the exercise price of any ISO granted to an eligible employee owning more than 10 %
of our outstanding common stock must not be less than 110 % of fair market value on the date of the grant.

The
plans further provide that with respect to ISOs the aggregate fair market value of the common stock underlying the options which are
exercisable by any option holder during any calendar year cannot exceed $ 100,000 .

The
exercise price of any NSO granted under the 2012, 2014 or 2016 Plans is determined by the Board at the time of grant but must be at least
equal to fair market value on the date of grant.

The
term of each plan option and the manner in which it may be exercised is determined by the board of directors or the compensation committee,
provided that no option may be exercisable more than 10 years after the date of its grant and, in the case of an incentive option granted
to an eligible employee owning more than 10% of the common stock, no more than five years after the date of the grant.

The
terms of grants of any other type of award under the 2012, 2014 or 2016 Plans is determined by the Board at the time of grant. Subject
to the limitation on the aggregate number of shares issuable under the plans, there is no maximum or minimum number of shares as to which
a stock grant or plan option may be granted to any person.

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.

F- 71

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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.

Equity
Transactions for the Year Ended December 31, 2021

Stock
Issued for Cash

The
Company issued 53,616 shares of common stock for $ 293,000 ($ 5.47 /share) under the terms of it’s At the Market Offering (ATM). The
Company had to pay direct offering costs of $ 9,000 , resulting in net proceeds of $ 284,000 .

Conversion
of Debt

The
Company issued 3,122,167 shares of common stock, in exchange for the settlement of $ 5,974,000 in debt. See Note 12.

F- 72

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Exercise
of Warrants – net of offering costs

The
Company issued 6,828,611 shares of common stock upon the exercise of 7,148,501 $ 15,952,000 ($ 2.33 /share).

Repurchase
and Retirement of Shares

The
Company repurchased 155,000 shares of common stock for $ 793,000 , pursuant to the Company’s share buy-back program. These shares
were cancelled and retired.

Stock
Options

Stock
option transactions for the years ended December 31, 2022 and 2021 are summarized as follows:

Weighted
Average | Weighted
Weighted | Remaining | Average
Number
of | Average Exercise | Contractual Term | Grant Date | Aggregate Intrinsic
Stock
Options | Options | Price | (Years) | Fair
Value | Value
Outstanding
- December 31, 2020 | 1,642,324 | $ | 3.30 | 2.81 | $ | -
Vested
and Exercisable - December 31, 2020 | 844,742 | $ | 3.54 | 2.62 | $ | 333,000
Unvested
- December 31, 2020 | 797,582 | $ | 2.81 | 3.00 | $ | 207,000
Granted | 21,627 | $ | 4.38 | 6.29 | $ | 3.60
Exercised | ( 12,500 | ) | $ | 2.70 | 3.63
Cancelled/Forfeited | ( 317,164 | ) | $ | 4.60 | 0.65
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 | $ | - | $ | -

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.

F- 73

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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.

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 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 totalling $ 983,000 related to the
vesting of its other share-based payments.

Stock-based
compensation expense (benefit) – net, for the years ended December 31, 2022 and 2021 was $ ( 156,000 ) and $ 1,006,000 , respectively.

The
weighted average period in which unrecognized stock option compensation ($ 1,333,000 ) will vest is 2.16 years.

F- 74

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Warrants

Warrant
activity for the years ended December 31, 2022 and 2021 are summarized as follows:

Weighted
Average
Number
of | Weighted Average Exercise | Remaining Contractual Term | Aggregate Intrinsic
Warrants | Warrants | Price | (Years) | Value
Outstanding
- December 31, 2020 | 12,585,283 | $ | 2.98 | 1.78 | $ | 4,460,000
Vested
and Exercisable - December 31, 2020 | 12,285,283 | $ | 2.94 | 1.74 | $ | 4,460,000
Unvested
- December 31, 2020 | 300,000 | $ | 4.75 | 3.37 | $ | -
Granted | 4,582,345 | $ | 7.48 | 0.11
Exercised | ( 7,148,501 | ) | $ | 2.74 | 0.78
Cancelled/Forfeited | - | $ | - | -
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 | - | $ | - | - | $ | -

Warrant
Transactions for the Year Ended December 31, 2022

Warrants
Modification Expense

See
Note 12 regarding the extension of debt and related warrant modification expense incurred in connection with the new terms.

Warrant
Transactions for the Year Ended December 31, 2021

BIGToken
Warrants

See
Note 4 regarding BIGToken warrants and related discontinued operations.

F- 75

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Warrants
Issued to Debt Holders and Related Inducement Expense

On
February 21, 2021 the Company entered into an agreement with the certain Debenture holders to exercise 4,545,440 of the Warrants issued
in the June 2020 Debenture offering. As an inducement for the Warrant holders to exercise the Warrants, the holders received a new registered
warrant (“New Warrant”) to purchase an aggregate of 4,545,440 shares of the Company’s common stock at an exercise price
of $ 7.50 per share. The New Warrants expired on January 31, 2022 . Each holder agreed to pay $ 0.125 for each New Warrant. The Company
received net proceeds of approximately $ 11,022,000 , consisted of the exercise price of $ 11,363,000 , $ 568,000 for the purchase of the
New Warrant less solicitation fees of approximately $ 909,000 .

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

During
the quarter ended March 31, 2021, the Company: (i) received cash of approximately $ 4,930,000 , (ii) cancelled 349,197 warrants (as a result
of cashless exercises) and (iii) issued an aggregate of 2,283,171 shares of Common Stock, in connection with the exercise of outstanding
warrants.

In
total the Company issued a total of 6,828,611 shares of common stock, for the exercise of warrants, with net proceeds of $ 15,952,000 .

Note
21 – Income Taxes

The
Components of the deferred tax assets and liabilities at December 31, 2022 and 2021 were approximately as follows:

December 31, 2022 | December 31, 2021
Deferred Tax Assets
Net operating loss carryforward | $ | 13,739,000 | $ | 10,003,000
Bad debt reserve | 29,000 | 33,000
Stock based compensation | 683,000 | 525,000
Interest expense limitation carryover | - | 161,000
Contribution carryover | 5,000 | 5,000
Lease liability | 29,000 | 62,000
Unrealized loss on marketable securities | 2,445,000 | 2,668,000
Other | 3,000 | 124,000
Total deferred tax assets | 16,953,000 | 13,581,000
Deferred Tax Liabilities
Fixed assets | ( 15,000 | ) | ( 29,000 | )
Right-of-Use asset | ( 33,000 | ) | ( 66,000 | )
Intangibles | ( 151,000 | ) | ( 455,000 | )
Prepaid expenses | ( 15,000 | ) | ( 15,000 | )
Total deferred tax liabilities | ( 214,000 | ) | ( 565,000 | )
Deferred Tax Assets | 16,719,000 | 13,016,000
Less: valuation allowance | ( 16,719,000 | ) | ( 13,016,000 | )
Deferred tax asset - net | $ | - | $ | -

The
components of the income tax expense (benefit) from continuing operations for the year ended December 31, 2022 were as follows:

Current | Deferred | Total
Federal | $ | - | $ | ( 3,239,000 | ) | $ | ( 3,239,000 | )
State | 6,000 | ( 667,000 | ) | ( 661,000 | )
Subtotal | 6,000 | ( 3,906,200 | ) | ( 3,900,000 )
Valuation allowance | ( 6,000 | ) | 3,906,200 | 3,900,000
Total | $ | - | $ | - | $ | -

The
components of the income tax expense (benefit) from continuing operations for the year ended December 31, 2021 were as follows:

Current | Deferred | Total
Federal | $ | - | $ | ( 132,000 | ) | $ | ( 132,000 | )
State | 5,000 | - | 5,000
Subtotal | 5,000 | ( 132,000 | ) | ( 127,000 | )
Valuation allowance | - | - | -
Total | $ | 5,000 | $ | ( 132,000 | ) | $ | ( 127,000 | )
F- 76

SRAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

A
reconciliation of the federal statutory tax rate for the years ended December 31, 2022 and 2021 as compared to the effective tax rate
was as follows:

2022 | 2021
Tax calculated at federal rate | 21.0 | % | 21.0 | %
Goodwill impairment | ( 6.8 | )% | 0.0 | %
Preferred tax liability remeasurement | 1.7 | % | 0.0 | %
Other permanent differences | ( 0.3 | )% | ( 1.0 | )%
Change in valuation allowance | ( 12.3 | )% | ( 15.1 | )%
Other adjustments | ( 3.3 | )% | ( 4.1 | )%
Income tax expense (benefit) | ( 0.0 | )% | 0.8 | %

Deferred tax assets and liabilities are computed by
applying the federal and state income tax rates in effect to the gross amounts of temporary differences and other tax attributes, such
as net operating loss carry-forwards. In assessing if the deferred tax assets will be realized, the Company considers whether it is more
likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the period in which these deductible temporary differences reverse.

During the years ended December 31, 2022
and 2021, the increase in valuation allowance for both years was primarily attributable to the increase in our net operating loss carryforwards.
The total valuation allowance results from the Company’s estimate of its inability to recover its net deferred tax assets.

As of December 31, 2022, the Company had approximately
federal net operating loss carry forwards, which are available to offset future taxable income, of approximately $ 50,106,000 of which
$ 10,500,000 was generated prior to 2018 and will begin to expire in 2036. The remaining net operating loss carryforwards generated can
be carried forward indefinitely. These carry forwards may be subject to an annual limitation under Section 382 and 383 of the Internal
Revenue Code of 1986, and similar state provisions if the Company experienced one or more ownership changes which would limit the amount
of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively. In general, an ownership
change, as defined by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in
the stock of the corporation by more than 50 percentage points over a three-year period. The Company has not completed an IRC Section
382/383analysis. If a change in ownership were to have occurred, NOL and tax credit carryforwards could be eliminated or restricted. If
eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance.
Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s
effective tax rate.

The Company files income tax returns in the United
States and various state jurisdictions. Due to the Company’s net operating loss posture all tax years are open and subject to income
tax examination by tax authorities. The Company’s policy is to recognize interest expense and penalties related to income tax matters
as tax expense. As of December 31, 2022 and 2021, there are no unrecognized tax benefits, and there are no significant accruals for interest
related to unrecognized tax benefits or tax penalties.

The Company is in the process of analyzing its NOL and has not determined
if the company has had any change of control issues that could limit the future use of NOL. Additionally, the Company is in the process
of filing its 2020 through 2022 tax returns. NOL carryforwards that were generated after 2017 of approximately $ 39,600,000 may only
be used to offset 80% of taxable income and are carried forward indefinitely.

Note
22 – Subsequent Events

Designation
of Series B, Convertible Preferred Stock

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
November 2023, in connection with certain debt offerings (see below), the conversion rate was reduced to $ 0.25 /share.

F- 77

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Acquisition
of DNA Holdings, LLC (“DNA”) (Asset Purchase) – Former Related Party

On
February 3, 2023, the Company closed an asset purchase agreement and acquired the following assets from DNA:

● | $ 1,000,000 ,
● | Digital
crypto assets,
● | Equity
investments in three (3) private companies accounted for under the cost method; and,
● | Customer
list

DNA
is controlled by a former member of our Board of Directors.

Under
business combination guidance, the screen test states that if substantially all of the fair value of the gross assets acquired is concentrated
in a single identifiable asset or group of similar identifiable assets, the set is not considered a business and is accounted for as
an asset acquisition. The Company has determined that the screen test was met.

Additionally,
the Company determined that the acquisition did not meet the definition of a business under ASC 805, Business Combinations.

The
Company had the following considerations:

The
first classification of assets acquired were considered cash and investments which do not function as a business. Additionally, these
assets did not have inputs and processes that had the ability to create outputs.

1. | Cash
acquired is not a business. Subsequent to acquiring the cash, the Company used this amount
for working capital.
2. | Digital
crypto assets are not a business. Subsequent to acquiring these assets, the Company liquidated
its position to use as working capital.
3. | Investments
in private companies, with a less than 10 % ownership are not a business, additionally, subsequent
to the acquisition of these equity interests, the Company had determined that the fair value
ascribed should be impaired to $ 0 as these assets were deemed nonrecoverable.

The
second classification of asset acquired was a customer list. The Company acquired this list for purposes of hosting conferences. Subsequent
to the acquisition of this list, the Company was never able to execute its plan for hosting conferences. As of the date of these financial
statements, the Company has still not hosted any conferences and does not intend to.

F- 78

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

When
considering the nature of the assets acquired, the Company believed that it had only acquired one single identifiable asset, the customer
list, that was capable of producing inputs and processes which had the ability to create outputs.

As
the screen test was met, the Company determined that this was an asset acquisition under ASC 805-50, which requires the acquiring entity
in an asset acquisition to recognize assets acquired and liabilities assumed based on the cost to the acquiring entity on a relative
fair value basis, which includes consideration given.

Additionally,
this asset purchase did not result in the recognition of goodwill or other identifiable intangible assets.

The
Company paid aggregate consideration of the following in accordance with the asset purchase agreement:

● | 1,313,127 shares of common stock having a fair value of $ 3,033,000 ($ 2.31 /share), based upon the quoting
closing stock price.
● | 63,743 shares of Series B, Non-Voting, Convertible Preferred Stock, having a fair value of $ 3,060,000 (stated value of $ 48 /share).

The
Company determined the valuation of this asset purchase transaction as follows:

Consideration paid
to DNA Holdings, LLC
Class
A - common stock ( 1,313,127 shares - $ 2.31 /share) | $ | 3,033,000
Class
B - convertible preferred stock ( 63,743 shares - $ 48 /share - stated value) | 3,060,000
Fair
value of consideration transferred to DNA Holdings, LLC | $ | 6,093,000

Recognized
amounts of identifiable assets acquired (allocated purchase price at relative fair value):

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Deconsolidation
and Gain on Disposal of Subsidiary - LD Micro, Inc.

On
March 3, 2023, the Company disposed of its subsidiary LD Micro, Inc. through a sale to Freedom Holding, Corp. (Nasdaq: “FRHC”)

In
connection with the sale, the Company received aggregate consideration of $ 8,300,000 as follows:

● | $ 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.

As
a result of the sale of our subsidiary, we deconsolidated our entire ownership interest in LD Micro, Inc. from our consolidated
financial statements beginning with the quarter ended March 31, 2023, and recognized a gain on disposal of $ 594,000 as follows:

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

Recognized
amounts of identifiable assets sold and liabilities assumed by buyer (FRHC):

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
F- 80

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Debt

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.

Original
Issue Discount Convertible Notes Payable Issued with Warrants

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 due November 2024. 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.

In
November 2023, the Company executed a convertible note debt offering for up to $ 552,000 . The convertible notes issued under the terms
of this offering result in an original issue discount of 20 % (up to $ 110,000 ) for all convertible notes sold, with the Company receiving
net proceeds of up to $ 442,000 . These notes are convertible at $ 0.25 /share, are non-interest bearing, unsecured and mature one ( 1 ) year
from the issuance date.

Additionally,
these lenders were entitled to 200 % warrant coverage on an as-converted basis, up to 4,416,000 warrants. The warrants have an exercise
price of $ 0.25 /share and are due five ( 5 ) years from the date of issuance in September 2028.

Under
this debt offering, the Company executed convertible notes payable with a face amount of $ 376,000 , a related debt discount of $ 65,000 ,
and net proceeds to the Company of $ 311,000 . The Company also issued 3,009,600 warrants, which provided for an additional debt discount
of $ 311,000 .

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 20 % ($ 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.

F- 81

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

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 | %

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, 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 over a period of one ( 1 ) year.

Exercise
of Warrants (Cashless)

In
April 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.

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.

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

Prior
to the completion of the merger, DNA 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 acquired a controlling
voting interest, it was deemed the accounting acquirer, while the Company was 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.

F- 82

SRAX,
INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2022 AND 2021

Financial
Accounting and Reporting

The
historical financial statements of the Company will become those of DNA and of the consolidated entities from the date of the reverse
acquisition and prospectively.

GAAP
requires that business combinations are accounted for under the acquisition method of accounting, which requires all of the following
steps:

(a) | identifying
the acquirer;
(b) | determining
the acquisition date;
(c) | recognizing
and measuring the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; and
(d) | recognizing
and measuring goodwill or a gain from a bargain purchase.

On
the acquisition date, the identifiable assets acquired and liabilities assumed will be measured at fair value, with limited exceptions.
The Company cannot yet determine if there will be any recognized goodwill or any intangible assets in connection with the transaction.

In
reporting its weighted average shares outstanding and earnings (loss) per share data, all share and per share amounts will be retroactively
restated to the earliest period presented.

Transaction
costs associated with the reverse acquisition are expected to be $ 0 .

Pro-Forma
Unaudited Condensed Combined Financial Statements

The
Company will file the requisite unaudited pro forma financial information after the merger closes on Form 8-K.

While
pro forma adjustments related to SRAX’s assets and liabilities will be based on estimates of fair value determined from preliminary
information received from SRAX and initial discussions between DNA and SRAX management, due diligence efforts, and information available
in the historical audited financial statements of SRAX and the related notes, the detailed valuation studies necessary to arrive at the
required estimates of the fair value of the SRAX assets to be acquired and the liabilities to be assumed, as well as the identification
of all adjustments necessary to conform DNA and SRAX accounting policies, remain subject to completion.

DNA
intends to complete the valuations and other studies upon completion of the transaction and will finalize the purchase price allocation
as soon as practicable within the measurement period, but in no event later than one year following the closing date of the transaction.
The assets and liabilities of SRAX have been measured based on various preliminary estimates using assumptions that DNA believes are
reasonable, based on information that is currently available.

Differences
between these preliminary estimates and the final acquisition accounting may occur, and those differences may be material.

DNA
Business Description

DNA
is a Web3 investment company which provides both advisory services and invests in Web3 infrastructure.

DNA
currently has three (3) areas of focus:

Investment
funds

Web3
Services

Helping
companies position themselves to attract investors and creating the marketing attention that the companies need to become recognized
in this rapidly growing $2T+ Worldwide market

Community
and Events

In
collaboration with SRAX - DNA will host events all over the world to help educate investors about Web3 projects and its ecosystem. These
events will be in person and virtually through the SEQUIRE virtual platform.

See
Form 8-K filed with United States Securities and Exchange Commission on May 12, 2024 for complete details.

Series
C, Convertible Preferred Stock

In
May 2024, the Company has designated for issuance Series C, Convertible Preferred Stock. These shares have the following rights and preferences:

● | Authorized
shares – 1,000 .
● | Par
value - $ 0.001 /share.
● | Conversion
rate - equal to 75 % multiplied by the fully diluted shares as of the conversion date. That balance is then divided by the total number
of shares of Series C, convertible preferred stock issued and outstanding.
● | Stated
value - $ 1 /share.
● | Voting
rights – on an as converted basis into the equivalent number of shares of common stock.
● | Liquidation
rights – greater of the stated value of $ 1 /share and amount per share each holder would receive if converted into common stock
immediately preceding the conversion date. Additionally, this class of stock is senior to the Company’s common stock.
F- 83

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