SRAX(US:SRAX)2024-09-20 21:29Company Operations and Structure - The Sequire platform enables companies to manage shareholder communications and track investor behaviors, providing actionable insights to maximize ROI[16]. - The company sold its LD Micro business in Q1 2023 and has integrated its own conferences into the Sequire platform[18]. - The company launched the Sequire Investor Conference in Puerto Rico, which will be held for the third year in January 2025[21]. - The company has implemented significant changes to employee benefits in response to the COVID-19 pandemic, including remote work arrangements[30]. - The company aims to attract and retain talent through equity and cash incentive plans to enhance shareholder value[29]. - The Company acquired assets from DNA Holdings, LLC for approximately $4,000,000, including $1,000,000 in cash and a customer database[43][46]. - The Company received $8,300,000 from the sale of LD Micro, consisting of $4,000,000 in cash and shares of the Parent's common stock[60]. - The Company entered into a four-year Sponsorship Agreement related to LD Micro following the merger[60]. - The Company appointed Alan Urban as CFO, who later resigned, along with other key executive resignations[88]. - The Company engaged TAAD as its independent registered public accounting firm for the fiscal year ended December 31, 2022, after dismissing Marcum LLP[89]. Financial Performance - For the years ended December 31, 2022 and 2021, the company reported operating losses of $31,373,000 and $34,762,000, respectively, with an accumulated deficit of $61,728,000 as of December 31, 2022[95]. - Total revenue for the years ended December 31, 2022, was $27,859,000, an increase of $1,152,000 or 4.31% from $26,707,000 in 2021[163]. - Sequire SaaS platform revenue decreased by $368,000 or 1.44% from $25,478,000 in 2021 to $25,110,000 in 2022[194]. - LD Micro conference revenue increased by $1,520,000 or 123.68% from $1,229,000 in 2021 to $2,749,000 in 2022[194]. - Net loss for the year ended December 31, 2022, was $31,638,000, with net cash used in operations amounting to $12,327,000[184]. - Total operating expenses decreased by $2,936,000 or 10.96% from $26,792,000 in 2021 to $23,856,000 in 2022[200]. - Interest expense decreased to $4,391,000 in 2022 from $10,295,000 in 2021, a reduction of 57.35% due to less debt outstanding[1]. - Cash, cash equivalents, and marketable securities decreased by $7,772,000 or 45.81% from $16,965,000 in 2021 to $9,193,000 in 2022[192]. Debt and Financing - The company entered into a senior secured revolving credit facility agreement with ATW for up to $9,450,000, secured by all its assets[37]. - The annual interest rate on the Revolving Loans is 11.5%, with an original issue discount of 10%[39]. - The company has outstanding indebtedness of $1,216,000 in Convertible Debentures and $6,200,000 under a Senior Secured Revolving Credit Facility as of December 31, 2022[97]. - The company incurred an additional $1,010,402 in indebtedness during the year ended December 31, 2023 and in 2024[97]. - The Company must use 15% of gross cash proceeds from the Cash Payment to redeem common stock at a price per share of less than $5.00[65]. - The Company entered into definitive securities purchase agreements for $552,000 in principal amount of Original Issue Discount Convertible Debenture at a 20% discount, and warrants to purchase up to 3,680,000 shares of Class A common stock[67]. - The November 2023 Debentures are convertible at an initial price of $0.25 per share, maturing on November 3, 2024, with no interest[68]. - The Company has the right to prepay the November 2023 Debentures at 120% of their outstanding principal within five trading days' notice[69]. Legal and Regulatory Risks - The company is subject to evolving laws and regulations, including the GDPR and California Consumer Privacy Act, which could impact its operations[27]. - The company faces potential adverse effects on its business due to evolving regulations regarding internet privacy, which could restrict data collection and processing capabilities[110]. - Noncompliance with the European General Data Protection Regulation (GDPR) could lead to penalties of up to €20 million or 4% of global revenues[113]. - The company is subject to various covenants in its loan agreements that could impact its ability to secure additional financing[98]. - The auditors expressed substantial doubt about the company's ability to continue as a going concern due to insufficient capital resources as of December 31, 2022[96]. - The company may need to raise additional capital to meet its debt obligations, which could lead to insolvency if not managed properly[99]. - The company has identified material weaknesses in its internal control over financial reporting, which may harm investor confidence[105]. - The company may face securities litigation due to market price volatility, which could divert management's attention and incur substantial costs[137]. Market and Valuation Risks - The market price of the company's common stock is expected to remain highly volatile, influenced by factors such as competitive product success and changes in growth rates relative to competitors[134]. - The company has unrealized losses from its stock portfolio amounting to approximately $3.8 million as of December 31, 2022, indicating potential valuation risks[125]. - The actual liquidation value of the company's assets may be significantly less than their recorded value in financial statements, especially in volatile market conditions[127]. - A significant portion of the company's assets consists of securities in companies where it holds less than a majority interest, posing a risk of being deemed an investment company under the Investment Company Act of 1940[128]. - The company has $6,200,000 in principal outstanding under its revolving credit facility, which is convertible into common stock at an adjustable price, potentially leading to further dilution for shareholders[136]. - The trading market for the company's shares is dependent on the research published by a limited number of analysts, and any unfavorable reports could negatively impact stock price and trading volume[140]. - The company has previously missed financial performance guidance multiple times, which could lead to a decline in stock price if future results do not meet expectations[138]. Asset Management - The company sold approximately $680,000 of Designated Assets during the fourth quarter and part of the third quarter of 2021[156]. - As of December 31, 2022, the remaining Designated Assets had an aggregate value of approximately $170,000[157]. - The market value of the securities and cash underlying the Designated Assets was approximately $3,925,000 as of December 31, 2021[155]. - The company analyzed its holdings for impairment at least annually, concluding sufficient evidence to support the impairment loss on marketable securities[9]. - Impairment of marketable securities was $3,664,000 in 2022, reflecting a permanent decline in fair value[3]. - Realized loss on designated assets was $1,803,000 in 2022, a substantial increase of 2046.43% compared to a loss of $84,000 in 2021[5].