SRAX(SRAX) - 2023 Q1 - Quarterly Report

Financial Performance - Revenues for Q1 2023 were $4,014,000, a decrease of 46.6% compared to $7,499,000 in Q1 2022[16] - Net income for Q1 2023 was $2,627,000, compared to $3,728,000 in Q1 2022, reflecting a decline of 29.6%[16] - Basic net income per share for Q1 2023 was $0.09, down from $0.14 in Q1 2022[16] - Net income for the three months ended March 31, 2023, was $2,627,000, a decrease from $3,728,000 in the same period of 2022, representing a decline of approximately 29.6%[20] - The company reported a net cash used in operating activities of $5,114,000 for the three months ended March 31, 2023, compared to $5,328,000 in the same period of 2022[20] Assets and Liabilities - Total current assets decreased to $8,563,000 as of March 31, 2023, down from $8,853,000 at the end of 2022[14] - The company reported a total liabilities of $19,811,000 as of March 31, 2023, down from $27,319,000 at the end of 2022[14] - Total stockholders' deficit improved to $(5,302,000) as of March 31, 2023, compared to $(9,249,000) at the end of 2022[14] - The accumulated deficit as of March 31, 2023, was $59,366,000, and the stockholders' deficit was $5,302,000[38] - The company had $314,000 in excess of the federally insured limit as of March 31, 2023, with no losses experienced on cash balances exceeding FDIC insured limits[131][130] Cash and Cash Equivalents - The company’s cash position increased significantly to $765,000 from $7,000 at the end of 2022[14] - The company had cash on hand of $765,000 at March 31, 2023, compared to $351,000 at the end of the same period in 2022[20] Revenue Sources and Recognition - The Company generates revenue primarily from two sources: the Sequire SaaS platform and LD Micro, Inc. prior to its disposal in March 2023[192] - Revenue from the Sequire SaaS platform consists of licensing subscriptions, managed services, and ancillary data[194] - Revenue is recognized ratably over the contract term, typically 12 months, with no returns, refunds, or warranties offered[196] - The Company applies ASC 606 for revenue recognition, ensuring revenue aligns closely with service delivery[181] - The Company transitioned to accepting only cash as compensation for services in 2023, which is expected to significantly decrease Sequire revenue generated from securities[203] Expenses and Cost Management - General and administrative expenses decreased to $2,966,000 in Q1 2023, down from $5,842,000 in Q1 2022, a reduction of 49.3%[16] Asset Disposal and Acquisitions - The company recorded a gain of $594,000 on the disposal of its subsidiary, LD Micro, Inc.[16] - The company recognized a gain on the disposal of its subsidiary LD Micro, Inc. amounting to $594,000, with total consideration received from the sale being $8,300,000[30] - Cash acquired in connection with the sale of the subsidiary was $4,000,000, and an additional $1,000,000 was acquired from the asset purchase of DNA Holdings, LLC[20] - The company acquired assets from DNA Holdings, LLC for a total fair value of $1,256,000, which included $1,000,000 in cash and $256,000 in digital crypto assets[60] - The acquisition was classified as an asset purchase rather than a business combination, as it did not meet the definition of a business under ASC 805[64] Impairment and Valuation - The company recorded no impairment losses for the three months ended March 31, 2023, and goodwill was $0 as of March 31, 2023, down from $7,706,000 at the end of 2022[82] - The company assessed goodwill for impairment annually, with no impairments recorded for the reporting period[78] - The company evaluates its marketable securities for impairment at each reporting period, with no impairment losses recognized for the three months ended March 31, 2023, and 2022[149] Market Conditions and Risks - The company experienced variability in sales and earnings due to factors such as macroeconomic conditions and market price volatility[95] - The company continuously evaluates market conditions and implements strategic measures to mitigate risks associated with its operations[96] Future Capital Requirements - The company anticipates needing to raise additional capital to fund its operations, indicating reliance on third-party debt-based funding[40] - The company’s future capital requirements will depend on its ability to expand into new markets and potentially acquire other companies[41]