SRAX(SRAX) - 2023 Q2 - Quarterly Report

Financial Performance - Total revenues for Q2 2023 were $1.903 million, a decrease of 75.3% compared to $7.722 million in Q2 2022[16] - Net loss for Q2 2023 was $6.017 million, compared to a net loss of $23.030 million in Q2 2022, representing a 73.8% improvement[16] - For the six months ended June 30, 2023, the company reported a net loss of $3,390,000, a significant improvement compared to a net loss of $19,302,000 for the same period in 2022[22] - The company reported a basic net income per share of $(0.21) for Q2 2023, compared to $(0.88) for Q2 2022[16] Assets and Liabilities - Total current assets decreased to $2.785 million as of June 30, 2023, down from $8.853 million at the end of 2022, a decline of 68.5%[14] - Total liabilities decreased to $16.156 million as of June 30, 2023, down from $27.319 million at the end of 2022, a reduction of 40.8%[14] - The total stockholders' deficit increased to $11.255 million as of June 30, 2023, compared to $9.249 million at the end of 2022[14] - Cash and cash equivalents were reported as $0 as of June 30, 2023, down from $7,000 at the end of 2022[14] Cash Flow and Capital Needs - Net cash used in operating activities for the six months ended June 30, 2023, was $6,228,000, compared to $7,246,000 for the same period in 2022[22] - The company generated net cash provided by investing activities of $6,316,000, primarily from the sale of its subsidiary and other assets[22] - The company anticipates needing to raise additional capital to fund its operations and meet working capital requirements[42] - The company has relied on third-party debt funding and faces uncertainty regarding the sufficiency of funds to achieve profitable operations[42] Strategic Actions - The company completed the divestiture of LD Micro on March 3, 2023, as part of its strategic restructuring efforts[9] - The company recognized a gain on the disposal of its subsidiary LD Micro, Inc. amounting to $594,000, following the sale for total consideration of $8,300,000[32] - The company disposed of LD Micro, Inc. on March 3, 2023, which did not qualify as a discontinued operation[32] Market and Operational Risks - The company operates in a highly competitive industry, facing risks from market price volatility and macroeconomic conditions[100] - The company is heavily reliant on converting marketable securities into cash, facing inherent limitations such as legal restrictions and illiquid markets[44] - The company has not demonstrated an ability to raise additional funding on favorable terms, which may impact its operations[44] Revenue Recognition - Revenue is primarily generated from the Sequire SaaS platform and previously from LD Micro, Inc. prior to its disposal in March 2023[196] - The company recognizes revenue from the Sequire SaaS platform when control of the services is transferred to the customer, generally occurring ratably over the contract period[198] - The company applies ASC 606 for revenue recognition, ensuring alignment with the delivery of services and enhancing financial disclosures[184] - Licensing and service revenue is recognized over time on a ratable basis over the contract term, typically 12 months, with services revenue recognized based on elapsed time[200] Financial Instruments and Valuation - The company utilizes a third-party independent valuation expert for fair value measurements of financial instruments[125] - The company’s financial instruments, including cash and accounts receivable, are carried at historical cost, approximating their fair values due to their short-term nature[111] - The company assesses the intent and ability to hold securities for potential recovery in fair value, which is a critical factor in impairment evaluations[151] Impairment and Goodwill - The Company recorded no impairment losses for the three and six months ended June 30, 2023, but recognized an impairment of $10,200,000 to goodwill and $1,481,000 to intangible assets for the same period in 2022[84][85] - Goodwill at June 30, 2023, was $0, down from $7,706,000 at December 31, 2022, related to the acquisition of LD Micro, Inc.[87]