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Prospectus
Supplement
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Filed
Pursuant to Rule 424(b)(5)
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(To
Prospectus Dated December 11, 2019)
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File
No. 333-235298
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SRAX,
INC.
Up
to $3,150,000
Class
A Common Stock
We
have entered into an at the market sales agreement (“Sales Agreement”) with B. Riley FBR, Inc (the “Sales Agent”),
as our sales agent, relating to the shares of Class A common stock (“Class A Common Stock”) of SRAX, Inc. (the “Company”)
offered by this prospectus supplement. In accordance with the terms of the Sales Agreement, we may offer and sell shares of Class
A Common Stock having an aggregate offering price of up to $3,150,000 from time to time through or to our Sales Agent.
Our
Class A Common Stock trades on The Nasdaq Capital Market under the symbol “SRAX.” On May 4, 2020, the last
reported sale price of our Class A Common Stock on The Nasdaq Capital Market was $2.00 per share.
Sales
of shares of our Class A Common Stock, if any, under this prospectus supplement may be made by any method deemed to be an “at
the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”).
There is no arrangement for funds to be received in any escrow, trust or similar arrangement.
As
of May 5, 2020, the aggregate market value of our outstanding Class A Common Stock held by non-affiliates was approximately
$33,457,801.30 based on 14,034,152 outstanding shares of Class A Common Stock, of which approximately 12,918,070 shares
are held by non-affiliates, and a per share price of $2.59, based upon the closing sale price of our Class A Common Stock
on March 6, 2020. During the 12 calendar month period that ends on, and includes, the date of this prospectus supplement
(excluding anything sold in this offering), we have sold an aggregate of $7,990,645 of securities pursuant to General Instruction
I.B.6 of Form S-3. At no time during the term of this offering will we sell securities for aggregate consideration in excess of
the maximum amount available to us under General Instruction I.B.6 of Form S-3 ($11,152,600.43 as of the date hereof) unless
the aggregate market value of our outstanding Class A Common Stock held by non-affiliates exceeds $75,000,000. In the event that
the aggregate market value of our outstanding Class A Common Stock held by non-affiliates exceeds $75,000,000 subsequent to the
date hereof, then the one third limitation on sales specified in General Instruction I.B.6(a) shall not apply to additional sales
made pursuant to this prospectus supplement.
The
compensation of our Sales Agent for sales of Class A Common Stock shall be a commission rate equal to 5.0% of the gross sales
price per share of Class A Common Stock. The net proceeds from any sales under this prospectus supplement will be used as described
under “Use of Proceeds” in this prospectus supplement.
Under
the terms of the Sales Agreement, we also may sell Class A Common Stock to the Sales Agent as principal for its own account at
a price agreed upon at the time of the sale. If we sell Class A Common Stock to the Sales Agent as principal, we will enter into
a separate agreement with the Sales Agent, and the sale will be made pursuant to the terms thereunder.
In
connection with the sale of Class A Common Stock on our behalf, the Sales Agent will be deemed to be an underwriter within the
meaning of the Securities Act, and its compensation as the sales agent will be deemed to be underwriting commissions or discounts.
We have agreed to provide indemnification and contribution to the Sales Agent with respect to certain liabilities, including liabilities
under the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The
Sales Agent is not required to sell any specific number or dollar amount of Class A Common Stock but will use its commercially
reasonable efforts, as our agent and subject to the terms of the Sales Agreement, to sell the Class A Common Stock offered, as
instructed by us or by the Sales Agent (upon an event of default of our outstanding loan obligations with BRF Finance CO., LLC
(“BRF”), an affiliate of the Sales Agent). The offering of Class A Common Stock pursuant to the Sales Agreement will
terminate upon the earlier of (i) the sale of all Class A Common Stock subject to the Sales Agreement or (ii) the termination
of the Sales Agreement by us or by the Sales Agent pursuant to the terms of the Sales Agreement.
Investing
in our securities involves certain risks. You could lose some or all of your investment. See “Risk Factors”
beginning on page S-5 of this prospectus supplement and “Risk Factors” beginning on page 5 of the accompanying
base prospectus and in the documents incorporated by reference herein and therein. You should consider carefully these risks together
with all of the other information contained, or incorporated by reference, in this prospectus supplement and the accompanying
base prospectus before making a decision to purchase our securities.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
B.
Riley FBR
The
date of this prospectus supplement is May 5, 2020.
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
prospectus supplement is part of the registration statement on Form S-3 (File No. 333-235298) that we filed with the Securities
and Exchange Commission, or the SEC, using a “shelf” registration process to register sales of our securities under
the Securities Act of 1933, as amended, or the Securities Act. This document contains two parts. The first part consists of this
prospectus supplement, which provides you with specific information about this offering. The second part, the accompanying prospectus,
provides more general information, some of which may not apply to this offering. Generally, when we refer only to the “prospectus,”
we are referring to both parts combined. This prospectus supplement, and the information incorporated herein by reference, may
add, update or change information in the accompanying prospectus. You should read the entire prospectus supplement as well as
the accompanying prospectus and the documents incorporated by reference herein that are described under the headings “Where
You Can Find More Information” and “Incorporation of Documents by Reference.” If there is any inconsistency
between the information in this prospectus supplement and the accompanying prospectus, you should rely on the information in this
prospectus supplement.
You
should rely only on the information contained in or incorporated by reference into this prospectus supplement, the accompanying
prospectus and any free writing prospectus we may provide to you in connection with this offering. Neither we, nor the Sales Agent
have authorized any other person to provide you with different information. If anyone provides you with different or inconsistent
information, you should not rely on it.
The
information appearing in this prospectus supplement, the accompanying prospectus and any free writing prospectus we may provide
to you in connection with this offering is accurate only as of the date of the respective document and any information we have
incorporated by reference is accurate only as of the date of the document incorporated by reference, regardless of the time of
delivery of this prospectus supplement, the accompanying prospectus, any free writing prospectus we may provide to you in connection
with this offering, or any sale of a security. Our business, financial condition, results of operations and prospects may have
changed since those dates. You should read this prospectus supplement, the accompanying prospectus, any free writing prospectus
prepared by us or on our behalf, and the documents incorporated by reference in the prospectus supplement, in their entirety before
making any investment decision.
We
are offering to sell, and seeking offers to buy, our securities only in jurisdictions where offers and sales are permitted. The
distribution of this prospectus supplement and the offering of the securities in certain jurisdictions may be restricted by law.
Persons outside the United States who come into possession of this prospectus supplement must inform themselves about, and observe
any restrictions relating to, the offering of the securities and the distribution of this prospectus supplement outside the United
States. This prospectus supplement does not constitute, and may not be used in connection with, an offer to sell, or a solicitation
of an offer to buy, any securities offered by this prospectus supplement by any person in any jurisdiction in which it is unlawful
for such person to make such an offer or solicitation.
The
representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated
by reference in this prospectus were made solely for the benefit of the parties to such agreement, including, in some cases, for
the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty
or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly,
such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.
In
this prospectus supplement, unless otherwise stated or the context otherwise requires, the terms “we,” “us,”
“our,” “the Company,” “SRAX,” “Registrant” refer to SRAX, Inc. and its subsidiaries.
Additionally, and reference to “BIGToken” and “BIGToken, Inc.”, or the “BIGToken Project”
refer to the Company’s wholly owned subsidiary, BIGToken, Inc. and the assets used in its operations. Also, any reference
to “common share” or “Common Stock,” refers to our $.001 par value Class A Common Stock.
All
references in this prospectus supplement to our financial statements include, unless the context indicates otherwise, the related
notes.
PROSPECTUS
SUPPLEMENT SUMMARY
This
summary highlights certain information about us, this offering and information appearing elsewhere in this prospectus supplement,
the accompanying base prospectus and in the documents we incorporate by reference in this prospectus. This summary is not complete
and does not contain all of the information that you should consider before investing in our securities. After you read this summary,
to fully understand our company and this offering and its consequences to you, you should read this entire prospectus and any
related free writing prospectus carefully, including the information referred to under the heading “Risk Factors”
in this prospectus supplement beginning on page S-5 and in the accompanying base prospectus beginning on page 5, and any related
free writing prospectus, as well as the other documents that we incorporate by reference into this prospectus supplement and the
accompanying base prospectus, including our financial statements and the exhibits to the registration statement of which this
prospectus supplement is a part.
Overview
We
are a data technology company offering tools and services to identify and reach consumers for the purpose of marketing and advertising
communication. Our technologies assist our clients in: (i) identifying their core consumers and such consumers’ characteristics
across various channels in order to discover new and measurable opportunities maximize profits associated with advertising campaigns
and (ii) gaining insight into the activities of their customers.
We
derive our revenues from the:
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Sale
and licensing of our proprietary SaaS platform; and
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Sales
of proprietary consumer data; and
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Sales
of digital advertising campaigns.
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Sales
of Advertising Campaigns.
We
provide services and data to allow our customers to utilize our proprietary data to enhance their data analytics and marketing
needs. Our products and services support and assist our customers with data management, audience optimization and recognition,
multi-channel and omnichannel media, and marketing services. These tools also assist our customers in driving online and traditional
retail sales.
Our
solutions allow for the analysis of multiple layers of data to build and scale audience profiles that can be analyzed and targeted
with digital media. Our capabilities allow the leveraging of data from our proprietary platforms to achieve more effective analysis
and marketing campaigns.
Key
features of our platforms:
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Access
to consumers who have joined our proprietary platforms who have opted to be marketed to. We provide proprietary information
on these consumers and have their consent to market to them, providing marketers safe and reliable data.
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The
discovery of new avenues through which customers are able to reach the higher-performing audiences / customers by leveraging
machine learning capabilities.
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The
use of our proprietary platform in order to allow marketers to unlock shopper profiles built from location, web browsing,
purchase history, social behavior and other analytics.
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The
use of customized audience creation tools.
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Sale
and licensing of SaaS platform
Our
software as a service (“SaaS”) solution, SRAX IR, enables companies to understand their shareholder base through the
tracking of holdings, the management of investor contact information and identification of trends in the purchase and sale of
issuer’s securities, if applicable. Once the investors are identified, our platform provides tools to communicate with these
investors.
SRAX
IR provides the following:
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Insight
into investor sentiment by analyzing buying and selling trends of an issuer’s shareholder base.
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Communication
points with an issuer’s investors, such as emails, phone number, social media accounts and address of record.
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Engaging
current and potential shareholders through real-time targeted cross-device omni-channel informational campaigns regarding
an issuer’s products and services.
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Assisting
issuers in managing and monitoring the return of investment achieved from investor relations and corporate communication initiatives.
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Sales
of proprietary consumer data.
In
2019 we launched our BIGToken consumer data management platform, where consumers are rewarded for providing and verifying their
data and completing activities within the platform. Our business is currently based on a platform of registered users, developed
as a direct to consumer data marketplace, providing advertisers and marketers highly accurate, informed consent-based research
and ad targeting data. We believe that the information gathered through the BIGToken platform will, upon reaching critical mass,
be significantly more valuable than information that is gathered and validated through other means without the specific knowledge
and consent of the data provider.
Our
strategy is to develop an opt-in first party data set (CCPA and GDPR compliant) which we believe will uniquely position SRAX to
capitalize on the rapidly evolving data marketplace. We are currently focused on executing on our plans to increase registered
users on the platform, and effectively segment, and eventually monetize on the data our users provide and the insight we derive
therefrom. As part of this strategy, we continue to explore partnership opportunities that would allow us to leverage the capabilities
of the BIGToken platform to effectively grow the platform and increase and enhance our user experience and user rewards / compensation.
Examples
of how we plan to use BIGToken and the proprietary consumer data derived therefrom include:
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The
use of BIGToken user surveys and the sale of such information received from surveys.
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The
creation and management of targeted rewards and loyalty programs based on information and buying trends ascertained by data
captured on our BIGToken platform.
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The
ability to assist our customers in conducting market research based on analytics received from users of the BIGToken platform.
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The
ability to identify specific audiences for our customers and to target questions, surveys and data analytics geared toward
our customers’ products / industries. Additionally, if we are unable to scale the needed information for a customer’s
target audience, we may utilize our proprietary analytics to gain insight to further focus and refine user segments that need
to be targeted in order to optimize data and media spend.
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The
use of Lightning Insights that allow our customers to conduct research around specific audience groups through both long and
short research studies.
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The
creation of customized loyalty programs that utilize rewards to drive consumer purchasing habits.
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Corporate
Information
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.
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.
The
Offering
The
following summary is provided solely for your convenience and is not intended to be complete. You should read the full text and
more specific details contained elsewhere in this prospectus supplement and the accompanying base prospectus. For a more detailed
description of the Class A Common Stock, see “Description of Securities to be Registered” in the accompanying base
prospectus.
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Class
A Common Stock Offered by us
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Shares
of our Class A Common Stock having an aggregate offering price of up to $3,150,000.
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Manner
of Offering
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“At-the-market”
offerings that may be made from time to time through or to the Sales Agent as sales agent or principal. See “Plan of
Distribution” on page S-10.
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Use
of Proceeds
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Pursuant
to the terms of our loan and security agreement entered into between the Company and BRF, an affiliate of the Sales Agent,
we are required to use the net proceeds from this offering, after deducting the Sales Agent’s commissions and our offering
expenses, for the repayment of our outstanding loan obligations. Any excess proceeds will be used for general and administrative
expenses and other general corporate purposes. See “Use of Proceeds” on page S-8.
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Risk
Factors
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Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning on page S-5 of this prospectus
supplement and page 5 of the accompanying base prospectus, and under similar headings in the other documents incorporated
by reference into this prospectus supplement and the accompanying base prospectus for a discussion of factors you should consider
carefully when making an investment decision.
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Nasdaq
Capital Market Symbol
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SRAX
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RISK
FACTORS
An
investment in our securities is subject to risks inherent to our business. The material risks and uncertainties that management
believes affect us are described below. Before making an investment decision, you should carefully consider the risks and uncertainties
described below together with all of the other information included or incorporated by reference in this prospectus supplement
and the accompanying base prospectus. The risks and uncertainties described below are not the only ones facing us. Additional
risks and uncertainties that we are not aware of or focused on or that we currently deem immaterial may also impair our business
operations. We also update risk factors from time to time in our periodic reports on Forms 10-K and 10-Q, which will be incorporated
by reference to this prospectus supplement and the accompanying base prospectus. If any of the following risks actually occur,
our financial condition and results of operations could be materially and adversely affected. If this were to occur, our business,
financial condition, results of operations, cash flows or prospects could be materially adversely affected. In such case, you
could lose all or a portion of your investment.
Risks
Related to this Offering and Our Securities
We
are required to utilize the net proceeds of this offering to repay amounts currently or potentially owed under our loan and security
agreement with BRF Finance CO., LLC and accordingly, we may not be able to utilize any proceeds to further our business plan or
for other corporate purposes, which may harm our financial position.
Under
our outstanding loan and security agreement with the BRF, an affiliate of the Sales Agent, whereby we initially borrowed $2,500,000
and we may draw an additional $2,5000,000 within thirty (30) days of the date of this prospectus supplement, we agreed to make
mandatory payments on such loans with the net proceeds received from sales pursuant to the offering. Accordingly, we will be required
to make mandatory payments under these loan obligations until they are paid in full before we will receive any proceeds that can
be used for any other purpose. Accordingly, given our cash position at March 31, 2020, of $110,000, even if we successfully sell
our securities under the offering described in this prospectus supplement, we may be unable to meet our ongoing obligations as
they become due. For additional information see “Use of Proceeds” beginning on page S-8 of this prospectus supplement.
In
the event that we generate net proceeds in excess of amounts owed under our outstanding loan agreement, our management will have
broad discretion over the use of proceeds from this offering and may not use the proceeds effectively.
In
the event that we are able to meet our obligations under the loan and security agreement, then with regard to any excess proceeds,
our management will have broad discretion in the application of such excess net proceeds from this offering, if any, and could
spend the proceeds in ways that do not improve our results of operations or enhance the value of our Class A Common Stock. You
will be relying on the judgment of our management concerning these uses and you will not have the opportunity, as part of your
investment decision, to assess whether the proceeds are being used appropriately. The failure of our management to apply these
funds effectively could result in unfavorable returns and uncertainty about our prospects, each of which could cause the price
of our Class A Common Stock to decline.
Upon
the occurrence of certain events, including an event of default under our existing loan instruments, the Sales Agent may have
the unilateral right to sell our shares in this offering.
Upon
the occurrence of certain events, including an event of default under our existing loan instruments, the Sales Agent may have
the unilateral right to sell our shares in this offering in amounts and prices as determined by the Sales Agent. As a result,
the Sales Agent may sell more shares at a lower price than the Company would have wanted and may negatively impact the trading
price and volume of our Class A Common Stock.
Sales
of a substantial number of shares of our Class A Common Stock in the public market by our existing stockholders, future issuances
of Class A Common Stock or rights to purchase our Class A Common Stock, could all cause our Class A Common Stock price to fall.
Sales
of a substantial number of shares of our Class A Common Stock by our existing stockholders in the public market, or the perception
that these sales might occur, could depress the market price of our Class A Common Stock and could impair our ability to raise
capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the
prevailing market price of our Class A Common Stock.
Our
auditors have expressed substantial doubt about our ability to continue as a going concern.
Our
auditors’ report on our December 31, 2019 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 March 31, 2020, as well the anticipated proceeds from
the Small Business Association (SBA) Pay Roll Protection loan that we were recently approved for, there is substantial doubt about
our ability to continue as a going concern past June 30, 2020. If we do not obtain additional capital by such time, we may no
longer be able to continue as a going concern and may cease operation or seek bankruptcy protection.
The
shares of our Class A Common Stock offered under this prospectus supplement and the accompanying base prospectus may be sold in
“at-the-market” offerings, and investors who buy shares at different times will likely pay different prices.
Investors
who purchase shares under this prospectus supplement and the accompanying base prospectus at different times will likely pay different
prices, and so may experience different outcomes in their investment results. Initially, we will be able to vary the timing, prices,
and numbers of shares sold, and to determine the minimum sales price for shares sold until an event of default occurs under our
loan obligations to BRF, an affiliate of the Sales Agent, at which point the Sales Agent will unilateral control to sell such
number of shares and at what price at its sole discretion. Investors may experience declines in the value of their shares as a
result of share sales made in connection with “at-the-market” offerings at prices lower than the prices they paid.
The
actual number of shares we will issue under the Sales Agreement, at any one time or in total, is uncertain.
Subject
to certain limitations in the Sales Agreement and compliance with applicable law, we and our Sales Agent may mutually agree to
sell shares of our Class A Common Stock under a transaction acceptance at any time throughout the term of the Sales Agreement.
The number of shares that are sold by the Sales Agent after agreement on the terms of the transaction acceptance will fluctuate
based on the market price of the shares of our Class A Common Stock during the sales period and limits we set with our Sales Agent.
Because the price per share of each share sold will fluctuate based on the market price of our shares of Class A Common Stock
during the sales period, it is not possible to predict the number of shares that will ultimately be issued.
If
you purchase shares of Class A Common Stock sold in this offering, you will incur immediate and substantial dilution.
If you purchase shares of our Class A Common
Stock in this offering, you will experience substantial and immediate dilution in the pro forma net tangible book value per share
after giving effect to this offering, based on the assumed public offering price of $2.00 per share, which is the last
reported sale price of our Class A Common Stock on The Nasdaq Stock Market on May 4, 2020, because the price that you pay
will be substantially greater than the pro forma net tangible book value per share of the Class A Common Stock that you acquire.
You will experience additional dilution upon exercise of the outstanding stock options and other equity awards that may be granted
under our equity incentive plans, and when we otherwise issue additional shares of our Class A Common Stock or convertible securities.
For more information, see “Dilution” beginning on page S-9 of this prospectus supplement.
Our
publicly filed reports are subject to review by the SEC, and any significant changes or amendments required as a result of any
such review may result in material liability to us and may have a material adverse impact on the trading price of our Class A
Common Stock.
The
reports of publicly traded companies are subject to review by the SEC from time to time for the purpose of assisting companies
in complying with applicable disclosure requirements, and the SEC is required to undertake a comprehensive review of a company’s
reports at least once every three years under the Sarbanes-Oxley Act of 2002. SEC reviews may be initiated at any time. We could
be required to modify, amend or reformulate information contained in prior filings as a result of an SEC review. Any modification,
amendment or reformulation of information contained in such reports could be significant and result in material liability to us
and have a material adverse impact on the trading price of our Class A Common Stock.
We
face business disruption and related risks resulting from the recent outbreak of the novel coronavirus 2019 (COVID-19), which
could have a material adverse effect on our business and results of operations.
In December 2019, an outbreak of a new strain
of coronavirus, COVID-19, began in Wuhan, Hubei Province, China. In March 2020, the World Health Organization
declared COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the
global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. The potential
impacts and duration of the COVID-19 pandemic on the global economy and on the Company’s business,
in particular, are uncertain and may be difficult to assess or predict. The pandemic has resulted in, and may continue to result
in, significant disruption of global financial markets, which may reduce the Company’s ability to access capital and continue
to operate effectively. The COVID-19 pandemic could also reduce the demand for the Company’s products
and services, including its ability to operate its business and to actively market to its customers. In addition, a recession
or further financial market correction resulting from the spread of COVID-19 could adversely affect demand
for the Company’s products and services. To the extent that the COVID-19 pandemic adversely impacts
the Company’s business, results of operations, liquidity or financial condition, it may also have the effect of heightening
many of the other risks described in the section entitled “Risk Factors” in our most recent Annual Report on Form
10-K and any subsequent report filed with the Securities and Exchange Commission.
The
global outbreak of the COVID-19 pandemic continues to rapidly evolve. The extent to which the COVID-19
pandemic may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence,
such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing
in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in
the United States and other countries to contain and treat the disease.
Additional
Risks Related to our Business, Industry and an Investment in our Class A Common Stock
For
a discussion of additional risks associated with our business, our industry and ownership of our securities, see the section entitled
“Risk Factors” in our most recent our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and
in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, both filed with the SEC on May
1, 2020, as well as any other subsequently filed document that is also incorporated or deemed to be incorporated by reference
in this prospectus supplement.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus supplement, the accompanying prospectus and the documents we have filed with the SEC that are incorporated by reference
into this prospectus supplement and the accompanying base prospectus contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act.
Forward-looking statements reflect our current view about future plans, intentions or expectations. These forward-looking statements
may be included herein or incorporated by reference in this prospectus supplement or the accompanying prospectus and include,
in particular, statements about our plans, strategies and prospects and may be identified by terminology such as “may”,
“will”, “should”, “would”, “could”, “expect”, “scheduled”,
“plan”, “continue”, “intend”, “anticipate”, “believe”, “estimate”,
“aim”, “potential”, or “continue” or the negative of those terms or other comparable terminology.
These forward-looking statements are subject to risks, uncertainties and assumptions about us. Although we believe that our plans,
intentions and expectations are reasonable, we may not achieve our plans, intentions or expectations.
Important
factors that could cause actual results to differ materially from the forward-looking statements we make in this prospectus supplement
and the accompanying base prospectus are set forth in this prospectus supplement and the accompanying base prospectus under the
caption “Risk Factors”, and in the reports we have filed or will file with the SEC and which are incorporated by reference
herein and therein, including statements under the caption “Risk Factors” and “Special Note Regarding Forward-Looking
Statements” in such reports. All forward-looking statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements in this prospectus supplement and the accompanying base prospectus under
the caption “Risk Factors”, and in the reports we have filed or will file with the SEC and which are incorporated
by reference herein and therein, including statements under the caption “Risk Factors” and “Special Note Regarding
Forward-Looking Statements” in such reports, in which we have disclosed the material risks related to our business. These
forward-looking statements involve risks and uncertainties, and the cautionary statements identify important factors that could
cause actual results to differ materially from those predicted in any forward-looking statements. We undertake no obligation to
update any of the forward-looking statements after the date of this prospectus supplement to conform those statements to reflect
the occurrence of unanticipated events, except as required by applicable law. You should read this prospectus supplement, the
accompanying prospectus and the documents incorporated by reference herein and therein completely and with the understanding that
our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We
qualify all of our forward-looking statements by these cautionary statements.
USE
OF PROCEEDS
We
may issue and sell shares of our Class A Common Stock having aggregate sale proceeds of up to $3,150,000 from time to time.
There can be no assurance that we will be able to sell any shares under or fully utilize the Sales Agreement with the Sales Agent
as a source of financing. Because there is no minimum offering amount required as a condition to closing this offering, the actual
total public offering amount, commissions and proceeds to us, if any, are not determinable at this time.
Subject
to the terms of a term loan and security agreement entered into between the Company and BRF, an affiliate of the Sales Agent,
on February 28, 2020, we agreed to make mandatory prepayments with the net proceeds received from sales pursuant to the Sales
Agreement. The Company currently is indebted in the amount of $2,500,000 as of the date of this Prospectus Supplement and may
draw an additional $2,500,000 subject to certain conditions being met as contained in the loan and security agreement. These loans
bear interest at 10% per annum, mature on March 1, 2022, and pursuant to their terms, we are required to make interest and principal
payments beginning on August 1, 2020. As required, we will make mandatory payments upon sales from this offering until all amounts
owed under the loans have been paid. After, we intend to use any additional proceeds for general and administrative expenses and
other general corporate purposes (“Discretionary Proceeds”). We will retain broad discretion in the allocation of
the Discretionary Proceeds, if any, we receive in connection with securities offered pursuant to this prospectus supplement and
investors will be relying on the judgment of our management regarding the application of the Discretionary Proceeds.
DILUTION
If you invest in this offering, your ownership
interest will be diluted to the extent of the difference between the public offering price per share and the as adjusted net tangible
book value per share after giving effect to this offering. Our net tangible book value as of March 31, 2020, was approximately
$12,284,000, or approximately $0.88 per share of Class A Common Stock. Net tangible book value per share represents
the amount of total tangible assets (total assets less intangible assets) less total liabilities, divided by the number of shares
of our Class A Common Stock outstanding as of March 31, 2020.
Dilution in net tangible book value per share
represents the difference between the amount per share paid by purchasers in this offering and the net tangible book value per
share of our class A Common Stock immediately after this offering. After giving effect to the assumed sale of shares of our Class
A Common Stock in the aggregate amount of approximately $3,150,000 at an assumed offering price of $2.00 per share,
the last reported sale price of our Class A Common Stock on May 4, 2020, and after deduction of commissions and estimated
offering expenses payable by us, our as adjusted net tangible book value as of March 31, 2020, would have been approximately $15,151,000
or 0.97 per share of Class A Common Stock. This represents an immediate increase in net tangible book value of $0.09
per share of Class A Common Stock to our existing stockholders and an immediate dilution in net tangible book value of $1.03
per share of Class A Common Stock to investors participating in this offering at an assumed offering price of $2.00 per
share. The following table illustrates this per share dilution:
|
Assumed public offering price per share
|
|
|
|
|
|
$
|
2.00
|
|
|
Net tangible book value per share as of March 31, 2020
|
|
$
|
0.88
|
|
|
|
|
|
|
Increase in net tangible book value per share attributable to this offering
|
|
$
|
0.09
|
|
|
|
|
|
|
As adjusted net tangible book value per share as of March 31, 2020, after giving effect to this offering
|
|
|
|
|
|
$
|
0.97
|
|
|
Dilution per share to new investors participating in this offering
|
|
|
|
|
|
$
|
1.03
|
|
The table above assumes for illustrative purposes
that an aggregate of 1,575,000 shares of our Class A Common Stock are sold at a price of $2.00 per share, the last
reported sale price of our Common Stock on the Nasdaq Capital Market on May 4, 2020 for aggregate gross proceeds of approximately
$3,150,000. The shares sold in this offering, if any, will be sold from time to time at various prices. An increase, or
decrease, of $0.50 per share in the price at which the shares are sold from the assumed offering price of $2.00 per share
shown in the table above, assuming the entire $3,150,000 worth of shares of Class A Common Stock offered are sold at that
price, would increase (or decrease) our adjusted net tangible book value per share after the offering by approximately $0.02 and
($0.03) per share, respectively, and the dilution in net tangible book value per share to new investors in this
offering by approximately $0.48 and ($0.47) per share, respectively, after deducting the estimated commissions of
the Sales Agent and estimated aggregate offering expenses payable by us.
This
information is supplied for illustrative purposes only, and will adjust based on the actual offering prices, the actual number
of shares that we offer and sell in this offering and other terms of each sale of shares in this offering.
The
number of shares of Class A Common Stock to be outstanding after this offering is based on 14,034,152 shares outstanding on March
31, 2020 and excludes as of that date:
|
|
●
|
options
representing the right to purchase a total of 837,435 shares of Class A Common Stock at a weighted average exercise
price of $3.49 per share;
|
|
|
●
|
warrants
representing the right to purchase a total of 6,237,430 shares of Class A Common Stock at a weighted-average exercise
price of $4.75 per share; and
|
|
|
●
|
937,699
shares of Class A Common Stock available for future issuances
under our equity compensation plans;
|
|
|
●
|
up
to 239,029 shares of Class A Common Stock pledged as collateral to secure our payment on certain outstanding non-performing
receivables sold in January 2020; and
|
|
|
|
|
|
|
●
|
up
to 450,000 shares of Class A Common Stock pledged as collateral to secure our payment on outstanding promissory notes sold
in February 2020, subject to increase to cover deficiencies in the event that the shares are insufficient to cover the notes.
|
The
foregoing discussion and table also exclude the following stock, warrant and option transactions that have occurred subsequent
to March 31, 2020:
|
|
●
|
36,700
shares of Class A Common Stock issued pursuant to an extension of the payment date for payment owed on outstanding non-performing
receivables that we sold for cash in January 2020;
|
|
|
●
|
options representing the
right to purchase a total of 37,632 shares of Class A Common Stock at a weighted average exercise price of $1.95 per share;
and
|
|
|
|
|
|
|
●
|
The anticipated
issuance of a Class A Common Stock purchase warrant to purchase 500,000 shares with a to be determined exercise price, to
be issued to BRF, an affiliate of the Sales Agent, upon completion of a second draw down $2,500,000 under our existing loan
agreement with BRF.
|
To
the extent that outstanding options or warrants are exercised, investors purchasing our Class A Common Stock in this offering
will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic
considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional
capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in
further dilution to our stockholders.
PLAN
OF DISTRIBUTION
We
have entered into an at market issuance sales agreement, or Sales Agreement, with B. Riley FBR, Inc., or the Sales Agent, under
which we may issue and sell shares of our Class A Common Stock having aggregate gross sales proceeds of up to $3,150,000
from time to time through or to the Sales Agent as sales agent or principal. The Sales Agent may sell the Class A Common Stock
by any method that is deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities
Act.
Each
time we wish to issue and sell Class A Common Stock under the Sales Agreement, we will notify the Sales Agent of the number or
dollar value of shares to be issued, the dates on which such sales are anticipated to be made, and any minimum price below which
sales may not be made. Once we have so instructed the Sales Agent, unless the Sales Agent declines to accept the terms of such
notice, the Sales Agent has agreed to use its commercially reasonable efforts consistent with its normal trading and sales practices
to sell such shares up to the amount specified on such terms. The obligations of the Sales Agent under the Sales Agreement to
sell our Class A Common Stock are subject to a number of customary conditions that we must meet.
In
connection with the loan and security agreement dated February 28, 2020, we granted BRF a power of attorney whereby BRF has the
authority upon an event of default, to direct the sale of an undetermined amount of Class A Common Stock by the Sales Agent under
the Sales Agreement. The proceeds from such sales would be dedicated toward payment of all amounts due and owing under the loan
and security agreement.
Settlement
for shares of our Class A Common Stock will occur on the second trading day following the date on which the sale was made. Sales
of our Class A Common Stock as contemplated in this prospectus supplement will be settled through the facilities of The Depository
Trust Company or by such other means as we and the Sales Agent may agree upon. There is no arrangement for funds to be received
in an escrow, trust or similar arrangement.
We
will pay the Sales Agent a commission of 5.0% of the gross proceeds from each sale. We also agreed to reimburse the Sales Agent
for certain specified expenses, including the fees and disbursements of its legal counsel in an amount not to exceed $50,000 and
ongoing diligence arising from the transactions contemplated by this Agreement in an amount not to exceed $2,500 in the aggregate
per calendar quarter. Because there is no minimum offering amount required as a condition to closing this offering, the actual
total public offering amount, commissions and proceeds to us, if any, are not determinable at this time. In connection with the
sale of the Class A Common Stock on our behalf, the Sales Agent will be deemed to be an “underwriter” within the meaning
of the Securities Act as amended, and the compensation of the Sales Agent will be deemed to be underwriting commissions or discounts.
We have agreed to provide indemnification and contribution to the Sales Agent with respect to certain civil liabilities, including
liabilities under the Securities Act. We estimate that the total expenses for the offering, excluding compensation payable to
the Sales Agent and expense reimbursement under the terms of the sales agreement, will be up to approximately $75,000.
The
offering of our Class A Common Stock pursuant to the Sales Agreement will terminate upon the termination of the Sales Agreement
as described therein. We and the Sales Agent may each terminate the Sales Agreement at any time upon five (5) days’ prior
notice.
This
summary of the material provisions of the Sales Agreement does not purport to be a complete statement of its terms and conditions.
A copy of the Sales Agreement will be filed with the SEC on the Company’s current report on Form 8-K as Exhibit 10.01, and
is incorporated by reference into the registration statement of which this prospectus supplement is a part. See “Where You
Can Find More Information” below.
To
the extent required by Regulation M under the Exchange Act, the Sales Agent will not engage in any market making activities involving
our Class A Common Stock while the offering is ongoing under this prospectus.
In
addition, the Sales Agreement provides that we will not (i) take any action designed to cause or result in, or that constitutes
or would reasonably be expected to constitute, the stabilization or manipulation of the price of any of our securities to facilitate
the sale or resale of Class A Common Stock, or (ii) sell, bid for, or purchase Class A Common Stock in violation of Regulation
M, or pay anyone any compensation for soliciting purchases of the Class A Common Stock under the Sales Agreement other than the
Sales Agent.
The
Sales Agent and its affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings
in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees
and commissions for these transactions. As disclosed above, we have a lending relationship with BRF, an affiliate of the Sales
Agent. More than 50% of the proceeds from this offering may be used for payment of amounts due and owing under the loan and security
agreement.with BRF.
In
addition, in the ordinary course of their business activities, the Sales Agent and its affiliates may make or hold a broad array
of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including
bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve
securities and/or instruments of ours or our affiliates. The Sales Agent and its affiliates may also make investment recommendations
and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend
to clients that they acquire, long and/or short positions in such securities and instruments.
LEGAL
MATTERS
The validity of the issuance of the securities
offered hereby will be passed upon for us by The Silvestre Law Group, P.C. Westlake Village, California. The Silvestre Law
Group, P.C. or its affiliates or principals own 133,000 shares of Class A Common Stock and $100,000 in outstanding
promissory notes. Duane Morris LLP, New York, New York, is acting as counsel to the Sales Agent in connection with this
offering.
EXPERTS
The
consolidated financial statements of SRAX, Inc. as of December 31, 2019 and 2018 and for each of the years in the two-year period
ended December 31, 2019 incorporated by reference in this prospectus supplement form the Annual Report on Form 10-K for the year
ended December 31, 2019 have been audited by RBSM LLP, an independent registered public accounting firm, as stated in their report
thereon, incorporated herein by reference, and have been so incorporated in this prospectus supplement in reliance upon such report
and upon the authority of such firm as experts in auditing and accounting.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The
SEC allows us to “incorporate by reference” the information we file with it, which means that we can disclose important
information to you by referring you to those documents. The information we incorporate by reference is an important part of this
prospectus, and certain information that we will later file with the SEC will automatically update and supersede this information.
We incorporate by reference the documents listed below, as well as any future filings made with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act made after the date of this prospectus supplement until the termination of the offering
of the securities covered under this prospectus supplement, except that we do not incorporate any document or portion of a document
that was furnished and deemed by the rules of the SEC not to have been filed:
|
●
|
Our
Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on May 1, 2020;
|
|
●
|
Our
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020, filed with the SEC on May 1, 2020;
|
|
●
|
Our
Current Reports on Form 8-K filed with the SEC on March 5, 2020, March 27, 2020 and April 23, 2020; and
|
|
●
|
The
description of our Class A Common Stock and related rights contained in our registration statement on S-1 filed with the SEC
on January 24, 2012, including any amendment or report filed for the purpose of updating such description.
|
Any
information that we subsequently file with the SEC that is incorporated by reference as described above will automatically update
and supersede any previous information that is part of this prospectus.
We
hereby undertake to provide without charge to each person, including any beneficial owner, to whom a copy of this prospectus is
delivered, upon written or oral request of any such person, a copy of any and all of the information that has been or may be incorporated
by reference in this prospectus, other than exhibits to such documents. You may request, and we will provide you with, a copy
of these filings, at no cost, by calling us at (323) 694-9800 or by writing to us at the following address:
SRAX,
Inc.
456
Seaton Street
Los
Angeles, CA 90013
Attn:
Corporate Secretary
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
As
permitted by SEC rules, this prospectus omits certain information and exhibits that are included in the registration statement
of which this prospectus forms a part. Since this prospectus may not contain all of the information that you may find important,
you should review the full text of these documents. If we have filed a contract, agreement or other document as an exhibit to
the registration statement of which this prospectus forms a part, you should read the exhibit for a more complete understanding
of the document or matter involved. Each statement in this prospectus, including statements incorporated by reference as discussed
above, regarding a contract, agreement or other document is qualified in its entirety by reference to the actual document.
We
are subject to the information reporting requirements of the Exchange Act, and, in accordance with these requirements, we file
annual, quarterly and current reports, proxy statements, and other information with the SEC. You may inspect, read and copy the
reports and other information we file with the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington,
D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC also maintains an internet website at www.sec.gov that contains our filed reports, proxy and information statements, and other
information that we file electronically with the SEC. Additionally, we make these filings available, free of charge, on our website
at www.srax.com in the “Filings” subsection of the “Investors” menu as soon as reasonably practicable
after we electronically file such materials with, or furnish them to, the SEC. The information on our website, other than these
filings, is not, and should not be, considered part of this prospectus, is not incorporated by reference into this prospectus,
and should not be relied upon in connection with making any investment decision with respect to our securities.
PROSPECTUS
SRAX,
Inc.
$100,000,000
CLASS
A COMMON STOCK
PREFERRED
STOCK
WARRANTS
RIGHTS
PURCHASE
CONTRACTS
UNITS
This
prospectus will allow us to issue, from time to time at prices and on terms to be determined at or prior to the time of the offering,
up to $100,000,000 of any combination of the securities described in this prospectus, either individually or in units. We may
also offer Class A common stock upon conversion of or exchange for the preferred stock; Class A common stock or preferred stock
upon the exercise of warrants, rights or performance of purchase contracts; or any combination of these securities upon the performance
of purchase contracts.
This
prospectus describes the general terms of these securities and the general manner in which these securities will be offered. We
will provide you with the specific terms of any offering in one or more supplements to this prospectus. The prospectus supplements
will also describe the specific manner in which these securities will be offered and may also supplement, update or amend information
contained in this document. You should read this prospectus and any prospectus supplement, as well as any documents incorporated
by reference into this prospectus or any prospectus supplement, carefully before you invest.
Our
securities may be sold directly by us to you, through agents designated from time to time or to or through underwriters or dealers.
For additional information on the methods of sale, you should refer to the section entitled “Plan of Distribution”
in this prospectus and in the applicable prospectus supplement. If any underwriters or agents are involved in the sale of our
securities with respect to which this prospectus is being delivered, the names of such underwriters or agents and any applicable
fees, commissions or discounts and over-allotment options will be set forth in a prospectus supplement. The price to the public
of such securities and the net proceeds that we expect to receive from such sale will also be set forth in a prospectus supplement.
The
aggregate market value of our outstanding common stock held by non-affiliates was $20,032,537.20
based on 13,997,452 shares of outstanding Class A common stock as of November 13, 2019 of which approximately 12,841,370 shares
were held by non-affiliates, and based on the last reported sale price of our Class A Common stock as noted above. Pursuant to
General Instruction I.B.6 of Form S-3, in no event will we sell securities pursuant to this prospectus with a value of more than
one-third of the aggregate market value of our Class A common stock held by non-affiliates in any twelve-month period, so long
as the aggregate market value of our Class A common stock held by non-affiliates is less than $75,000,000. In the event that subsequent
to the date of this prospectus, the aggregate market value of our outstanding common stock held by non-affiliates equals or exceeds
$75,000,000, then the one-third limitation on sales shall not apply to additional sales made during the corresponding you in reliance
on this prospectus. During the prior twelve calendar months prior to, and including, the date of this prospectus, we have
not sold any securities pursuant to General Instruction I.B.6 of Form S-3.
Our
common stock is listed on the NASDAQ Capital Market under the symbol “SRAX” On November 13, 2019, the last reported
sale price of our Class A common stock was $1.56 per share. The applicable prospectus supplement will contain information, where
applicable, as to any other listing, if any, on the NASDAQ Capital Market or any securities market or other securities exchange
of the securities covered by the prospectus supplement. Prospective purchasers of our securities are urged to obtain current information
as to the market prices of our securities, where applicable. Our principal executive offices are located at 456 Seaton Street,
Los Angeles, CA 90013, and our telephone number is (323) 694-9800.
Investing
in our common stock involves a high degree of risk. You are urged to read the section entitled “Risk Factors”
beginning on page 5 of this prospectus, which describes specific risks and other information that should be considered
before you make an investment decision.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This
prospectus is dated , 2019
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
Unless
the context requires otherwise or unless otherwise noted, all references in this prospectus to “our company,” “we,”
“our,” “SRAX” and “us” refer to SRAX, Inc. and its subsidiary. Also, any reference to “common
share” or “common stock,” refers to our $0.001 par value Class A common stock. All share and per share information
contained in this prospectus takes into account the 1-for-5 reverse stock split of our Class A common shares effective September
22, 2016.
This
prospectus is a part of a registration statement that we filed with the Securities and Exchange Commission, or SEC, utilizing
a “shelf” registration process. Under this shelf process, we may sell the securities described in this prospectus
in one or more offerings. This prospectus provides you with a general description of the securities we may offer. Each time we
sell securities under this shelf registration, we will provide a prospectus supplement that will contain specific information
about the terms of that offering. We may also authorize one or more free writing prospectuses to be provided to you that may contain
material information relating to these offerings. The prospectus supplement and any related free writing prospectus that we may
authorize to be provided to you may also add, update or change information contained in this prospectus or in any documents that
we have incorporated by reference into this prospectus. You should read this prospectus, any applicable prospectus supplement
and any related free writing prospectus, together with the information incorporated herein by reference as described under the
headings “Where You Can Find More Information” and “Incorporation by Reference.”
You
should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized any other
person to provide you with different information. If anyone provides you with different information, you should not rely on it.
We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume
that the information contained in this prospectus and the documents incorporated by reference herein and therein are accurate
only as of the date such information is presented or in any applicable prospectus supplement. Neither the delivery of this prospectus
nor any sale made in connection with this prospectus shall, under any circumstances, create any implication that there has been
no change in our affairs since the date of this prospectus or that the information contained by reference to this prospectus is
correct as of any time after its date.
This
prospectus may be supplemented from time to time to add, update or change information in this prospectus. Any statement contained
in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement
contained in such prospectus supplement modifies or supersedes such statement. Any statement so modified will be deemed to constitute
a part of this prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this
prospectus.
FORWARD-LOOKING
STATEMENTS
The
SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future
prospects and make informed investment decisions. This prospectus contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, or the “Securities Act”, and Section 21E of the Securities Exchange
Act of 1934, as amended, or the “Exchange Act”.
Such
statements in connection with any discussion of future operations or financial performance are identified by the use of words
such as “may,” “anticipate,” “estimate,” “expect,” “project,” “intend,”
“plan,” “believe,” and other words and terms of similar meaning. Forward-looking statements include, but
are not limited to, statements about: our business, operations, financial performance and condition, earnings, our prospects,
our ability to raise capital to fund our operations and business plan, the continued listing of our securities on the NASDAQ Capital
Market, our ability to protect intellectual property rights as well as regarding our industry generally. Forward–looking
statements are not guarantees of performance. Such statements are based on management’s expectations and are subject to
certain factors, risks and uncertainties that may cause actual results, outcome of events, timing and performance to differ materially
from those expressed or implied by such statements. For a summary of such factors, please refer to the section entitled “Risk
Factors” in this prospectus, as updated and supplemented by the discussion of risks and uncertainties in our most recent
annual report on Form 10-K, as revised or supplemented by our subsequent quarterly reports on Form 10-Q or our current reports
on Form 8-K, as well as any amendments thereto, as filed with the SEC and which are incorporated herein by reference. The information
contained in this document is believed to be current as of the date of this document. We do not intend to update any of the forward-looking
statements after the date of this document to conform these statements to actual results or to changes in our expectations, except
as required by law.
In
light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained
in this prospectus or in any document incorporated herein by reference might not occur. Investors are cautioned not to place undue
reliance on the forward-looking statements, which speak only as of the date of this prospectus or the date of the document incorporated
by reference in this prospectus. We are not under any obligation, and we expressly disclaim any obligation, to update or alter
any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent forward-looking
statements attributable to us or to any person acting on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section.
OUR
BUSINESS
Overview
We
are a digital marketing and data technology company. We derive our revenues from:
|
|
●
|
sales
of digital advertising campaigns to advertising agencies and brands;
|
|
|
●
|
licensing
our SRAXir platform to public companies;
|
|
|
●
|
creation
of custom platforms for buying media on SRAX for large brands; and
|
|
|
●
|
sales
of proprietary consumer data
|
BIGToken
Platform
Overview
We
have developed BIGToken as a way for consumers to benefit from the use of their data. Users of BIGToken will have the ability
to earn a pre-established number of points for completing certain tasks. By way of example, a user may earn 4 points for providing
their name and 10 points for checking in at a local restaurant. The number of points for each action will be prominently displayed
for the user to review prior to undertaking such action. The points will be convertible by the user into rewards which initially
will consist of: (i) cash, (ii) gift cards and (iii) donations to non-profit entities. We anticipate that as the user base of
BIGToken expands, additional goods and services offered by our advertising sponsors will also be available as rewards.
Since
initially launching our BIGToken platform in the United States, we have expanded the functionality of the platform through a series
of new applications as well as its geographical reach.
Platform
Development:
|
|
●
|
Big
Rewards: An application within the BIGtoken platform that provides users branded action that drives offers for cash back.
Consumer answers questions about a brand’s specific item at a retailer and then are offered a reward for the purchase
of the item at a select retailer. This offers brands an end to end reach in the digital media cycle by creating data driven
insights for planning, audience creation, and then all the way through activation and ultimately sales and other results-based
attribution.
|
|
|
|
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|
|
●
|
BIG
Research: we’ve launched an application within the BIGtoken platform that will allow brands access to our users for
purposes of opt-in research panels. Through our global platform we can launch multi-country studies and scale consumer populations
based on client needs. Additionally, our unique platform allows for analysis and relevancy of data points collected by brands
through research studies.
|
Geographic
Reach:
|
|
●
|
BIGtoken
in Asia: The Company has entered into a partnership with an investor familiar with the Asian advertising market.
|
|
|
|
|
|
|
●
|
BIGtoken
in India: We’ve entered into a partnership with the Yash Birla Group, one of India’s largest conglomerates to
explore partnerships in India.
|
|
|
|
|
|
|
●
|
BIGtoken
in European Union: We’ve launched the availability of the application within the 28 member countries of the European
Union.
|
As
of September 30, 2019, we have not generated any revenue through the sale of data gathered from users of the BIGToken Platform.
Since commencing the BIGToken project, we have spent approximately $4 million in the development and management of the BIGToken
Platform. Additionally, we are currently obligated to redeem users’ points which are earned on our BIGToken Platform. We
are currently redeeming each point for $0.001 to $0.01, subject to the user meeting certain conditions. Notwithstanding the foregoing,
we believe that in order to fully launch the BIGToken Platform and recognize all the benefits therefrom, not only will we be required
to further increase the functionally of the platform but we will also need to comply with both state and federal securities laws
and regulations with regard to certain aspects of the platform and specifically, BIGToken. There can be no assurances that we
will successfully develop the blockchain portion of the BIGToken Platform or that we will be able to comply with any applicable
laws or regulations on a timely basis, if at all. Our failure successfully complete the development of the BIGToken Platform or
to adequately comply with applicable laws and regulations, or comply with them on a timely basis, will greatly impact the value
and utility of the BIGToken Platform and could materially impact the operations of our company.
SRAX
IR Platform
Overview
SRAX
IR is a SaaS platform that while providing invaluable insights to public company issuers, delivers a long-term recurring revenue
stream for SRAX and builds one of the most valuable data sets in the industry.
The
platform enables issuers of public securities to analyze and engage shareholders. The Company currently offers access to the platform
through monthly subscriptions. The Company has partnered with resellers to license the platform on a white label basis for a portion
of the revenue earned from the licensees.
Employees
At
September 30, 2019 we had 48 full-time employees. We also contract for the services of a number individuals from a third-party
provider. There are no collective bargaining agreements covering any of our employees.
Corporate
information
We
were incorporated in the state of Delaware in 2011. Our principal executive offices are located at 456 Seaton Street, Los Angeles,
CA 90013, telephone number 323-694-9800. We maintain a website at www.srax.com. Effective August 25, 2019 we changed
our corporate name form Social Reality, Inc. to SRAX, Inc.
Our
wholly owned subsidiary, BIGToken, Inc. maintains a website at Bigtoken.com.
We
have not incorporated by reference into this prospectus, the information in, or that can be accessed through, our websites and
you should not consider them to be a part of this prospectus.
RISK
FACTORS
Investing
in our securities involves a high degree of risk. Before deciding whether to invest in our securities, you should consider carefully
the risks and uncertainties described under the heading “Risk Factors” contained in the applicable prospectus supplement
and any related free writing prospectus, and discussed under the section entitled “Risk Factors” contained in our
most recent Annual Report on Form 10-K and in our most recent Quarterly Report on Form 10-Q, as well as any amendments thereto
reflected in subsequent filings with the SEC, which are incorporated by reference into this prospectus in their entirety, together
with other information in this prospectus, the documents incorporated by reference and any free writing prospectus that we may
authorize for use in connection with this offering. The risks described in these documents are not the only ones we face, but
those that we consider to be material. There may be other unknown or unpredictable economic, business, competitive, regulatory
or other factors that could have material adverse effects on our future results. Past financial performance may not be a reliable
indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. If
any of these risks actually occurs, our business, financial condition, results of operations or cash flow could be seriously harmed.
This could cause the trading price of our Class A common stock to decline, resulting in a loss of all or part of your investment.
Please also read carefully the section above entitled “Forward-Looking Statements.”
USE
OF PROCEEDS
We
cannot assure you that we will receive any proceeds in connection with securities which may be offered pursuant to this prospectus.
Unless otherwise indicated in the applicable prospectus supplement, we intend to use any net proceeds from the sale of securities
under this prospectus for general corporate purposes, including, but not limited to, working
capital, acquisitions, payment of debt and other business opportunities. We have not determined the amounts we plan to
spend on any of the areas listed above or the timing of these expenditures. As a result, our management will have broad discretion
to allocate the net proceeds, if any, we receive in connection with securities offered pursuant to this prospectus for any purpose.
Pending application of the net proceeds as described above, we may initially invest the net proceeds in short-term, investment-grade,
interest-bearing securities or apply them to the reduction of short-term indebtedness.
PLAN
OF DISTRIBUTION
General
Plan of Distribution
We
may offer securities under this prospectus from time to time pursuant to underwritten public offerings, negotiated transactions,
block trades or a combination of these methods. We may sell the securities (i) through underwriters or dealers, (ii) through agents
or (iii) directly to one or more purchasers, or through a combination of such methods. We may distribute the securities from time
to time in one or more transactions at:
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a
fixed price or prices, which may be changed from time to time;
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market
prices prevailing at the time of sale;
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prices
related to the prevailing market prices; or
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negotiated
prices.
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We
may directly solicit offers to purchase the securities being offered by this prospectus. We may also designate agents to solicit
offers to purchase the securities from time to time. We will name in a prospectus supplement any underwriter or agent involved
in the offer or sale of the securities.
If
we utilize a dealer in the sale of the securities being offered by this prospectus, we will sell the securities to the dealer,
as principal. The dealer may then resell the securities to the public at varying prices to be determined by the dealer at the
time of resale.
If
we utilize an underwriter in the sale of the securities being offered by this prospectus, we will execute an underwriting agreement
with the underwriter at the time of sale, and we will provide the name of any underwriter in the prospectus supplement which the
underwriter will use to make resales of the securities to the public. In connection with the sale of the securities, we, or the
purchasers of the securities for whom the underwriter may act as agent, may compensate the underwriter in the form of underwriting
discounts or commissions. The underwriter may sell the securities to or through dealers, and the underwriter may compensate those
dealers in the form of discounts, concessions or commissions.
With
respect to underwritten public offerings, negotiated transactions and block trades, we will provide in the applicable prospectus
supplement information regarding any compensation we pay to underwriters, dealers or agents in connection with the offering of
the securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers. Underwriters,
dealers and agents participating in the distribution of the securities may be deemed to be underwriters within the meaning of
the Securities Act of 1933, as amended, or the Securities Act, and any discounts and commissions received by them and any profit
realized by them on resale of the securities may be deemed to be underwriting discounts and commissions. We may enter into agreements
to indemnify underwriters, dealers and agents against civil liabilities, including liabilities under the Securities Act, or to
contribute to payments they may be required to make in respect thereof.
If
so indicated in the applicable prospectus supplement, we will authorize underwriters or other persons acting as our agents to
solicit offers by certain institutions to purchase securities from us pursuant to delayed delivery contracts providing for payment
and delivery on the date stated in the prospectus supplement. Each contract will be for an amount not less than, and the aggregate
amount of securities sold pursuant to such contracts shall not be less nor more than, the respective amounts stated in the prospectus
supplement. Institutions with whom the contracts, when authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable institutions and other institutions, but shall in all
cases be subject to our approval. Delayed delivery contracts will not be subject to any conditions except that:
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the
purchase by an institution of the securities covered under that contract shall not at the time of delivery be prohibited under
the laws of the jurisdiction to which that institution is subject; and
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if
the securities are also being sold to underwriters acting as principals for their own account, the underwriters shall have
purchased such securities not sold for delayed delivery. The underwriters and other persons acting as our agents will not
have any responsibility in respect of the validity or performance of delayed delivery contracts.
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Certain
underwriters may use this prospectus and any accompanying prospectus supplement for offers and sales related to market-making
transactions in the securities. These underwriters may act as principal or agent in these transactions, and the sales will be
made at prices related to prevailing market prices at the time of sale. Any underwriters involved in the sale of the securities
may qualify as “underwriters” within the meaning of Section 2(a)(11) of the Securities Act. In addition, the underwriters’
commissions, discounts or concessions may qualify as underwriters’ compensation under the Securities Act and the rules of
the Financial Industry Regulatory Authority, Inc., or FINRA.
Shares
of our Class A common stock sold pursuant to the registration statement of which this prospectus is a part will be authorized
for quotation and trading on the NASDAQ Capital Market. The applicable prospectus supplement will contain information, where applicable,
as to any other listing, if any, on the NASDAQ Capital Market or any securities market or other securities exchange of the securities
covered by the prospectus supplement. We can make no assurance as to the liquidity of or the existence of trading markets for
any of the securities.
In
order to facilitate the offering of the securities, certain persons participating in the offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the securities. This may include over-allotments or short sales of the securities,
which involve the sale by persons participating in the offering of more securities than we sold to them. In these circumstances,
these persons would cover such over-allotments or short positions by making purchases in the open market or by exercising their
over-allotment option. In addition, these persons may stabilize or maintain the price of the securities by bidding for or purchasing
the applicable security in the open market or by imposing penalty bids, whereby selling concessions allowed to dealers participating
in the offering may be reclaimed if the securities sold by them are repurchased in connection with stabilization transactions.
The effect of these transactions may be to stabilize or maintain the market price of the securities at a level above that which
might otherwise prevail in the open market. These transactions may be discontinued at any time.
The
underwriters, dealers and agents may engage in other transactions with us, or perform other services for us, in the ordinary course
of their business.
DESCRIPTION
OF SECURITIES TO BE REGISTERED
General
The
following is a summary of the rights of our common stock and preferred stock and related provisions of our certificate of incorporation
and bylaws. For more detailed information, please see our certificate of incorporation and bylaws, which are filed as exhibits
to the registration statement of which this prospectus is a part.
Our
certificate of incorporation provides that we will have two classes of common stock: Class A common stock, which has one vote
per share, and Class B common stock, which has ten votes per share. Any holder of Class B common stock may convert his or her
shares at any time into shares of Class A common stock on a share-for-share basis. Otherwise the rights of the two classes of
common stock will be identical. The rights of these classes of common stock are discussed in greater detail below.
Our
authorized capital stock consists of 309,000,000 shares, each with a par value of $0.001 per share, of which:
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250,000,000
shares are designated as Class A common stock;
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9,000,000
shares are designated as Class B common stock;
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20,000,000
shares are designated as BIGToken Preferred Tracking Stock; and
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30,000,000
remaining shares are designated as preferred stock.
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As
of November 13, 2019, we had: (i) 13,997,452 shares of Class A common stock outstanding, (ii) no shares of Class B common stock
or preferred stock outstanding, and (iii) an aggregate of 15,612,946 special dividend rights outstanding.
Common
Stock
Voting
Rights
Holders
of our Class A and Class B common stock have identical rights, except that holders of our Class A common stock are entitled to
one vote per share and holders of our Class B common stock are entitled to ten votes per share. Holders of shares of Class A common
stock and Class B common stock will vote together as a single class on all matters (including the election of directors) submitted
to a vote of stockholders, unless otherwise required by law. Delaware law could require either our Class A common stock or Class
B common stock to vote separately as a single class in the following circumstances:
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If
we amended our certificate of incorporation to increase the authorized shares of a class of stock, or to increase or decrease
the par value of a class of stock, then that class would be required to vote separately to approve the proposed amendment.
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If
we amended our certificate of incorporation in a manner that altered or changed the powers, preferences or special rights
of a class of stock in a manner that affects them adversely then that class would be required to vote separately to approve
the proposed amendment.
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We
have not provided for cumulative voting for the election of directors in our certificate of incorporation.
Dividends
Subject
to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of Class A common stock and
Class B common stock shall be entitled to share equally in any dividends that our board of directors may determine to issue from
time to time. In the event a dividend is paid in the form of shares of common stock or rights to acquire shares of common stock,
the holders of Class A common stock shall receive Class A common stock, or rights to acquire Class A common stock, as the case
may be, and the holders of Class B common stock shall receive Class B common stock, or rights to acquire Class B common stock,
as the case may be.
Liquidation
Rights
Upon
our liquidation, dissolution or winding-up, the holders of Class A common stock and Class B common stock shall be entitled to
share equally all assets remaining after the payment of any liabilities and the liquidation preferences on any outstanding preferred
stock.
Subdivision
or Combinations.
Upon
the subdivision or combination of the outstanding shares of one class of Common Stock, the outstanding shares of the other class
of Common Stock will be subdivided or combined in the same manner.
Conversion
Our
Class A common stock is not convertible into any other shares of our capital stock.
Each
share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In
addition, each share of Class B common stock shall convert automatically into one share of Class A common stock upon any transfer,
whether or not for value, except for certain transfers described in our certificate of incorporation, including the following:
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Transfers
between one Class B Stockholder to another Class B Stockholder.
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Transfers
for tax and estate planning purposes, including to trusts, corporations and partnerships controlled by a holder of Class B
common stock.
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The
death of any holder of Class B common stock who is a natural person will result in the conversion of his or her shares of Class
B common stock to Class A common stock. Once transferred and converted into Class A common stock, the Class B common stock shall
not be reissued. No class of common stock may be subdivided or combined unless the other class of common stock concurrently is
subdivided or combined in the same proportion and in the same manner.
Dual
Class Structure
As
discussed above, our Class B common stock has ten votes per share, while our Class A common stock, which is the class of stock
the Selling Stockholders are selling pursuant to this prospectus and which is the only class of stock which is publicly traded,
has one vote per share. We currently have no shares of our Class B common stock outstanding. Notwithstanding, in the event Class
B common stock were issued, due to our dual class structure with superior voting rights, such ownership of Class B common stock
could discourage others from initiating any potential merger, takeover or other change of control transaction that other stockholders
may view as beneficial.
Preferred
Stock
Our
board of directors has the authority, without approval by the stockholders, to issue up to a total of 50,000,000 shares of preferred
stock in one or more series. Our board of directors may establish the number of shares to be included in each such series and
may fix the designations, preferences, powers and other rights of the shares of a series of preferred stock. Our board could authorize
the issuance of preferred stock with voting or conversion rights that could dilute the voting power or rights of the holders of
common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of SRAX.
Anti-Takeover
Effects of Delaware Law and Our Certificate of Incorporation and Bylaws
Certain
provisions of Delaware law, our certificate of incorporation and our bylaws contain provisions that could have the effect of delaying,
deferring or discouraging another party from acquiring control of us. In particular, our dual class common stock structure will
concentrate ownership of our voting stock in the hands of our founders, board members, and employees. These provisions, which
are summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are
also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe
that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh
the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement
of their terms.
Special
Approval for Change in Control Transactions
In
the event a person seeks to acquire us by means of a merger or consolidation transaction, a purchase of all or substantially all
of our assets, or an issuance of stock which constitutes 2% or more of our outstanding shares at the time of issuance and which
results in any person or group owning more than 50% of our outstanding voting power, then these types of acquisition transactions
must be approved by our stockholders at an annual or special meeting. At this meeting, we must obtain the approval of stockholders
representing the greater of:
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A
majority of the voting power of our outstanding capital stock; and
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60%
of the voting power of the shares of capital stock present in person or represented by proxy at the stockholder meeting and
entitled to vote.
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Undesignated
Preferred Stock
The
ability to authorize undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting
or other rights or preferences that could impede the success of any attempt to acquire us. These and other provisions may have
the effect of deferring hostile takeovers or delaying changes in control or management of our company.
Requirements
for Advance Notification of Stockholder Nominations and Proposals
Our
bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election
as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors.
The bylaws do not give the board of directors the power to approve or disapprove stockholder nominations of candidates or proposals
regarding business to be conducted at a special or annual meeting of the stockholders. However, our bylaws may have the effect
of precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions may also
discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of
directors or otherwise attempting to obtain control of our company.
Delaware
Anti-Takeover Statute
We
will be subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers. In general,
Section 203 prohibits a publicly-held Delaware corporation from engaging under certain circumstances, in a business combination
with an interested stockholder for a period of three (3) years following the date the person became an interested stockholder
unless:
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Prior
to the date of the transaction, the board of directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested stockholder.
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Upon
completion of the transaction that resulted in the stockholder becoming an interested stockholder, the stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes
of determining the number of shares outstanding (1) shares owned by persons who are directors and also officers and (2) shares
owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer.
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On
or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual
or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the interested stockholder.
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Generally,
a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested
stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three (3) years
prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting securities.
We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors
does not approve in advance. We also anticipate that Section 203 may also discourage attempts that might result in a premium over
the market price for the shares of common stock held by stockholders.
The
provisions of Delaware law, our certificate of incorporation and our bylaws could have the effect of discouraging others from
attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common
stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing
changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders
may otherwise deem to be in their best interests.
Transfer
Agent and Registrar
The
transfer agent and registrar for our Class A common stock is Transfer Online, Inc. 512 SE Salmon Street, Portland, OR 97214, 503-227-2950.
Limitations
on Liability and Indemnification of Officers and Directors
Our
amended restated certificate of incorporation limits the liability of our officers and directors to the fullest extent permitted
by the Delaware General Corporation Law, and our restated certificate of incorporation and restated bylaws provide for indemnification
of our officers and directors to the fullest extent permitted by such law.
DESCRIPTION
OF WARRANTS
General
We
may issue warrants to purchase shares of our Class A common stock and/or preferred stock in one or more series together with other
securities or separately, as described in the applicable prospectus supplement. Below is a description of certain general terms
and provisions of the warrants that we may offer. Particular terms of the warrants will be described in the warrant agreements
and the prospectus supplement relating to the warrants.
The
applicable prospectus supplement will contain, where applicable, the following terms of and other information relating to the
warrants:
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the
specific designation and aggregate number of, and the price at which we will issue, the warrants;
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the
currency or currency units in which the offering price, if any, and the exercise price are payable;
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the
designation, amount and terms of the securities purchasable upon exercise of the warrants;
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if
applicable, the exercise price for shares of our Class A common stock and the number of shares of Class A common stock to
be received upon exercise of the warrants;
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if
applicable, the exercise price for shares of our preferred stock, the number of shares of preferred stock to be received upon
exercise, and a description of that series of our preferred stock;
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the
date on which the right to exercise the warrants will begin and the date on which that right will expire or, if you may not
continuously exercise the warrants throughout that period, the specific date or dates on which you may exercise the warrants;
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whether
the warrants will be issued in fully registered form or bearer form, in definitive or global form or in any combination of
these forms, although, in any case, the form of a warrant included in a unit will correspond to the form of the unit and of
any security included in that unit;
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any
applicable material U.S. federal income tax consequences;
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if
applicable, the identity of the warrant agent for the warrants and of any other depositaries, execution or paying agents,
transfer agents, registrars or other agents;
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the
proposed listing, if any, of the warrants or any securities purchasable upon exercise of the warrants on any securities exchange;
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if
applicable, the date from and after which the warrants and the Class A common stock and/or preferred stock will be separately
transferable;
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if
applicable, the minimum or maximum amount of the warrants that may be exercised at any one time;
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information
with respect to book-entry procedures, if any;
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the
anti-dilution provisions of the warrants, if any;
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any
redemption or call provisions;
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whether
the warrants may be sold separately or with other securities as parts of units; and
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any
additional terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the
warrants.
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Transfer
Agent and Registrar
The
transfer agent and registrar for any warrants we offer will be set forth in the applicable prospectus supplement.
DESCRIPTION
OF RIGHTS
General
We
may issue rights to our stockholders to purchase shares of our Class A common stock, preferred stock or the other securities described
in this prospectus. We may offer rights separately or together with one or more additional rights, preferred stock, Class A common
stock, warrants or purchase contracts, or any combination of those securities in the form of units, as described in the applicable
prospectus supplement. Each series of rights will be issued under a separate rights agreement. The following description sets
forth certain general terms and provisions of the rights to which any prospectus supplement may relate. The particular terms of
the rights to which any prospectus supplement may relate and the extent, if any, to which the general provisions may apply to
the rights so offered will be described in the applicable prospectus supplement. To the extent that any particular terms of the
rights, rights agreement or rights certificates described in a prospectus supplement differ from any of the terms described below,
then the terms described below will be deemed to have been superseded by that prospectus supplement. We encourage you to read
the applicable rights agreement and rights certificate for additional information before you decide whether to purchase any of
our rights.
We
will provide in a prospectus supplement the following terms of the rights being issued:
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the
date of determining the stockholders entitled to the rights distribution;
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the
aggregate number of shares of Class A common stock, preferred stock or other securities purchasable upon exercise of the rights;
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the
exercise price;
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the
aggregate number of rights issued;
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whether
the rights are transferrable and the date, if any, on and after which the rights may be separately transferred;
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the
date on which the right to exercise the rights will commence, and the date on which the right to exercise the rights will
expire;
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the
method by which holders of rights will be entitled to exercise;
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the
conditions to the completion of the offering, if any;
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the
withdrawal, termination and cancellation rights, if any;
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whether
there are any backstop or standby purchaser or purchasers and the terms of their commitment, if any;
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whether
stockholders are entitled to oversubscription rights, if any;
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any
applicable U.S. federal income tax considerations; and
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any
other terms of the rights, including terms, procedures and limitations relating to the distribution, exchange and exercise
of the rights, as applicable.
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Each
right will entitle the holder of rights to purchase for cash the principal amount of shares of Class A common stock, preferred
stock or other securities at the exercise price provided in the applicable prospectus supplement. Rights may be exercised at any
time up to the close of business on the expiration date for the rights provided in the applicable prospectus supplement.
Holders
may exercise rights as described in the applicable prospectus supplement. Upon receipt of payment and the rights certificate properly
completed and duly executed at the corporate trust office of a rights agent, if applicable, or any other office indicated in the
prospectus supplement, we will, as soon as practicable, forward the shares of common stock, preferred stock or other securities,
as applicable, purchasable upon exercise of the rights. If less than all of the rights issued in any rights offering are exercised,
we may offer any unsubscribed securities directly to persons other than stockholders, to or through agents, underwriters or dealers
or through a combination of such methods, including pursuant to standby arrangements, as described in the applicable prospectus
supplement.
Rights
Agent
If
applicable, the rights agent for any rights we offer will be set forth in the applicable prospectus supplement.
DESCRIPTION
OF PURCHASE CONTRACTS
We
may issue purchase contracts, including contracts obligating holders to purchase from us, and for us to sell to holders, a specific
or variable number of our shares of Class A common stock, preferred stock, warrants or rights, or securities of an entity unaffiliated
with us, or any combination of the above, at a future date or dates. Alternatively, the purchase contracts may obligate us to
purchase from holders, and obligate holders to sell to us, a specific or variable number of our shares of Class A common stock,
preferred stock, warrants, rights or other property, or any combination of the above. The price of the securities or other property
subject to the purchase contracts may be fixed at the time the purchase contracts are issued or may be determined by reference
to a specific formula described in the purchase contracts. We may issue purchase contracts separately or as a part of units each
consisting of a purchase contract and one or more of our other securities described in this prospectus or securities of third
parties, including U.S. Treasury securities, securing the holder’s obligations under the purchase contract. The purchase
contracts may require us to make periodic payments to holders or vice versa and the payments may be unsecured or pre-funded on
some basis. The purchase contracts may require holders to secure the holder’s obligations in a manner specified in the applicable
prospectus supplement.
The
applicable prospectus supplement will describe the terms of any purchase contracts in respect of which this prospectus is being
delivered, including, to the extent applicable, the following:
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whether
the purchase contracts obligate the holder or us to purchase or sell, or both purchase and sell, the securities subject to
purchase under the purchase contract, and the nature and amount of each of those securities, or the method of determining
those amounts;
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whether
the purchase contracts are to be prepaid;
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whether
the purchase contracts are to be settled by delivery, or by reference or linkage to the value, performance or level of the
securities subject to purchase under the purchase contract;
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any
acceleration, cancellation, termination or other provisions relating to the settlement of the purchase contracts;
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any
applicable U.S. federal income tax considerations; and
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whether
the purchase contracts will be issued in fully registered or global form.
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The
preceding description sets forth certain general terms and provisions of the purchase contracts to which any prospectus supplement
may relate. The particular terms of the purchase contracts to which any prospectus supplement may relate and the extent, if any,
to which the general provisions may apply to the purchase contracts so offered will be described in the applicable prospectus
supplement. To the extent that any particular terms of the purchase contracts described in a prospectus supplement differ from
any of the terms described above, then the terms described above will be deemed to have been superseded by that prospectus supplement.
We encourage you to read the applicable purchase contract for additional information before you decide whether to purchase any
of our purchase contracts.
DESCRIPTON
OF UNITS
The
following description, together with the additional information that we include in any applicable prospectus supplements summarizes
the material terms and provisions of the units that we may offer under this prospectus. While the terms we have summarized below
will apply generally to any units that we may offer under this prospectus, we will describe the particular terms of any series
of units in more detail in the applicable prospectus supplement. The terms of any units offered under a prospectus supplement
may differ from the terms described below.
We
will incorporate by reference from reports that we file with the SEC, the form of unit agreement that describes the terms of the
series of units we are offering, and any supplemental agreements, before the issuance of the related series of units. The following
summaries of material terms and provisions of the units are subject to, and qualified in their entirety by reference to, all the
provisions of the unit agreement and any supplemental agreements applicable to a particular series of units. We urge you to read
the applicable prospectus supplements related to the particular series of units that we may offer under this prospectus, as well
as any related free writing prospectuses and the complete unit agreement and any supplemental agreements that contain the terms
of the units.
General
We
may issue units consisting of Class A common stock, preferred stock, warrants, rights or purchase contacts for the purchase of
Class A common stock and/or preferred stock in one or more series or in any combination thereof. Each unit will be issued so that
the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights
and obligations of a holder of each security included in the unit. The unit agreement under which a unit is issued may provide
that the securities included in the unit may not be held or transferred separately, at any time or at any time before a specified
date.
We
will describe in the applicable prospectus supplement the terms of the series of units being offered, including:
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the
designation and terms of the units and of the securities comprising the units, including whether and under what circumstances
those securities may be held or transferred separately;
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any
provisions of the governing unit agreement that differ from those described below; and
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any
provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units.
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The
provisions described in this section, as well as those set forth in any prospectus supplement or as described under “Description
of Common Stock,” “Description of Preferred Stock,” “Description of Warrants,” “Description
of Rights” and “Description of Purchase Contracts” will apply to each unit, as applicable, and to any Class
A common stock, preferred stock, warrant, right or purchase contract included in each unit, as applicable.
Unit
Agent
If
applicable, the name and address of the unit agent for any units we offer will be set forth in the applicable prospectus supplement.
Issuance
in Series
We
may issue units in such amounts and in such numerous distinct series, if any, as we determine.
Enforceability
of Rights by Holders of Units
If
applicable, each unit agent will act solely as our agent under the applicable unit agreement and will not assume any obligation
or relationship of agency or trust with any holder of any unit. A unit agent may act as unit agent for more than one series of
units. If applicable, a unit agent will have no duty or responsibility in case of any default by us under the applicable unit
agreement or unit, including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand
upon us. Any holder of a unit may, without the consent of the related unit agent or the holder of any other unit, enforce by appropriate
legal action its rights as holder under any security included in the unit.
LEGAL
MATTERS
The
validity of the issuance of the securities offered hereby will be passed upon for us by the Silvestre Law Group, P.C., Westlake
Village, California. The Silvestre Law Group, P.C. or its affiliates or principals own 133,000 shares of our Class A common stock.
EXPERTS
Our
consolidated balance sheets as of December 31, 2018 and 2017 and the related consolidated statement of operations, stockholders’
equity and cash flows for the years ended December 31, 2018 and 2017 included in this prospectus have been audited by RBSM LLP,
independent registered public accounting firm, as indicated in their report with respect thereto, and have been so included in
reliance upon the report of such firm given on their authority as experts in accounting and auditing.
INFORMATION
INCORPORATED BY REFERENCE
The
SEC permits us to “incorporate by reference” the information contained in documents we file with the SEC, which means
that we can disclose important information to you by referring you to those documents rather than by including them in this prospectus.
Information that is incorporated by reference is considered to be part of this prospectus, and you should read it with the same
care that you read this prospectus. Later information that we file with the SEC will automatically update and supersede the information
that is either contained, or incorporated by reference, in this prospectus, and will be considered to be a part of this prospectus
from the date those documents are filed.
We
incorporate by reference into this prospectus the following documents and information filed with the SEC:
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Our Annual Report
on Form 10-K filed with the SEC on April 16, 2019, for the year ended December 31, 2018;
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Our Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 2019, filed on May 15, 2019, our Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2019, filed on August 14, 2019, and our Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2019, filed on November 14, 2019;
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Our Definitive Proxy
Statement on Form 14A for our 2019 Annual Meeting of Stockholders, filed with the SEC on April 30, 2019;
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Our Current Reports
on Forms 8-K filed with the SEC on January 4, 2019, April 2, 2019, April 8, 2019, April 10, 2019, May 16, 2019, June 28, 2019,
August 14, 2019, and August 15, 2019 (excluding any information furnished in such reports under Item 2.02, Item 7.01 or Item
9.01); and
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The description
of our Class A common stock and related rights contained in our registration statement on S-1 filed with the SEC on January
24, 2012, including any amendment or report filed for the purpose of updating such description;
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We
also incorporate by reference into this prospectus all additional documents that we file with the SEC under the terms of Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 that are made after the date of this prospectus and before the
termination of the offering of securities offered by this prospectus, including all such documents we may file with the SEC after
the date of the initial registration statement and prior to the effectiveness of the registration statement. We are not, however,
incorporating, in each case, any documents or information that we are deemed to furnish and not file in accordance with SEC rules.
You
may request a copy of any of the documents incorporated by reference into this prospectus, at no cost, by writing or telephoning
us at the following address: Corporate Secretary, SRAX, Inc., 456 Seaton Street, Los Angeles, CA 90013, telephone number (323)
694-9800.
WHERE
YOU CAN FIND MORE INFORMATION
As
permitted by SEC rules, this prospectus omits certain information and exhibits that are included in the registration statement
of which this prospectus forms a part. Since this prospectus may not contain all of the information that you may find important,
you should review the full text of these documents. If we have filed a contract, agreement or other document as an exhibit to
the registration statement of which this prospectus forms a part, you should read the exhibit for a more complete understanding
of the document or matter involved. Each statement in this prospectus, including statements incorporated by reference as discussed
above, regarding a contract, agreement or other document is qualified in its entirety by reference to the actual document.
We are subject to the information reporting
requirements of the Exchange Act, and, in accordance with these requirements, we file annual, quarterly and current reports, proxy
statements, and other information with the SEC. You may inspect, read and copy the reports and other information we file with
the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet website
at www.sec.gov that contains our filed reports, proxy and information statements, and other information that we file electronically
with the SEC. Additionally, we make these filings available, free of charge, on our website at www.srax.com in the “Filings”
subsection of the “Investors” menu as soon as reasonably practicable after we electronically file such materials with,
or furnish them to, the SEC. The information on our website, other than these filings, is not, and should not be, considered part
of this prospectus, is not incorporated by reference into this prospectus, and should not be relied upon in connection with making
any investment decision with respect to our securities.
SRAX,
INC.
Up
to $3,150,000
Class
A Common Stock
PROSPECTUS
SUPPLEMENT
B.
Riley FBR
May
5, 2020
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