Greetings and welcome to the SRAX Second Quarter 2018 Results Conference. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms.

Kirsten Chapman of LHA Investor Relations. Thank you, you may begin..

Good morning, everyone. I’d like to welcome all of you to SRAX’s second quarter 2018 conference call. This call is being webcast and is available on the website at srax.com/investors. With us today from management are SRAX’s CEO, Christopher Miglino; and CFO, J.P. Hannan. Chris Miglino will review the Company’s quarterly highlights, J.P.

will discuss the financial metrics, and then Chris will open the call for questions.

Before I turn the call over to management, I would like to remind you that this call may contain forward-looking statements which could be indicated by the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions as they relate to SRAX.

Investors are cautioned that all forward-looking statements involve risks and uncertainties that may cause actual results to differ from those anticipated by SRAX at this time. In addition, other risks are more fully described in SRAX’s public filings with the SEC, which can be reviewed at www.sec.gov.

Finally, please make note that on today’s call management will refer to certain non-GAAP measures in which SRAX excludes stock-based compensation expenses and other one-time items from its GAAP financial results.

Please refer to SRAX’s press release for a full reconciliation of its non-GAAP performance measures to the most comparable GAAP financial measures. It is now my pleasure to turn the call over to SRAX’s CEO, Chris Miglino.

Chris?.

Thank you, Kirsten. Good afternoon, everyone. Thank you for joining us today for what may be one of SRAX’s most exciting conference calls to-date. I’d like to thank our shareholders for all your support. We see a bright future for SRAX and we are excited that you are on the journey with us.

We are executing our transformational national strategy that we have outlined in the past; and today, I’ll review the significant initiatives.

First, the sale of SRAXmd; second, the development of our four other verticals; and then, finally, the development of BIGtoken.com our consumer-powered data marketplace where people own, verify and sell access to their data. Now, let’s review the SRAXmd sale that closed on August 6th.

First, we’ve proven our strategy of building and monetizing data verticals. The data that we built in SRAXmd has proven to be very valuable, and our other verticals have similar models. As most of you know, we embarked on monetizing our SRAXmd business last year and received a lot of interest, including a number of bids.

At the end of the day, the total consideration of the sale amounted to $52.5 million, including three components.

First was $33.5 million in cash, less transaction’s fees that we received last week; second was an earn out of up to $9 million based on MD achieving gross profit threshold by December 31 2018, providing a near term additional return; and third, and most significantly is the 31% ownership stake in the new MD entity, through $10 million in preferred shares that carry an 8% interest rate compounded quarterly until the sale of the acquiring entity.

While we’ve maintained the ability to sale our stake in the acquiring entity at any time, we are excited about the upside of holding our investment. MD is a great business, has built a solid foothold in the healthcare vertical. And with the right investment and attention, we believe MD will grow.

SRAXmd needed to be on its own as a standalone business, and now it has the chance to flourish with the team that has accomplished this previously many times.

Halyard Capital, the private equity firm along with other institutional investors that now owns a controlling interest, has a long history of taking companies to the next level and then selling those investments for a great return.

To give perspective, if Halyard sold MD in two years for $200 million, we would receive an additional $60 million for our interest on top of the cash and earn-out that we can use now to invest in our development initiatives.

Logistically, speaking, after the sale SRAX has 46 employees remaining in the United States and 78 in our development office in Mexico. 12 people left with the SRAXmd business. However, the SRAXmd team members will continue to share office space, especially engineers in Mexicali, and continue to foster collaboration among innovations.

We had a share repurchase that took part as part of the transaction. As part of that transaction, we repurchased the former employees’ equities, including 514,667,000 shares and 160,000 options.

As a result, we reduced SRAX outstanding share count by approximately 5% and funded further development of our other initiatives without diluting existing shareholders. Now, onto the core SRAX business. In addition to being well-capitalized, we can now focus a 100% of our attention on our growth initiatives.

These four verticals, consumer packaged goods, social media, automotive, and sports are in various stages of development, and we believe each could ultimately achieve similar if not greater valuations as SRAXmd.

And our blockchain identification graph, BIGtoken.com could have in my opinion the greatest revenue and valuation potential of all of our initiatives. First, let’s talk about SRAXshopper. It’s really important to note, SRAXshopper is our oldest vertical and has been our highest revenue-producing vertical to-date, much greater in fact than SRAXmd.

In 2017, we began to reduce less profitable revenue and eliminate some shopper business that was coming in at lower margins. In 2018, we’ve been working to expand our shopper sales team and broaden experts as well as the new leader.

We are excited to welcome George Stella, Vice President of SRAXshopper, who with 20 years of digital media experience spent the majority of the last decade focused on digital shopper strategies. He and his team are executing key strategies to drive profitable revenue growth.

As a reminder, SRAXshopper targets shoppers’ visiting advertisers key retailers by layering social and shopping data with media buying to enable marketers to message a single, verified shopper across multiple devices and inventory sources.

SRAXshopper marketing technology automates the discovery of shoppers and their characteristics, amplifying and targeting shoppers to drive sales list, all while tracking online to offline attribution.

On a proven stack of CPG tools, including our recently launched video ad unit positions SRAXshopper at the top of shopper marketing list of tools for reaching verified shoppers in unique and innovative ways. The synergies between shopper and BIGtoken.com are very, very compelling.

We believe BIGtoken.com’s data and media transparency offer tremendous differentiator and increase the growth potential in digital shopper. Second is SRAX Social. SRAX Social is a social media marketing tool that enables agencies and brands to push consistent messages to many audiences across all social media channels.

SRAX Social enables users to launch social media programs in one central location while our artificial intelligent engine automatically determines the best way to spend media dollars to get the best results for the brand. The users set the budget they want to spend for the month and SRAX Social does the rest.

Users are able to view, manage, grow, and measure multichannel social campaign data targeted social media engagement from multiple clients from one dashboard. For the next phase of development, we are introducing natural language generation as we continually improve our offering.

In fact, for all of our businesses, we are leveraging artificial intelligence deployed in SRAX Social to improve performance. We are specifically implementing a proprietary clustering algorithm that benefits each of our products.

This part of deep learning, generates meaningful user behavior data that with analytics creates usable cohort and thousands of marketable data segments. Third is SRAXauto.

SRAXauto’s intelligent stack of tools enable auto manufacturers and dealers to target and reach buyers at dealerships, auto shows or at home on both, desktop and mobile through precision audience building that identifies and targets highly engaged auto intenders on the road to purchase. We are continuing to develop this roadmap.

To-date, key offerings include CarTRAX, CarTRAX Loyalty, ShowTRAX, CarTRAX Direct, DealerTRAX, TestDriveTRAX, and Lease&LoanTRAX. The fourth vertical is SRAXfan.

SRAXfan tools enables brands and agency connect with fans at home, the stadium or r out-of-home at gathering locations, such as bars, restaurants, universities, during live sporting events or concerts. And we are also continuing to develop this roadmap. To-date, key offerings include StadiumTRAX, FanTRAX, and SportsViewTRAX.

Now, last but not least, let’s review BIGtoken.com. We are developing BIGtoken.com which we’ll launch in beta at the beginning of September in just a few weeks. A consumer data management and distribution system that will provide everyone in the internet ecosystem, choice, transparency and compensation to manage and access verified data.

The system will also provide advertisers and media companies, access to transparent, verified consumer data to better reach and serve audiences. This is a huge undertaking with even greater potential. We believe when we reach 600,000 users, we will be at a $15 million revenue run rate.

The ownership of this data is accretive to the growth of our other verticals and provides us a competitive advantage in the space that has the ability to create our first billion-dollar vertical. To meet our goals, we’ve been staffing with engineers and sales people. Last week, we named David James Stewart, Vice President of Business Development.

DJ has over 15 years of digital media experience and will lead our efforts to partner with brands and agencies, seeking access to transparent consumer verified data to better reach and serve audiences as well as third-party applications to learn more about their consumers and earn revenue through data sales.

He will evangelize our message of data security and consumer empowerment, full circle, by allowing consumers to finally own and manage their data.

During the quarter, we enhanced BIGtoken.com’s user experience, improving gamification and rewards for participating consumers, as well improving developer’s ability to build online experience on top of BIGtoken.com. Last week, we announced our exciting beta tester contest in which users are rewarded for their actions.

The highest number of points wins 5 Bitcoins while second and third place win two and one Bitcoin respectively. 10,000 testers will be accepted in groups through a public waitlist over six-week period.

Rewardable actions include registering for a free account with BIGtoken.com, connecting your social accounts, answering surveys, checking into locations and more.

As engagements and therefore gamifications are so important, beta testing will also include a series of team challenges where all members of the team must complete various actions, within a specific timeframe. While users are assessed individually, they can earn more points through the teams’ activities.

We fulfilled our promise to monetize the MD vertical and now, we plan to make good on our promise to dividend out BIGtoken to our existing shareholders. On the sales infrastructure front, over the past six months, we’ve put in place key sales management, and we have grown our sales team by 30% and have been getting ready to grow by an additional 50%.

We’ve identified key hires and are now implementing these hires that will help us further execute on our plan. And now, let’s discuss non-dilution. We did everything we could not to dilute our shareholders before the MD transaction was completed. That included us operating in the business in a way that allow us to achieve this goal.

It wasn’t easy but we did it. Now that we have the capital to grow these verticals, we are going to do it quickly. And with that, I’ll turn the call over to J.P. for the financial review..

Thanks, Chris. I’m going to review the results for the second quarter of 2018. Total gross revenue was $4.7 million versus gross revenue in the comparable prior year period of $5.9 million.

Now, while total revenue was lower year-over-year, gross profit increased slightly, driven by the strategic focus we have been telling you about since last year to refocus our business on profitability measures.

As a result, gross margin increased in the quarter to 72% compared to 56% in Q2 of 2017 and is now performing well above our historical averages in the mid-50% range.

Operating expense in the quarter was $5.4 million, that’s up from $3.3 million in the second quarter of 2017, and is primarily driven by onetime, noncash consulting fees paid in stock and the ongoing headcount additions at both SRAXmd and BIGtoken.com, which was necessary for both of those product groups to grow revenue further.

Interest expense in the quarter was $959,000 compared to $385,000 in the second quarter of 2017. This is due to higher level of total debt that resulted from our October 2017 debenture financing.

We also incurred onetime interest penalty payments of $267,000 during this past quarter related to the delayed acceptance of our S-3 filing for registration of underlying securities for 2017 convertible debentures. That registration statement ultimately was effective on May 27. Those debentures carry a cash coupon of 12.5% and come due in April 2020.

The current balance of total debt at the end of the quarter was approximately $6.8 million. Our total net loss was just under $3 million for the quarter or a loss of $0.29 per share as compared to a loss of $394,000 or $0.05 per share in the second quarter of 2017.

Adjusted EBITDA loss was 798,000 compared to adjusted EBITDA gain of $221,000 in the second quarter of 2017.

Now, as you review our financials versus the published ones from a year ago period, I want to point out that as we discussed at length in our last 10-K filing, we chose to early adopt some new accounting guidance related to noncash treatment of warrant issuances that was released in late 2017.

This adoption resulted in necessary retrospective adjustments to our previously issued numbers back to January 1, 2017. As such, the comparable numbers do not match exactly to those you saw in our Q2 2017 earnings release. However, none of those adjustments affected operating income or adjusted EBITDA.

A full bridge of these non-cash adjustments to our warrant accounting is included in our 10-Q to be filed later today.

I’d also like to quickly remind everyone, as you review the year-to-date numbers that advertising sales are highly seasonal in nature and the second half of the year is typically a much stronger period of revenue generation than the first half for our products.

Since the SRAXmd transaction closed after quarter end, the results I just outlined are fully inclusive of that product group. To give you some perspective though, in 2017, SRAXmd comprised $11 million or 47% of total SRAX revenue. In 2016 SRAXmd comprised approximately $4.5 million or just under 13% of the total SRAX revenue.

More detailed operating results contribution of SRAXmd can be found in our 10-Quarter, and we’ll begin presenting our results without the benefit of this product group in the third quarter reporting. We ended the quarter with $41,000 in cash and cash equivalents compared to $1 million at December 31, 2017.

Again, this balance reflects advertising business seasonality with lower revenue and collections in the first half of any year, and also the general state of lower liquidity levels we’ve been experiencing since late last year as we utilize cash to repurchase some highly dilutive legacy warrants.

Our liquidity profile was greatly enhanced with the proceeds received last week from the MD transaction. Now, very quickly a summary breakdown of the proceeds we received and utilized at closing from the SRAXmd sale. We received $33.5 million in gross proceeds at closing.

Approximately $2.5 million was paid down in transaction fees related to investment banking and legal expenses from the transaction. Just under $1 million was held back escrow for various indemnities and potential working capital adjustments. And if something unforeseen arises, we should receive these amounts at a later date.

Approximately $2 million was utilized to repay advances previously taken against SRAXmd accounts receivable through our agreement with FastPay Partners. The FastPay line was renewed this past April and this $4 million line remains available for use after this repayment.

Approximately $3 million are utilized to repurchase shares and options from exiting employees that Chris referenced earlier in the call. Approximately $4 million was paid out to existing employees as bonus compensation for a successful completion of the transaction as well as the final paychecks due on termination from SRAX.

The net of all these outflows, we retained approximately $21 million in cash from the transaction which will be utilized for general operating purposes and to make strategic investments in other SRAX product verticals. As Chris mentioned, we could receive upto another $9 million SRAXmd hitting gross profit performance targets by year-end.

Finally, as of June 30, 2018, there were approximately 10.3 million common shares outstanding. Now, with that, I’d like to turn the call back to Chris..

Thanks, J.P. Overall, we worked hard to build diligently and then monetize SRAXmd. We’re pleased with the outcome and our opportunity to still enjoy the potential upside. The sale demonstrates our strategy. And with our four remaining verticals, we are in various stages of development to drive valuation similar to or greater than that of SRAXmd.

Further, with our proceeds we can also hire more engineers and sales experts to invest more in BIGtoken.com. We believe that the future of the web is transparency and giving users the ability to monetize and control their data through our BIGtoken platform.

Frankly with so many privacy issues, BIGtoken.com provides a solution and is well-positioned to benefit by creating ecosystem where advertisers and marketing companies reward consumers to obtain quality and rich data. And we believe this addition will diversify our product portfolio and drive shareholder value.

I’d now like to turn the call over to the operator for Q&A..

[Operator Instructions] Our first question comes from the line of Jim McIlree with Chardan Capital. Please proceed with your question..

Thanks. Good morning, guys. J.P., you talked about, I think, pro forma information being in the 10-Q.

So, I just want to make sure you’re talking about a full pro forma or would it just be a revenue pro forma?.

Revenue and EBITDA contribution. Something to keep in mind is the way we’ve run these businesses, they are not independent discrete operating segments, they don’t have full P&L with discernible depreciation interest et cetera. But we’ve given you the core elements. So, you could see what that profit contribution was..

Okay.

Can you give at least a ballpark of what operating expenses were in Q2 and the first half, without MD?.

Yes. Total MD was $2.2 million of the total expense load for the first half of the year. Revenue was -- and I say -- caveat, about 77% of the revenue in the first half of the year was MD driven. Now, there is a lot of seasonality in this business and MD tends to be much more frontloaded than the other products. So, I wouldn’t just extrapolate that out.

As I mentioned in my prepared remarks, 47% of the revenue through MD and the previous year was even lower, 13%. [Ph].

Thanks for that reminder. And then, the operating expenses, going forward, I think both you and Chris talked about increased investment there.

What are we talking? Are we talking about 10% operating expense increase from current levels, 20%, 50%, or is it that easy to just talk about what the increases are?.

Interestingly, the largest area of growth in operating expenses over the last year has been in MD as we’ve been trying to ramp that business and provide it with more dedicated resources to support the revenue growth.

So, we extract that out, the total expenses that was estimated for the business in its current standard about $9 million or $9.5 million a year, about 4.5 of which is the core corporate and general overhead of running the business and the rest allocated out amongst the different product lines.

We added about a $1 million in the first half of this year alone just applicable to BIGtoken..

And I’m trying to understand if the operating expenses increases going forward, will be results driven or there’s an element that you have to spend X amount of dollars to even generate the results that you’re trying to get? Does that make sense?.

It will be sales, Jim -- Jim, it will be sales, a lot of sales oriented activity. So, it’s going to scale -- as we start to scale out the sales team with additional team members. Infrastructure wise from a technology perspective, we’re very close to what we need. And I don’t see a substantial amount of new addition there..

So, it’s not completely success driven, but I mean to a certain extent, it is success driven. I mean, you’re not going to keep throwing money at sales if they are not bringing in the revenues..

Correct..

And we’ve hired a very good sales management team that’s done an amazing job of growing the sales team outside of the MD business. And hopefully by the end of this year, we look to be somewhere around the 25 to 30 sales people within the organization..

And again, how many are there now ex-MD?.

Right now, there is around 15..

Okay.

Chris, can you talk about the potential for an ICO for BIGtoken, is that still contemplated to occur?.

So, the word ICO is kind of a unique phenomenon. But, the way that BIGtoken is being structured it is as a preferred share. And this is one of the things that held up the registration statement with the SEC. They wanted to get comfortable with what we were doing on the BIGtoken front before they left that registration statement going effective.

So, what we’re doing on BIGtoken is we’re putting in place a preferred share that will have rights to the revenue of BIGtoken, Inc. which is a wholly-owned subsidiary of Social Reality, Inc. So, we’re in the process of working through that now. And once that is all in place, then, we will be able to do a non-dilutive offering within BIGtoken, Inc.

that will handle the expenses of BIGtoken. In fact, we already have some investments from accredited investors in escrow for BIGtoken, Inc. today. So, we’ll look to complete that. But, anything that we do within BIGtoken, Inc. for that preferred share will be non-dilutive to the shareholders in the parent.

And when you say ICO, it confuses some people too because an ICO is connoted with the cryptocurrency that trades on an exchange like coin base or any of the other cryptocurrency changes. Our -- what we are planning on doing with BIGtoken will not list on any of those cryptocurrency exchanges.

Our goal is to have it actually list and trade on a national exchange..

Okay. That’s helpful. Thank you. And just a couple more, if I might.

So, this preferred piece of paper that you are getting in MD, is that convertible in any way?.

It’s not convertible. It’s just upon the sale. So, we have preferred rights. So, if they sold it today for less than what they paid for it, we would get our piece back and then, before distributions got out to the rest of the shareholders. And the amount that we will get back increases 8% a year compounded quarterly until the sale actually happens.

So, you could say, if they sold it for in two -- if they it sold in two years for an amount of money, we would be sure to get back the $10 million plus another 8% compounded interest. So, just flat line, it’d be another $1.6 million, you get back $11.6 million plus whatever was compound..

And that’s a PIC payment.

Is that correct?.

Correct..

And my last one. So, the earn-out, I know it’s based December 31st results.

But, when would that get paid?.

Surely after an audit is complete [multiple speakers] reconciled in early part of next year?.

Okay. So, we have to wait on the audits and all of that good stuff. Okay, great. Well, congratulations on the deal, and good luck with everything..

Our next question comes from the line of David Lavigne with Trickle Research. Please proceed with your question..

Hi, guys. First, congratulations, obviously, I think a milestone event for the Company. It’s really great to see on a variety of levels, I think. So, I know you kind of really answered this, but just to kind of piggyback on the last question a little bit.

But, is that -- is the number on the SRAXmd performance -- I’m assuming it’s something that you feel you have a reasonable -- they have a reasonable chance of achieving.

I mean, it’s not something that kind of so far out there that you can’t get there? Can you comment on that at all?.

So, we were -- without giving the specific numbers, we were $2 million away from signed transactions for the remainder of the year to hitting the start of the earn-out..

Okay. So, it’s doable….

Yes, it’s doable. Definitely, it kicks in at a certain level and then continues to grow after that..

Okay. So, I have another question on the verticals.

So, you’ve gone through the list of verticals, are all of these verticals now basically operational, they are all technically sound, can be sold today, or are they in different stages? I’m just trying to get an idea of how these verticals are going to roll out and how they may and when they may start contributing to revenues and that sort of thing.

And I’m assuming some are maybe further ahead, even from a marketing standpoint than others.

But, can you just kind of give us a sense of what the path forward looks like for these verticals and sort of where they sit in terms of development, or are we just fully into sales mode of those?.

On the SRAXshopper where -- obviously that’s been going on for a long time, it’s been our largest revenue generator. We did -- when we did $36 million in revenue a couple years ago, MD was $4 million of that $36 million, and most of that was coming from CPG shopper-based marketing.

So, all the tools that we’ve built inside that offering have been enhanced and improved over time and are continuing to be viable to the market. On SRAXauto, we’ve completed those products but they are at the beginning of being sold, similar to where MD was three years ago.

So, MD, there was a time three years ago when MD was at sales of around $1 million. And so, we’re kind of at the beginning of that and the same with fan product, so with SRAXfan. Both of those are at the beginning. But, the technology is there and the sales team is taking it to market now.

On SRAX Social, the tech has been finished for around five or six months now, but it’s being really enhanced again now. And we added all the artificial intelligence mechanisms over the last, I’d say, 3 to 4 months. So, that’s starting to recognize revenue today, and it’s being sold by our sales team as we speak.

As far as then BIGtoken is not going to have revenues until we hit, I’d say, at least 100,000 participants inside the platform itself..

Okay..

And there would be a key metric I will start to give you guys every quarter is the number of sign-ups that we will have for BIGtoken, so you can understand where we sit within that with signing consumers out for that platform?.

And just so I wanted to make sure I got this right.

Did you say 600,000 users equates to roughly $50 million worth of revenue?.

Correct..

Okay..

On a run rate..

One last question.

The remaining debt piece, is that something you have some capability or even maybe an inclination to maybe just pay off? Can you do that or is it -- that’s something you are able to do with that piece of paper or likely to do or is that just going to stay there?.

There is a call premium….

We can -- oh, please, J.P..

Okay. There is a call premium associated with that. We can’t take it out. But, pay somewhere between 10% and 20% depending on when we take it out. And then, there are some additional warrant issuances that would have to be made. So, it’s dilutive to do that. So, for now, we are going to leaving it in place. It [indiscernible] on it..

Okay, great. Thanks, fellows..

And Dave, I think one thing that’s important to mention is that what you see remaining on the debt today is substantially less than what was there previously, as people converted out of that debt. So, there is still chance....

Yes. I mean get that, the outcome. Okay, great. Thanks..

Our next question comes from the line of Robert Ainbinder with WestPark Capital. Please proceed with your question..

Hey, guys. First, let me apologize. I am driving my car right now. So, if there is a little background noise, I apologize.

First, let me just say that I want to congratulate to you and the team, Chris, for executing on the sale of the MD, because obviously it was extremely important for shareholders and the potential for dilution, because I believe there was about $40,000 at the end of the quarter, in cash.

In my analyzing the Company over the years, I believe that there wasn’t -- you’ve never had discounted cash to be able to really execute on your business plan. And this is really good opportunity and position..

Yes. We’ve never --, I mean, if my numbers serve me correct, I don’t think we have ever had more than $3 million in the bank at any given time. We’ve certainly learned to stretch the dollar. And there was definitely people calling, trying to get us to do a transaction to take out -- to get more money on the balance sheet and we just declined to do.

I know, it’s a gutsy move and risky move. But, we pulled it off and didn’t add any additional dilution to all of our shareholders. So, we are happy about that..

As a shareholder, I have to say, we are appreciative. So, congratulations on executing this transaction. It’s obviously very good for all of us. Another follow-up question is, I just want to make sure I understand the repurchase of shares that you announced with the transaction.

What percentage of the overall outstanding shares is that? What kind of reduction actually exists within that repurchase?.

So, it’s around 5% reduction of the total shares outstanding. So, it’s out of 10 million something, the number that J.P. gave at the end of the call, reduce that by another 0.5 million, little bit more than 0.5 shares. So, it’s a substantial amount of shares. And the options that we took out from the other employees were in the money.

So, those options would have also hit the market. And we didn’t want that to happen. So, we took those out and we thought that was the best thing to do. So, it’s essentially -- it was like almost -- if those shares were converted on the option side, you would have had almost 750,000 shares that we took out of the market..

So, now, I’m just trying to access the value and the valuation for the verticals that you are now going to be really working on.

And the one in particular, I think there is a lot of excitement around, and I’m really trying to understand the potential of is this -- is the BIGtoken platform and the advertising market that you are going after for consumers.

I mean, how do you assess that potential for that division and that vertical?.

The challenge that every internet advertising company has is the living from insertion order to insertion order. And BIGtoken and the other platforms that we have are providing a technological infrastructure that creates equity over time.

So, instead of being a purely an insertion order to insertion order provider, we’re creating something that the advertising community will tap into on an ongoing basis, and will be able to tap into without us having to go insertion order to insertion order.

So, truly -- and when I said this earlier that I think BIGtoken can be our first billion-dollar vertical, if we are successful on accomplishing what we think we can do there, we truly believe that that will be the biggest piece of our business.

And the data inside of that platform will provide tremendous value to the shareholders and also to the consumers that are engaged with the platform itself..

Exciting stuff. Okay. I’m looking forward to this -- to the launch and I’ll be on there as a beta tester. Another question just regarding BIGtoken. You talked about the potential, so there could be a dividend.

That’s for existing SRAX common shareholders as you’re thinking about giving dividend and BIGtoken to them?.

So, there is two promises that we made last year. One was getting MD sold and monetizing that asset, and the other was to do a dividend of BIGtoken. So, that’s coming your way..

Okay.

So, would that be in the form of the preferreds you talked about, is that how the dividend would come?.

Correct. Yes, that’s going to be a preferred share that will be coming your way for BIGtoken. So, for every share that you own in SRAX, you will be receiving a ratio of BIGtoken to shares..

Fantastic. Well, once again, congratulations on executing. It definitely was a boldly move. And I’m very, very to see you execute and complete this transaction. I think it’s very good for all of the shareholders. Thank you so much..

Thank you. Our next question comes from the line of Anthony, [ph] private investor. Please proceed with your question..

Hey, Chris, nice job. I’m a little bit confused on the -- as a shareholder, just if you could just walk us through on the BIGtoken dividend.

So, this will be a traditional not traditional -- it would be distributed as a traditional dividend within x dividend base?.

Correct..

Is that the way it’s going to -- okay, so, in other words, you have to own the stock by a certain date? And what are you getting? Are you getting a preferred share or the right to a preferred share? I guess, I’m trying to understand where you are in the registration process.

In other words, are you going to be issuing this before the registration is completed or subsequent to the registration being completed?.

Before. So, you will get right -- you’ll get a non-transferable right to a preferred share. And it converts upon registration of the preferred share itself..

So, timing on that could be at any time, correct? So, there is no -- you don’t have to wait for registration obviously to do that.

You can -- whenever the Board feels appropriate is when you do that?.

Correct. It’s in a -- we have been a little busy with some of the other things that we are working on. And now, we use a fantastic law firm that does a great job for us. They are a boutique smaller law firm. So, now that they’ve probably gotten a little bit of rest after this transaction, which was intense for a six months period, that is happening..

And final question.

Where are you in the -- I mean, is there any to sort of handicap how much longer this registration process will take? You guys have been in there since when -- since last November? Is that about right, in terms of trying to register this token?.

No. I mean, I think that everything is being done confidentially there. So, I’d rather not talk about details of that. I think that anytime that we get in talking about the details, there is just one more question that we are going to get from the SEC about it. So, I think just know that we are working diligently to get it done.

And I think we’re on a path to creating what will be a model that other companies can take going forward..

Our next question comes from the line of Jonathan Mark [ph] with WestPark Capital. Please proceed with your question..

Congratulations on the sale. Obviously, everyone said it, great job. Most of my questions were answered -- Bob got most of my questions answered.

But, on the stock that you bought back, what was the cost basis on that?.

We bought it back at $5.80 a share. When we agreed to buy that back, it was -- the stock was trading a little bit higher. So, we cut the deal to buy that back, paid a little bit more than where the market was. But, I mean, if you try to go into the market today and buy 525,000 shares, you’d probably drive the stock to 8 bucks.

So, we think it was a good price to pay for the stock..

And with the proceeds from the MD, obviously, you are talking about the special dividend, will the company be thinking about company buyback at all?.

So, we just did almost -- like I said, almost 1 million shares, right, 750,000, if you include the warrants. And certainly, depending on where the price of the stock goes, the Board is definitely evaluating whether to take any more back in.

And it also relates to where we end up with the earn-out, how much more money comes in from the earn-out that we have, and how much more money comes in from any non-dilutive offering that we do for BIGtoken.

And if you shift any expenses associated with BIGtoken, that’s not dilutive to the existing shareholders, and we can take that off of the P&L, and so that we’re -- we don’t need that additional capital, then we have a lot more cash to do that. So, those are things that we’re evaluating right now..

Okay. I mean, because the disconnects of the market and the news is kind of ridiculous, at this price, I would think that’s in everyone’s best interest. But, all right, I appreciate, great job. And we’ll look forward to future. Thanks..

[Operator Instructions] Our next question comes from the line of Frederick Lacy with Fincom Investment Partners. Please proceed with your question..

I’m wondering how much of the $21 million in cash is covered by your NOL?.

Well that’s -- we’ve got a quite a bit of work to do around the taxes over the next couple of month. We have about $8 million or so of NOL. We’ll also generate additional NOL this current year. We’ve got to do some analysis to see what if any are restricted by old ownership changes from the inception of the company.

So, I can’t give you any guidance right now as to what portion of that will be tactical..

Fair enough. There’s a lot going on. So, I’m kind of wondering how you’re going to balance the customers. It’s a big difference between direct-to-consumer, BIGtoken and making partners with advertisers. How are you going to manage that process? [Multiple Speakers] who your primary customer….

Yes. So, within the BIGtoken world, there is two customers. You have the advertising agencies and the brands who are looking for opted in, verified consumer data.

It’s very important for them with everything that’s going on in the world around privacy that they know that the data that they’re buying is coming directly from the source and from a consumer that has said, you can market to me, I’m opted in. That is the -- so the biggest customer becomes the brand and agency in that front.

Then, secondly, and just as importantly is the consumer themselves. And we’ve had tremendous success in just the short time that we’ve been out there asking people to sign up for the data of having people say they want to participate in the beta.

And we’re confident that we’re going to hit our goals that we’ll start to provide some guidance on the number of consumers that are signing up over the next few quarters. And you have to remember where -- I mean, you have to remember, we are really good at converting consumers into certain activities. That’s what we do for a living.

So, when a brand comes to us and utilizes our services to drive awareness and drive engagement, some other type of performance indicator, they hire us to do that because we have expertise in that area. So, while it might seem that direct-to-consumer is different, we are very engaged in the direct-to-consumer game.

We don’t have to hire an outside party to help us execute a digital marketing initiative to drive consumers to take an activity. That’s what we are good at. We are good at doing it across social media, we are good at doing it across the internet, on mobile and native.

We understand the process, we understand the cost, we understand everything involved in executing a campaign, and we can do it at a fraction of the cost versus what somebody else would have to pay a company like us to do it..

That’s kind of interesting because the one thing that investors do understand is eyeball growth. And like you’ve been saying, there’s a correlation. And I think if you can start showing evidence of it, you might be able to start getting some of the respect that perhaps you’ve now deserved..

Yes. I think that those numbers are going to be key to the growth, and also, the sales from the team that we have out in the marketplace that’s selling to the advertisers is key as well. That infrastructure that we have in place that is selling this data into the advertising ecosystem is very, very important.

The concept of giving consumers the ability to own their data is something that is unique. But without the ability to turn that into sales within the big advertising ecosystems that exist out there, you would fall in death years. And we have the infrastructure to make that happen..

Is there any way you can sort of piggyback? I know everybody knows, there is a kind of press about Facebook and how they are using their data? It seems to me that by offering a consumer transact with pay it forward, [ph] you should have an enormous amount of leverage and should be able to start to generate enormous amount of attention from people.

Is there any way to piggyback and get out of the just I mean, what’s so far been a very -- delivering low profile company. I’ve never seen in 30 years, a company sell -- do major transactions and not come out with a whole bunch of hyping press releases along the way. This is really rock solid in delivering the results.

Is there any way that you can kind of step up this now and begin to feed off of some of the - press this in the market?.

Yes. I think, once we -- we have the beta that’s launched in a few week later, and there will be an abundance of data that we are going to continue to bring out to the marketplace, once that beta is out there. We’ve been working really hard on it. And we think it’s a very solid product and is going to do fantastic.

And the news flow around all of this will -- we think is better suited for when the product is actually out in market and consumers can get it..

Okay. I’ll be looking forward. Thanks. Congratulations again..

Thank you. Ladies and gentlemen, we have come to the end of our allotted for questions. I will turn the floor back to Mr. Miglino for any final comments..

Thank you very much,. We really appreciate all the support from the investors. We are happy to do more detailed calls with any of you, if you have an interest in doing so, you can reach out to myself or to J.P., and walk you through the different models that we have and talk to you in more detail about what our plans are for the future.

So, thank you again and appreciate the support..

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation..