LOS ANGELES, Aug. 14, 2018 /PRNewswire/ -- Social
Reality, Inc. (Nasdaq: SRAX), a digital marketing and consumer data
management and distribution technology platform company, reported
results for the three ended June 30,
2018.
SRAX's CEO and Chairman Christopher
Miglino, stated, "As promised, 2018 is turning out to be
pivotal. Proving our strategy of building and monetizing data
verticals, we successfully completed the sale of our healthcare
vertical, SRAXmd, for up to $52.5
million in total consideration. Most significantly, we
retained a 31% ownership stake in the new SRAXmd entity through
$10 million in preferred shares. MD
is a great business that has built a solid foothold in healthcare.
And, we believe with its recapitalization, MD will flourish and
continue to return value to shareholders.
"Now, using our same successful formula, we are investing our
sale proceeds in the continued development of our other verticals
and our blockchain initiative BIGtoken.com. We are very excited
about BIG, a consumer-powered data marketplace, that will enable
people to own, verify and sell access to their data, providing the
Internet ecosystem with choice, transparency and compensation to
manage and access verified data. We believe BIG's data and media
transparency offers a tremendous differentiator and increases the
growth potential of our other verticals. We expect
BIGtoken.com to revolutionize the consumer view of their data with
the possibility that it becomes our first billion-dollar
business.
"Ultimately, we believe our verticals and BIGtoken.com, could
all achieve valuations similar to SRAXmd, if not greater. Overall,
we are in the strongest position we have ever been, and now we are
well capitalized to drive product growth and achieve significant
shareholder value," concluded Miglino.
Financial Results: Second Quarter 2018 Compared to Second
Quarter 2017
- Gross revenue was $4.7 million,
compared to $5.9 million in the
second quarter of 2017, which included high volume, low-margin
revenue.
- Gross margin was 72%, compared to gross margin of 56% in the
year ago quarter.
- Operating expenses were $5.4
million, compared to $3.3
million, reflecting a one-time $860,000 non-cash consulting fee paid in stock
and ongoing headcount additions.
- Net loss was $3.0 million, which,
in addition to the aforementioned consulting fee, included a
one-time $267,000 charge associated
with certain registration obligations, or $0.29 cents per share, compared to $394,000, or $0.05
cents per share in the second quarter of 2017.
- Adjusted EBITDA loss was $798,000, compared Adjusted EBITDA gain of
$221,000 in the second quarter of
2017.
- Cash and cash equivalents were $41,000 at June 30,
2018, compared to $1.0 million
at December 31, 2017. The
company renewed its $4 million credit
facility with FastPay in April. And, subsequent to quarter end, the
company received $33.5 million in
gross proceeds from the sale of SRAXmd.
Adjusted EBITDA is defined as earnings before interest, taxes,
depreciation and amortization, and certain additional one-time
expenses. It is not intended to represent a measure of performance
in accordance with accounting principles generally accepted
in the United States (GAAP). A detailed description and
reconciliation of EBITDA and management's reasons for using this
measure is set forth at the end of this press release.
Other Recent Corporate Highlights:
- Sold its healthcare and pharmaceutical business, SRAXmd for up
to $52.5 million in total
consideration including $33.5 million
in cash less transaction expenses, up to $9
million in gross profit earn-out and $10 million in preferred shares in the new SRAXmd
entity, representing 31% ownership.
- Announced a contest to rewarded participants for Beta testing
BIGtoken.com, which is planned to begin in September. Beta
testers will have the unique opportunity to earn Bitcoin for
participating. Anyone interested in becoming a Beta tester can sign
up at http://www.bigtoken.com/signup.
- Hired David James Stewart as
vice president of business development to drive commercial adoption
of BIGtoken.com.
- Named George Stella vice
president of SRAXshopper to fuel growth in the CPG vertical.
Conference Call
Management will review the results on
a conference call with a live question and answer session today,
August 14, 2018, at 10:30 a.m. ET/7:30 a.m.
PT.
- If calling from the United
States or Canada, please
dial Dial-In Numbers: 1-877-407-9716 to access the live call and
1-844-512-2921 for the replay, code 13682568 available until
August 28, 2018.
- If calling internationally, please dial 1-201-493-6779 to
access the live call and 1-412-317-6671 for the replay, code
13682568.
- The call will be webcast over the internet and accessible at
the Company's website at http://srax.com/investors/ for at least 90
days.
About SRAX
Social Reality, Inc.(NASDAQ: SRAX) is a digital marketing and
consumer data management and distribution technology platform
company. SRAX's technology delivers the tools to unlock data to
reveal brands and content owners' core consumers and their
characteristics across marketing channels. Through its blockchain
identification graph technology platform, BIG (www.bigtoken.com),
SRAX is developing a consumer-powered data marketplace where people
will own and sell access to their data thereby providing everyone
in the Internet ecosystem transparency, choice and compensation.
SRAX's technology and tools deliver a digital competitive advantage
for brands in the healthcare, CPG, automotive, sports and lifestyle
verticals by integrating all aspects of the advertising experience,
including verified consumer participation, into one platform. For
more information on SRAX, visit www.srax.com.
Safe Harbor Statement
This press release contains
certain forward-looking statements that are based upon current
expectations and involve certain risks and uncertainties within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995. Words or expressions such as "anticipate," "plan," "will,"
"intend," "believe" or "expect'" or variations of such words and
similar expressions are intended to identify such forward-looking
statements. These forward-looking statements are not guarantees of
future performance and are subject to risks, uncertainties, and
other factors, some of which are beyond our control and difficult
to predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements,
including, without limitation, statements made with respect to
expectations of our ability to increase our revenues, satisfy our
obligations as they become due, report profitable operations and
other risks and uncertainties as set forth in our Annual Report on
Form 10-K for the year ended December 31,
2017, and our subsequent Quarterly Reports on Form 10-Q as
filed with the Securities and Exchange Commission. All
forward-looking statements involve significant risks and
uncertainties that could cause actual results to differ materially
from those in the forward-looking statements, many of which are
generally outside the control of Social Reality and are difficult
to predict. Social Reality undertakes no obligation to publicly
update any forward-looking statements, whether as a result of new
information, future events or otherwise.
Contact Information:
Kirsten Chapman, LHA Investor
Relations, +1 415 433 3777, srax@lhai.com
SOCIAL REALITY,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(unaudited)
|
|
|
June
30,
|
|
December
31,
|
|
2018
|
|
2017
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
41,036
|
|
$
|
1,017,299
|
Accounts receivable,
net
|
|
2,723,472
|
|
|
4,348,305
|
Prepaid
expenses
|
|
515,397
|
|
|
468,336
|
Other current
assets
|
|
300,898
|
|
|
300,898
|
Total current
assets
|
|
3,580,803
|
|
|
6,134,838
|
|
|
|
|
|
|
Property and
equipment, net of accumulated depreciation
|
|
155,303
|
|
|
154,546
|
|
|
|
|
|
|
Goodwill
|
|
15,644,957
|
|
|
15,644,957
|
Intangibles -
net
|
|
1,743,763
|
|
|
1,642,760
|
Other
assets
|
|
31,270
|
|
|
28,598
|
|
|
|
|
|
|
Total
assets
|
$
|
21,156,096
|
|
$
|
23,605,699
|
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
$
|
7,001,672
|
|
$
|
5,010,815
|
Total current
liabilities
|
|
7,001,672
|
|
|
5,010,815
|
|
|
|
|
|
|
Secured convertible
debentures, net
|
|
2,516,393
|
|
|
1,711,146
|
|
|
|
|
|
|
Total
liabilities
|
|
9,518,065
|
|
|
6,721,961
|
|
|
|
|
|
|
Commitments and
contingencies (Note 13)
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
Preferred stock,
authorized 50,000,000 shares, $0.001 par value, no shares issued or
outstanding at June 30, 2018 and December 31, 2017,
respectively
|
|
—
|
|
|
—
|
Class A common stock,
authorized 250,000,000 shares, $0.001 par value, 10,274,220 and
9,910,565 shares issued and outstanding at June 30, 2018 and
December 31, 2017, respectively
|
|
10,274
|
|
|
9,911
|
Class B common stock,
authorized 9,000,000 shares, $0.001 par value, no shares issued or
outstanding at June 30, 2018 and December 31, 2017,
respectively
|
|
—
|
|
|
—
|
Common stock to be
issued
|
|
869,500
|
|
|
879,500
|
Additional paid in
capital
|
|
38,514,429
|
|
|
37,143,033
|
Accumulated
deficit
|
|
(27,756,172)
|
|
|
(21,148,706)
|
Total stockholders'
equity
|
|
11,638,031
|
|
|
16,883,738
|
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
|
21,156,096
|
|
$
|
23,605,699
|
SOCIAL REALITY,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
THREE AND SIX
MONTH PERIODS ENDED JUNE 30, 2018
|
(Unaudited)
|
|
|
Three Months
ended
June
30,
|
|
Six Months
ended
June
30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenues
|
$
|
4,697,351
|
|
$
|
5,979,688
|
|
$
|
6,808,201
|
|
$
|
11,305,852
|
Cost of
revenue
|
|
1,320,464
|
|
|
2,644,208
|
|
|
2,138,569
|
|
|
5,923,327
|
Gross
profit
|
|
3,376,887
|
|
|
3,335,480
|
|
|
4,669,632
|
|
|
5,382,525
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expense
|
|
|
|
|
|
|
|
|
|
|
|
General, selling and
administrative expense
|
|
5,414,790
|
|
|
3,344,445
|
|
|
9,545,048
|
|
|
7,754,252
|
Write-off of
non-compete agreement
|
|
—
|
|
|
—
|
|
|
—
|
|
|
468,751
|
Restructuring
costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
377,961
|
Total operating
expense, net
|
|
5,414,790
|
|
|
3,344,445
|
|
|
9,545,048
|
|
|
8,600,964
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations
|
|
(2,037,903)
|
|
|
(8,965)
|
|
|
(4,875,416)
|
|
|
(3,218,439)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
(expense)
|
|
(486,758)
|
|
|
(197,267)
|
|
|
(921,543)
|
|
|
(330,573)
|
Amortization of debt
issuance costs
|
|
(472,589)
|
|
|
(187,568)
|
|
|
(805,247)
|
|
|
(765,708)
|
Total interest
expense
|
|
(959,347)
|
|
|
(384,835)
|
|
|
(1,726,790)
|
|
|
(1,096,281)
|
Exchange Gain or
Loss
|
|
(596)
|
|
|
—
|
|
|
(5,260)
|
|
|
—
|
Total other income
(expense)
|
|
(959,943)
|
|
|
(384,835)
|
|
|
(1,732,050)
|
|
|
(1,096,281)
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision
for income taxes
|
|
(2,997,846)
|
|
|
(393,800)
|
|
|
(6,607,466)
|
|
|
(4,314,720)
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(2,997,846)
|
|
$
|
(393,800)
|
|
$
|
(6,607,466)
|
|
$
|
(4,314,720)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
share, basic and diluted
|
$
|
(0.29)
|
|
$
|
(0.05)
|
|
$
|
(0.65)
|
|
$
|
(0.54)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding, basic and diluted
|
|
10,213,618
|
|
|
8,025,017
|
|
|
10,126,247
|
|
|
7,954,294
|
SOCIAL REALITY,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
THREE AND SIX
MONTH PERIODS ENDED JUNE 30, 2018
|
(Unaudited)
|
|
|
Six Months
ended
June
30,
|
|
2018
|
|
2017
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss)
|
$
|
(6,607,466)
|
|
$
|
(4,314,720)
|
Adjustments to
reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
|
Stock based
compensation
|
|
1,161,760
|
|
|
621,327
|
Amortization of debt
issue costs
|
|
187,178
|
|
|
612,168
|
Amortization of debt
discount
|
|
618,068
|
|
|
153,540
|
Write-off of
non-compete agreement
|
|
—
|
|
|
468,751
|
Provision for bad
debts
|
|
(5,426)
|
|
|
(21,433)
|
Depreciation
expense
|
|
20,036
|
|
|
6,182
|
Amortization of
intangibles
|
|
350,165
|
|
|
226,205
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
1,630,258
|
|
|
835,025
|
Prepaid
expenses
|
|
(47,060)
|
|
|
8,443
|
Other
assets
|
|
(2,672)
|
|
|
1,115
|
Accounts payable and
accrued expenses
|
|
2,140,856
|
|
|
(1,058,976)
|
Unearned
revenue
|
|
—
|
|
|
135,032
|
Cash used by
operating activities
|
|
(554,303)
|
|
|
(2,327,341)
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
Purchase of
equipment
|
|
(20,793)
|
|
|
(14,235)
|
Development of
software
|
|
(451,168)
|
|
|
(270,328)
|
Cash used in
investing activities
|
|
(471,961)
|
|
|
(284,563)
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
Proceeds from the
issuance of common stock, net
|
|
—
|
|
|
3,820,001
|
Proceeds from the
issuance of common stock in conjunction with warrant
exercised
|
|
50,001
|
|
|
-
|
Repayments of note
payable and PIK interest
|
|
—
|
|
|
(3,996,928)
|
Proceeds from secured
convertible debentures, net
|
|
—
|
|
|
2,136,629
|
Net cash provided by
financing activities
|
|
50,001
|
|
|
1,959,702
|
|
|
|
|
|
|
Net decrease in cash
and cash equivalents
|
|
(976,263)
|
|
|
(652,202)
|
Cash and cash
equivalents, beginning of period
|
|
1,017,299
|
|
|
1,048,762
|
Cash and cash
equivalents, end of period
|
$
|
41,036
|
|
$
|
396,560
|
|
|
|
|
|
|
Supplemental
schedule of cash flow information:
|
|
|
|
|
|
Cash paid for
interest
|
$
|
313,791
|
|
$
|
649,199
|
Cash paid for
taxes
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
Supplemental
Schedule of noncash financing activities:
|
|
|
|
|
|
Common stock issued
for preferred stock conversion and vesting grants
|
$
|
—
|
|
$
|
52
|
Vesting of common
stock award
|
$
|
150,000
|
|
$
|
—
|
Issuance of placement
agent warrants
|
$
|
—
|
|
$
|
249,028
|
Issuance of common
stock to be issued
|
$
|
869,500
|
|
$
|
100
|
SOCIAL REALITY, INC.
NON-GAAP TO
GAAP RECONCILIATION
THREE MONTHS ENDED JUNE 30, 2018 AND
2017
(Unaudited)
Social Reality's management evaluates and makes operating
decisions using various financial metrics. In addition to the
company's GAAP results, management also considers the non-GAAP
measure of Adjusted EBITDA. Adjusted EBITDA is defined as income
from operations before depreciation and amortization expenses,
stock-based compensation and one-time financing and transaction
expense. Management believes that this non-GAAP measure
provides useful information about Social Reality's operating
results. The tables below provide a reconciliation of this non-GAAP
financial measure with the most directly comparable GAAP financial
measure. This non-GAAP measure should be considered a
supplement to, and not a substitute for, or superior to, financial
measures calculated in accordance with GAAP.
|
|
For
the
Three Month Period
Ended
June
30,
|
|
|
2018
|
|
2017
|
Net Loss
|
|
$
|
(2,997,846)
|
|
$
|
(393,800)
|
plus
|
|
|
|
|
|
|
Equity Based
compensation
|
|
|
995,630
|
|
|
108,885
|
Adjusted net
loss
|
|
$
|
(2,002,216)
|
|
$
|
(284,915)
|
Exchange Gain or
Loss
|
|
|
596
|
|
|
—
|
Interest
Expense
|
|
|
959,347
|
|
|
384,835
|
SRAXmd Transaction
Fees
|
|
|
49,513
|
|
|
—
|
Depreciation and
amortization
|
|
|
194,576
|
|
|
131,433
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$
|
(798,184)
|
|
$
|
221,353
|
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SOURCE SRAX