LOS ANGELES, Nov. 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 months ended September
30, 2018 and provided guidance for 2019.
"SRAX solves data challenges for all actors in the digital
advertising ecosystem by building valuable verticals around
specific data sets," stated SRAX's CEO and Chairman Christopher Miglino. "During the third quarter,
through the sale of our healthcare vertical, we delivered proof of
concept of our strategy to build, optimize and monetize digital
marketing around three integrated areas of focus: industry data
verticals, social media data and BIGtoken and our consumer
data product.
"Today, we believe our industry verticals and social media
solutions have substantial value. To capture the tremendous
opportunity these assets have, we are investing in development and
sales expansion. Year to date, we have launched several new
products and increased our sales team from six at the beginning of
the year to 22, the majority of whom are dedicated to SRAX
solutions.
"Data accuracy is the largest area of uncertainty for marketers,
and we are delivering a solution that is good for both the marketer
and the consumer. Our consumer-powered data management and
distribution system, BIGtoken, is positioned to revolutionize
advertising by offering consumers choice, transparency and
compensation for their data. By gathering information directly from
the source, conducting multi-layer verification and providing data
security, BIGtoken can solve data accuracy challenges the market
faces. We have entered open beta, hired a VP of business
development to help evangelize the system, and are excited about
driving BIGtoken user growth.
"Overall, we expect to deliver significant revenue growth in
2019 and are confident about achieving our projected goals,"
concluded Miglino.
2019 Guidance
For 2019, the company estimates revenue
will be between $20 million and
$25 million with gross margins
between 45% and 55% for the year.
Financial Results: Third Quarter 2018 Compared to Third
Quarter 2017
SRAXmd contributed 37 days of revenue in 2018,
compared to a full quarter in 2017.
- Gross revenue was $2.0 million,
compared to $5.6 million in the third
quarter of 2017, which included a full quarter of SRAXmd
revenue.
- Gross margin was 62%, compared to gross margin of 56% in the
year ago quarter.
- Operating expenses were $4.9
million, compared to $3.7
million, up due to ongoing headcount additions in the SRAX
industry data verticals.
- Gain on sales of assets was $24.0
million, compared to none in the same period 2018.
- Net income was $19.3 million, or
$1.91 per share, reflecting the sale
of SRAXmd, compared to a net loss of $1.0
million, or $0.13 per share,
in the third quarter of 2017.
- Adjusted EBITDA loss was $2.8
million, compared to $93,000
in the third quarter of 2017.
- Cash and cash equivalents were $14.4
million at September 30, 2018,
compared to $1.0 million at
December 31, 2017.
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 SRAXmd, the healthcare business, 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.
- Provided updates regarding BIGtoken.com
-
- Declared dividend right to shareholders and certain holders of
the company's common stock equivalents on September 17, 2018, at no charge, a
non-transferable right to receive a special dividend (also at no
charge), if and when declared, consisting of such number and
designation of the SRAX subsidiary BIGtoken, Inc.'s securities as
determined by the company's management
- Entered closed beta and moved quickly to open beta to have
users test the ecosystem.
- Began a contest to reward Beta testers with the unique
opportunity to earn Bitcoin for participating. To join the BIG Beta
contest, download the BIGtoken app on the Apple App Store or
Google
-
- Apple App Store:
http://big.srax.com/app-store
- Google Play: https://big.srax.com/google-play
- 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,
November 14, 2018, at 4:30 p.m. ET/1:30 p.m.
PT.
- If calling from the United
States or Canada, please
use Dial-In Numbers: 1-877-407-9716 to access the live call and
1-844-512-2921 for the replay, code 13684813 available until
November 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
13684813.
- The call will be webcast over the internet and accessible at
the Company's website at https://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
can own and sell access to their data thereby users choice,
transparency, and compensation. SRAX's technology and tools deliver
a digital competitive advantage for brands in the 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)
|
|
|
September
30,
|
|
December
31,
|
|
2018
|
|
2017
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
14,423,573
|
|
$
|
1,017,299
|
Accounts receivable,
net
|
|
969,110
|
|
|
4,348,305
|
Prepaid
expenses
|
|
448,784
|
|
|
468,336
|
Other current
assets
|
|
417,813
|
|
|
300,898
|
Total current
assets
|
|
16,259,280
|
|
|
6,134,838
|
|
|
|
|
|
|
Property and
equipment, net of accumulated depreciation
|
|
153,619
|
|
|
154,546
|
|
|
|
|
|
|
Goodwill
|
|
15,644,957
|
|
|
15,644,957
|
Intangibles -
net
|
|
1,832,323
|
|
|
1,642,760
|
Other
assets
|
|
451,145
|
|
|
28,598
|
|
|
|
|
|
|
Total
assets
|
$
|
34,341,324
|
|
$
|
23,605,699
|
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
$
|
2,475,229
|
|
$
|
5,010,815
|
Total current
liabilities
|
|
2,475,229
|
|
|
5,010,815
|
|
|
|
|
|
|
Secured convertible
debentures, net
|
|
2,943,109
|
|
|
1,711,146
|
|
|
|
|
|
|
Total
liabilities
|
|
5,418,338
|
|
|
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 September 30, 2018 and December 31, 2017,
respectively
|
|
—
|
|
|
—
|
Class A common stock,
authorized 250,000,000 shares, $0.001 par value, 10,183,330 and
9,910,565 shares issued and outstanding at September 30, 2018 and
December 31, 2017, respectively
|
|
10,183
|
|
|
9,911
|
Class B common stock,
authorized 9,000,000 shares, $0.001 par value, no shares issued or
outstanding at September 30, 2018 and December 31, 2017,
respectively
|
|
—
|
|
|
—
|
Common stock to be
issued
|
|
—
|
|
|
879,500
|
Additional paid in
capital
|
|
37,343,937
|
|
|
37,143,033
|
Accumulated
deficit
|
|
(8,431,134)
|
|
|
(21,148,706)
|
Total stockholders'
equity
|
|
28,922,986
|
|
|
16,883,738
|
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
|
34,341,324
|
|
$
|
23,605,699
|
SOCIAL REALITY,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
THREE AND NINE
MONTH PERIODS ENDED SEPTEMBER 30, 2018
|
(Unaudited)
|
|
|
Three Months
ended
September
30,
|
|
Nine Months
ended
September
30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenues
|
$
|
2,015,391
|
|
$
|
5,554,182
|
|
$
|
8,823,592
|
|
$
|
16,861,449
|
Cost of
revenue
|
|
763,610
|
|
|
2,454,919
|
|
|
2,902,179
|
|
|
8,378,247
|
Gross
profit
|
|
1,251,781
|
|
|
3,099,263
|
|
|
5,921,413
|
|
|
8,483,202
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expense
|
|
|
|
|
|
|
|
|
|
|
|
General, selling and
administrative expense
|
|
4,869,232
|
|
|
3,659,202
|
|
|
14,414,279
|
|
|
11,395,454
|
Write-off of
non-compete agreement
|
|
—
|
|
|
—
|
|
|
—
|
|
|
486,750
|
Restructuring
costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
377,961
|
Total operating
expense, net
|
|
4,869,232
|
|
|
3,659,202
|
|
|
14,414,279
|
|
|
12,260,165
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations
|
|
(3,617,451)
|
|
|
(559,939)
|
|
|
(8,492,866)
|
|
|
(3,776,963)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
(expense)
|
|
(318,942)
|
|
|
(338,010)
|
|
|
(1,240,485)
|
|
|
(668,583)
|
Amortization of debt
issuance costs
|
|
(726,716)
|
|
|
(133,224)
|
|
|
(1,531,963)
|
|
|
(898,932)
|
Total interest
expense
|
|
(1,045,658)
|
|
|
(471,234)
|
|
|
(2,772,448)
|
|
|
(1,567,515)
|
Gain on sale of
assets
|
|
23,978,389
|
|
|
—
|
|
|
23,978,389
|
|
|
—
|
Other non-operating
income (expense)
|
|
9,758
|
|
|
—
|
|
|
4,498
|
|
|
—
|
Total other income
(expense)
|
|
22,942,489
|
|
|
(471,234)
|
|
|
21,210,439
|
|
|
(1,567,515)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
provision for income taxes
|
|
19,325,038
|
|
|
(1,031,173)
|
|
|
12,717,573
|
|
|
(5,344,478)
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
19,325,038
|
|
$
|
(1,031,173)
|
|
$
|
12,717,573
|
|
$
|
(5,344,478)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
share, basic and diluted
|
$
|
1.91
|
|
$
|
(0.13)
|
|
$
|
1.26
|
|
$
|
(0.67)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding, basic and diluted
|
|
10,112,804
|
|
|
8,115,790
|
|
|
10,121,717
|
|
|
8,008,717
|
SOCIAL REALITY,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
THREE AND NINE
MONTH PERIODS ENDED SEPTEMBER 30, 2018
|
(Unaudited)
|
|
|
Nine Months ended
September 30,
|
|
2018
|
|
2017
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss)
|
$
|
12,717,573
|
|
$
|
(5,344,478)
|
Adjustments to
reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
|
Stock based
compensation
|
|
1,756,795
|
|
|
947,968
|
Gain on sale of
SRAXmd
|
|
(23,978,389)
|
|
|
—
|
Amortization of debt
issue costs
|
|
325,791
|
|
|
515,082
|
Amortization of debt
discount
|
|
1,206,172
|
|
|
383,850
|
PIK Interest expense
accrued to principal
|
|
—
|
|
|
51,323
|
Write-off of
non-compete agreement
|
|
—
|
|
|
486,750
|
Provision for bad
debts
|
|
(8,600)
|
|
|
(181,702)
|
Depreciation
expense
|
|
30,730
|
|
|
14,240
|
Amortization of
intangibles
|
|
512,308
|
|
|
358,698
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
1,816,668
|
|
|
1,377,870
|
Prepaid
expenses
|
|
(196,929)
|
|
|
(209,007)
|
Other
assets
|
|
(119,462)
|
|
|
12,762
|
Accounts payable and
accrued expenses
|
|
(3,005,533)
|
|
|
(721,272)
|
Unearned
revenue
|
|
—
|
|
|
67,516
|
Cash used in
operating activities
|
|
(8,942,876)
|
|
|
(2,240,400)
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
Purchase of
equipment
|
|
(29,803)
|
|
|
(97,287)
|
Development of
software
|
|
(701,871)
|
|
|
(454,368)
|
Proceeds from
SRAXmd
|
|
22,980,824
|
|
|
—
|
Cash provided by
(used in) investing activities
|
|
22,249,150
|
|
|
(551,655)
|
|
|
|
|
|
|
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
|
|
100,000
|
|
|
—
|
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
|
|
100,000
|
|
|
1,959,702
|
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
13,406,274
|
|
|
(832,353)
|
Cash and cash
equivalents, beginning of period
|
|
1,017,299
|
|
|
1,048,762
|
Cash and cash
equivalents, end of period
|
$
|
14,423,573
|
|
$
|
216,409
|
|
|
|
|
|
|
Supplemental
schedule of cash flow information:
|
|
|
|
|
|
Cash paid for
interest
|
$
|
758,767
|
|
$
|
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, issued now
|
$
|
879,500
|
|
$
|
100
|
Shares issued for
convertible note conversions
|
$
|
300,000
|
|
$
|
—
|
SOCIAL REALITY, INC.
NON-GAAP TO
GAAP RECONCILIATION
THREE AND NINE MONTH PERIODS ENDED
SEPTEMBER 30,
2018
(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
September
30,
|
|
|
2018
|
|
2017
|
Net Income or
(loss)
|
|
$
|
19,325,038
|
|
$
|
(1,031,173)
|
plus
|
|
|
|
|
|
|
Equity Based
compensation
|
|
|
594,985
|
|
|
326,641
|
Adjusted net
loss
|
|
$
|
19,920,023
|
|
$
|
(704,532)
|
(Gain) or loss on sale
of assets
|
|
|
(23,978,389)
|
|
|
-
|
Interest
Expense
|
|
|
1,045,658
|
|
|
471,234
|
Other non-operating
expenses
|
|
|
(9,758)
|
|
|
-
|
Depreciation and
amortization
|
|
|
172,838
|
|
|
140,551
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$
|
(2,849,628)
|
|
$
|
(92,747)
|
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SOURCE SRAX