LOS ANGELES, April 2, 2018 /PRNewswire/ -- Social Reality,
Inc. (Nasdaq: SRAX), a digital marketing and consumer data
management and distribution technology platform company, reported
GAAP net income of $178,000,
$0.02 per share, and Adjusted EBITDA
gain of $1.2 million for the fourth
quarter 2017.
SRAX's CEO and Chairman Christopher
Miglino, stated, "Our focus on high margin revenue for the
past year culminated in a very strong fourth quarter with a
positive bottom line and substantial annual improvements. In 2017,
gross margin reached 60%, increasing from 35%, and Adjusted EBITDA
improved over $750,000, both when
compared to 2016. To broaden our growth opportunities, we also
invested in sales talent, including in our consumer-packaged goods
vertical, and engineering resources in the past year. Now, we are
well positioned to leverage our successful healthcare vertical,
both as a model to grow other verticals and as an asset to be
monetized. In fact, we are now in the final phase of this
process. While we cannot discuss more until a definitive agreement
has been signed, we are happy with our progress."
"Additionally, we are excited to be in the next development
phase of our consumer data management and distribution system with
the Alpha release of our BIG platform. This is particularly
relevant since consumers are increasingly realizing the true value
of their data as they see large companies monetarily benefiting
from their information. We believe our BIG platform will markedly
expand the digital data ecosystem by providing consumers the
ability to own, verify and sell access to their data, and by
improving the quality of enriched data available to advertisers and
marketing companies. Overall, we believe 2018 will be a year of
strategic change and growth for our verticals and BIG
platform."
Financial Results: Fourth Quarter 2017 Compared to Fourth
Quarter 2016
- Gross revenue was $6.5 million,
compared to $11.5 million in the
fourth quarter of 2016, which included revenue from a large,
non-recurring SRAX Reach customer that was partially offset by an
increase in revenue from SRAX buy-side and sell-side clients as
well as continuing growth in SRAXmd.
- Gross profit was $5.5 million,
increasing from $4.7 million in the
fourth quarter of 2016. Gross margin was 85%, compared 41% in the
fourth quarter of 2016, reflecting the focus on high-margin revenue
and the impact of several one-time year-end adjustments.
- Operating expenses were $5.6
million, compared to $5.6
million in fourth quarter of 2016. The 2017 cost
levels reflect first quarter cost management measures offset by
product development costs related to the BIG platform.
- Loss from operations decreased to $67,000, up from $849,000 the fourth quarter
of 2016.
- Other income improved to $244,000, compared to other expense of
$494,000 in the fourth quarter of
2016.
- Net income improved to $178,000,
or $0.02 per share, compared a net
loss of $1.3 million, or $0.22 per share in the fourth quarter of 2016.
- Adjusted EBITDA gain improved to $1.2
million, compared to a gain of $581, 000 in the fourth quarter of 2016.
- Cash and cash equivalents were $1.0
million at December 31, 2017,
compared to $216,000 at September 30, 2017 and $1.0 million at December
31, 2016. Working capital at December 31, 2017 was positive $1.1 million, improved from negative $8.3 million.
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.
2017 Financial Results:
- Gross revenue was $23.3 million,
compared to $35.8 million in
2016.
- Gross profit increased to $14.3
million, from $12.5 million in
2016. Gross margin was 60%, up from 35% in 2016.
- Loss from operations decreased to $3.8
million, up from $4.8 million
in 2016.
- Net loss was $6.7 million, or
$0.81 per share. 2016 net loss
including a $3.7 million benefit from
a contingent consideration write-off was $4.2 million, or $0.69 per share.
- Adjusted EBITDA loss improved to $382,000, up from and Adjusted EBITDA loss of
$1.1 million in 2016.
Other Recent Corporate Highlights:
- Released the Alpha version of the BIG platform consumer data
management and distribution system to a limited, by invitation only
group of users.
- Made significant progress toward the monetization of SRAXmd,
including starting an auction process that management believes has
entered its final stage.
- Expended SRAX human capital to support the development of the
BIG platform and expand the sales force, particular for the
consumer-packaged goods vertical.
As the company is evaluating strategic alternatives for SRAXmd,
management has elected not to provide financial guidance at this
time.
Conference Call
Management will review the results on
a conference call with a live question and answer session today,
April 2, 2018, at 1:30 p.m. ET. To access the call, please use
passcode 3536327:
- If calling from the United
States or Canada, please
dial Dial-In Numbers: 1-800-281-7973 to access the live call and
1-844-512-2921 for the replay available until April 16, 2018.
- If calling internationally, please dial 1-323-794-2093 to
access the live call and 1-412-317-6671 for the replay.
- 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, the
ultimate outcome of any proposed transaction with SRAXmd, and other
risks and uncertainties, all as set forth in our Annual Report on
Form 10-K for the year ended December 31,
2017, 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.
Statements contained in this press release also reference the
auction process with regards to SRAXmd. Although management
is optimistic regarding the successful completion of the auction
process, there can be no assurances that the process will be
completed, will be successful, or that if such process is
completed, that it will be on terms favorable to us.
Contact Information:
Kirsten Chapman, LHA Investor
Relations, +1 415 433 3777, srax@lhai.com
SOCIAL REALITY,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(unaudited)
|
|
|
December
31,
|
|
December
31,
|
|
2017
|
|
2016
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
1,017,299
|
|
$
1,048,762
|
Accounts
receivable, net
|
4,348,305
|
|
8,411,019
|
Prepaid
expenses
|
468,336
|
|
332,503
|
Other current
assets
|
300,898
|
|
6,488
|
Total current
assets
|
6,134,838
|
|
9,798,772
|
|
|
|
|
Property and
equipment, net of accumulated depreciation
|
154,546
|
|
55,492
|
Goodwill
|
15,644,957
|
|
15,644,957
|
Intangibles -
net
|
1,642,760
|
|
1,365,241
|
Other
assets
|
28,598
|
|
34,659
|
|
|
|
|
Total
assets
|
$
23,605,699
|
|
$
26,899,121
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable and accrued expenses
|
$
5,010,815
|
|
$
13,156,083
|
Note payable,
net of unamortized costs
|
-
|
|
3,418,788
|
Unearned
revenue
|
-
|
|
-
|
Put warrant
liability
|
-
|
|
-
|
Debenture
warrant liability
|
-
|
|
|
Leapfrog
warrant liability
|
-
|
|
|
Debenture
conversion liability
|
-
|
|
|
Put
liability
|
-
|
|
1,500,000
|
Total current liabilities
|
5,010,815
|
|
18,074,871
|
|
|
|
|
Secured convertible
debentures, net
|
671,146
|
|
-
|
Total
liabilities
|
5,681,961
|
|
18,074,871
|
|
|
|
|
Stockholders'
equity
|
|
|
|
Preferred stock,
authorized 50,000,000 shares, $0.001 par value, no shares issued or
outstanding at December 31, 2017 and December 31, 2016,
respectively
|
-
|
|
-
|
Class A common stock,
authorized 250,000,000 shares, $0.001 par value, 9,910,565 and
6,951,077 shares issued and outstanding at December 31, 2017 and
December 31, 2016, respectively
|
9,911
|
|
6,951
|
Class B common stock,
authorized 9,000,000 shares, $0.001 par value, no shares issued or
outstanding at December 31, 2017 and December 31, 2016,
respectively
|
-
|
|
-
|
Common stock to be
issued
|
879,500
|
|
678,000
|
Additional paid in
capital
|
38,183,033
|
|
22,529,303
|
Accumulated
deficit
|
(21,148,706)
|
|
(14,390,004)
|
Total stockholders'
equity
|
17,923,738
|
|
8,824,250
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
23,605,699
|
|
$
26,899,121
|
SOCIAL REALITY,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
THREE AND TWELVE
MONTHS ENDED DECEMBER 31, 2017 AND 2016
|
(Unaudited)
|
|
|
|
|
Three Months ended
December 31,
|
|
Twelve Months
ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
6,487,265
|
|
$11,513,459
|
|
$23,348,714
|
|
$35,763,047
|
Cost of
revenue
|
|
|
950,647
|
|
6,796,791
|
|
9,328,893
|
|
23,226,995
|
Gross
profit
|
|
|
5,536,618
|
|
4,716,668
|
|
14,019,821
|
|
12,536,052
|
|
|
|
|
|
|
|
|
|
|
Operating
expense
|
|
|
|
|
|
|
|
|
|
General,
selling and administrative expense
|
|
|
5,603,335
|
|
5,566,124
|
|
17,016,789
|
|
16,648,705
|
Write-off of non-compete agreement
|
|
|
-
|
|
-
|
|
468,750
|
|
-
|
Restructuring costs
|
|
|
-
|
|
-
|
|
377,961
|
|
-
|
Impairment of goodwill
|
|
|
-
|
|
-
|
|
-
|
|
670,000
|
Total operating
expense, net
|
|
|
5,603,335
|
|
5,566,124
|
|
17,863,500
|
|
17,318,705
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations
|
|
|
(66,717)
|
|
(849,456)
|
|
(3,843,679)
|
|
(4,782,653)
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
Interest
income (expense)
|
|
|
(79,746)
|
|
(234,549)
|
|
(748,329)
|
|
(2,133,442)
|
Amortization of debt issuance costs
|
|
|
(1,054,318)
|
|
(259,929)
|
|
(2,101,377)
|
|
(1,076,634)
|
Total interest
expense
|
|
|
(1,134,064)
|
|
(494,478)
|
|
(2,849,706)
|
|
(3,210,076)
|
Loss on
repurchase of Series B warrants
|
|
|
2,053,975
|
|
-
|
|
-
|
|
-
|
Loss on
repricing of Series A warrants
|
|
|
99,820
|
|
-
|
|
-
|
|
-
|
Accretion of put warrants
|
|
|
(1,934,663)
|
|
-
|
|
-
|
|
-
|
Accretion of debenture discount and warrants
|
|
|
788,873
|
|
-
|
|
-
|
|
-
|
Accretion of Leapfrog warrants
|
|
|
336,348
|
|
-
|
|
-
|
|
-
|
Exchange
Gain or Loss
|
|
|
(10,622)
|
|
-
|
|
(10,622)
|
|
-
|
Gain on
settlement
|
|
|
45,125
|
|
-
|
|
45,125
|
|
-
|
Write-off of contingent consideration
|
|
|
-
|
|
-
|
|
-
|
|
3,744,496
|
Total other income
(expense)
|
|
|
244,792
|
|
(494,478)
|
|
(2,815,203)
|
|
534,420
|
|
|
|
|
|
|
|
|
|
|
Loss before provision
for income taxes
|
|
|
178,075
|
|
(1,343,934)
|
|
(6,658,882)
|
|
(4,248,233)
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
|
-
|
|
-
|
|
-
|
|
-
|
Net loss
|
|
|
$
178,075
|
|
$
(1,343,934)
|
|
$
(6,658,882)
|
|
$
(4,248,233)
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
pershare, basic
|
|
|
$
0.02
|
|
$
(0.22)
|
|
$
(0.81)
|
|
$
(0.69)
|
Net (loss) income
pershare, diluted
|
|
|
$
0.02
|
|
$
(0.22)
|
|
$
(0.81)
|
|
$
(0.69)
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding, basic
|
|
|
8,253,851
|
|
6,196,197
|
|
8,253,851
|
|
6,196,197
|
Weighted average
shares outstanding, diluted
|
|
|
8,253,851
|
|
6,196,197
|
|
8,253,851
|
|
6,196,197
|
SOCIAL REALITY,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
TWELVE MONTH
PERIOD ENDED DECEMBER 31, 2017 AND 2016
|
(Unaudited)
|
|
|
|
Twelve Month
Period Ended December 31,
|
|
|
2017
|
|
2016
|
|
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
Net income
(loss)
|
|
$
(6,658,882)
|
|
$
(4,248,233)
|
Adjustments to
reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
Amortization
of stock based prepaid fees
|
|
-
|
|
373,567
|
Stock to be
issued
|
|
|
|
678,000
|
Stock based
compensation
|
|
2,085,988
|
|
1,200,121
|
Noncash
financing cost
|
|
-
|
|
274,634
|
Amortization
of debt issue costs
|
|
1,082,830
|
|
1,076,695
|
Amortization
of debt discount
|
|
1,018,548
|
|
-
|
PIK interest
expense accrued to principal
|
|
-
|
|
511,261
|
Impairment of
Goodwill
|
|
-
|
|
670,000
|
Write-off of
non-compete agreement
|
|
468,751
|
|
-
|
Accretion of
contingent consideration
|
|
-
|
|
(3,585,435)
|
Accretion of
put liability
|
|
-
|
|
63,718
|
Provision for
bad debts
|
|
(195,172)
|
|
119,434
|
Depreciation
expense
|
|
22,908
|
|
21,304
|
Amortization
of intangibles
|
|
505,712
|
|
365,728
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
|
4,261,574
|
|
(6,817,597)
|
Prepaid
expenses
|
|
(135,834)
|
|
(23,069)
|
Other
assets
|
|
(288,349)
|
|
29,602
|
Accounts
payable and accrued expenses
|
|
(6,535,152)
|
|
8,020,903
|
Unearned
revenue
|
|
-
|
|
(1,295)
|
|
|
|
|
|
Cash (used) provided
by operating activities
|
|
(4,367,078)
|
|
(1,270,662)
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Purchase of
equipment
|
|
(121,962)
|
|
(32,862)
|
Development of
software
|
|
(634,914)
|
|
(119,225)
|
|
|
|
|
|
Cash used in
investing activities
|
|
(756,876)
|
|
(152,087)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from the
issuance of common stock, net
|
|
4,020,401
|
|
4,643,799
|
Proceeds from
exercise of warrants
|
|
1,085,004
|
|
-
|
Proceeds from notes
payable
|
|
-
|
|
2,100,000
|
Proceeds from secured
convertible debentures, net
|
|
6,066,406
|
|
-
|
Repayments of note
payable and PIK interest
|
|
(3,996,928)
|
|
(3,763,474)
|
Debt issue
costs
|
|
(582,392)
|
|
-
|
Payment of put
liability
|
|
(1,500,000)
|
|
-
|
Payment of contingent
consideration
|
|
-
|
|
(1,600,000)
|
|
|
|
|
|
Net cash provided by
financing activities
|
|
5,092,491
|
|
1,380,325
|
|
|
|
|
|
Net decrease in cash
and cash equivalents
|
|
(31,463)
|
|
(42,424)
|
Cash and cash
equivalents, beginning of period
|
|
1,048,762
|
|
1,091,186
|
Cash and cash
equivalents, end of period
|
|
$
1,017,299
|
|
$
1,048,762
|
|
|
|
|
|
Supplemental Schedule
of Cash Flow Information:
|
|
|
|
|
Cash paid for
interest
|
|
$
1,217,716
|
|
$
1,312,293
|
Cash paid for
taxes
|
|
$
-
|
|
$
-
|
|
|
|
|
|
SOCIAL REALITY, INC.
NON-GAAP TO GAAP RECONCILIATION
THREE AND TWELVE MONTHS ENDED DECEMBER 31,
2017 AND 2016
(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.
|
|
|
Three Months ended
December 31,
|
|
Twelve Months
ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net loss
|
|
|
$16,507,703
|
|
$12,392,394
|
|
$16,507,703
|
|
$12,392,394
|
Plus:
|
|
|
|
|
|
|
|
|
|
Equity
Based compensation
|
|
|
1,138,021
|
|
1,319,817
|
|
2,085,988
|
|
2,303,843
|
Accretion of put warrants
|
|
|
1,934,663
|
|
-
|
|
-
|
|
-
|
Accretion of debenture discount and warrants
|
|
|
(788,873)
|
|
-
|
|
-
|
|
-
|
Accretion of Leapfrog warrants
|
|
|
(336,348)
|
|
-
|
|
-
|
|
-
|
Accretion of put liability
|
|
|
-
|
|
-
|
|
-
|
|
-
|
Accretion of contingent consideration
|
|
|
-
|
|
-
|
|
-
|
|
-
|
Adjusted net
loss
|
|
|
2,125,538
|
|
(24,117)
|
|
(4,572,894)
|
|
(1,944,390)
|
Loss on
repurchase of Series B warrants
|
|
|
(2,053,975)
|
|
-
|
|
-
|
|
-
|
Loss on
repricing of Series A warrants
|
|
|
(99,820)
|
|
-
|
|
-
|
|
274,695
|
Derivative liabilities for convertible debentures and
warrants
|
|
|
|
|
-
|
|
-
|
|
-
|
Restructuring Costs
|
|
|
-
|
|
-
|
|
377,961
|
|
-
|
Write-off of non-compete agreement
|
|
|
-
|
|
-
|
|
468,750
|
|
-
|
Exchange
Gain or Loss
|
|
|
10,622
|
|
-
|
|
10,622
|
|
-
|
Gain on
settlement
|
|
|
(45,125)
|
|
-
|
|
(45,125)
|
|
-
|
Write-off of contingent consideration
|
|
|
-
|
|
-
|
|
-
|
|
(3,744,496)
|
Impairment of goodwill
|
|
|
-
|
|
-
|
|
-
|
|
670,000
|
Interest
Expense
|
|
|
1,134,064
|
|
504,891
|
|
2,849,706
|
|
3,220,489
|
Depreciation and amortization
|
|
|
155,682
|
|
100,090
|
|
528,622
|
|
387,034
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
$
1,226,986
|
|
$
580,864
|
|
$
(382,358)
|
|
$
(1,136,668)
|
View original content with
multimedia:http://www.prnewswire.com/news-releases/srax-reports-positive-net-income-and-positive-adjusted-ebitda-for-the-fourth-quarter-of-2017-300622796.html
SOURCE Social Reality, Inc.