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8-K - CURRENT REPORT - SRAX, Inc.scri_8k.htm

EXHIBIT 99.1

Social Reality Q1 Revenue Beats Guidance

Total Revenue Tops $4M, a 626% Year-over-Year Increase

Company Guides Current Q2 Revenue Growth to $6M, a 2,067% Year-over-Year Increase


Press Release: Social Reality, Inc. – 


Los Angeles, CA (Marketwired - May 18, 2015)—Social Reality, Inc. (OTCQB: SCRI), an Internet advertising and platform technology company that provides tools to automate the digital advertising market, announced today its first quarter 2015 financial results. Revenues for the first quarter ended March 31, 2015 were $4,021,284, an increase of 626% over the first quarter of 2014 and an 11% sequential increase over the fourth quarter of 2014. The company also reported gross margins of 44% for the period ended March 31, 2015.


“Historically our first quarter revenues have been lower than the rest of the year, so we are very excited to see such a significant increase in our first quarter. We expect this growth to continue into the next quarter so we are providing Q2 2015 gross revenue guidance of $6,000,000, a 2,067% increase over Q2 2014,” said Christopher Miglino, Social Reality CEO and Chairman. “Our revenue for the first quarter almost surpasses our entire 2014 yearly revenue and by the end of the second quarter we expect to almost double last year’s revenue. We are experiencing significant growth this year, and Social Reality is well-positioned to participate in the explosive growth in digital ad spending,” added Miglino.


First Quarter 2015 Highlights


·

Revenue of $4,021,284 represents a 626% increase over the first quarter of 2014

·

Third consecutive quarter-over-quarter growth

·

Q2 2015 revenue guidance of $6M, a 2,067% increase over the second quarter of 2014


Three-month financial results for the period ended March 31, 2015


Revenues for the three months ended March 31, 2015 were $4,021,284 compared to $553,677 reported for the three months ended March 31, 2014.  The growth is attributed to an approximate three-fold increase in sell-side revenue from organic growth and in-house technology development, expansion into buy-side revenue through last year’s acquisitions, and most recently, new revenue streams from platform sales. As a result, our gross profit increased to $1,778,809 for the three months ended March 31, 2015 compared to $181,062 for the same period of 2014, with a corresponding increase of over 10% in the gross margin, up to 44% for the three months ended March 31, 2015.


For the quarter ended March 31, 2015, adjusted EBITDA was ($709,634) compared to ($451,788) in the first quarter of 2014. The net increase in the adjusted EBITDA loss is mostly attributable to the growth of the Company’s technology team and the addition of support for its trading desk products, and we are pleased with the dramatic improvement in the loss represented as a percent of total revenue.


The company also reported a net loss of $2,054,461, or $0.08 per share, for the three months ended March 31, 2015, compared to a net loss of $687,810, or $0.03 per share, for the corresponding period of 2014.  In the table, Reconciliation of Adjusted EBITDA to GAAP, the additional $1,344,827 of costs contributing to the net loss, incremental to adjusted EBITDA, are primarily comprised of non-cash stock-based compensation, amortization, accretion, and interest expenses.




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Balance Sheet as of March 31, 2015


Cash and cash equivalents totaled $703,025 at March 31, 2015. Current assets and total assets were $4,958,537 and $26,746,671, respectively, and current liabilities and total liabilities were $10,814,793 and $22,783,639, respectively. At March 31, 2015 the company had stockholders' equity of $3,963,032.


About Social Reality, Inc.

Social Reality, Inc. is an Internet advertising company that provides tools to automate the digital advertising market. The company has built technologies and leveraged partner technologies that service social media and the Real Time Bidding (RTB) markets. For more information, please visit www.socialreality.com.


Forward-Looking Statements


This press release contains forward-looking statements that are based upon current expectations and involve certain risks.  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:  our ability to grow our revenues and manage our gross margins; our history of losses; our limited operating history; the terms of our financing agreement with Victory Park Management, LLC as agent for the lenders; the impact of our debt obligations on our liquidity and financial conditions; the impact of the earn out payments to Mr. Steel; our possible need for additional financing; risks associated with loss of access to the Facebook platform; risks associated with our recent participation on the Google ADX Platform; risks associated with loss of access to RTB inventory buyers; the continued appeal of digital advertising; our dependence on our publishers; risks related to possible future acquisitions; the limited market for our Class A common stock; and the impact of penny stock rules on the trading in our Class A common stock, among others, all as set forth in our Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission. Except for our ongoing obligations to disclose material information under the Federal securities laws, Social Reality undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.


Contact:


Robert Haag

Managing Director

IRTH Communications

SCRI@irthcommunications.com

1-866-976-4784





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SOCIAL REALITY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


 

 

Three Month Periods Ended

March 31,

 

 

 

2015

 

 

2014

 

 

  

                       

  

  

                       

  

Revenues

 

$

4,021,284

 

 

$

553,677

 

Cost of revenue

 

 

2,242,475

 

 

 

372,615

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

1,778,809

 

 

 

181,062

 

 

 

 

 

 

 

 

 

 

Operating expense

 

 

2,910,000

 

 

 

869,405

 

 

 

 

 

 

 

 

 

 

Loss from operations before other expense

 

 

(1,131,191

)

 

 

(688,343

)

 

 

 

 

 

 

 

 

 

Interest income (expense)

 

 

(923,270

)

 

 

533

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(2,054,461

)

 

 

(687,810

)

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(2,054,461

)

 

$

(687,810

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.08

)

 

$

(0.03

)

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

27,029,749

 

 

 

20,630,358

 





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SOCIAL REALITY, INC.

CONSOLIDATED BALANCE SHEETS


 

 

March 31,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

703,025

 

 

$

1,843,393

 

Accounts receivable, net of allowance for doubtful accounts of $59,545 and $52,338

 

 

4,075,629

 

 

 

3,874,620

 

Prepaid expenses

 

 

177,524

 

 

 

222,532

 

Other current assets

 

 

2,359

 

 

 

7,352

 

Total current assets

 

 

4,958,537

 

 

 

5,947,897

 

 

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $29,792 and $25,013

 

 

22,823

 

 

 

27,602

 

Goodwill and other intangibles

 

 

18,318,911

 

 

 

18,318,911

 

Deferred debt issue costs

 

 

2,587,800

 

 

 

2,907,736

 

Prepaid stock based compensation

 

 

849,406

 

 

 

1,008,019

 

Other assets

 

 

9,194

 

 

 

4,804

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

26,746,671

 

 

$

28,214,969

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

3,185,285

 

 

$

2,882,120

 

Note payable - related party

 

 

2,500,000

 

 

 

2,500,000

 

Notes payable, current portion

 

 

1,417,000

 

 

 

1,350,000

 

Unearned revenue

 

 

8,095

 

 

 

25,295

 

Contingent consideration payable to related party - current portion

 

 

3,704,413

 

 

 

3,586,722

 

Total current liabilities

 

 

10,814,793

 

 

 

10,344,137

 

 

 

 

 

 

 

 

 

 

Notes payable

 

 

7,418,880

 

 

 

7,713,014

 

Contingent consideration payable to related party - long term

 

 

3,248,611

 

 

 

3,145,401

 

Put liability

 

 

1,301,355

 

 

 

1,260,010

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

22,783,639

 

 

 

22,462,562

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, authorized 50,000,000 shares, $0.001 par value,

 

 

 

 

 

 

 

 

Undesignated, 49,800,000 shares, no shares issued and outstanding

 

 

 

 

 

 

 

 

Series 1 Preferred stock, authorized 200,000 shares, 86,000 shares issued and outstanding, respectively

 

 

86

 

 

 

86

 

Class A common stock, authorized 250,000,000 shares, $0.001 par value, 29,416,612 shares issued and 27,029,749 shares outstanding, respectively

 

 

27,030

 

 

 

27,030

 

Class B common stock, authorized 9,000,000 shares, $0.001 par value, no shares issued and outstanding

 

 

 

 

 

 

Additional paid in capital

 

 

13,408,239

 

 

 

13,143,153

 

Accumulated deficit

 

 

(9,472,323

)

 

 

(7,417,862

)

 

 

 

 

 

 

 

 

 

Total stockholders' equity

 

 

3,963,032

 

 

 

5,752,407

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

26,746,671

 

 

$

28,214,969

 





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SOCIAL REALITY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2014 AND 2013

(Unaudited)


 

 

Three Month Periods Ended

March 31,

 

 

 

2015

 

 

2014

 

 

  

                       

  

  

                       

  

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(2,054,461

)

 

$

(687,810

)

Adjustments to reconcile net loss to net cash used by operating activities:

 

 

 

 

 

 

 

 

Amortization of stock based prepaid fees

 

 

158,613

 

 

 

168,417

 

Stock based compensation

 

 

258,166

 

 

 

65,353

 

Amortization of debt issue costs

 

 

319,936

 

 

 

 

PIK interest expense accrued to principal

 

 

88,667

 

 

 

 

Accretion of contingent consideration

 

 

220,901

 

 

 

 

Accretion of put liability

 

 

41,345

 

 

 

 

Depreciation

 

 

4,779

 

 

 

2,785

 

Bad debt expense

 

 

7,207

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(208,216

)

 

 

317,606

 

Prepaid expenses

 

 

45,008

 

 

 

17,623

 

Other current assets

 

 

4,993

 

 

 

(2,000

)

Other assets

 

 

(4,390

)

 

 

(804

)

Accounts payable and accrued expenses

 

 

303,164

 

 

 

(542,606

)

Unearned revenue

 

 

(17,200

)

 

 

 

 

 

 

 

 

 

 

 

 

Cash used by operating activities

 

 

(831,488

)

 

 

(661,436

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of equipment

 

 

 

 

 

(6,856

)

 

 

 

 

 

 

 

 

 

Cash used by investing activities

 

 

 

 

 

(6,856

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Sale of common stock

 

 

 

 

 

1,273,161

 

Cost of common stock sale

 

 

 

 

 

(16,291

)

Proceeds from warrant offering

 

 

6,921

 

 

 

 

Repayments of note payable

 

 

(315,801

)

 

 

 

 

 

 

 

 

 

 

 

 

Cash (used) provided by financing activities

 

 

(308,880

)

 

 

1,256,870

 

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash

 

 

(1,140,368

)

 

 

588,578

 

Cash, beginning of period

 

 

1,843,393

 

 

 

1,715,264

 

Cash, end of period

 

$

703,025

 

 

$

2,303,842

 

 

 

 

 

 

 

 

 

 

Supplemental Schedule of Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

221,669

 

 

$

 

Cash paid for taxes

 

$

 

 

$

 





5




Use of Non-GAAP Measure – Adjusted EBITDA


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 net income before income taxes, depreciation and amortization expenses, plus stock-based compensation and interest 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.


Reconciliation of Adjusted EBITDA to GAAP


 

 

 

 

 

 

 

 

 

 

 

Three Month Periods Ended

March 31,

(unaudited)

 

(unaudited, in thousands)

 

2015

 

 

2014

 

Net income (loss)

 

$

(2,054

)

 

$

(688

)

plus:

  

 

 

 

 

 

 

  

Equity based compensation

 

 

417

 

 

 

234

 

Adjusted net income (loss)

 

$

(1,637

)

 

$

(454

)

Interest expense

 

 

923

 

 

 

 

Depreciation of property, plant and equipment

 

 

5

 

 

 

3

 

Adjusted EBITDA

 

$

(709

)

 

$

(451

)




6