SRAX Reports First Quarter of 2018

SRAX Reports First Quarter of 2018

- Entered a Memorandum of Understanding Regarding SRAXmd -

- Delivered 61% Gross Margins -

LOS ANGELES, May 15, 2018 /PRNewswire/ -- Social Reality, Inc. (Nasdaq: SRAX), a digital marketing and consumer data management and distribution technology platform company, reported results for the quarter ended March 31, 2018.

SRAX's CEO and Chairman Christopher Miglino, stated, "2018 has been and will be a year of tremendous strategic change as we grow and monetize our verticals as well as launch our consumer data management and distribution system BIGtoken.com. Even as our first quarter experienced its typical seasonality, we achieved a gross margin above historical averages at 61%. Also, during the quarter, we continued to invest in sales, engineering and product development, which yielded several new launches. Regarding SRAXmd, our healthcare vertical, we have entered into a MOU, and our team is working diligently to close the transaction.

"BIGtoken.com development is proceeding quite well. In March, we released our Alpha version to test functionality, reward mechanisms and blockchain mechanics. We are receiving excellent, actionable feedback. As we move into Beta testing, we intend to include additional features with team-oriented components for gaming and social-oriented elements for data gathering. BIGtoken.com will provide a solution to many of today's privacy concerns by creating an ecosystem where advertisers and marketing companies obtain quality, verified data through secure blockchain technology designed to provide consumers with choice, awareness and rewards. We believe this addition will diversify our product portfolio and drive shareholder value."

Financial Results: First Quarter 2018 Compared to First Quarter 2017

    --  Gross revenue was $2.1 million, compared to $5.3 million in the first
        quarter of 2017, which included high volume, low-margin revenue as well
        as a larger contribution from SRAX Reach customers.
    --  Gross margin was 61% on gross profit of $1.3 million, compared to gross
        margin of 38% on gross profit of $2.0 million in the year ago quarter,
        reflecting the company's focus on high-margin revenue.
    --  Operating expenses were $4.1 million, compared to $5.2 million, which
        included $847,000 in one-time charges in the first quarter of 2017.
    --  Loss from operations improved to $2.8 million, compared to $3.2 million
        in the first quarter of 2017.
    --  Net loss was $3.6 million, or $0.36 cents per share, compared to $3.9
        million, or $0.50 cents per share in the first quarter of 2017.
    --  Adjusted EBITDA loss was $2.5 million, compared to $1.7 million in the
        first quarter of 2017.
    --  Cash and cash equivalents were $190,000 at March 31, 2018, compared to
        $1.0 million at December 31, 2017.  The company renewed its $4 million
        credit facility with FastPay in April.

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:

    --  Entered into a non-binding memorandum of understanding in May 2018.  The
        closing of the transaction is subject to the completion of due diligence
        and definitive agreements.  As of the date hereof, none of these
        conditions have been met.
    --  Gathered useful feedback from the BIGtoken.com platform Alpha release to
        begin Beta testing.
    --  Launched SRAX Social's Intelligent Budget to facilitate allocation and
        payment amongst specific campaigns or client profiles.
    --  Unveiled SRAX Social's Auto-Boost to automatically enhance social
        advertising campaigns based on user-set rules and parameters.
    --  Bolstered SRAXshopper target verified shoppers visiting advertisers' key
        retailers with a single intended message across multiple devices and
        inventory sources.

Conference Call
Management will review the results on a conference call with a live question and answer session today, May 15, 2018, at 4:30 p.m. ET. To access the call, please use passcode 5318221:

    --  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 May 29, 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)


                                                March 31,                  December 31,

                                                      2018                          2017
                                                      ----                          ----

                          Assets

    Current assets:

    Cash and cash equivalents                                     $189,888                      $1,017,299

    Accounts receivable, net                                   1,734,058                       4,348,305

    Prepaid expenses                                             540,753                         468,336

    Other current assets                                         300,898                         300,898
                                                                 -------                         -------

    Total current assets                                       2,765,597                       6,134,838


    Property and equipment, net of
     accumulated depreciation                                    165,898                         154,546


    Goodwill                                                  15,644,957                      15,644,957

    Intangibles - net                                          1,708,349                       1,642,760

    Other assets                                                  32,043                          28,598
                                                                  ------                          ------


    Total assets                                               $20,316,844                     $23,605,699
                                                               ===========                     ===========


          Liabilities and stockholders'
                      equity


    Current liabilities:

    Accounts payable and
     accrued expenses                                           $4,682,794                      $5,010,815
                                                                ----------                      ----------

    Total current liabilities                                  4,682,794                       5,010,815
                                                               ---------                       ---------


    Secured convertible debentures, net                        2,043,804                       1,711,146


    Total liabilities                                          6,726,598                       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 March 31, 2018 and
     December 31, 2017, respectively                     -                               -

    Class A common stock, authorized
     250,000,000 shares, $0.001 par
     value, 10,212,738 and 9,910,565
     shares issued and outstanding at
     March 31, 2018 and December 31,
     2017, respectively                                           10,213                           9,911

    Class B common stock, authorized
     9,000,000 shares, $0.001 par
     value, no shares issued or
     outstanding at March 31, 2018 and
     December 31, 2017, respectively                     -                               -

    Common stock to be issued                                     10,000                         879,500

    Additional paid in capital                                38,328,359                      37,143,033

    Accumulated deficit                                     (24,758,326)                   (21,148,706)
                                                             -----------                     -----------

    Total stockholders' equity                                13,590,246                      16,883,738
                                                              ----------                      ----------


    Total liabilities and
     stockholders' equity                                      $20,316,844                     $23,605,699
                                                               ===========                     ===========


                                       SOCIAL REALITY, INC.

                          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                THREE ENDED MARCH 31, 2018 AND 2017

                                            (Unaudited)


                                                          Three Months ended
                                                            March 31,
                                                            ---------

                                                       2018                  2017
                                                       ----                  ----

    Revenues                                                    $2,110,850                    $5,326,163

    Cost of revenue                                              818,105                     3,279,120
                                                                 -------                     ---------

    Gross profit                                               1,292,745                     2,047,043


    Operating expense

    General, selling and
     administrative
     expense                                                   4,130,258                     4,409,807

    Write-off of non-
     compete agreement                                    -                       468,751

    Restructuring costs                                   -                       377,961
                                                        ---                       -------

    Total operating
     expense, net                                              4,130,258                     5,256,519
                                                               ---------                     ---------


    Loss from operations                                     (2,837,513)                  (3,209,476)


    Other income
     (expense)

    Interest income
     (expense)                                                 (434,785)                    (133,306)

    Amortization of debt
     issuance costs                                            (332,658)                    (578,140)
                                                                --------                      --------

    Total interest
     expense                                                   (767,443)                    (711,446)
                                                                --------                      --------

    Accretion of put
     warrants                                             -                             -

    Exchange Gain or Loss                                        (4,664)                            -
                                                                  ------                           ---

    Total other income
     (expense)                                                 (772,107)                    (711,446)
                                                                --------                      --------


    Loss before provision
     for income taxes                                        (3,609,620)                  (3,920,922)


    Provision for income
     taxes                                                -                             -
                                                        ---                           ---


    Net loss                                                  $(3,609,620)                 $(3,920,922)
                                                               ===========                   ===========



    Net (loss)
     income
     per
     share,
     basic and
     diluted                                                       $(0.36)                      $(0.50)
                                                                    ======                        ======


    Weighted average
     shares outstanding,
     basic and diluted                                        10,037,905                     7,844,127
                                                              ==========                     =========


                                           SOCIAL REALITY, INC.

                             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 THREE MONTH PERIOD ENDED MARCH 31, 2018

                                               (Unaudited)


                                                              Three Month Period Ended
                                                                   March 31,
                                                                   ---------

                                                              2018                     2017


    Cash flows from operating activities:

    Net income (loss)                                                $(3,609,620)                        $(3,920,922)

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

    Stock based compensation                                            166,130                              512,442

    Amortization of debt issue costs                                     93,639                              578,140

    Accretion of put warrants                                    -                                    -

    Amortization of debt discount                                       239,018                                    -

    Write-off of non-compete agreement                           -                              468,751

    Provision for bad debts                                               (425)                             (8,277)

    Depreciation expense                                                  9,441                                3,234

    Amortization of intangibles                                         166,185                              107,720

    Changes in operating assets and liabilities:

    Accounts receivable                                               2,614,671                            1,840,549

    Prepaid expenses                                                   (72,416)                               2,071

    Other assets                                                        (3,445)                                   -

    Accounts payable and accrued expenses                             (178,022)                           (195,150)
                                                                       --------                             --------

    Cash (used) provided by operating activities                      (574,844)                           (611,442)
                                                                       --------                             --------


    Cash flows from investing activities:

    Purchase of equipment                                              (20,793)                             (5,821)

    Development of software                                           (231,774)                           (135,241)
                                                                       --------                             --------

    Cash used in investing activities                                 (252,567)                           (141,062)
                                                                       --------                             --------


    Cash flows from financing activities:

    Proceeds from the issuance of common stock,
     net                                                         -                            3,820,001

    Repayments of note payable and PIK interest                  -                          (3,996,928)
                                                               ---                           ----------

    Net cash provided by financing activities                    -                            (176,927)
                                                               ---                             --------


    Net decrease in cash and cash equivalents                         (827,411)                           (929,431)

    Cash and cash equivalents, beginning of
     period                                                           1,017,299                            1,048,762
                                                                      ---------                            ---------

    Cash and cash equivalents, end of
     period                                                              $189,888                             $119,331
                                                                         ========                             ========


    Supplemental schedule of cash flow
     information:

    Cash paid for interest                                               $340,684                             $550,695

    Cash paid for taxes                                          $              -                     $             -


    Supplemental Schedule of noncash financing
     activities:

    Common stock issued for preferred
     stock conversion and vesting
     grants                                                      $              -                                 $52

    Initial derivative liability on
     issuance of put warrants                                    $              -                     $             -

    Vesting of common stock award                                        $150,000                      $             -

    Issuance of common stock to be
     issued                                                              $869,500                                 $100

SOCIAL REALITY, INC.
NON-GAAP TO GAAP RECONCILIATION
THREE MONTHS ENDED MARCH 31, 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
                                         March 31,
                                         ---------

                                  2018                      2017
                                                           ----

    Net Loss                             $(3,609,620)            $(3,920,922)

    plus

    Equity Based compensation                 166,130                  512,442

    Accretion of put liability                      -                       -
                                                  ---                     ---

    Adjusted net loss                    $(3,443,490)            $(3,408,480)

    Restructuring Costs                             -                 377,961

    Write-off of non-compete
     agreement                                      -                 468,751

    Exchange Gain or Loss                       4,664                        -

    Interest Expense                          767,443                  711,446

    Depreciation and amortization             175,625                  110,954
                                              -------                  -------


    Adjusted EBITDA                      $(2,495,758)            $(1,739,368)
                                          ===========              ===========

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SOURCE Social Reality, Inc.