SRAX Reports $19.3 million in Net Income and $1.91 EPS for Third Quarter 2018

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
    --  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
        --  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:
            --  Google Play:
    --  Hired David James Stewart as vice president of business development to
        drive commercial adoption of
    --  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 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 (, 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

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,

              SOCIAL REALITY, INC.



                                                                 September 30,                        December 31,

                                                                          2018                                 2017




              Current assets:

      Cash and cash equivalents                                                  $
            14,423,573                        $

     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                       $


                 Liabilities and stockholders'

                 Current liabilities:

      Accounts payable and
       accrued expenses                                                           $
            2,475,229                        $


     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

                 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,

      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,

     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                       $


                SOCIAL REALITY, INC.




                                                                Three Months ended                                        Nine Months ended

                                                                  September 30,                                             September 30,


                                                 2018                             2017                                    2018                    2017


     Revenues                                         $
             2,015,391                             $
              5,554,182                            $
             8,823,592           $

     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          $


      Net (loss) income per
       share, basic and diluted                            $
              1.91                                $
              (0.13)                               $
              1.26               $


      Weighted average shares outstanding,
       basic and diluted                                       10,112,804                                         8,115,790                                      10,121,717                        8,008,717

                SOCIAL REALITY, INC.




                                                                                                     Nine Months ended September 30,

                                                                                     2018                                2017


                Cash flows from operating activities:

     Net income (loss)                                                                     $
              12,717,573                           $

      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                               $


                   Supplemental schedule of cash flow information:

     Cash paid for interest                                                                   $
              758,767                               $

     Cash paid for taxes                                                    
              $                      -

                   Supplemental Schedule of noncash financing activities:

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

     Vesting of common stock award                                                            $

      Issuance of placement agent warrants                                   
              $                                                       $

      Issuance of common stock to be issued, issued
       now                                                                                     $
              879,500                                  $

      Shares issued for convertible note
       conversions                                                                             $


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             $


     Equity Based compensation                        594,985                      326,641

     Adjusted net loss                      $
         19,920,023               $

     (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)               $

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