SRAX Reports Revenue Grew 53% Sequentially for Q2 2019

LOS ANGELES, Aug. 14, 2019 /PRNewswire/ -- SRAX, Inc. (Nasdaq: SRAX), a digital marketing and consumer data management and distribution technology platform company, reported results for the three months ended June 30, 2019.

"We continue to build our data assets through increasing adoption of our verticals and BIGtoken," stated SRAX's CEO and Founder Christopher Miglino. "These proprietary platforms are positioned to generate long-term revenue and value. During the quarter, we made substantial technology advancements in the SRAX IR platform and BIGtoken. SRAX IR is a perfect example of the type of platform that we believe will deliver long term recurring revenue, while building one of the most valuable data sets in the financial markets.

"BIGtoken is the leading edge of the new data economy. Our global and diverse BIGtoken subscriber base experienced viral growth in April and reached 15.9 million users as of this week. During the third quarter, we began to monetize our BIGtoken users, as we engaged with brands and several marketing agencies. Now, we are focused on increasing scale within certain data segments in specific countries. In addition, our discussions with advertisers and agencies have uncovered new revenue opportunities that leverage our high-quality user data. Through building what we predict will be one of the most valuable opt-in data sets in the world, we are well positioned to generate long-term revenue and value for shareholders.

Financial Highlights for Second Quarter 2019

    --  Grew Q2 2019 total revenue 53%, compared to Q1 2019.
    --  Increased total gross margin to 55% in the second quarter, compared to
        42% in Q1 2019.

Operating Highlights:

    --  BIGtoken, the first digital exchange of transparent and verified
        consumer data:
        --  Signed agreement with one of India's largest conglomerate groups,
            Yash Birla Group, to launch BIGtoken India.
        --  Partnered with several high-profile non-profit association to
            provide BIGtoken users the ability to donate their earnings. They
            include
            --  American Heart Association, the nation's oldest and largest
                voluntary organization dedicated to fighting heart disease and
                stroke;
            --  HealthCorps, founded by Dr. Mehmet Oz, dedicated to helping
                high-school students make better choices about their health and
                physical fitness; and
            --  ALS Association, which recently launched its Challenge Me
                campaign in observance of the fifth anniversary of the ALS Ice
                Bucket Challenge.
        --  Introduced the ability for users to receive gift cards in exchange
            for giving brands access to their anonymized data.
        --  Formed a strategic partnership with LiveXLive, a global digital
            media company focused on live entertainment, to increase each
            platform's user base while generating data-based insight.
        --  Signed an agreement with Blue Chip, integrated marketing agency, to
            activate anonymized self-attested, transaction, location, and social
            media data.
        --  Introduced a feature for users to earn points with popular travel,
            grocery, and retail loyalty/rewards programs.
    --  Verticals:
        --  Enhanced SRAX IR features, adding real-time trading data, warrant
            management and the ability for companies to access shareholder
            contact data, including email, phone number and social media links.
        --  Launched SRAX Lux, in June, to target and reach luxury consumers at
            luxury retail stores, high-end art, music, film, fashion, and sports
            events, across all consumer devices.
    --  Corporate:
        --  Changing the company name to SRAX to better reflect the positioning.
        --  Raised $1 million at $5 per share in a private placement to support
            the launch of BIGtoken across Asia.
        --  Raised $7.8 million: $6.7 million from a registered direct offering
            and $1.1 million from warrant conversion.
        --  Raised $5.5 million from a registered direct offering, subsequent to
            quarter end.
        --  Options trading became available for SRAX.

Conference Call:
Management will review the results on a conference call with a live question and answer session today, August 14, 2019, at 4:30 p.m. ET/1:30 p.m. PT.

    --  If calling from the U.S. or Canada, please dial 1-877-451-6152 to access
        the live call and 1-844-512-2921 for the replay, code 13691889 available
        until Wednesday August 28, 2019.
    --  If calling internationally, please dial 1-201-389-0879 to access the
        live call and 1-412-317-6671 for the replay, code 13691889.
    --  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.

Non-GAAP Measures:
To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States (GAAP), we use the following non-GAAP financial measure: Adjusted EBITDA. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In addition, these measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures. We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business. For more information on our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, please see the "Reconciliation of GAAP to Non-GAAP Results" table in this press release.

    --  Adjusted EBITDA is defined as earnings before interest, taxes,
        depreciation and amortization, changes in the fair-value of derivative
        and warrant liabilities, other non-cash charges related to financing
        activities and certain additional one-time charges.

About SRAX
SRAX, Inc. (NASDAQ: SRAX) is a digital marketing and consumer data management technology company. SRAX's technology unlocks data to reveal brands core consumers and their characteristics across marketing channels. Through our BIGtoken platform, SRAX has developed a consumer-managed data marketplace where people can own and earn from their data thereby providing everyone in the Internet ecosystem choice, transparency, and compensation. SRAX's tools deliver a digital competitive advantage for brands in the CPG, automotive, investor relations, luxury, 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, 2018, 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/Mary Magnani, LHA Investor Relations, +1 415 433 3777, srax@lhai.com


                                      
            
              SOCIAL REALITY, INC.


                             
            
              CONDENSED CONSOLIDATED BALANCE SHEETS




                                                           
            June 30,                         
     December 31,


                                                                                              2019                               2018



                                                         
            (unaudited)



                       
            
              Assets



     Current assets:


      Cash and cash equivalents                                                  $
            2,465,639                 $
           2,784,865



     Accounts receivable, net                                                             780,187                          1,828,940



     Prepaid expenses                                                                     550,003                            466,823



     Other current assets                                                                 300,898                            387,085




     Total current assets                                                               4,096,727                          5,467,713





     Non-current Assets:



     Property and equipment, net                                                          211,240                            192,065



     Goodwill                                                                          15,644,957                         15,644,957



     Intangible assets, net                                                             1,811,044                          1,762,605


      Right-of-Use Asset - Long Term
       Portion                                                                             466,253



     Other assets                                                                         107,454                             51,153




     Total non-current assets                                                          18,240,948                         17,650,780




     Total assets                                                              $
            22,337,675                $
           23,118,493

                                                                                                                                   ===



                 Liabilities and stockholders' equity



     Current liabilities:


      Accounts payable and accrued expenses                                              1,456,965                          3,574,926



     Debenture warrant liability                                                        8,215,035                          4,323,499



     Leapfrog warrant liability                                                         1,161,350                            622,436



     Derivative liability                                                                 902,915                            496,260



     Other current liabilities                                                            894,686




     Total current liabilities                                                         12,630,951                          9,017,121




     Non-current liabilities:


      Secured convertible debentures, net


      Lease Obligation -Long Term Portion                                                  326,471




     Total non-current liabilities                                                        326,471




     Total liabilities                                                                 12,957,422                          9,017,121





      Commitments and contingencies (Note 11)





     Stockholders' equity:


      Preferred stock, authorized 50,000,000
       shares, $0.001 par value, no shares
       issued or outstanding at June 30, 2019
       and December 31, 2018, respectively


      Class A common stock, authorized
       250,000,000 shares, $0.001 par value,
       12,546,022 and 10,109,530 shares issued
       and outstanding at June 30, 2019 and
       December 31, 2018, respectively                                                      12,546                             10,109


      Class B common stock, authorized
       9,000,000 shares, $0.001 par value, no
       shares issued or outstanding at June
       30, 2019 and December 31, 2018,
       respectively



     Common stock to be issued



     Additional paid in capital                                                        42,030,110                         32,869,611



     Accumulated deficit                                                             (32,662,403)                      (18,778,348)




     Total stockholders' equity                                                         9,380,253                         14,101,372



      Total liabilities and
       stockholders' equity                                                     $
            22,337,675                $
           23,118,493

                                                                                                                                   ===


                                                         
              
                SOCIAL REALITY, INC.


                                               
           
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                              
              
                (Unaudited)




                                                         Three Months ended                                         Six Months ended


                                          
            
              June 30,                          
              
                June 30,



                                          2019                               2018                                    2019            2018






     Revenue                                      $
            904,222                               $
              4,697,351                    $
           1,495,977    $
          6,808,201



     Cost of revenue                                        410,892                                           1,320,464                               753,239            2,138,569




     Gross profit                                           493,330                                           3,376,887                               742,738            4,669,632


      General, selling and administrative
       expense                                             5,114,115                                           5,392,625                             9,605,377            9,522,883




     Loss from operations                               (4,620,785)                                        (2,015,738)                          (8,862,639)         (4,853,251)





     Other income (expense):



     Interest expense                                     (182,957)                                          (486,758)                            (250,944)           (921,543)


      Amortization of debt issuance costs                                                                     (482,588)                                                (918,254)




     Total Interest Expense                               (182,957)                                          (969,346)                            (250,944)         (1,839,797)


        Gain or (loss) on sale of Assets                    (77,373)                                           (22,165)                              395,106             (22,165)



        Exchange Gain or Loss                                                                                    (596)                               13,509              (5,260)


         Loss on repricing of equity
          warrants                                         (341,682)                                                                               (341,682)


         Change in Fair Value of Warrant
          Liability                                      (2,875,554)                                        (1,013,565)                          (4,837,405)           2,710,129



      Other non operating income /
       (expense)                                         (3,294,609)                                        (1,036,326)                          (4,770,472)           2,682,704


      Total other income /(expense)                      (3,477,566)                                        (2,005,672)                          (5,021,416)             842,907



      Income /(Loss) before provision
       for income taxes                                  (8,098,351)                                        (4,021,410)                         (13,884,055)         (4,010,344)




      Provision for income taxes



     Net income / (loss)                       $
           (8,098,351)                            $
              (4,021,410)                  $
         (13,884,055)   $
        (4,010,344)





      Net income /(loss) per share,
       basic and diluted                            $
            (0.67)                                 $
              (0.39)                      $
           (1.24)      $
          (0.40)





      Weighted average shares outstanding



     Basic                                               12,129,787                                          10,213,618                            11,210,810           10,126,247



     Diluted                                             12,129,787                                          10,213,618                            11,210,810           10,126,247


                               
              
                SOCIAL REALITY, INC.


                 
              
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                   
              
                (Unaudited)




                                                                                   Six Months Ended


                                                               
              
                June 30,



                                                               2019                                 2018

                                                                                                    ---

                   Cash flows from operating activities


      Net Income (loss)                                               $
              (13,884,055)                   $
            (4,010,344)


      Adjustments to reconcile net loss
       to net cash (used in) provided
       by operating activities:                                                                                -


      Stock based compensation                                                       446,396                                1,161,760


      Amortization of debt issuance
       costs                                                                                             300,185


      Accretion of debenture discount
       and warrants                                                                                      618,069


      Gain/Loss on valuation of
       warrant derivatives                                                         4,837,406                              (2,710,129)


      Amortization of intangibles                                                    495,178                                  350,165


      Changes in operating assets and
       liabilities:



     Accounts receivable                                                            807,000                                1,630,258



     Prepaid expenses                                                              (83,480)                                (47,061)



     Other assets                                                                    29,886                                  (2,672)


      Accounts payable and accrued
       expenses                                                                  (1,363,056)                               2,140,856



     Unearned revenue



      Net cash used in
       operating activities                                            $
              (8,097,541)                     $
            (554,303)

                                                                                                                                   ---



                   Cash flows from investing
                    activities



     Purchase of equipment                                                         (52,924)                                (20,793)


      Development of software                                                      (543,617)                               (451,168)



      Net cash (used in)
       provided by investing
       activities                                                        $
              (596,541)                     $
            (471,961)

                                                                                                                                   ---



                   Cash flows from financing
                    activities


      Proceeds from the issuance of
       common stock units                                                          7,228,709


      Proceeds from the issuance of
       common stock in conjunction with
       warrant exercised                                                           1,146,148                                   50,001


      Proceeds from secured convertible
       debentures, net


      Repayments of notes payable



      Net cash provided by
       financing activities                                              $
              8,374,857                         $
            50,001

                                                                                                                                   ---



      Net increase /(decrease) in cash
       and cash equivalents                                                        (319,225)                               (976,263)


      Cash and cash equivalents,
       beginning of period                                                         2,784,865                                1,017,299



      Cash and cash
       equivalents, end of
       period                                                            $
              2,465,640                         $
            41,036

                                                                                                                                   ---

                                                                                           1


                   Supplemental schedule of cash
                    flow information


      Cash paid for interest                           
              $                                                  $
            313,791



     Cash paid for taxes


                   Supplemental schedule of noncash
                    financing activities


      Recorded right-of-use asset                                                  (466,253)


      Recorded lease obligation                                                      466,253


      Common stock issued for preferred
       stock conversion and vesting
       grants


      Vesting of common stock award                                                                      150,000


      Issuance of treasury shares  for
       purposes of loan
       collateralization                                                                 220


      Issuance of common stock to be
       issued                                                                                            869,500


                                                            
              
                SOCIAL REALITY, INC.


                                                      
         
                RECONCILIATION OF GAAP TO NON-GAAP RESULTS


                                                                 
              
                (Unaudited)




                                           
            
          For the three months ended


                                      June 30, 2019                                                    March 31, 2019    June 30, 2018




     Net Income / (Loss)                               $
           (8,088,792)                                          $
       (5,795,265)  $
       (4,021,486)



     Plus:


      Equity based compensation                                      316,234                                                    130,161            995,630


      Interest (income) expense                                      182,957                                                     67,988            969,346


      Depreciation and amortization                                  275,602                                                    253,324            222,000


      Change in Fair Value of Warrant
       Liability                                                   2,875,554                                                  1,961,851            986,217



     Financing Costs                                                341,682



     Gain on Sale                                                    77,373                                                  (472,479)            49,513



     Other (income)/ expense                                                                                                 (13,509)               596



     Adjusted EBITDA                                   $
           (4,019,390)                                          $
       (3,867,928)    $
       (798,184)


                                                            For the three months ended



                                             
     
     As Reported - GAAP                               
     
               Disc. Products                         
        
     Excl. Disc Products


                               ($s in '000s)                                  June 30, March 31,     June 30,                         QoQ            YoY                        June 30,        March 31,        June
                                                                                                                                                                                                              
       30,            QoQ            YoY      June 30,      March 31,       June 30,               QoQ                 YoY
                                                                                  2019       2019          2018                                                                        2019              2019         2018                                        2019            2019            2018

    ---

             Net Revenue                                                           904        592         4,697                          53%           -87%                                                        3,857    
           n/m          -100%           904             592             840                53%                  8%




             Cost of revenue                                                       411        342         1,320                          20%           -74%                             (4)               44          734          -110%          -101%           415             298             586                39%                -29%


             Gross Profit                                                          493        249         3,377                          98%           -93%                               4              (44)       3,123          -110%          -100%           489             294             254                67%                 92%


    Margin %                                                                     55%       42%          72%                    1241 bps      -1733 bps                             n/a      
     
         n/a         81%           n/m            n/m           54%            50%            30%           444 bps            2383 bps




             Operating expense                                                   5,105      4,501         5,393                          13%           -17%                               8               114        1,680           -93%           -93%         5,097           4,386           3,712                16%                 18%

    ---



             Operating Income                                                  (4,611)   (4,251)      (2,016)                          8%           111%                             (3)            (159)       1,443           -98%          -111%       (4,608)        (4,093)        (3,458)               13%                 18%

    ---


            less:


             Equity based
              compensation                                                         316        130           996                         143%           -87%                                                                
           n/m    
           n/m           316             130             996               143%                -68%


             Depreciation and
              amortization                                                         276        253           222                           9%            14%                                                           54          -100%    
           n/m           276             199             168                38%                 64%





            EBITDA                                                            (4,019)   (3,868)        (798)                          4%           385%                             (3)             (54)       1,497           -94%          -104%       (4,016)        (3,814)        (2,295)                5%                 66%

    ---

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SOURCE SRAX