LOS ANGELES, April 17, 2019 /PRNewswire/ -- Social Reality,
Inc. (Nasdaq: SRAX), a digital marketing and consumer data
management and distribution technology platform company, reported
results for the three months and year ended December 31, 2018.
"To build for long-term growth, in 2018, we focused on enhancing
our sales and technology infrastructures while maintaining healthy
margins," stated SRAX's CEO and Chairman Christopher Miglino. "In fact, we improved gross
margin from 62% to 76% from the third quarter to the fourth quarter
of 2018 and from 60% to 68% from 2017 to 2018. We also reported
2018 net income of $8.7 million."
"To position us for growth in 2019, we have increased sales
people from six in January 2018 to 30
today. The majority of the team was onboarded in late in 2018, and
we are seeing their contribution already. We expect their efforts
to impact revenue with greater magnitude in the latter half of
2019. Also, we expanded our engineering talent and leadership,
which has enhanced our technology capabilities for BIGtoken and our
verticals."
"Regarding BIGtoken, our digital data exchange, we recently
passed 15,000,000 registered users driven by community members who
are beginning to realize the value of their data and are inviting
their friends and family to share in the experience. Now the BIG
platform has reached the critical mass necessary to enter the
monetization phase. We will continue to enhance the platform with
initiatives like our recently unveiled banking integration. We also
advanced our verticals. We finished incorporating Autoboost within
SRAX Social, made some key hires in SRAX Shopper and launched our
new investor vertical, SRAX IR."
"With our improved infrastructure, we are better positioned
today than ever before. Overall, our actions in 2018 set a
foundation for growth, and we expect 2019 revenue to be between
$20 million and $25 million with gross margins between 45% and
55%," concluded Miglino.
Fourth Quarter 2018 Financial Results
Fourth quarter 2017 and full year 2017 results include operations
from SRAXmd and Reach, which were sold or discontinued,
respectively.
- Gross revenue was $1.1 million.
This compares to $6.5 million,
including $5.3 million of revenue
from SRAXmd and Reach in the fourth quarter of 2017.
- Gross margin was 76%, compared to 62% in the third quarter of
2018 and 85% in the fourth quarter of 2017, which included the high
margin SRAXmd business.
- Operating expenses were $4.1
million, compared to $5.6
million, which included $1.9
million in SRAXmd costs, in the fourth quarter of 2017.
- Net loss was $9.5 million, or
$0.94 per common share, compared to a
net income of $178,000, or
$0.02 per common share, in the fourth
quarter of 2017.
Full Year 2018 Financial Results
- Gross revenue was $9.9 million,
including revenue from SRAXmd of $6.3
million and from Reach of $567,000. This compares to 2017 gross revenue of
$23.3 million, including $11.1 million from SRAXmd and $7.9 million from Reach.
- Gross margin was 68%, up from 60% in 2017, reflecting the shift
in product mix from lower margin products, including Reach, to
higher margin business.
- Net income was $8.7 million, or
$0.86 per common share, compared to a
net loss of $13 million, or
$1.58 per common share, in 2017.
- Adjusted EBITDA loss was $8.8
million, which included $3.2 million
dollars attributable to discontinued products. This compares
to 2017 Adjusted EBITDA loss of $382,000, which included $5.0 million attributable to discontinued
products.
Balance Sheet at December 31,
2018
- Cash and cash equivalents were $2.8
million at December 31, 2018,
compared to $1.0 million at
December 31, 2017.
- The company was debt free at December
31, 2018, compared to $6.8
million of secured convertible debentures at December 31, 2017, at face value.
On April 16, 2019, the company
filed its SEC Form 10-K, which was held up until the calculations
and financials statement adjustments were finalized to restate
certain warrants and derivatives as liabilities from equity.
In 2017, the company had moved certain warrants from liabilities to
equity due to an early adoption of an accounting standard update
(ASU 2017 – 11) that allowed equity reporting for certain warrants
with exercise price reset provisions. During the preparation
of the financial statements for 2018, the company had determined
that many warrants have additional provisions that preclude equity
classification; specifically, provisions that allow the holder to
force cash redemption if the company changes control or is sold.
The warrants are carried on the balance sheet at fair value
with changes in fair value from one period to the next being
recorded within income (loss).
2019 Guidance
For 2019, the company reiterates full year revenue guidance to be
between $20 million and $25 million with gross margins between 45% and
55%.
Recent Highlights
- BIGtoken, the first digital exchange of transparent and
verified consumer data:
-
- Moved to general availability. Consumers participate in
BIG by entering through BIGtoken, a gamified and simplified app
enabling consumers to own, verify, and sell access to their
data.
- Integrated mobile banking applications from some of the largest
banks in the United States.
- Partnered with The Black Jaguar-White Tiger Foundation (BJWT)
to generate donations to the foundation through the use of the
BIGtoken platform.
- Attracted more than 15,000,000 registered users as of
April 15, 2019.
- Verticals:
-
- Launched SRAX IR, a new investor relations software as a
service (SaaS) platform that analyzes stock buyer behavior and
trends for issuers of publicly traded companies.
- Hired shopper marketing industry veterans Eleanor Pirtle, who worked for Walmart for 12
years, and Gina Gates, who worked
for Procter & Gamble to drive the SRAX Shopper vertical
strategy.
- Launched SRAX Social Auto Boost, enabling marketers to
automatically trigger campaigns in their social media
communities.
- Corporate:
-
- Appointed Chief Financial Officer Michael Malone, who previously served as the VP
of Finance for Westwood One, LLC, the largest audio broadcast
network in America.
- Redeemed $6.5 million of all of
the company's 12.5% Senior Secured Convertible Debentures due
April 21, 2020.
Conference Call Webcast
Management held a conference call on April
1st, 2019. Investors can access the call and
accompanying by visiting www.srax.com/investors.
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 measures: Adjusted net income (loss) and 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 net income (loss) is defined
as net income (loss) less non-cash equity-based compensation and
the accretion of warrants.
Adjusted EBITDA is defined as earnings before
interest, taxes, depreciation and amortization, changes in the
fair-value of derivative and warrant liabilities and certain
additional one-time charges.
About SRAX
Social Reality, Inc. (SRAX) is a digital marketing and
consumer data management technology company. SRAX's technology
delivers the tools to unlock data to reveal brands core consumers
and their characteristics across marketing channels. Through its
blockchain identification graph technology platform, BIGtoken, SRAX
has developed a consumer-managed data marketplace where people can
own, verify and sell access to their data thereby providing
everyone in the Internet ecosystem 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 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 STATEMENT OF INCOME (LOSS)
|
(Unaudited)
|
|
|
|
Three Months
Ended
December 31,
|
|
|
Year ended
December 31,
|
|
|
2018
|
|
|
2017
As
Restated
|
|
|
2018
|
|
2017
As Restated
|
Revenue
|
$
|
1,057,016
|
|
$
|
6,487,265
|
|
$
|
9,880,608
|
|
$
|
23,348,714
|
Costs of
revenue
|
|
254,741
|
|
|
950,647
|
|
|
3,156,920
|
|
|
9,328,893
|
Gross
Profit
|
|
802,275
|
|
|
5,536,618
|
|
|
6,723,688
|
|
|
14,019,821
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
General,
selling and administrative
|
|
4,100,238
|
|
|
5,603,335
|
|
|
18,442,839
|
|
|
17,016,789
|
Write-off of non-compete agreement
|
|
-
|
|
|
-
|
|
|
-
|
|
|
468,750
|
Restructuring costs
|
|
-
|
|
|
-
|
|
|
-
|
|
|
377,961
|
Total
expense
|
|
4,100,238
|
|
|
5,603,335
|
|
|
18,442,839
|
|
|
17,863,500
|
Loss from
operations
|
|
(3,297,963)
|
|
|
(66,717)
|
|
|
(11,719,151)
|
|
|
(3,843,679)
|
Interest and other
income (expense), net
|
|
(6,203,267)
|
|
|
244,792
|
|
|
20,656,288
|
|
|
(9,251,092)
|
Income before
provision for income taxes
|
|
(9,501,230)
|
|
|
178,075
|
|
|
8,937,137
|
|
|
(13,094,771)
|
Provision for income
taxes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Net
loss
|
$
|
(9,501,230)
|
|
$
|
178,075
|
|
$
|
8,937,137
|
|
$
|
(13,094,771)
|
Earnings (loss) per
share basic and diluted
|
|
(0.94)
|
|
|
0.02
|
|
|
0.88
|
|
|
(1.59)
|
Weighted average
shares used to compute earnings (loss) per share basic and
diluted
|
|
10,160,692
|
|
|
8,253,851
|
|
|
10,121,408
|
|
|
8,253,851
|
Social Reality,
Inc.
|
CONDENSED
CONSOLIDATED BALANCE SHEET
|
|
|
|
December 31,
2018
|
|
December 31,
2017
As Restated
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
2,784,865
|
|
$
|
1,017,299
|
Accounts receivable,
net
|
|
|
1,828,940
|
|
|
4,348,305
|
Prepaid
expenses
|
|
|
466,823
|
|
|
468,336
|
Other current
assets
|
|
|
387,085
|
|
|
300,898
|
Total current
assets
|
|
|
5,467,713
|
|
|
6,134,838
|
Property and
equipment, net
|
|
|
192,065
|
|
|
154,546
|
Goodwill
|
|
|
15,644,957
|
|
|
15,644,957
|
Intangible assets,
net
|
|
|
1,762,605
|
|
|
1,642,760
|
Other
assets
|
|
|
51,153
|
|
|
28,598
|
Total
assets
|
|
$
|
23,118,493
|
|
$
|
23,605,699
|
|
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
3,574,926
|
|
$
|
5,010,816
|
Warrant
Liability
|
|
|
4,945,935
|
|
|
9,129,970
|
Derivative
Liability
|
|
|
496,260
|
|
|
2,026,031
|
Total current
liabilities
|
|
|
9,017,121
|
|
|
16,166,817
|
Secured convertible
debentures, net
|
|
|
-
|
|
|
1,524,592
|
Total
liabilities
|
|
|
9,017,121
|
|
|
17,691,409
|
Commitments and
contingencies
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
Common stock to be
issued
|
|
|
-
|
|
|
879,500
|
Common stock and additional
paid in capital
|
|
|
32,879,720
|
|
|
32,556,731
|
Accumulated
deficit
|
|
|
(18,778,348)
|
|
|
(27,521,941)
|
Total stockholders'
equity
|
|
|
14,101,372
|
|
|
5,914,290
|
Total liabilities
and stockholders' equity
|
|
$
|
23,118,493
|
|
$
|
23,605,699
|
Social Reality,
Inc.
|
NON-GAAP TO GAAP
RECONCILIATION
|
(Unaudited)
|
|
|
|
For the years
ended
|
|
|
December
31,
|
|
|
2018
|
|
2017
As Restated
|
Net Income /
(Loss)
|
|
$
|
8,743,593
|
|
$
|
(13,032,117)
|
Plus:
|
|
|
|
|
|
|
Equity based
compensation
|
|
|
2,089,301
|
|
|
2,085,988
|
Accretion
of beneficial conversion feature
|
|
|
3,085,822
|
|
|
925,748
|
Accretion
of debenture discount and warrants
|
|
|
1,208,524
|
|
|
263,648
|
Adjusted net income
(loss)
|
|
|
15,127,240
|
|
|
(9,756,733)
|
Interest (income)
expense
|
|
|
3,056,541
|
|
|
3,864,876
|
Depreciation and
amortization
|
|
|
767,821
|
|
|
528,622
|
Change in Fair Value
of Warrant Liability
|
|
|
(8,953,933)
|
|
|
4,134,166
|
Restructuring
Costs
|
|
|
-
|
|
|
377,961
|
Write-off of
non-compete agreement
|
|
|
-
|
|
|
468,750
|
Gain on
Sale
|
|
|
(22,108,028)
|
|
|
-
|
Gain (Loss) on
settlement
|
|
|
3,240,126
|
|
|
-
|
Other income
(loss)
|
|
|
8,204
|
|
|
-
|
Adjusted
EBITDA
|
|
$
|
(8,862,029)
|
|
$
|
(382,358)
|
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SOURCE SRAX