Social Reality Beats Guidance to Achieve Record Revenue and Net Income Profitability for Q2 2015

Company Provides Full Year 2015 Guidance of $30M Revenue, a 485% Increase Over 2014; Q2 Adjusted EBITDA of $1.8M; Net Income of $416k

August 13, 2015 8:35 AM EDT

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LOS ANGELES, CA -- (Marketwired) -- 08/13/15 -- Social Reality, Inc. (OTCQB: SCRI), an Internet advertising and platform technology company that provides tools to automate the digital advertising market, today announced second quarter 2015 financial results. Revenue for the quarter ended June 30, 2015 was $10,761,573, an increase of 3,786% over the second quarter of 2014, and a 168% increase over the first quarter of 2015.

"We are excited by the rapid growth that we are experiencing. This growth validates the synergies of the investments we made at the end of 2014. We are also very proud of the team for achieving net income profitability in the second quarter, as this has been a long-term goal for the company and adds us to a short list of profitable advertising technology companies," said Christopher Miglino, Social Reality's CEO and Chairman. "We continue to see demand in our platform, thus we are providing full-year 2015 revenue guidance of $30M, a 486% increase over 2014," added Miglino.

Second Quarter 2015 Highlights

  • Revenue of $10,761,573 represents a 168% increase over the first quarter of 2015
  • Fourth consecutive quarter-over-quarter increase in revenue
  • $1.8M in adjusted EBITDA
  • Net income of $416k
  • FY 2015 revenue guidance of $30M

Three- and six-month financial results for the period ended June 30, 2015

Revenue for the three months ended June 30, 2015, totaled $10,761,573 compared to $276,934 reported for the three months ended June 30, 2014. Revenue of $14,782,857 was reported for the first half of 2015, compared to $830,611 in the first half of 2014. Gross profit increased to $5,603,130 for the three months ended June 30, 2015, compared to $72,629 for the same period of 2014. Gross profit increased to $7,381,939 for the six months ended June 30, 2015, compared to $253,691 for the same period of 2014.

The company reported net income of $415,591 for the three months ended June 30, 2015, compared to a net loss of ($880,112) for the corresponding period of 2014. The company reported a net loss of ($1,638,870) for the six months ended June 30, 2015, compared to a net loss of ($1,567,922) for the corresponding period of 2014. For the quarter ended June 30, 2015, net income was $0.01 per diluted share, compared to a net loss of ($0.04) per share for the three months ended June 30, 2014. Adjusted EBITDA was $1,804,000 for the quarter ended June 30, 2015, compared to ($625,000) in the same period of 2014. For the first half of 2015, the net loss was ($0.06) per share, compared to a net loss of ($0.08) per share for the same period of 2014, and adjusted EBITDA was $1,094,000 for the first half of 2015, compared to ($1,076,000) in the same period of 2014. As shown in the following table, Reconciliation of Adjusted EBITDA to GAAP, the differences between net income and adjusted EBITDA are primarily composed of non-cash stock-based compensation, amortization, accretion, and interest expenses.

Balance Sheet as of June 30, 2015

Cash and cash equivalents totaled $1,515,726 on June 30, 2015. Current assets and total assets were $10,784,710 and $32,101,129, respectively, while current liabilities and total liabilities were $17,045,848 and $27,533,988, respectively. As of June 30, 2015, the company had stockholders' equity of $4,567,141, a 15% sequential increase over $3,963,032 at March 31, 2015.

About Social Reality, Inc.

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

Forward-Looking Statements

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

                                                                            
                           SOCIAL REALITY, INC.                             
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               
          THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2015 AND 2014          
                                (Unaudited)                                 
                                                                            
                                                                            
                            Three Months ended         Six Months ended     
                                 June 30,                  June 30,         
                         ------------------------  ------------------------ 
                             2015         2014         2015         2014    
                         -----------  -----------  -----------  ----------- 
                                                                            
                                                                            
Revenues                 $10,761,573  $   276,934  $14,782,857  $   830,611 
Cost of revenue            5,158,443      204,305    7,400,918      576,920 
                         -----------  -----------  -----------  ----------- 
                                                                            
Gross profit               5,603,130       72,629    7,381,939      253,691 
                                                                            
Operating expense          4,252,752      953,202    7,162,752    1,822,607 
                         -----------  -----------  -----------  ----------- 
                                                                            
Income (loss) from                                                          
 operations                1,350,378     (880,573)     219,187   (1,568,916)
                                                                            
Interest income                                                             
 (expense)                  (934,787)         461   (1,858,057)         994 
                         -----------  -----------  -----------  ----------- 
                                                                            
Income (loss) before                                                        
 provision for income                                                       
 taxes                       415,591     (880,112)  (1,638,870)  (1,567,922)
                                                                            
Provision for income                                                        
 taxes                             -            -            -            - 
                         -----------  -----------  -----------  ----------- 
                                                                            
Net income (loss)        $   415,591  $  (880,112) $(1,638,870) $(1,567,922)
                         ===========  ===========  ===========  =========== 
                                                                            
                                                                            
Net income (loss) per                                                       
 share, basic            $      0.02  $     (0.04) $     (0.06) $     (0.08)
                         ===========  ===========  ===========  =========== 
Net income (loss) per                                                       
 share, diluted          $      0.01  $     (0.04) $     (0.06) $     (0.08)
                         ===========  ===========  ===========  =========== 
                                                                            
Weighted average shares                                                     
 outstanding, basic       26,911,285   20,515,259   26,879,029   20,390,170 
                         ===========  ===========  ===========  =========== 
Weighted average shares                                                     
 outstanding, diluted     29,520,556   20,515,259   26,879,029   20,390,170 
                         ===========  ===========  ===========  =========== 
                                                                            
                                                                            
                                                                            
                           SOCIAL REALITY, INC.                             
                   CONDENSED CONSOLIDATED BALANCE SHEETS                    
                                (Unaudited)                                 
                                                                            
                                                  June 30,     December 31, 
                                                    2015           2014     
                                               -------------  ------------- 
                                                (Unaudited)                 
Assets                                                                      
                                                                            
Current assets:                                                             
  Cash and cash equivalents                    $   1,515,726  $   1,843,393 
  Accounts receivable, net of allowance for                                 
   doubtful accounts of $103,533 and $52,338       9,124,275      3,874,620 
  Prepaid expenses                                   142,259        222,532 
  Other current assets                                 2,450          7,352 
                                               -------------  ------------- 
Total current assets                              10,784,710      5,947,897 
                                                                            
Property and equipment, net of accumulated                                  
 depreciation of $34,460 and $25,013                  18,155         27,602 
                                                                            
Goodwill/ and other intangibles                   18,318,911     18,318,911 
Deferred debt issue costs                          2,279,366      2,907,736 
Prepaid stock based compensation                     690,793      1,008,019 
Other assets                                           9,194          4,804 
                                               -------------  ------------- 
                                                                            
Total assets                                   $  32,101,129  $  28,214,969 
                                               =============  ============= 
                                                                            
Liabilities and stockholders' equity                                        
                                                                            
Current liabilities:                                                        
  Accounts payable and accrued expenses        $   7,810,331  $   2,882,120 
  Note payable - related party                     2,500,000      2,500,000 
  Notes payable, current portion                   1,541,000      1,350,000 
  Unearned revenue                                    22,640         25,295 
  Contingent consideration payable to related                               
   party - current portion                         3,827,339      3,586,722 
  Put liability                                    1,344,538              - 
                                               -------------  ------------- 
Total current liabilities                         17,045,848     10,344,137 
                                                                            
Notes payable                                      7,131,728      7,713,014 
Contingent consideration payable to related                                 
 party - long term                                 3,356,412      3,145,401 
Put liability                                              -      1,260,010 
                                               -------------  ------------- 
                                                                            
Total liabilities                                 27,533,988     22,462,562 
                                               -------------  ------------- 
                                                                            
Stockholders' equity:                                                       
  Preferred stock, authorized 50,000,000                                    
   shares, $0.001 par value,                                                
    Undesignated, 49,800,000 shares, no shares                              
     issued and outstanding                                                 
    Series 1 Preferred stock, authorized                                    
     200,000 shares, 86,000 shares issued and                               
     outstanding, respectively                            86             86 
  Class A common stock, authorized 250,000,000                              
   shares, $0.001 par value, 29,544,943 and                                 
   29,416,612 shares issued, respectively, and                              
   27,158,080 and 27,029,749 shares                                         
   outstanding, respectively                          27,158         27,030 
  Class B common stock, authorized 9,000,000                                
   shares, $0.001 par value, no shares issued                               
   and outstanding                                         -              - 
  Additional paid in capital                      13,596,629     13,143,153 
  Accumulated deficit                             (9,056,732)    (7,417,862)
                                               -------------  ------------- 
Total stockholders' equity                         4,567,141      5,752,407 
                                               -------------  ------------- 
                                                                            
Total liabilities and stockholders' equity     $  32,101,129  $  28,214,969 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                           SOCIAL REALITY, INC.                             
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
               SIX MONTH PERIODS ENDED JUNE 30, 2015 AND 2014               
                                (Unaudited)                                 
                                                                            
                                                 Six Month Periods Ended    
                                                         June 30,           
                                               ---------------------------- 
                                                    2015           2014     
                                               -------------  ------------- 
Cash flows from operating activities:                                       
  Net loss                                     $  (1,638,870) $  (1,567,922)
  Adjustments to reconcile net loss to net                                  
   cash provided (used) by operating                                        
   activities:                                                              
    Amortization of stock based prepaid fees         317,226        336,834 
    Stock based compensation                         446,683        147,909 
    Amortization of debt issue costs                 628,370              - 
    PIK interest expense accrued to principal        176,966              - 
    Accretion of contingent consideration            451,628              - 
    Accretion of put liability                        84,528              - 
    Depreciation                                       9,447          6,522 
    Bad debt expense                                  51,195              - 
  Changes in operating assets and liabilities:                              
    Accounts receivable                           (5,300,850)       167,424 
    Prepaid expenses                                  80,273         (8,645)
    Other current assets                               4,902         (2,000)
    Other assets                                      (4,390)          (804)
    Accounts payable and accrued expenses          4,928,211       (503,965)
    Unearned revenue                                  (2,655)             - 
                                               -------------  ------------- 
                                                                            
Cash provided (used) by operating activities         232,664     (1,424,647)
                                               -------------  ------------- 
                                                                            
Cash flows from investing activities:                                       
  Purchase of equipment                                    -         (6,856)
                                               -------------  ------------- 
                                                                            
Cash used by investing activities                          -         (6,856)
                                               -------------  ------------- 
                                                                            
Cash flows from financing activities:                                       
  Sale of common stock                                     -      1,273,161 
  Cost of common stock sale                                -        (16,291)
  Proceeds from warrant offering                       6,921              - 
  Repayments of note payable                        (567,252)             - 
                                               -------------  ------------- 
                                                                            
Cash (used) provided by financing activities        (560,331)     1,256,870 
                                               -------------  ------------- 
                                                                            
Net decrease in cash                                (327,667)      (174,633)
Cash, beginning of period                          1,843,393      1,715,264 
                                               -------------  ------------- 
Cash, end of period                            $   1,515,726  $   1,540,631 
                                               =============  ============= 
                                                                            
Supplemental Schedule of Cash Flow                                          
 Information:                                                               
  Cash paid for interest                       $     462,887  $           - 
                                               =============  ============= 
  Cash paid for taxes                          $           -  $           - 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            

Use of Non-GAAP Measure - Adjusted EBITDA

Social Reality's management evaluates and makes operating decisions using various financial metrics. In addition to the company's GAAP results, management also considers the non-GAAP measure of Adjusted EBITDA. Adjusted EBITDA is defined as net income before income taxes, depreciation and amortization expenses, plus stock-based compensation and interest expense. Management believes that this non-GAAP measure provides useful information about Social Reality's operating results. The tables below provide a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure. This non-GAAP measure should be considered a supplement to, and not a substitute for, or superior to, financial measures calculated in accordance with GAAP.

Reconciliation of Adjusted EBITDA to GAAP

                                  Three Months Ended     Six Months Ended   
                                        June 30,             June 30,       
                                  -------------------  -------------------- 
(unaudited, in thousands)            2015      2014       2015       2014   
                                  --------- ---------  ---------  --------- 
Net income (loss)                 $     416 $    (880) $  (1,639) $  (1,568)
plus:                                                                       
  Equity based compensation             448       251        865        485 
                                  --------- ---------  ---------  --------- 
Adjusted net income (loss)        $     864 $    (629) $    (774) $  (1,083)
  Interest expense                      935         -      1,858          - 
  Depreciation of property, plant                                           
   and equipment                          5         4         10          7 
                                  --------- ---------  ---------  --------- 
Adjusted EBITDA                   $   1,804 $    (625) $   1,094  $  (1,076)
                                  ========= =========  =========  ========= 
   Contact:Robert Haag Managing Director IRTH CommunicationsSCRI@irthcommunications.com 1-866-976-4784

Source: Social Reality, Inc.



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