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Social Reality, Inc. Reports Record Revenue in Third Quarter

LOS ANGELES, CA--(Marketwired - Nov 14, 2013) - Social Reality, Inc. ( OTCBB : SCRI ), an Internet advertising, and platform technology company that provides tools to automate the digital advertising market, today announced its third quarter 2013 financial results. Revenues were $853,000, a 251% year-over-year increase from the third quarter of 2012 and a 72% increase sequentially over its second quarter of 2013. Social Reality is providing revenue guidance for the fourth quarter of 2013 in the range of $1.8 to $2.1 million. In addition, Social Reality is providing 2014 revenue guidance, based on its current monthly sales, in the range of $10 million to $12 million.

"Social Reality's technology platforms are growing rapidly while providing for consistent recurring revenue. In support of our expected growth, we raised $2.7 million in the 4th quarter of 2013. We will accelerate our sales and marketing efforts with the capital that we have raised, which should increase our market share in 2014. During 2014, we plan to build further value for our stockholders by continuing our current growth trajectory and pursuing strategic transactions," said Christopher Miglino, Social Reality's Chairman and CEO.

Third Quarter 2013 Highlights

  • Revenue of $853,338 a 251% increase over the third quarter 2012
  • Operating expense of $864,394, which includes $486,000 in stock-based compensation, compared to $481,456 in the third quarter of 2012.
  • Adjusted EBITDA, a non-GAAP measure, reflects a loss of $195,000

Three-month financial results for the period ended September 30, 2013

Revenues for the three months ended September 30, 2013, were $853,338, as compared to the $242,799 reported in the three months ended September 30, 2012. The higher year over year revenue comparison for the quarter was due to an increase in our SRAX real time bidding technology for website publishers. Gross profit increased to $181,926 in the three months ended September 30, 2013 compared to $164,774 in the same period of 2012.

For the quarter ended September 30, 2013, Adjusted EBITDA, a non-GAAP measure, increased to $195,000 loss compared to $103,000 loss in the second quarter of 2013 and $296,000 loss in the third quarter of 2012. The company reported net loss of $829,616, or $0.06 per share, for the three months ended September 30, 2013, compared to a net loss of $316,682, or $0.02 per share loss, for the corresponding period last year.

Nine-month financial results for the period ended September 30, 2013

Revenues for the first nine months of 2013 were $1,519,999, up from the $1,073,214 reported in the same nine months of 2012. Gross profit decreased to $442,901 in the nine months ended September 30, 2013 compared to $575,075 in the same period of 2012.

For the nine months ended September 30, 2013, Adjusted EBITDA, a non-GAAP measure, decreased to $587,000 loss compared to $712,000 loss for the nine months ended September 30, 2012. The company reported net loss of $1,484,492 for the nine months ended September 30, 2013 or $0.11 per share, compared to a net loss of $792,986 or a $0.06 per share loss for the corresponding period last year.

Balance Sheet as of September 30, 2013

Cash and cash equivalents totaled $145,818 at September 30, 2013. Current assets and total assets were $632,321 and $1,994,162, respectively and current liabilities and total liabilities were $1,643,813.

Fourth Quarter 2013 Events

In October 2013, we:

  • Raised $2.7 Million of financing for the company
  • Paid off note payable and related liabilities and substantially reduced accounts payable

About Social Reality, Inc.

Social Reality, Inc. is an internet advertising company that provides tools that 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

Certain matters discussed in this press release may be forward-looking statements. Such matters involve risks and uncertainties that may cause actual results to differ materially, including the following: changes in economic conditions; general competitive factors; acceptance of Social Reality's products in the market; the company's success in obtaining new customers; Social Reality's success in technology and product development; the company's ability to execute its business model and strategic plans; and all the risks and related information described from time to time in Social Reality's filings with the Securities and Exchange Commission ("SEC"), including the financial statements and related information contained in the company's Annual Report on Form 10-K for the year ended December 31, 2012 and interim Quarterly Reports on Form 10-Q. 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 of the control of Social Reality and are difficult to predict. Social Reality assumes no obligation to update the cautionary information in this release.

 
 
SOCIAL REALITY, INC.
CONDENSED STATEMENTS OF OPERATIONS
THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012
(Unaudited)
             
    Three Months ended
September 30,
    Nine Months ended
September 30,
 
    2013     2012     2013     2012  
                                 
                                 
Revenues   $ 853,338     $ 242,799     $ 1,519,999     $ 1,073,214  
Cost of revenue     671,412       78,025       1,077,098       498,139  
Gross profit     181,926       164,774       442,901       575,075  
Operating expense     864,394       481,456       1,614,340       1,368,061  
Loss from operations     (682,468 )     (316,682 )     (1,171,439 )     (792,986 )
Interest expense     (147,148 )     -       (313,053 )     -  
Loss before provision for income taxes     (829,616 )     (316,682 )     (1,484,492 )     (792,986 )
Provision for income taxes     -       -       -       -  
Net loss   $ (829,616 )   $ (316,682 )   $ (1,484,492 )   $ (792,986 )
Net loss per share, basic and diluted   $ (0.06 )   $ (0.02 )   $ (0.11 )   $ (0.06 )
Weighted average shares outstanding     13,801,891       12,912,129       13,295,851       12,819,481  
                                 
                                 
 
SOCIAL REALITY, INC.
CONDENSED BALANCE SHEETS
             
    September 30,     December 31,  
    2013     2012  
    (Unaudited)        
Assets                
                 
Current assets:                
  Cash and cash equivalents   $ 145,818     $ 105,987  
  Accounts receivable, net of allowance for doubtful accounts of $0     481,101       53,821  
  Tax refunds receivable     -       38,000  
  Other current assets     5,402       5,000  
Total current assets     632,321       202,808  
Property and equipment, net of accumulated depreciation of $7,500 and $3,000     10,500       15,000  
Deferred offering costs     14,539       -  
Prepaid fees     1,333,247       58,834  
Other assets     3,555       3,555  
Total assets   $ 1,994,162     $ 280,197  
                 
Liabilities and stockholders' equity (deficit)                
Current liabilities:                
  Accounts payable and accrued expenses   $ 1,097,516     $ 302,057  
  Note payable     371,297       -  
  Common stock put liability payable     175,000       -  
Total current liabilities     1,643,813       302,057  
Stockholders' equity (deficit)                
  Preferred stock, undesignated; authorized 49,800,000 shares, $0.001 par value, no shares issued and outstanding     -       -  
  Preferred stock, Series 1; authorized 200,000 shares, $0.001 par value, 86,000 and no shares issued and outstanding, respectively     86       -  
  Class A common stock, authorized 250,000,000 shares, $0.001 par value, 5,465,804 and 3,912,129 shares issued and outstanding, respectively     5,466       3,912  
  Class B common stock, authorized 9,000,000 shares, $0.001 par value, 9,000,000 and 9,000,000 shares issued and outstanding, respectively     9,000       9,000  
  Additional paid in capital     3,079,148       1,224,087  
  Accumulated deficit     (2,743,351 )     (1,258,859 )
Total stockholders' equity (deficit)     350,349       (21,860 )
Total liabilities and stockholders' equity (deficit)   $ 1,994,162     $ 280,197  
                 
                 
 
SOCIAL REALITY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTH PERIODS ENDED SEPTEMBER 30, 2013 AND 2012
(Unaudited)
 
    Nine Month Periods Ended
September 30,
 
    2013     2012  
                 
Cash flows from operating activities:                
  Net loss   $ (1,484,492 )   $ (792,986 )
  Adjustments to reconcile net loss to net cash used in operating activities:                
    Amortization of stock based prepaid fees     85,503       49,089  
    Stock based compensation     493,785       31,770  
    Amortization of debt issuance costs     274,737       -  
    Depreciation     4,500       1,500  
  Changes in operating assets and liabilities:                
    Accounts receivable     (427,280 )     423,531  
    Prepaid expenses     -       (85,821 )
    Tax refunds receivable     38,000          
    Other current assets     (402 )     200  
    Other assets     -       (3,555 )
    Accounts payable and accrued expenses     798,459       (178,246 )
    Deferred tax liability     -       (38,000 )
Cash used in operating activities     (217,190 )     (592,518 )
Cash flows from investing activities:                
  Purchase of equipment     -       (18,000 )
Cash used in investing activities     -       (18,000 )
Cash flows from financing activities:                
  Proceeds from note payable, net     486,425       -  
  Repayments of note payable     (178,703 )     -  
  Deferred offering costs     (14,539 )     -  
  Debt issuance costs     (36,162 )     -  
  Sale of common stock     -       472,959  
Cash provided by financing activities     257,021       472,959  
Net increase (decrease) in cash     39,831       (137,559 )
Cash, beginning of period     105,987       221,664  
Cash, end of period   $ 145,818     $ 84,105  
Supplemental Schedule of Cash Flow Information:                
  Cash paid for interest   $ 37,318     $ -  
  Cash paid for taxes   $ (38,000 )   $ 38,000  
Non-cash financial activities:                
  Fees and costs deducted from proceeds of debt   $ 63,575     $ -  
  Common and preferred stock issued as prepayment for services   $ 1,235,000     $ -  
  Common stock warrant issued as prepayment for services   $ 124,916     $ -  
  Common stock issued as payment of financing fee   $ 175,000     $ -  
  Common stock issued as payment of accounts payable   $ 3,000     $ -  
  Contribution of member interests (net assets) in Social Reality, LLC in exchange for common stock   $ -     $ 575,194  
                   

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. Management believes that this non-GAAP measure provides useful information about the 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.

Adjusted EBITDA is defined as net income before income taxes, depreciation and amortization expenses, plus stock-based compensation and interest expense.

Reconciliation of Adjusted EBITDA to Income from Operations

             
    For the Three Months Ended September 30,     For the Nine Months Ended September 30,  
(unaudited, in thousands)   2013     2012     2013     2012  
Net income (loss)   $ (830 )   $ (317 )   $ (1,484 )   $ (793 )
plus:                                
  Equity based compensation     486       21       579       81  
Adjusted net income (loss)   $ (344 )   $ (296 )   $ (905 )   $ (712 )
  Interest expense     147       --       313       --  
  Depreciation of property, plant and equipment     2       --       5       --  
Adjusted EBITDA   $ (195 )   $ (296 )   $ (587 )   $ (712 )