UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 16, 2015
SOCIAL REALITY, INC. |
(Exact name of registrant as specified in its charter) |
Delaware | 000-54996 | 42-2925231 |
(State or other jurisdiction of | (Commission File Number) | (I.R.S. Employer |
456 Seaton Street, Los Angeles, CA 90013
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (323) 694-9800
not applicable |
(Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02
Results of Operations and Financial Condition.
On November 16, 2015 Social Reality, Inc. issued a press release announcing its financial results for the third quarter and nine months ended September 30, 2015. A copy of this press release is furnished as Exhibit 99.1 to this report.
Pursuant to General Instruction B.2 of Form 8-K, the information in this Item 2.02 of Form 8-K, including Exhibit 99.1, is being furnished pursuant to Item 2.02 and shall not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise be subject to the liabilities of that section, nor is it incorporated by reference into any filing of Social Reality, Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Item 7.01
Regulation FD Disclosure.
As disclosed in Item 2.02 above, on November 16, 2015 Social Reality, Inc. issued a press release announcing its financial results for the third quarter and nine months ended September 30, 2015. A copy of this press release is furnished as Exhibit 99.1 to this report.
Pursuant to General Instruction B.2 of Form 8-K, the information in this Item 7.01 of Form 8-K, including Exhibit 99.1, is being furnished pursuant to Item 2.02 and shall not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise be subject to the liabilities of that section, nor is it incorporated by reference into any filing of Social Reality, Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Item 9.01
Financial Statements and Exhibits.
Exhibit No. |
| Description |
| Press release dated November 16, 2015. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SOCIAL REALITY, INC. | |
|
|
|
Date: November 16, 2015 | By: | /s/ Christopher Miglino |
|
| Christopher Miglino, Chief Executive Officer |
EXHIBIT 99.1
Social Reality Reports 1,014% Year-Over-Year Revenue Growth
for Q3 2015
Innovative Ad Tech Company Reiterates Full Year 2015 Guidance of $30M Revenue,
a 486% increase over 2014 Q3 Adjusted EBITDA of $774K
LOS ANGELES - November 16, 2015 - Social Reality, Inc. (OTCQB: SCRI), an Internet advertising and platform technology company that provides tools to automate and maximize the digital advertising market, announced third quarter 2015 financial results. Revenue for the quarter ended September 30, 2015 was $7,390,238, an increase of 1,014% over the third quarter of 2014. Revenue for the first nine months of 2015 was $22,173,095, an increase of 1,384% over the first nine months of 2014.
During the third quarter we continued a rapid growth trend, as our proprietary brand and agency platforms proceeded to expand with ever-increasing adoption across all platforms including SRAX and SRAXmd, said Christopher Miglino, Social Reality's CEO and Chairman. Digital advertising spend is forecasted to reach $214 billion by 2018 and, though the space is competitive and fragmented, we operate in a very unique niche with our suite of proprietary products. Our core technologies, which cater to some of the largest brands and retailers in the world, help generate long-term recurring revenue streams for our company. Looking forward, we are confident in our execution and continued growth across all platforms, and reiterate our revenue guidance of $30 million for 2015.
Third Quarter 2015 Highlights
·
Revenue of $7,390,238 represents a 1,014% increase over the third quarter 2014
·
$774K in Adjusted EBITDA
·
Operating income of $342K for the third quarter 2015 vs. a loss of $918k in 2014
·
FY 2015 revenue guidance of $30M
Three- and Nine-Month Financial Results for the Period ended September 30, 2015
Revenue for the three months ended September 30, 2015, totaled $7,390,238 compared to $663,144 reported for the three months ended September 30, 2014. Revenue of $22,173,095 was reported for the first nine months of 2015, compared to $1,493,755 for the first nine months of 2014. Gross profit increased to $4,094,094 for the three months ended September 30, 2015, compared to $173,728 for the same period of 2014. Gross profit increased to $11,476,033 for the nine months ended September 30, 2015, compared to $427,419 for the same period of 2014.
1
The company reported a net loss of $(658,540) for the three months ended September 30, 2015, compared to a net loss of $(917,750) for the corresponding period of 2014. The company reported a net loss of $(2,297,410) for the nine months ended September 30, 2015, compared to a net loss of $(2,485,672) for the corresponding period of 2014. For the quarter ended September 30, 2015, net loss was $(0.02) per diluted share, compared to a net loss of $(0.04) per share for the three months ended September 30, 2014.
Adjusted EBITDA was $774,000 for the quarter ended September 30, 2015, compared to $(669,000) in the same period of 2014. For the first nine months of 2015, net loss was $(0.09) per share, compared to a net loss of $(0.12) per share for the same period of 2014, and adjusted EBITDA was $1,868,000 for the first nine months of 2015, compared to $(1,745,000) 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 September 30, 2015
Cash and cash equivalents totaled $1,032,958 on September 30, 2015. Current assets and total assets were $10,096,449 and $30,802,043, respectively, while current liabilities and total liabilities were $15,204,105 and $26,713,587 respectively. As of September 30, 2015, the company had stockholders' equity of $4,088,456.
About Social Reality
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 may contain forward-looking statements. These forward-looking statements are based on current expectations and involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. 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, 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.
2
SOCIAL REALITY, INC.
CONDENSED CONSOOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2015 AND 2014
(Unaudited)
|
| Three Months ended September 30, |
|
| Nine Months ended September 30, |
| ||||||||||
|
| 2015 |
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| 2014 |
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| 2015 |
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| 2014 |
| ||||
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Revenues |
| $ | 7,390,238 |
|
| $ | 663,144 |
|
| $ | 22,173,095 |
|
| $ | 1,493,755 |
|
Cost of revenue |
|
| 3,296,144 |
|
|
| 489,416 |
|
|
| 10,697,062 |
|
|
| 1,066,336 |
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Gross profit |
|
| 4,094,094 |
|
|
| 173,728 |
|
|
| 11,476,033 |
|
|
| 427,419 |
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Operating expense |
|
| 3,751,736 |
|
|
| 1,091,749 |
|
|
| 10,914,488 |
|
|
| 2,914,356 |
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Income (loss) from operations |
|
| 342,358 |
|
|
| (918,021 | ) |
|
| 561,545 |
|
|
| (2,486,937 | ) |
|
|
|
|
|
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|
|
|
|
|
|
|
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|
Interest income (expense) |
|
| (1,000,898 | ) |
|
| 271 |
|
|
| (2,858,955 | ) |
|
| 1,265 |
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|
Loss before provision for income taxes |
|
| (658,540 | ) |
|
| (917,750 | ) |
|
| (2,297,410 | ) |
|
| (2,485,672 | ) |
|
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Provision for income taxes |
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| |
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| |
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| |
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| |
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Net loss |
| $ | (658,540 | ) |
| $ | (917,750 | ) |
| $ | (2,297,410 | ) |
| $ | (2,485,672 | ) |
|
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Net loss per share, basic and diluted |
| $ | (0.02 | ) |
| $ | (0.04 | ) |
| $ | (0.09 | ) |
| $ | (0.12 | ) |
|
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Weighted average shares outstanding |
|
| 27,046,241 |
|
|
| 20,692,959 |
|
|
| 26,935,631 |
|
|
| 20,522,596 |
|
3
SOCIAL REALITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
| September 30, |
|
| December 31, |
| ||
|
| 2015 |
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| 2014 |
| ||
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| (Unaudited) |
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| ||
Assets |
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Current assets: |
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Cash and cash equivalents |
| $ | 1,032,958 |
|
| $ | 1,843,393 |
|
Accounts receivable, net of allowance for doubtful accounts of $119,066 and $52,338 |
|
| 8,910,043 |
|
|
| 3,874,620 |
|
Prepaid expenses |
|
| 130,964 |
|
|
| 222,532 |
|
Other current assets |
|
| 22,484 |
|
|
| 7,352 |
|
Total current assets |
|
| 10,096,449 |
|
|
| 5,947,897 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation of $37,626 and $25,013 |
|
| 45,646 |
|
|
| 27,602 |
|
Goodwill |
|
| 16,314,957 |
|
|
| 16,312,911 |
|
Intangible assets, net of accumulated amortization of $190,972 and $0 |
|
| 1,815,028 |
|
|
| 2,006,000 |
|
Deferred debt issue costs |
|
| 1,982,124 |
|
|
| 2,907,736 |
|
Prepaid stock based compensation |
|
| 532,180 |
|
|
| 1,008,019 |
|
Other assets |
|
| 15,659 |
|
|
| 4,804 |
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 30,802,043 |
|
| $ | 28,214,969 |
|
|
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Liabilities and stockholders' equity |
|
|
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Current liabilities: |
|
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Accounts payable and accrued expenses |
| $ | 5,717,731 |
|
| $ | 2,882,120 |
|
Note payable - related party |
|
| 2,258,263 |
|
|
| 2,500,000 |
|
Notes payable, current portion |
|
| 1,881,000 |
|
|
| 1,350,000 |
|
Unearned revenue |
|
| 1,695 |
|
|
| 25,295 |
|
Contingent consideration payable to related party - current portion |
|
| 3,955,763 |
|
|
| 3,586,722 |
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Put liability |
|
| 1,389,653 |
|
|
| |
|
Total current liabilities |
|
| 15,204,105 |
|
|
| 10,344,137 |
|
|
|
|
|
|
|
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Notes payable |
|
| 8,040,448 |
|
|
| 7,713,014 |
|
Contingent consideration payable to related party - long term |
|
| 3,469,034 |
|
|
| 3,145,401 |
|
Put liability |
|
| |
|
|
| 1,260,010 |
|
|
|
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|
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Total liabilities |
|
| 26,713,587 |
|
|
| 22,462,562 |
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Stockholders' equity: |
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Preferred stock, authorized 50,000,000 shares, $0.001 par value, |
|
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Undesignated, 49,800,000 shares, no shares issued and outstanding |
|
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Series 1 Preferred stock, authorized 200,000 shares, 86,000 shares issued and outstanding, respectively |
|
| 86 |
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|
| 86 |
|
Class A common stock, authorized 250,000,000 shares, $0.001 par value, 29,637,092 and 29,416,612 shares issued, respectively, and 27,250,229 and 27,029,749 shares outstanding, respectively |
|
| 27,250 |
|
|
| 27,030 |
|
Class B common stock, authorized 9,000,000 shares, $0.001 par value, no shares issued and outstanding |
|
| |
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| |
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Additional paid in capital |
|
| 13,776,392 |
|
|
| 13,143,153 |
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Accumulated deficit |
|
| (9,715,272 | ) |
|
| (7,417,862 | ) |
Total stockholders' equity |
|
| 4,088,456 |
|
|
| 5,752,407 |
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Total liabilities and stockholders' equity |
| $ | 30,802,043 |
|
| $ | 28,214,969 |
|
4
SOCIAL REALITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTH PERIODS ENDED SEPTEMBER 30, 2015 AND 2014
(Unaudited)
|
| Nine Month Periods Ended September 30, |
| |||||
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| 2015 |
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| 2014 |
| ||
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Cash flows from operating activities: |
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| ||
Net loss |
| $ | (2,297,410 | ) |
| $ | (2,485,672 | ) |
Adjustments to reconcile net loss to net cash used by operating activities: |
|
|
|
|
|
|
|
|
Amortization of stock based prepaid fees |
|
| 475,839 |
|
|
| 495,444 |
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Stock based compensation |
|
| 626,539 |
|
|
| 235,348 |
|
Amortization of debt issue costs |
|
| 925,612 |
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|
| |
|
PIK interest expense accrued to principal |
|
| 279,216 |
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|
| |
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Accretion of contingent consideration |
|
| 692,674 |
|
|
| |
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Accretion of put liability |
|
| 129,643 |
|
|
| |
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Depreciation and amortization |
|
| 203,585 |
|
|
| 10,258 |
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Bad debt expense |
|
| 66,728 |
|
|
| |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (5,102,151 | ) |
|
| (258,826 | ) |
Prepaid expenses |
|
| 91,568 |
|
|
| (24,765 | ) |
Other current assets |
|
| (15,132 | ) |
|
| (6,530 | ) |
Other assets |
|
| (10,855 | ) |
|
| (804 | ) |
Accounts payable and accrued expenses |
|
| 2,833,564 |
|
|
| (152,934 | ) |
Unearned revenue |
|
| (23,600 | ) |
|
| |
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Cash used by operating activities |
|
| (1,124,180 | ) |
|
| (2,188,481 | ) |
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Cash flows from investing activities: |
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Purchase of equipment |
|
| (30,657 | ) |
|
| (6,856 | ) |
|
|
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Cash used by investing activities |
|
| (30,657 | ) |
|
| (6,856 | ) |
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Cash flows from financing activities: |
|
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Sale of common stock |
|
| |
|
|
| 1,273,161 |
|
Cost of common stock sale |
|
| |
|
|
| (16,291 | ) |
Proceeds from warrant offering |
|
| 6,921 |
|
|
| |
|
Proceeds from note payable |
|
| 1,500,000 |
|
|
| |
|
Repayments of notes payable |
|
| (1,162,519 | ) |
|
| |
|
Debt issue costs |
|
| |
|
|
| (200,000 | ) |
|
|
|
|
|
|
|
|
|
Cash provided by financing activities |
|
| 344,402 |
|
|
| 1,056,870 |
|
|
|
|
|
|
|
|
|
|
Net decrease in cash |
|
| (810,435 | ) |
|
| (1,138,467 | ) |
Cash, beginning of period |
|
| 1,843,393 |
|
|
| 1,715,264 |
|
Cash, end of period |
| $ | 1,032,958 |
|
| $ | 576,797 |
|
|
|
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|
Supplemental Schedule of Cash Flow Information: |
|
|
|
|
|
|
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|
Cash paid for interest |
| $ | 718,119 |
|
| $ | |
|
Cash paid for taxes |
| $ | |
|
| $ | |
|
5
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 September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(unaudited, in thousands) |
| 2015 |
|
| 2014 |
|
| 2015 |
|
| 2014 |
| ||||
Net income (loss) |
| $ | (658 | ) |
| $ | (918 | ) |
|
| (2,297 | ) |
|
| (2,486 | ) |
plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity based compensation |
|
| 237 |
|
|
| 246 |
|
|
| 1,102 |
|
|
| 731 |
|
Adjusted net income (loss) |
| $ | (421 | ) |
| $ | (672 | ) |
|
| (1,195 | ) |
|
| (1,755 | ) |
Interest expense |
|
| 1,001 |
|
|
| |
|
|
| 2,859 |
|
|
| |
|
Depreciation and amortization |
|
| 194 |
|
|
| 3 |
|
|
| 204 |
|
|
| 10 |
|
Adjusted EBITDA |
| $ | 774 |
|
| $ | (669 | ) |
|
| 1,868 |
|
|
| (1,745 | ) |
Contact:
MDC Group
Investor Relations:
David Castaneda
Arsen Mugurdumov
414.351.9758
IR-PR@socialreality.com
Media Relations:
Susan Roush
747.222.7012
IR-PR@socialreality.com
Robert Haag
Managing Director
IRTH Communications
SCRI@irthcommunications.com
866.976.4784
6