Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | May. 13, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | SOCIAL REALITY, Inc. | |
Entity Central Index Key | 1,538,217 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 29,977,925 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,016 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 1,600,356 | $ 1,091,186 |
Accounts receivable, net | 4,999,896 | 7,056,298 |
Prepaid expenses | 303,678 | 309,436 |
Other current assets | 10,677 | 36,090 |
Total current assets | 6,914,607 | 8,493,010 |
Property and equipment, net of accumulated depreciation of $51,772 and $42,295 | 34,459 | 43,936 |
Goodwill | 16,314,957 | 16,314,957 |
Intangible assets, net | 1,521,861 | 1,611,744 |
Prepaid stock based compensation | 214,954 | 373,567 |
Other assets | 34,659 | 34,659 |
Total assets | 25,035,497 | 26,871,873 |
Current liabilities: | ||
Accounts payable and accrued expenses | 4,208,541 | 5,138,807 |
Notes payable, current portion, net of unamortized costs of $994,654 and $1,076,633 | 2,699,346 | 1,378,367 |
Unearned revenue | 3,265 | 1,295 |
Contingent consideration payable to related party | 3,704,413 | 7,585,435 |
Put liability | 1,483,943 | 1,436,282 |
Total current liabilities | 12,099,508 | 15,540,186 |
Notes payable, net of unamortized costs of $365,262 and $578,140 | 8,283,865 | 7,455,758 |
Total liabilities | $ 20,383,373 | $ 22,995,944 |
Stockholders' equity: | ||
Preferred stock, authorized 50,000,000 shares, $0.001 par value, no shares issued and outstanding | ||
Additional paid in capital | $ 17,165,572 | $ 13,989,590 |
Accumulated deficit | (12,543,426) | (10,141,771) |
Total stockholders' equity | 4,652,124 | 3,875,929 |
Total liabilities and stockholders' equity | 25,035,497 | 26,871,873 |
Common Class A [Member] | ||
Stockholders' equity: | ||
Common stock | $ 29,978 | $ 28,110 |
Common Class B [Member] | ||
Stockholders' equity: | ||
Common stock |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Property and equipment, accumulated depreciation | $ 51,772 | $ 42,295 |
Notes payable, unamortized discount current portion | 994,654 | 1,076,633 |
Notes payable, unamortized discount noncurrent portion | $ 365,262 | $ 578,140 |
Preferred Stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred Stock, par value per share | $ 0.001 | $ 0.001 |
Preferred Stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common Stock, shares authorized | 259,000,000 | |
Common Stock, par value per share | $ 0.001 | |
Common Class A [Member] | ||
Common Stock, shares authorized | 250,000,000 | 250,000,000 |
Common Stock, par value per share | $ 0.001 | $ 0.001 |
Common Stock, shares issued | 29,977,925 | 28,110,229 |
Common Stock, shares outstanding | 29,977,925 | 28,110,229 |
Common Class B [Member] | ||
Common Stock, shares authorized | 9,000,000 | 9,000,000 |
Common Stock, par value per share | $ 0.001 | $ 0.001 |
Common Stock, shares issued | 0 | 0 |
Common Stock, shares outstanding | 0 | 0 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Income Statement [Abstract] | ||
Revenues | $ 5,469,335 | $ 4,021,284 |
Cost of revenue | 3,180,562 | 2,242,475 |
Gross profit | 2,288,773 | 1,778,809 |
Operating expense | 3,805,101 | 2,910,000 |
Loss from operations before other expense | (1,516,328) | (1,131,191) |
Interest income (expense) | (885,327) | (923,270) |
Loss from operations | $ (2,401,655) | $ (2,054,461) |
Provision for income taxes | ||
Net loss | $ (2,401,655) | $ (2,054,461) |
Net loss per share, basic and diluted | $ (0.08) | $ (0.08) |
Weighted average shares outstanding | 29,536,146 | 27,029,749 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (2,401,655) | $ (2,054,461) |
Adjustments to reconcile net loss to net cash used by operating activities: | ||
Amortization of stock based prepaid fees | 158,613 | 158,613 |
Stock based compensation | 277,849 | 258,166 |
Amortization of debt issue costs | 294,857 | 319,936 |
PIK interest expense accrued to principal | 120,284 | 88,667 |
Accretion of contingent consideration | 118,978 | 220,901 |
Accretion of put liability | 47,661 | 41,345 |
Depreciation and amortization | 99,360 | 4,779 |
Bad debt expense | 5,330 | 7,207 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 2,051,072 | (208,216) |
Prepaid expenses | 5,758 | 45,008 |
Other current assets | $ 25,413 | 4,993 |
Other assets | (4,390) | |
Accounts payable and accrued expenses | $ (930,265) | 303,164 |
Unearned revenue | 1,970 | (17,200) |
Cash used by operating activities | $ (124,775) | $ (831,488) |
Cash flows from investing activities: | ||
Cash used by investing activities | ||
Cash flows from financing activities: | ||
Sale of common stock | $ 500,000 | |
Proceeds from warrant offering | $ 6,921 | |
Payment of contingent consideration | $ (1,600,000) | |
Proceeds from notes payable | 2,100,000 | |
Repayments of note payable | (366,055) | $ (315,801) |
Cash provided (used) by financing activities | 633,945 | (308,880) |
Net increase (decrease) in cash | 509,170 | (1,140,368) |
Cash, beginning of period | 1,091,186 | 1,843,393 |
Cash, end of period | 1,600,356 | 703,025 |
Supplemental Schedule of Cash Flow Information: | ||
Cash paid for interest | 325,828 | $ 221,669 |
Cash paid for taxes | 20,000 | |
Non-cash financial activities: | ||
Common stock issued for payment of contingent consideration | $ 2,400,000 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Basis of Presentation Social Reality, Inc. ("Social Reality", "we", "us" or "the Company") is a Delaware corporation formed on August 2, 2011. Effective January 1, 2012 we acquired all of the member interests and operations of Social Reality, LLC, a California limited liability company formed on August 14, 2009, which began business in May of 2010, in exchange for 12,328,767 shares of our Class A and Class B common stock. The former members of Social Reality, LLC owned all of our common stock after the acquisition. At Social Reality, we sell digital advertising campaigns to advertising agencies and brands. We have developed technology that allows brands to launch and manage digital advertising campaigns, and we provide the platform that allows website publishers to sell their media inventory to a number of digital adverting buyers. Our focus is to provide technology tools that enable both publishers and advertisers to maximize their digital advertising initiatives. We derive our revenues from: · sales of digital advertising campaigns to advertising agencies and brands; · sales of media inventory owned by our publishing partners through real-time bidding, or RTB, exchanges; · sale and licensing of our SRAX Social platform and related media; and, · creation of custom platforms for buying media on SRAX for large brands. The core elements of this business are: · Social Reality Ad Exchange or "SRAX" – Real Time Bidding sell side and buy side representation · SRAX MD · SRAXSocial · SRAX APP, We offer our customers a number of pricing options including cost-per-thousand-impression ("CPM"), whereby our customers pay based on the number of times the target audience is exposed to the advertisement, and cost-per-engagement ("CPE"), whereby payment is triggered only when an individual takes a specific activity. Social Reality is also an approved Facebook advertising partner. We sell targeted and measurable online advertising campaigns and programs to brand advertisers and advertising agencies across large Facebook apps and websites, generating qualified Facebook likes and quantifiable engagement for our clients, driving online sales and increased brand equity. We are headquartered in Los Angeles, California. Basis of Presentation The accompanying condensed consolidated financial statements are unaudited. The unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These interim financial statements as of and for the three months ended March 31, 2016 and 2015 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows of the Company for the periods presented. The results for the three months ended March 31, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016 or for any future period. All references to March 31, 2016 and 2015 in these footnotes are unaudited. These unaudited condensed financial statements should be read in conjunction with our audited financial statements and the notes thereto for the year ended December 31, 2015, included in the Company's annual report on Form 10-K filed with the SEC on March 16, 2016. The condensed balance sheet as of December 31, 2015 has been derived from the audited financial statements at that date but do not include all disclosures required by the accounting principles generally accepted in the United States of America. Certain items have been reclassified to conform to the current period presentation. Principles of Consolidation The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries from the acquisition date of majority voting control and through the date of disposition, if any. Use of Estimates Accounting principles generally accepted in the United States ("GAAP") require management of the Company to make estimates and assumptions in the preparation of these consolidated financial statements that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and assumptions. The most significant areas that require management judgment and which are susceptible to possible change in the near term include the Company's revenue recognition, allowance for doubtful accounts and sales credits, stock-based compensation, income taxes, purchase price for acquisition, goodwill, other intangible assets, put rights and valuation of liabilities. The accounting policies for these areas are discussed elsewhere in these unaudited consolidated financial statements. Cash and Cash Equivalents The Company considers all short-term highly liquid investments with a remaining maturity at the date of purchase of three months or less to be cash equivalents. Revenue Recognition The Company recognizes revenue when the following criteria have been met: persuasive evidence of an arrangement exists, no significant Company obligations remain, collection of the related receivable is reasonably assured, and the fees are fixed or determinable. The Company acts as a principal in its revenue transactions as the Company is the primary obligor in the transactions. Revenue is recognized on a gross basis, and media and publisher expenses that are directly related to a revenue-generating event are recorded as a component of cost of revenue. Cost of Revenue Cost of revenue consists of payments to media providers and website publishers that are directly related to a revenue-generating event and project and application design costs. The Company becomes obligated to make payments related to media providers and website publishers in the period the advertising impressions, click-throughs, actions or lead-based information are delivered or occur. Such expenses are classified as cost of revenue in the corresponding period in which the revenue is recognized in the accompanying income statement. Accounts Receivable Credit is extended to customers based on an evaluation of their financial condition and other factors. Management periodically assesses the Company's accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. Accounts determined to be uncollectible are charged to operations when that determination is made. The Company usually does not require collateral. Allowance for doubtful accounts was $140,772 and $135,442 at March 31, 2016 and December 31, 2015, respectively. Concentration of Credit Risk, Significant Customers and Supplier Risk Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited in the United States. The balances in the United States held at any one financial institution are generally in excess of Federal Deposit Insurance Corporation ("FDIC") insurance limits. The uninsured cash bank balances were approximately $1,242,000 at March 31, 2016. The Company has not experienced any loss on these accounts. The balances are maintained in demand accounts to minimize risk. At March 31, 2016, two customers accounted for more than 10% of the accounts receivable balance, for a total of 61%. For the three months ended March 31, 2016 one customer accounted for 59% of total revenue. For the three months ended March 31, 2015 two customers accounted for 42% of total revenue. Additionally, 23% of our revenue was collected and paid to us by two of our RTB exchange service providers. Fair Value of Financial Instruments The Company's financial instruments, including cash and cash equivalents, net accounts receivable, accounts payable and accrued expenses, are carried at historical cost. At March 31, 2016 and December 31, 2015 the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments. Property and equipment Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight line basis over the estimated useful lives of the assets of three to seven years. Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations. Management periodically reviews the carrying value of its property and equipment for impairment. Intangible assets Intangible assets consist of intellectual property and a non-complete agreement and are stated at cost less accumulated amortization. Amortization is provided for on the straight line basis over the estimated useful lives of the assets of five to six years. Business Combinations For all business combinations (whether partial, full or step acquisitions), the Company records 100% of all assets and liabilities of the acquired business, including goodwill, generally at their fair values; contingent consideration, if any, is recognized at its fair value on the acquisition date and, for certain arrangements, changes in fair value are recognized in earnings until settlement and acquisition-related transaction and restructuring costs are expensed rather than treated as part of the cost of the acquisition. Goodwill Our goodwill consists of the excess purchase price paid in business combinations over the fair value of assets acquired. Goodwill is considered to have an indefinite life. The Company employs the non-amortization approach to account for goodwill. Under the non-amortization approach, goodwill is not amortized into the results of operations, but instead is reviewed annually or more frequently if events or changes in circumstances indicate that the asset might be impaired, to assess whether the fair value exceeds the carrying value. The Company performs its annual goodwill and impairment assessment on September 30 of each year. When evaluating the potential impairment of goodwill we first assess a range of qualitative factors, including but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for the Company's products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel, and the overall financial performance for each of the Company's reporting units. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we then proceed to a two-step impairment testing methodology using the income approach (discounted cash flow method). In the first step of the two step testing methodology, we compare the carrying value of the reporting unit, including goodwill, with its fair value, as determined by its estimated discounted cash flows. If the carrying value of a reporting unit exceeds its fair value, we then complete the second step of the impairment test to determine the amount of impairment to be recognized. In the second step, we estimate an implied fair value of the reporting unit's goodwill by allocating the fair value of the reporting unit to all of the assets and liabilities other than goodwill (including any unrecognized intangible assets). If the carrying value of a reporting unit's goodwill exceeds its implied fair value, the Company records an impairment loss equal to the difference in that period. When required, we arrive at our estimates of fair value using a discounted cash flow methodology which includes estimates of future cash flows to be generated by particular assets, as well as selecting a discount rate to measure the present value of those anticipated cash flows. Estimating future cash flows requires significant judgment and includes making assumptions about projected growth rates, industry-specific factors, working capital requirements, weighted average cost of capital, and current and anticipated operating conditions. The use of different assumptions or estimates for future cash flows could produce different results. No impairment of goodwill has been recorded in either the three months ended March 31, 2016 or 2015. Long-lived Assets Management evaluates the recoverability of the Company's identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists. Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; a significant decline in the Company's stock price for a sustained period of time; and changes in the Company's business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets. If impairment is indicated based on a comparison of the assets' carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairments have been recorded in either the three months ended March 31, 2016 or 2015. Loss Per Share We use ASC 260, "Earnings Per Share" for calculating the basic and diluted earnings (loss) per share. We compute basic earnings (loss) per share by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and warrants and stock awards. For periods with a net loss, basic and diluted loss per share are the same, in that any potential common stock equivalents would have the effect of being anti-dilutive in the computation of net loss per share. There were 12,887,016 common share equivalents at March 31, 2016 and 13,990,471 at March 31, 2015. For the three months ended March 31, 2016 and 2015 these potential shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per share. Income Taxes We utilize ASC 740 Income Taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at year-end based on enacted laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. The Company recognizes the impact of a tax position in the financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. Stock-Based Compensation We account for our stock based compensation under ASC 718 "Compensation Stock Compensation" using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. We use the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods. Business Segments The Company uses the "management approach" to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company's reportable segments. Using the management approach, the Company determined that it has one operating segment due to business similarities and similar economic characteristics. Recently Issued Accounting Standards In April 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-10, Identifying Performance Obligations and Licensing (Topic 606), which amends certain aspects of the FASBs new revenue standard, ASU 2014-09, Revenue from Contracts with Customer (Topic 606). ASU 2016-10 identifies performance obligations and provides licensing implementation guidance. The effective date for ASU 2016-10 is the same as the effective date of ASU No. 2014-09. ASU No. 2015-14 (Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date) defers the effective date of ASU No. 2014-09 by one year, for fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718), which is part of the FASB's Simplification Initiative. The updated guidance simplifies the accounting for share-based payment transactions. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customer (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), or ASU 2016-08, that clarifies how to apply revenue recognition guidance related to whether an entity is a principal or an agent. ASU 2016-08 clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer and provides additional guidance about how to apply the control principle when services are provided and when goods or services are combined with other goods or services. The effective date for ASU 2016-08 is the same as the effective date of ASU No. 2014-09. ASU No. 2015-14 defers the effective date of ASU No. 2014-09 by one year, for fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-3, Simplifying the Presentation of Debt Issuance Costs (ASU 2015-3) which changes the presentation of debt issuance costs in financial statements to present such costs as a direct deduction from the related debt liability rather than as an asset. ASU 2015-3 became effective for public companies during interim and annual reporting periods beginning after December 15, 2015. The Company adopted this ASU on January 1, 2016. The adoption of this ASU did not have a material impact to our consolidated financial statements. Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements. |
ACQUISITIONS
ACQUISITIONS | 3 Months Ended |
Mar. 31, 2016 | |
Business Combinations [Abstract] | |
ACQUISITIONS | NOTE 2 ACQUISITIONS. Acquisition of Steel Media On October 30, 2014, we acquired 100% of the capital stock of Steel Media, a California corporation ("Steel Media"), from Richard Steel pursuant to the terms and conditions of a stock purchase agreement, dated October 30, 2014, by and among the Company, Steel Media and Mr. Steel (the "Stock Purchase Agreement"). As consideration for the purchase of Steel Media, we agreed to pay Mr. Steel up to $20 million, consisting of: (i) a cash payment at closing of $7.5 million; (ii) a cash payment of $2 million which is being held in escrow to satisfy certain indemnification obligations to the extent such arise under the Stock Purchase Agreement; (iii) a one year secured subordinated promissory note in the principal amount of $2.5 million (the "Note") which was secured by 2,386,863 shares of our Class A common stock (the "Escrow Shares"); and (iv) earnout payments of up to $8 million (the "Earnout Consideration"). The Earnout Consideration target was achieved for the first earnout period ended October 31, 2015 and on January 29, 2016 we paid Mr. Steel $4 million, of which $1.6 million was paid in cash and the balance was paid through the issuance of 1,283,766 shares of our Class A common stock in accordance with the terms of the Stock Purchase Agreement. At March 31, 2016 and December 31, 2015, we have recorded a liability for the Earnout consideration in the amount of $3,704,413 and $7,585,435; respectively. Acquisition of Five Delta, Inc. On December 19, 2014, we acquired 100% of the outstanding capital stock of Five Delta, Inc., a Delaware corporation ("Five Delta"), in exchange for 600,000 shares of our Class A common stock pursuant to the terms and conditions of the Share Acquisition and Exchange Agreement dated December 19, 2014 (the "Five Delta Agreement") by and among Social Reality, Five Delta and the stockholders of Five Delta. The acquisition price was $756,000. |
NOTES PAYABLE
NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2016 | |
Notes Payable [Abstract] | |
NOTES PAYABLE | NOTE 3 NOTES PAYABLE. Financing Agreement with Victory Park Management, LLC as agent for the lenders On October 30, 2014 (the "Financing Agreement Closing Date"), the Company entered into a financing agreement (the "Financing Agreement") with Victory Park Management, LLC, as administrative agent and collateral agent for the lenders and holders of notes and warrants issued thereunder (the "Agent"). The Financing Agreement provides for borrowings of up to $20 million to be evidenced by notes issued thereunder, which are secured by a first priority, perfected security interest in substantially all of the assets of the Company and its subsidiaries (including Steel Media) and a pledge of 100% of the equity interests of each domestic subsidiary of the Company pursuant to the terms of a pledge and security agreement (the "Pledge and Security Agreement") entered into by the Company on the Financing Agreement Closing Date (which was joined by Steel Media immediately after the Company's acquisition of Steel Media). The Financing Agreement contains covenants limiting, among other things, indebtedness, liens, transfers or sales of assets, distributions or dividends, and merger or consolidation activity. The notes (the "Financing Notes") issued pursuant to the Financing Agreement, including the note issued to the lender thereunder in the original aggregate principal amount of $9 million on the Financing Agreement Closing Date (the "Initial Financing Note") and the subsequent notes described below, bear interest at a rate per annum equal to the sum of (1) cash interest at a rate of 10% per annum and (2) payment-in-kind (PIK) interest at a rate of 4% per annum for the period commencing on the Financing Agreement Closing Date and extending through the last day of the calendar month during which the Company's financial statements for December 31, 2014 are delivered, and which PIK interest rate thereafter from time to time may be adjusted based on the ratio of the Company's consolidated indebtedness to its earnings before interest, taxes, depreciation and amortization. If the Company achieves a reduction in the leverage ratio as described in the Financing Agreement, the PIK interest rate declines on a sliding scale from 4% to 2%. The Financing Notes issued under the Financing Agreement are scheduled to mature on October 30, 2017, with scheduled quarterly payment dates commencing December 31, 2014. Proceeds from the Initial Financing Note issued on the Financing Agreement Closing Date were used to finance, in part, the Company's acquisition of Steel Media as described in Note 2. The Financing Agreement provides for subsidiaries of the Company to join the Financing Agreement from time to time as borrowers and cross guarantors thereunder. Immediately after the Company's acquisition of Steel Media on October 30, 2014, Steel Media executed a joinder agreement under which it became a borrower under the Financing Agreement. The Company and its subsidiary, Steel Media, are cross guarantors of each other's obligations under the Financing Agreement, all of which guaranties and obligations are secured pursuant to the terms of the Pledge and Security Agreement. On May 14, 2015, we entered into the First Amendment to Financing Agreement with Victory Park Management, LLC, as administrative agent and collateral agent for the lenders. Under the terms of the amendment, the leverage ratio, senior leverage ratio, fixed charge coverage ratio and interest coverage ratio under the Financing Agreement were all modified, and the minimum current ratio was reduced. The amendment also modified our obligations with respect to the delivery of certain reports, certain representations by us as well as clarifying other additional terms by which the loan is administered. On July 6, 2015, we borrowed an additional $1,500,000 pursuant to the Financing Agreement. The loan funded on July 8, 2015. In connection therewith, we issued a Senior Secured Term Note to the Lender in the principal amount of $1,500,000. The Senior Secured Term Note has terms identical to the Initial Financing Note described above. The Senior Secured Term Note will mature on October 30, 2017. We used the proceeds from this additional draw under the Financing Agreement for working capital. On October 26, 2015, we borrowed an additional $1,400,000 pursuant to the Financing Agreement. The loan funded on October 26, 2015. In connection therewith, we issued a Senior Secured Term Note to the Lender in the principal amount of $1,400,000. The Senior Secured Term Note has terms identical to the Initial Financing Note described above. The Senior Secured Term Note will mature on October 30, 2017. We used the proceeds from this additional draw under the Financing Agreement towards the payment of the Note due Richard Steel described in Note 3, and for working capital. On January 26, 2016, we borrowed an additional $1,600,000 pursuant to the financing agreement with Victory Park Management, LLC described in Note 3. The loan funded on January 28, 2016. In connection therewith, we issued a Senior Secured Term Note to the Lender in the principal amount of $1,600,000. In connection therewith, we issued a Senior Secured Term Note to the Lender in the principal amount of $1,600,000. The Senior Secured Term Note has terms identical to the Initial Financing Note described above. The Senior Secured Term Note will mature on October 30, 2017. We used the proceeds from this additional draw under the Financing Agreement as a portion of the payment to Mr. Richard Steel of the first year earn out payment described in Notes 2 and 7. On February 16, 2016, we borrowed an additional $500,000 pursuant to the Financing Agreement with Victory Park Management, LLC described in Note 3. The loan funded on February 16, 2016. In connection therewith, we issued a Senior Secured Term Note to the Lender in the principal amount of $500,000. The Senior Secured Term Note has terms identical to the Initial Financing Note described above. The Senior Secured Term Note will mature on October 30, 2017. We used the proceeds from this additional draw under the Financing Agreement as working capital. During March 2016, we made principal payments of $366,055 and made an additional payment of $400,000 on April 1, 2016. Notes payable consists of the following: March 31, 2016 December 31, 2015 Principal amount $ 11,830,462 $ 10,071,828 PIK interest accrued 512,665 417,070 12,343,127 10,488,898 Less current portion (3,694,000 ) (2,455,000 ) Notes payable and PIK interest accrued, net of current portion $ 8,649,127 $ 8,033,898 During the three months ended March 31, 2016 and 2015, $120,284 and $88,667, respectively, were recorded as PIK interest expense. Pursuant to the Financing Agreement dated October 31, 2014, the Company also issued to the lender thereunder, on the Financing Agreement Closing Date, a five year warrant to purchase 2,900,000 shares of its Class A common stock at an exercise price of $1.00 per share (the "Financing Warrant"). The warrant holder may not, however, exercise the Financing Warrant for a number of shares of Class A common stock that would cause such holder to beneficially own shares of Class A common stock in excess of 4.99% of the Company's outstanding shares of Class A common stock following such exercise. The number of shares issuable upon exercise of the Financing Warrant and the exercise price therefor are subject to adjustment in the event of stock splits, stock dividends, recapitalizations and similar corporate events. Pursuant to the Financing Warrant, the warrant holder has the right, at any time after the earlier of April 30, 2016 and the maturity date of the Financing Notes issued pursuant to the Financing Agreement, but prior to the date that is five years after the Financing Agreement Closing Date, to exercise its put right under the terms of the Financing Warrant, pursuant to which the warrant holder may sell to the Company, and the Company will purchase from the warrant holder, all or any portion of the Financing Warrant that has not been previously exercised. In connection with any exercise of this put right, the purchase price will be equal to an amount based upon the percentage of the Financing Warrant for which the put right is being exercised, multiplied by the lesser of (A) 50% of the total revenue for the Company and its subsidiaries, on a consolidated basis, for the trailing 12- month period ending with the Company's then-most recently completed fiscal quarter, and (B) $1,500,000. We have recorded the put liability at its present value of $1,232,294 at October 31, 2014 and have recorded it as deferred debt cost. We will record the accretion as interest expense. As contemplated under the Financing Agreement, the Company also entered into a registration rights agreement on the Financing Agreement Closing Date (the "Financing Registration Rights Agreement") with the holder of the Financing Warrant, pursuant to which the Company granted to such holder certain "piggyback" rights to register the shares of the Company's Class A common stock issuable upon exercise of the Financing Warrant. Specifically, the holder of the Financing Warrant has the right, subject to certain allocation provisions set forth in the Financing Registration Rights Agreement, to include the shares underlying the Financing Warrant in registration statements for offerings by the Company of its Class A common stock, as well as offerings of the Company's Class A common stock held by third parties. The shares underlying the Financing Warrant were included in a registration statement on Form S-1 that was declared effective by the Securities and Exchange Commission in October 2015. As part of the arrangements under the Financing Agreement, the Agent, Mr. Steel, and the Company and Steel Media (as borrowers under the Financing Agreement) have also entered into a subordination agreement (the "Subordination Agreement") under which Mr. Steel agreed, subject to the terms and conditions of the Subordination Agreement, to subordinate to the lenders and holders of Financing Notes and the Financing Warrant issued under the Financing Agreement (i) certain obligations, liabilities, and indebtedness, including, without limitation, payments under the Note and payments of Earnout Consideration, which may be owed to him by the Company; and (ii) during the time the Note was outstanding a put right we granted him if in the event of a default under the Note. As set forth above, the Note was paid in full in October 2015 and the put right was terminated upon such payment. Activity for the put liability associated with the Financing Warrant during the three months ended March 31, 2016 and 2015 was: March 31, 2016 2015 Balance, beginning of year $ 1,436,282 $ 1,260,010 Accretion in value 47,661 41,345 Balance, March 31 $ 1,483,943 $ 1,301,355 We incurred a total of $3,164,352 of costs related to the Financing Agreement. These costs will be amortized to interest expense over the life of the debt. During the three months ended March 31, 2016 and 2015, $294,857 and $319,936, respectively, was amortized with a remaining balance of $1,359,916 reported as deferred debt issue costs as of March 31, 2016. The maturities of the long term portion of the Financing Agreement are as follows: Year ended December 31, 2017 8,649,127 |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2016 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE 4 STOCKHOLDERS' EQUITY Preferred Stock We are authorized to issue 50,000,000 of preferred stock, par value $0.001, of which 200,000 shares were designated as Series 1 Preferred Stock. Our board of directors, without further stockholder approval, may issue preferred stock in one or more series from time to time and fix or alter the designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series. The rights, preferences, limitations and restrictions of different series of preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and other matters. Our board of directors may authorize the issuance of preferred stock, which ranks senior to our common stock for the payment of dividends and the distribution of assets on liquidation. In addition, our board of directors can fix limitations and restrictions, if any, upon the payment of dividends on both classes of our common stock to be effective while any shares of preferred stock are outstanding. On August 16, 2013 our Board of Directors approved a Certificate of Designations, Rights and Preferences pursuant to which it designated a series consisting of 200,000 shares of its blank check preferred stock as Series 1 Preferred Stock. The designations, rights and preferences of the Series 1 Preferred Stock are as follows: · each share has a stated and liquidation value of $0.001 per share, · the shares do not pay any dividends, except as may be declared by our Board of Directors, and are not redeemable, · the shares do not have any voting rights, except as may be provided under Delaware law, · each share is convertible into 10 shares of our Class A common stock, subject to customary anti-dilution provisions in the event of stock splits, recapitalizations and similar corporate events, and · the number of shares of Series 1 Preferred Stock, as well as the number of shares of Class A common stock issued upon a conversion of shares of Series 1 Preferred Stock, that a holder may sell, transfer, assign, hypothecate or otherwise dispose of (collectively or severally, a "Disposition") at any one time shall be limited to an amount which is pari passu to any Disposition of Class A common stock by either Christopher Miglino and/or Erin DeRuggiero, executive officers and directors of our company. Notwithstanding anything contained in the designations, the holder of Series 1 Preferred Stock is not obligated to make any Dispositions of Series 1 Preferred Stock or Class A common stock issued upon the conversion of Series 1 Preferred Stock. Following the conversion of the remaining shares of our Series 1 Preferred Stock during 2015 into shares of our Class A Common Stock, in February 2016 we filed a Certificate of Elimination with the Secretary of State of Delaware returning all shares of previously designated Series 1 Preferred Stock to our blank check preferred stock. Common Stock We are authorized to issue an aggregate of 259,000,000 shares of common stock. Our certificate of incorporation provides that we will have two classes of common stock: Class A common stock (authorized 250,000,000 shares, par value $0.001), which has one vote per share, and Class B common stock (authorized 9,000,000 shares, par value $0.001), which has ten votes per share. Any holder of Class B common stock may convert his or her shares at any time into shares of Class A common stock on a share-for-share basis. Otherwise the rights of the two classes of common stock are identical. There were no shares of Class B common stock outstanding during either the 2015 or 2016 periods. 2016 Transactions: On February 23, 2016 our Board of Directors approved the adoption of our 2016 Equity Compensation Plan (the 2016 Plan Common Stock During January and February 2016, we received aggregate proceeds of $500,000 from the sale of 500,000 shares of our Class A common stock. During January 2016, we issued 1,283,766 shares of Class A common stock, valued at $2,400,000, to Richard Steel as partial payment of Earnout consideration. During February 2016, we issued 33,930 shares of Class A common stock, valued at $47,500, to members of our board of directors for services. On February 23, 2016, we issued an aggregate of 50,000 shares of our Class A common stock valued at $70,000 as partial compensation for services under the terms of a consulting agreement. Stock Awards During February 2016, we granted an aggregate of 33,930 common stock awards to four directors. The shares were vested upon grant. We recorded $47,500 of compensation expense related to these awards. During the three months ended March 31, 2016, we recorded expense of $111,460 related to stock awards granted in prior years. Stock Options and Warrants During the three months ended March 31, 2016, we recorded expense of $48,889 related to stock options granted in prior years. Awards in the amount of 210,000 options were forfeited during 2016. 2015 Transactions: Stock Awards During the three months ended March 31, 2015 we recorded expense of $186,020 related to stock awards granted in prior years. Stock Options and Warrants During February 2015 we granted 12,000 common stock options to a director. The options will vest quarterly over one year. The options have an exercise price of $1.20 per share and a term of five years. These options have a grant date fair value of $0.62 per option, determined using the Black-Scholes method based on the following assumptions: (1) risk free interest rate of 0.50%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 99%; and (4) an expected life of the options of 2 years. We have recorded an expense for the director options of $1,244 for the three months ended March 31, 2015. During the three months ended March 31, 2015 we recorded expense of $70,902 related to stock options granted in prior years. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | NOTE 5 INTANGIBLE ASSETS Intangible assets consist of the following: March 31, 2016 December 31, 2015 Non-compete agreement $ 1,250,000 $ 1,250,000 Intellectual property 756,000 756,000 2,006,000 2,006,000 Accumulated amortization (484,139 ) (394,256 ) Carrying value $ 1,521,861 $ 1,611,744 Amortization expense was $37,800 for intellectual property and $52,083 for the non-compete agreement for the three months ended March 31, 2016. No amortization expense was recorded for the three months ended March 31, 2015. Estimated total amortization expense for each of the next five years is as follows: 2016 - 2019, $359,533 per year; 2020, $173,612. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 6 RELATED PARTY TRANSACTIONS We are obligated to Mr. Steel for contingent Earnout Consideration of up to $8,000,000 incurred in connection with the acquisition of Steel Media, as described in Note 2 upon Steel Media meeting certain EBITDA measurements. The Company had initially recorded the liability at its present value of $6,584,042. Changes in the value will be recorded through the statement of operations. The Earnout Consideration target was achieved for the first earnout period ended October 31, 2015 and on January 29, 2016 we paid Mr. Steel $4 million, of which $1.6 million was paid in cash and the balance was paid through the issuance of 1,283,766 shares of our Class A common stock in accordance with the terms of the Stock Purchase Agreement. Activity for the contingent consideration payable during the three months ended March 31, 2016 and 2015 was: March 31, 2016 2015 Balance, beginning of year $ 7,585,435 $ 6,732,123 Accretion in value 118,978 220,901 Payment made (4,000,000 ) Balance, March 31 $ 3,704,413 $ 6,953,024 |
ACCOUNTS PAYABLE AND ACCRUED EX
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 3 Months Ended |
Mar. 31, 2016 | |
Accounts Payable and Accrued Liabilities [Abstract] | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | NOTE 7 ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses are comprised of the following: March 31, 2016 December 31, 2015 Accounts payable, trade $ 2,577,363 $ 3,003,642 Accrued expenses 112,711 45,450 Accrued compensation 444,412 659,262 Accrued commissions 1,074,055 1,430,453 Total $ 4,208,541 $ 5,138,807 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 8 COMMITMENTS AND CONTINGENCIES Operating Leases The Company leases offices under operating leases with lease terms which expire through September 30, 2021. Rent expense for office space amounted to $61,986 and $38,302 for the three months ended March 31, 2016 and 2015, respectively. Other Commitments In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company's breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers and employees that will require the Company to, among other things, indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. The Company has also agreed to indemnify certain former officers, directors and employees of acquired companies in connection with the acquisition of such companies. The Company maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its directors and certain of its officers and employees, and former officers, directors and employees of acquired companies, in certain circumstances. It is not possible to determine the maximum potential amount of exposure under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements may not be subject to maximum loss clauses. Employment agreements We have entered into employment agreements with a number of our employees. These agreements may include provisions for base salary, guaranteed and discretionary bonuses and option grants. The agreements may contain severance provisions if the employees are terminated without cause, as defined in the agreements. Litigation From time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. In addition, the Company may receive letters alleging infringement of patent or other intellectual property rights. The Company is not currently a party to any material legal proceedings, nor is the Company aware of any pending or threatened litigation that would have a material adverse effect on the Company's business, operating results, cash flows or financial condition should such litigation be resolved unfavorably. |
ORGANIZATION AND SUMMARY OF S14
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Basis of Presentation | Organization and Basis of Presentation Social Reality, Inc. ("Social Reality", "we", "us" or "the Company") is a Delaware corporation formed on August 2, 2011. Effective January 1, 2012 we acquired all of the member interests and operations of Social Reality, LLC, a California limited liability company formed on August 14, 2009, which began business in May of 2010, in exchange for 12,328,767 shares of our Class A and Class B common stock. The former members of Social Reality, LLC owned all of our common stock after the acquisition. At Social Reality, we sell digital advertising campaigns to advertising agencies and brands. We have developed technology that allows brands to launch and manage digital advertising campaigns, and we provide the platform that allows website publishers to sell their media inventory to a number of digital adverting buyers. Our focus is to provide technology tools that enable both publishers and advertisers to maximize their digital advertising initiatives. We derive our revenues from: · sales of digital advertising campaigns to advertising agencies and brands; · sales of media inventory owned by our publishing partners through real-time bidding, or RTB, exchanges; · sale and licensing of our SRAX Social platform and related media; and, · creation of custom platforms for buying media on SRAX for large brands. The core elements of this business are: · Social Reality Ad Exchange or "SRAX" – Real Time Bidding sell side and buy side representation · SRAX MD · SRAXSocial · SRAX APP, We offer our customers a number of pricing options including cost-per-thousand-impression ("CPM"), whereby our customers pay based on the number of times the target audience is exposed to the advertisement, and cost-per-engagement ("CPE"), whereby payment is triggered only when an individual takes a specific activity. Social Reality is also an approved Facebook advertising partner. We sell targeted and measurable online advertising campaigns and programs to brand advertisers and advertising agencies across large Facebook apps and websites, generating qualified Facebook likes and quantifiable engagement for our clients, driving online sales and increased brand equity. We are headquartered in Los Angeles, California. |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements are unaudited. The unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These interim financial statements as of and for the three months ended March 31, 2016 and 2015 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows of the Company for the periods presented. The results for the three months ended March 31, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016 or for any future period. All references to March 31, 2016 and 2015 in these footnotes are unaudited. These unaudited condensed financial statements should be read in conjunction with our audited financial statements and the notes thereto for the year ended December 31, 2015, included in the Company's annual report on Form 10-K filed with the SEC on March 16, 2016. The condensed balance sheet as of December 31, 2015 has been derived from the audited financial statements at that date but do not include all disclosures required by the accounting principles generally accepted in the United States of America. Certain items have been reclassified to conform to the current period presentation. |
Principles of Consolidation | Principles of Consolidation The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries from the acquisition date of majority voting control and through the date of disposition, if any. |
Use of Estimates | Use of Estimates Accounting principles generally accepted in the United States ("GAAP") require management of the Company to make estimates and assumptions in the preparation of these consolidated financial statements that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and assumptions. The most significant areas that require management judgment and which are susceptible to possible change in the near term include the Company's revenue recognition, allowance for doubtful accounts and sales credits, stock-based compensation, income taxes, purchase price for acquisition, goodwill, other intangible assets, put rights and valuation of liabilities. The accounting policies for these areas are discussed elsewhere in these unaudited consolidated financial statements. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all short-term highly liquid investments with a remaining maturity at the date of purchase of three months or less to be cash equivalents. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue when the following criteria have been met: persuasive evidence of an arrangement exists, no significant Company obligations remain, collection of the related receivable is reasonably assured, and the fees are fixed or determinable. The Company acts as a principal in its revenue transactions as the Company is the primary obligor in the transactions. Revenue is recognized on a gross basis, and media and publisher expenses that are directly related to a revenue-generating event are recorded as a component of cost of revenue. |
Cost of Revenue | Cost of Revenue Cost of revenue consists of payments to media providers and website publishers that are directly related to a revenue-generating event and project and application design costs. The Company becomes obligated to make payments related to media providers and website publishers in the period the advertising impressions, click-throughs, actions or lead-based information are delivered or occur. Such expenses are classified as cost of revenue in the corresponding period in which the revenue is recognized in the accompanying income statement. |
Accounts Receivable | Accounts Receivable Credit is extended to customers based on an evaluation of their financial condition and other factors. Management periodically assesses the Company's accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. Accounts determined to be uncollectible are charged to operations when that determination is made. The Company usually does not require collateral. Allowance for doubtful accounts was $140,772 and $135,442 at March 31, 2016 and December 31, 2015, respectively. |
Concentration of Credit Risk, Significant Customers and Supplier Risk | Concentration of Credit Risk, Significant Customers and Supplier Risk Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited in the United States. The balances in the United States held at any one financial institution are generally in excess of Federal Deposit Insurance Corporation ("FDIC") insurance limits. The uninsured cash bank balances were approximately $1,242,000 at March 31, 2016. The Company has not experienced any loss on these accounts. The balances are maintained in demand accounts to minimize risk. At March 31, 2016, two customers accounted for more than 10% of the accounts receivable balance, for a total of 61%. For the three months ended March 31, 2016 one customer accounted for 59% of total revenue. For the three months ended March 31, 2015 two customers accounted for 42% of total revenue. Additionally, 23% of our revenue was collected and paid to us by two of our RTB exchange service providers. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company's financial instruments, including cash and cash equivalents, net accounts receivable, accounts payable and accrued expenses, are carried at historical cost. At March 31, 2016 and December 31, 2015 the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments. |
Property and equipment | Property and equipment Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided on the straight line basis over the estimated useful lives of the assets of three to seven years. Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations. Management periodically reviews the carrying value of its property and equipment for impairment. |
Intangible assets | Intangible assets Intangible assets consist of intellectual property and a non-complete agreement and are stated at cost less accumulated amortization. Amortization is provided for on the straight line basis over the estimated useful lives of the assets of five to six years. |
Business Combinations | Business Combinations For all business combinations (whether partial, full or step acquisitions), the Company records 100% of all assets and liabilities of the acquired business, including goodwill, generally at their fair values; contingent consideration, if any, is recognized at its fair value on the acquisition date and, for certain arrangements, changes in fair value are recognized in earnings until settlement and acquisition-related transaction and restructuring costs are expensed rather than treated as part of the cost of the acquisition. |
Goodwill | Goodwill Our goodwill consists of the excess purchase price paid in business combinations over the fair value of assets acquired. Goodwill is considered to have an indefinite life. The Company employs the non-amortization approach to account for goodwill. Under the non-amortization approach, goodwill is not amortized into the results of operations, but instead is reviewed annually or more frequently if events or changes in circumstances indicate that the asset might be impaired, to assess whether the fair value exceeds the carrying value. The Company performs its annual goodwill and impairment assessment on September 30 of each year. When evaluating the potential impairment of goodwill we first assess a range of qualitative factors, including but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for the Company's products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel, and the overall financial performance for each of the Company's reporting units. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we then proceed to a two-step impairment testing methodology using the income approach (discounted cash flow method). In the first step of the two step testing methodology, we compare the carrying value of the reporting unit, including goodwill, with its fair value, as determined by its estimated discounted cash flows. If the carrying value of a reporting unit exceeds its fair value, we then complete the second step of the impairment test to determine the amount of impairment to be recognized. In the second step, we estimate an implied fair value of the reporting unit's goodwill by allocating the fair value of the reporting unit to all of the assets and liabilities other than goodwill (including any unrecognized intangible assets). If the carrying value of a reporting unit's goodwill exceeds its implied fair value, the Company records an impairment loss equal to the difference in that period. When required, we arrive at our estimates of fair value using a discounted cash flow methodology which includes estimates of future cash flows to be generated by particular assets, as well as selecting a discount rate to measure the present value of those anticipated cash flows. Estimating future cash flows requires significant judgment and includes making assumptions about projected growth rates, industry-specific factors, working capital requirements, weighted average cost of capital, and current and anticipated operating conditions. The use of different assumptions or estimates for future cash flows could produce different results. No impairment of goodwill has been recorded in either the three months ended March 31, 2016 or 2015. |
Long-lived Assets | Long-lived Assets Management evaluates the recoverability of the Company's identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists. Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; a significant decline in the Company's stock price for a sustained period of time; and changes in the Company's business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets. If impairment is indicated based on a comparison of the assets' carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairments have been recorded in either the three months ended March 31, 2016 or 2015. |
Loss Per Share | Loss Per Share We use ASC 260, "Earnings Per Share" for calculating the basic and diluted earnings (loss) per share. We compute basic earnings (loss) per share by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and warrants and stock awards. For periods with a net loss, basic and diluted loss per share are the same, in that any potential common stock equivalents would have the effect of being anti-dilutive in the computation of net loss per share. There were 12,887,016 common share equivalents at March 31, 2016 and 13,990,471 at March 31, 2015. For the three months ended March 31, 2016 and 2015 these potential shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per share. |
Income Taxes | Income Taxes We utilize ASC 740 Income Taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at year-end based on enacted laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. The Company recognizes the impact of a tax position in the financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. |
Stock-Based Compensation | Stock-Based Compensation We account for our stock based compensation under ASC 718 "Compensation Stock Compensation" using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. We use the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods. |
Business Segments | Business Segments The Company uses the "management approach" to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company's reportable segments. Using the management approach, the Company determined that it has one operating segment due to business similarities and similar economic characteristics. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In April 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-10, Identifying Performance Obligations and Licensing (Topic 606), which amends certain aspects of the FASBs new revenue standard, ASU 2014-09, Revenue from Contracts with Customer (Topic 606). ASU 2016-10 identifies performance obligations and provides licensing implementation guidance. The effective date for ASU 2016-10 is the same as the effective date of ASU No. 2014-09. ASU No. 2015-14 (Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date) defers the effective date of ASU No. 2014-09 by one year, for fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718), which is part of the FASB's Simplification Initiative. The updated guidance simplifies the accounting for share-based payment transactions. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customer (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), or ASU 2016-08, that clarifies how to apply revenue recognition guidance related to whether an entity is a principal or an agent. ASU 2016-08 clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer and provides additional guidance about how to apply the control principle when services are provided and when goods or services are combined with other goods or services. The effective date for ASU 2016-08 is the same as the effective date of ASU No. 2014-09. ASU No. 2015-14 defers the effective date of ASU No. 2014-09 by one year, for fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-3, Simplifying the Presentation of Debt Issuance Costs (ASU 2015-3) which changes the presentation of debt issuance costs in financial statements to present such costs as a direct deduction from the related debt liability rather than as an asset. ASU 2015-3 became effective for public companies during interim and annual reporting periods beginning after December 15, 2015. The Company adopted this ASU on January 1, 2016. The adoption of this ASU did not have a material impact to our consolidated financial statements. Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements. |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Notes Payable [Abstract] | |
Schedule of notes payable | Notes payable consists of the following: March 31, 2016 December 31, 2015 Principal amount $ 11,830,462 $ 10,071,828 PIK interest accrued 512,665 417,070 12,343,127 10,488,898 Less current portion (3,694,000 ) (2,455,000 ) Notes payable and PIK interest accrued, net of current portion $ 8,649,127 $ 8,033,898 |
Schedule of put liability | Activity for the put liability associated with the Financing Warrant during the three months ended March 31, 2016 and 2015 was: March 31, 2016 2015 Balance, beginning of year $ 1,436,282 $ 1,260,010 Accretion in value 47,661 41,345 Balance, March 31 $ 1,483,943 $ 1,301,355 |
Schedule of maturities of long term debt | The maturities of the long term portion of the Financing Agreement are as follows: Year ended December 31, 2017 8,649,127 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible assets | Intangible assets consist of the following: March 31, 2016 December 31, 2015 Non-compete agreement $ 1,250,000 $ 1,250,000 Intellectual property 756,000 756,000 2,006,000 2,006,000 Accumulated amortization (484,139 ) (394,256 ) Carrying value $ 1,521,861 $ 1,611,744 |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
Schedule of contingent consideration payable | Activity for the contingent consideration payable during the three months ended March 31, 2016 and 2015 was: March 31, 2016 2015 Balance, beginning of year $ 7,585,435 $ 6,732,123 Accretion in value 118,978 220,901 Payment made (4,000,000 ) Balance, March 31 $ 3,704,413 $ 6,953,024 |
ACCOUNTS PAYABLE AND ACCRUED 18
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Accounts Payable and Accrued Liabilities [Abstract] | |
Schedule of Accounts payable and accrued expenses | Accounts payable and accrued expenses are comprised of the following: March 31, 2016 December 31, 2015 Accounts payable, trade $ 2,577,363 $ 3,003,642 Accrued expenses 112,711 45,450 Accrued compensation 444,412 659,262 Accrued commissions 1,074,055 1,430,453 Total $ 4,208,541 $ 5,138,807 |
ORGANIZATION AND SUMMARY OF S19
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 1 Months Ended | 3 Months Ended | ||
Jan. 31, 2012shares | Mar. 31, 2016USD ($)Itemshares | Mar. 31, 2015USD ($)shares | Dec. 31, 2015USD ($) | |
Allowance for doubtful accounts | $ 140,772 | $ 135,442 | ||
Uninsured cash bank balance | $ 1,242,000 | |||
Number of operating segments | Item | 1 | |||
Antidilutive common share equivalents | shares | 12,887,016 | 13,990,471 | ||
Goodwill impairment | ||||
Impairment of long-lived assets | ||||
Minimum [Member] | ||||
Property and equipment estimated useful life | 3 years | |||
Intangible assets estimated useful life | 5 years | |||
Maximum [Member] | ||||
Property and equipment estimated useful life | 7 years | |||
Intangible assets estimated useful life | 6 years | |||
Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||||
Concentration risk percentage | 61.00% | |||
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | ||||
Concentration risk percentage | 59.00% | 42.00% | ||
Sales Revenue, Net [Member] | Two RTB Exchange Service Provider [Member] | ||||
Concentration risk percentage | 23.00% | |||
Social Reality Llc [Member] | ||||
Effective date of business acquisition | Jan. 1, 2012 | |||
Social Reality Llc [Member] | Class A and Class B Common Stock [Member] | ||||
Shares issued in business acquisition | shares | 12,328,767 |
ACQUISITIONS (Acquisition of St
ACQUISITIONS (Acquisition of Steel Media) (Details) - USD ($) | Oct. 30, 2014 | Mar. 31, 2016 | Jan. 29, 2016 | Dec. 31, 2015 | Mar. 31, 2015 | Dec. 31, 2014 |
Business Acquisition [Line Items] | ||||||
Earnout consideration | $ 3,704,413 | $ 7,585,435 | $ 6,953,024 | $ 6,732,123 | ||
Steel Media [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Ownership acquired (as a percent) | 100.00% | |||||
Cash payment | $ 7,500,000 | |||||
Cash payment held in escrow | $ 2,000,000 | |||||
Contingent Earnout Consideration paid | $ 4,000,000 | |||||
Earnout consideration paid in cash | $ 1,600,000 | |||||
Earnout consideration paid in shares | 1,283,766 | |||||
Steel Media [Member] | Senior Subordinated Notes [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Notes term | 1 year | |||||
Notes issued | $ 2,500,000 | |||||
Steel Media [Member] | Maximum [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Purchase consideration | 20,000,000 | |||||
Earnout consideration | $ 8,000,000 | |||||
Steel Media [Member] | Common Class A [Member] | Senior Subordinated Notes [Member] | ||||||
Business Acquisition [Line Items] | ||||||
Escrow shares | 2,386,863 |
ACQUISITIONS (Acquisition of Fi
ACQUISITIONS (Acquisition of Five Delta, Inc.) (Details) - Five Delta Inc [Member] | Dec. 19, 2014USD ($)shares |
Business Acquisition [Line Items] | |
Ownership acquired (as a percent) | 100.00% |
Purchase consideration | $ | $ 756,000 |
Common Class A [Member] | |
Business Acquisition [Line Items] | |
Number of common stock issued | shares | 600,000 |
NOTES PAYABLE (Financing Agreem
NOTES PAYABLE (Financing Agreement with Victory Park Management, LLC as agent for the lenders) (Details) - USD ($) | Feb. 16, 2016 | Jan. 26, 2016 | Oct. 26, 2015 | Jul. 06, 2015 | Oct. 30, 2014 | Apr. 30, 2016 | Mar. 31, 2016 | Mar. 31, 2015 |
Debt Instrument [Line Items] | ||||||||
Amortization of debt issue costs | $ 294,857 | $ 319,936 | ||||||
Unamortized discount remaining | 1,359,916 | |||||||
Repayments of note payable | 366,055 | 315,801 | ||||||
PIK interest expense accrued to principal | $ 120,284 | $ 88,667 | ||||||
Secured Debt [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Notes issued | $ 500,000 | $ 1,600,000 | $ 1,400,000 | $ 1,500,000 | $ 9,000,000 | |||
Percentage of equity interest pledged | 100.00% | |||||||
Interest rate (as a percent) | 10.00% | |||||||
Paid-in-kind interest rate (as a percent) | 4.00% | |||||||
Exercise period of warrants | 5 years | |||||||
Exercise price of warrants | $ 1 | |||||||
Percentage of revenue used as base to calculate purchase price | 50.00% | |||||||
Amount used as base to calculate purchase price | $ 1,500,000 | |||||||
Present value of put liability | 1,232,294 | |||||||
Costs related to agreement | $ 3,164,352 | |||||||
Maturity date | Oct. 30, 2017 | Oct. 30, 2017 | Oct. 30, 2017 | Oct. 30, 2017 | ||||
Secured Debt [Member] | Common Class A [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Number of shares to be issued | 2,900,000 | |||||||
Maximum [Member] | Secured Debt [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Notes issued | $ 20,000,000 | |||||||
Paid-in-kind interest rate (as a percent) | 4.00% | |||||||
Minimum [Member] | Secured Debt [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Paid-in-kind interest rate (as a percent) | 2.00% | |||||||
Subsequent Event [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Repayments of note payable | $ 400,000 |
NOTES PAYABLE (Schedule of Note
NOTES PAYABLE (Schedule of Notes Payable) (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Notes Payable [Abstract] | ||
Principal amount | $ 11,830,462 | $ 10,071,828 |
PIK interest accrued | 512,665 | 417,070 |
Notes payable | 12,343,127 | 10,488,898 |
Less current portion | (3,694,000) | (2,455,000) |
Notes payable and PIK interest accrued, net of current portion | $ 8,649,127 | $ 8,033,898 |
NOTES PAYABLE (Schedule of Put
NOTES PAYABLE (Schedule of Put Liability) (Details) - Put Liability Notes Payable [Member] - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Activity for the put liability- notes payable [Roll Forward] | ||
Beginning balance | $ 1,436,282 | $ 1,260,010 |
Accretion in value | 47,661 | 41,345 |
Ending balance | $ 1,483,943 | $ 1,301,355 |
NOTES PAYABLE (Maturities of lo
NOTES PAYABLE (Maturities of long term debt) (Details) | Mar. 31, 2016USD ($) |
Notes Payable Maturities Of Long Term Debt Details | |
2,017 | $ 8,649,127 |
STOCKHOLDERS' EQUITY (Preferred
STOCKHOLDERS' EQUITY (Preferred and Common Stock) (Details) - $ / shares | Mar. 31, 2016 | Dec. 31, 2015 | Aug. 16, 2013 |
Class of Stock [Line Items] | |||
Preferred Stock, shares authorized | 50,000,000 | 50,000,000 | |
Preferred Stock, par value per share | $ 0.001 | $ 0.001 | |
Common Stock, shares authorized | 259,000,000 | ||
Common Stock, par value per share | $ 0.001 | ||
Series 1 Preferred Stock [Member] | |||
Class of Stock [Line Items] | |||
Preferred Stock, shares authorized | 200,000 | ||
Liquidation preference per share | $ 0.001 | ||
Common Class A [Member] | |||
Class of Stock [Line Items] | |||
Common Stock, shares authorized | 250,000,000 | 250,000,000 | |
Common Stock, par value per share | $ 0.001 | $ 0.001 | |
Common Stock, shares outstanding | 29,977,925 | 28,110,229 | |
Common Class B [Member] | |||
Class of Stock [Line Items] | |||
Common Stock, shares authorized | 9,000,000 | 9,000,000 | |
Common Stock, par value per share | $ 0.001 | $ 0.001 | |
Common Stock, shares outstanding | 0 | 0 |
STOCKHOLDERS' EQUITY (2016 and
STOCKHOLDERS' EQUITY (2016 and 2015 Transactions) (Details) - USD ($) | 1 Months Ended | 2 Months Ended | 3 Months Ended | |||||
Feb. 29, 2016 | Jan. 31, 2016 | Feb. 28, 2015 | Jan. 31, 2015 | Feb. 29, 2016 | Mar. 31, 2016 | Mar. 31, 2015 | Jan. 29, 2016 | |
Sale of common stock | $ 500,000 | |||||||
Stock option compensation expense | $ 48,889 | $ 70,902 | ||||||
Stock options forfeited during period | 210,000 | |||||||
Proceeds from warrant offering | 6,921 | |||||||
Director [Member] | ||||||||
Expense related to stock awards | 1,244 | |||||||
Steel Media [Member] | ||||||||
Earnout consideration paid in shares | 1,283,766 | |||||||
Common Class A [Member] | ||||||||
Number of shares reserved under 2016 Plan | 3,000,000 | |||||||
Sale of common stock | $ 500,000 | |||||||
Stock issued | 500,000 | |||||||
Common Class A [Member] | Director [Member] | ||||||||
Common stock issued for services, shares | 50,000 | |||||||
Common stock issued for services | $ 70,000 | |||||||
Common Class A [Member] | Steel Media [Member] | ||||||||
Stock issued | 2,400,000 | |||||||
Warrant [Member] | ||||||||
Warrants to purchase shares of common stock, number of shares of common stock | 882,001 | |||||||
Exercise price of warrant | $ 1.50 | |||||||
Exercise period of warrants | 3 years | |||||||
Proceeds from warrant offering | $ 8,820 | |||||||
Common Stock Awards [Member] | ||||||||
Expense related to stock awards | $ 111,460 | $ 186,020 | ||||||
Common Stock Awards [Member] | Four Directors [Member] | ||||||||
Shares issued for stock awards that have vested | 33,930 | |||||||
Expense related to stock awards | $ 47,500 | |||||||
Employee Stock Option [Member] | Director [Member] | ||||||||
Granted during period | 12,000 | |||||||
Share-based compensation, vesting period | 1 year | |||||||
Granted during period, exercise price | $ 1.20 | |||||||
Stock options granted, grant date fair value | $ 0.62 | |||||||
Award term | 5 years | |||||||
Share-based compensation, risk free interest rate | 0.50% | |||||||
Share-based compensation, expected dividend yield | 0.00% | |||||||
Share-based compensation, expected volatility rate | 99.00% | |||||||
Share-based compensation, expected life | 2 years |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
2,016 | $ 359,533 | |
2,017 | 359,533 | |
2,018 | 359,533 | |
2,019 | 359,533 | |
2,020 | 173,612 | |
Intellectual Property [Member] | ||
Amortization expense | 37,800 | |
Non-compete agreement [Member] | ||
Amortization expense | $ 52,083 |
INTANGIBLE ASSETS (Schedule of
INTANGIBLE ASSETS (Schedule of Intangible assets) (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Intangible assets | $ 2,006,000 | $ 2,006,000 |
Accumulated amortization | (484,139) | (394,256) |
Carrying value | 1,521,861 | 1,611,744 |
Non-compete agreement [Member] | ||
Intangible assets | 1,250,000 | 1,250,000 |
Intellectual Property [Member] | ||
Intangible assets | $ 756,000 | $ 756,000 |
RELATED PARTY TRANSACTIONS (Nar
RELATED PARTY TRANSACTIONS (Narrative) (Details) - USD ($) | Mar. 31, 2016 | Jan. 29, 2016 | Dec. 31, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Oct. 30, 2014 |
Related Party Transaction [Line Items] | ||||||
Contingent Earnout Consideration | $ 3,704,413 | $ 7,585,435 | $ 6,953,024 | $ 6,732,123 | ||
Steel Media [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Earnout consideration paid in cash | $ 1,600,000 | |||||
Present value of consideration | 6,584,042 | |||||
Contingent Earnout Consideration paid | $ 4,000,000 | |||||
Earnout consideration paid in shares | 1,283,766 | |||||
Steel Media [Member] | Maximum [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Contingent Earnout Consideration | $ 8,000,000 | |||||
Steel Media [Member] | Richard Steel [Member] | Maximum [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Contingent Earnout Consideration | $ 8,000,000 |
RELATED PARTY TRANSACTIONS (Sch
RELATED PARTY TRANSACTIONS (Schedule of contingent consideration payable) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Activity for the contingent consideration payable [Roll Forward] | ||
Beginning of period | $ 7,585,435 | $ 6,732,123 |
Accretion in value | 118,978 | $ 220,901 |
Payment made | (4,000,000) | |
End of period | $ 3,704,413 | $ 6,953,024 |
ACCOUNTS PAYABLE AND ACCRUED 32
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Accounts Payable and Accrued Liabilities [Abstract] | ||
Accounts payable, trade | $ 2,577,363 | $ 3,003,642 |
Accrued expenses | 112,711 | 45,450 |
Accrued compensation | 444,412 | 659,262 |
Accrued commissions | 1,074,055 | 1,430,453 |
Total | $ 4,208,541 | $ 5,138,807 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Lease expiration period | Sep. 30, 2021 | |
Rent expense | $ 61,986 | $ 38,302 |