Audioeye Inc. Files 10-Q for Period Ending March 31, 2024

TL;DR

<b>Audioeye Inc. filed its Q1 2024 10-Q, detailing financial performance and corporate activities.</b>

AI Summary

AUDIOEYE INC (AEYE) filed a Quarterly Report (10-Q) with the SEC on April 30, 2024. Audioeye Inc. reported financial results for the quarter ended March 31, 2024. The company's fiscal year ends on December 31. Key financial statement dates include March 31, 2024, December 31, 2023, and March 31, 2023. The filing references stock repurchase programs and employee stock options. Subsequent events include a mention of Bureau of Internet Accessibility Inc. and a Georgia country event.

Why It Matters

For investors and stakeholders tracking AUDIOEYE INC, this filing contains several important signals. This 10-Q filing provides investors with the latest quarterly financial data, including balance sheet and income statement information, crucial for assessing the company's performance and financial health. The inclusion of stock repurchase programs and employee stock options indicates potential shareholder value initiatives and equity-based compensation strategies.

Risk Assessment

Risk Level: medium — AUDIOEYE INC shows moderate risk based on this filing. The company's financial performance and future outlook are subject to various risks, including customer concentration and potential regulatory changes, as indicated by the references to 'CustomerConcentrationRisk' and 'BureauOfInternetAccessibilityInc'.

Analyst Insight

Investors should review the detailed financial statements and risk factors in the 10-Q to understand Audioeye Inc.'s current financial position and potential challenges.

Key Numbers

• 2024-03-31 — Report Period End Date (CONFORMED PERIOD OF REPORT)
• 2024-04-30 — Filing Date (FILED AS OF DATE)
• 11711000 — Value 1 (2024 Q1)
• 11662000 — Value 2 (2023 Q1)

Key Players & Entities

• AUDIOEYE INC (company) — FILER
• 0001362190 (company) — CENTRAL INDEX KEY
• 7372 (company) — STANDARD INDUSTRIAL CLASSIFICATION
• DE (company) — STATE OF INCORPORATION
• AZ (company) — STATE
• 85711 (company) — ZIP
• 866-331-5324 (company) — BUSINESS PHONE
• Bureau Of Internet Accessibility Inc (company) — Subsequent Event

FAQ

Risk Factors

• Customer Concentration Risk [high — financial]: The company faces risk due to reliance on a major customer, impacting revenue and accounts receivable.
• Bureau of Internet Accessibility Inc. [medium — regulatory]: The company is involved with entities related to internet accessibility compliance, suggesting potential regulatory scrutiny or business focus.

Key Dates

• 2024-03-31: Quarterly Report Period End — Marks the end of the reporting period for the 10-Q filing.
• 2024-04-30: Filing Date — Date the 10-Q was officially filed with the SEC.

Glossary

10-Q

A quarterly report required by the U.S. Securities and Exchange Commission (SEC). (Provides investors with a comprehensive overview of a company's financial performance during the quarter.)

Customer Concentration Risk

The risk associated with having a significant portion of revenue or accounts receivable from a small number of customers. (Highlights potential vulnerability if a major customer is lost or reduces business.)

Key Financial Figures

• $0.00001 — ich registered Common Stock, par value $0.00001 per share AEYE The Nasdaq Capital M

Filing Documents

• aeye-20240331x10q.htm (10-Q) — 984KB
• aeye-20240331xex31d1.htm (EX-31.1) — 9KB
• aeye-20240331xex31d2.htm (EX-31.2) — 9KB
• aeye-20240331xex32d1.htm (EX-32.1) — 8KB
• aeye-20240331x10q001.jpg (GRAPHIC) — 10KB
• 0001410578-24-000574.txt (&nbsp;) — 4182KB
• aeye-20240331.xsd (EX-101.SCH) — 34KB
• aeye-20240331_cal.xml (EX-101.CAL) — 52KB
• aeye-20240331_def.xml (EX-101.DEF) — 109KB
• aeye-20240331_lab.xml (EX-101.LAB) — 317KB
• aeye-20240331_pre.xml (EX-101.PRE) — 210KB
• aeye-20240331x10q_htm.xml (XML) — 558KB

Financial Statements

Financial Statements 1 Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 (unaudited) 2 Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 (unaudited) 3 Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2024 and 2023 (unaudited) 4 Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (unaudited) 5

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 6 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 19 Item 4.

Controls and Procedures

Controls and Procedures 20 PART II OTHER INFORMATION 21 Item 1.

Legal Proceedings

Legal Proceedings 21 Item 1A.

Risk Factors

Risk Factors 21 Item 2. Issuer Purchases of Equity Securities 21 Item 6. Exhibits 22

SIGNATURES

SIGNATURES 23 Table of Contents

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements The financial information set forth below with respect to the consolidated financial statements as of March 31, 2024 and December 31, 2023 and for the three-month periods ended March 31, 2024 and 2023 is unaudited. This financial information, in the opinion of our management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data. The results of operations for the three-month period ended March 31, 2024 are not necessarily indicative of results to be expected for any subsequent period. Our fiscal year end is December 31. Certain prior period amounts have been reclassified to conform to current period presentation. The Company presents its unaudited consolidated financial statements, notes, and other financial information rounded to the nearest thousand United States Dollars ("U.S. Dollar"), except for per share data. 1 Table of Contents AUDIOEYE, INC. CONSOLIDATED BALANCE SHEETS (unaudited) March 31, December 31, (in thousands, except per share data) 2024 2023 ASSETS Current assets: Cash $ 7,040 $ 9,236 Accounts receivable, net of allowance for doubtful accounts of $ 502 and $ 496 , respectively 5,084 4,828 Prepaid expenses and other current assets 838 712 Total current assets 12,962 14,776 Property and equipment, net of accumulated depreciation of $ 273 and $ 251 , respectively 238 218 Right of use assets 530 611 Intangible assets, net of accumulated amortization of $ 7,973 and $ 7,423 , respectively 5,723 5,783 Goodwill 4,001 4,001 Other 107 106 Total assets $ 23,561 $ 25,495 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 2,530 $ 2,339 Operating lease liabilities 249 312 Finance lease liabilities 1 7 Deferred revenue 6,254 6,472 Contingent consideration 2,387 2,399 Total current liabilities 11,421 11,529 Long term liab

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2024 (Unaudited) NOTE 1 — BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements of AudioEye, Inc. and its wholly-owned subsidiary, Springtime, Inc. ("we", "our" or the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP" or "GAAP") and the rules of the Securities and Exchange Commission (the "SEC"), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the "2023 Form 10-K"), as filed with the SEC on March 7, 2024. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Certain information and disclosures normally contained in the audited consolidated financial statements as reported in the Company's Annual Report on Form 10-K have been condensed or omitted in accordance with the SEC's rules and regulations for interim reporting. NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Our significant accounting policies are presented in "Note 2 – Significant Accounting Policies" in the 2023 Form 10-K. Users of financial information for interim periods are encouraged to refer to the footnotes to the consolidated financial statements contained in the 2023 Form 10-K when reviewing interim financial results. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and th

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2024 (Unaudited) NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Performance obligations are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised to the customer. If we determine that we have not satisfied a performance obligation, we will defer recognition of the revenue until the performance obligation is deemed to be satisfied. SaaS agreements are generally non-cancelable, although clients typically have the right to terminate their contracts for cause if we fail to perform material obligations. Our SaaS revenue is comprised of fixed subscription fees from customer accounts on our platform related to our software products. Our support revenue is comprised of subscription fees for customers for legal, remediation, and other support services. SaaS and support (also referred to as "subscription") revenue is recognized on a ratable basis over the contractual subscription term of the arrangement beginning on the date that our service is made available to the customer. Certain SaaS and support fees are invoiced in advance on an annual, semi-annual, or quarterly basis. Any funds received for services not provided yet are held in deferred revenue and are recorded as revenue when the related performance obligations have been satisfied. Non-subscription revenue consists primarily of PDF remediation and Website and Mobile App report services, and is recognized upon delivery. Consideration payable under PDF remediation arrangements is based on usage. Consideration payable under non-subscription Website and Mobile App report services arrangements is based on fixed fees. The following table presents our revenues disaggregated by sales channel: Three months ended March 31, (in thousands) 2024 2023 Partner and Marketplace $ 4,734 $ 4,342 Enterprise 3,349 3,430 Total revenues $ 8,083 $ 7,772 The Company reco

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2024 (Unaudited) NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Deferred Costs (Contract acquisition costs) We capitalize initial and renewal sales commissions in the period the commission is earned, which generally occurs when a customer contract is obtained, and amortize deferred commission costs on a straight-line basis over the expected period of benefit, which we have deemed to be the contract term. As a practical expedient, we expense sales commissions as incurred when the amortization period of related deferred commission costs would have been one year or less. The table below summarizes the deferred commission costs as of March 31, 2024 and December 31, 2023, which are included in Prepaid expenses and other current assets on our consolidated balance sheets: March 31, December 31, (in thousands) 2024 2023 Deferred costs — current $ 19 $ 20 Deferred costs — noncurrent 3 2 Total deferred costs $ 22 $ 22 Amortization expense associated with sales commissions was included in Selling and marketing expenses on the consolidated statements of operations and totaled $ 10,000 and $ 19,000 , respectively, for the three-month periods ended March 31, 2024 and 2023. Debt Discount and Debt Issuance Costs Costs related to the issuance of debt due to the lender (debt discount) or to third parties (debt issuance costs) are capitalized and amortized to interest expense based on the effective interest method over the term of the related debt. Debt discount and debt issuance costs are presented on the Company's consolidated balance sheets as a direct deduction from the carrying amount of our term loan. Employee Stock Purchase Plan In May 2022, the stockholders of the Company approved the Company's Employee Stock Purchase Plan (the "ESPP"), which provides for the issuance of up to 500,000 shares of common stock. Eligible employees may elect to have a percentage of e

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2024 (Unaudited) NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) We estimate the fair value of restricted stock unit awards with time- or performance-based vesting using the value of our common stock on the grant date. We estimate the fair value of market-based restricted stock unit awards as of the grant date using the Monte Carlo simulation model. We expense the compensation cost associated with time-based options and RSUs as the restriction period lapses, which is typically a one - to three-year service period with the Company. Compensation expense related to performance-based RSUs is recognized on a straight-line basis over the requisite service period, provided that it is probable that performance conditions will be achieved, with probability assessed on a quarterly basis and any changes in expectations recognized as an adjustment to earnings in the period of the change. Compensation cost is not recognized for service- and performance-based awards that do not vest because service or performance conditions are not satisfied, and any previously recognized compensation cost is reversed. Compensation costs related to awards with market conditions are recognized on a straight-line basis over the requisite service period regardless of whether the market condition is satisfied and is not reversed provided that the requisite service period derived from the Monte-Carlo simulation has been completed. If vesting occurs prior to the end of the requisite service period, expense is accelerated and fully recognized through the vesting date. The following table summarizes the stock-based compensation expense recorded for the three months ended March 31, 2024 and 2023: Three months ended March 31, (in thousands) 2024 2023 Options $ 4 $ 77 RSUs 813 987 Unrestricted shares of common stock 66 54 Total $ 883 $ 1,118 As of March 31, 2024, the outstanding unrecognized sto

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2024 (Unaudited) NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Potentially dilutive securities outstanding as of March 31, 2024 and 2023, which were excluded from the computation of basic and diluted net loss per share for the periods then ended, are as follows: March 31, (in thousands) 2024 2023 Options 105 151 Restricted stock units 1,557 1,940 Total 1,662 2,091 The following table summarizes the stock option and RSUs activity for the three months ended March 31, 2024: Options RSUs Outstanding at December 31, 2023 112,279 1,707,258 Granted — 122,721 Exercised/Settled ( 1,000 ) ( 234,617 ) Forfeited/Expired ( 6,740 ) ( 38,235 ) Outstanding at March 31, 2024 104,539 1,557,127 Vested at March 31, 2024 103,737 475,945 Unvested at March 31, 2024 802 1,081,182 Stock Repurchases In the fourth quarter of 2023, the Board of Directors of the Company approved a program to repurchase up to $ 5 million of its outstanding shares of common stock through December 31, 2025. In 2023, we used $ 1.12 million of the program to repurchase shares. In the three months ended March 31, 2024, we used $ 1.69 million of the program to repurchase shares. As of March 31, 2024, we had $ 2.19 million remaining for the repurchase of shares. Shares repurchased by the Company are immediately retired. The Company made an accounting policy election to charge the excess of repurchase price over par value entirely to retained earnings. Recent Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. The ASU is effective for annual periods beginning after December 15, 2024, with early ad

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2024 (Unaudited) NOTE 3 — ACQUISITIONS Bureau of Internet Accessibility Inc. On March 9, 2022, we entered into a Stock Purchase Agreement ("Purchase Agreement") to acquire all the outstanding equity interests of Bureau of Internet Accessibility Inc. ("BOIA"), a Delaware corporation which provides web accessibility services including audits, training, remediation and implementation support. The aggregate consideration for the purchase of BOIA was approximately $ 7.5 million (at fair value), consisting of $ 5.1 million cash payment at closing, $ 0.2 million cash received in the third quarter of 2022 resulting from net working capital adjustments, and an estimated $ 2.6 million in aggregate contingent consideration to be paid in cash following the one - and two-year anniversary of the closing date. Actual aggregate cash consideration is based on BOIA's revenues for 2022 and 2023. In the first quarter of 2023, we made a $ 974,000 cash payment towards the contingent consideration liability. We accounted for the acquisition of BOIA as business combination in accordance with FASB ASC 805, "Business Combinations" ("ASC 805"). Accordingly, under the acquisition method of accounting, we allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values, and recognized goodwill for the excess of purchase price over the estimated fair value of net tangible and intangible assets acquired. Acquired intangible assets are amortized on a straight-line basis over their estimated useful lives of 2 to 7 years . In the three months ended March 31, 2024 and 2023, amortization expense associated with acquired intangible assets totaled $ 177,000 and $ 179,000 , respectively. As of March 31, 2024, contingent consideration totaled $ 2,387,000 , which represented the estimated fair value of the second anniversary payment expected to be settled in the second

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