AudioEye Inc. Q2 2024 Update: Equity Accounts Detailed

TL;DR

AudioEye's Q2 2024 10-Q is out, showing equity changes. Check the details.

AI Summary

AudioEye Inc. reported its second quarter 2024 results on July 29, 2024. The company's financial statements for the period ending June 30, 2024, show changes in key equity accounts like Retained Earnings and Additional Paid-In Capital compared to previous periods in 2023 and 2024. Specific dollar amounts for these accounts are detailed within the filing.

Why It Matters

This filing provides insight into AudioEye's financial health and capital structure, which can influence investor confidence and future strategic decisions.

Risk Assessment

Risk Level: medium — The filing details financial performance and equity changes, which are crucial for assessing a company's stability and growth prospects.

Key Numbers

• 11711000 — Retained Earnings (2024 Q2) (Represents accumulated profits less losses.)
• 11808000 — Retained Earnings (2023 Q2) (Shows year-over-year change in accumulated profits.)

Key Players & Entities

• AUDIOEYE INC (company) — Filer
• 20240630 (date) — Period of Report
• 20240729 (date) — Filing Date
• 7372 (number) — Standard Industrial Classification
• 001-38640 (number) — SEC File Number
• 5210 E. WILLIAMS CIRCLE (address) — Business Address
• TUCSON (location) — Business City
• AZ (location) — Business State
• 85711 (zip_code) — Business Zip
• 866-331-5324 (phone_number) — Business Phone

FAQ

Key Financial Figures

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

Filing Documents

• aeye-20240630x10q.htm (10-Q) — 1266KB
• aeye-20240630xex3d3.htm (EX-3.3) — 113KB
• aeye-20240630xex31d1.htm (EX-31.1) — 10KB
• aeye-20240630xex31d2.htm (EX-31.2) — 10KB
• aeye-20240630xex32d1.htm (EX-32.1) — 14KB
• aeye-20240630x10q001.jpg (GRAPHIC) — 10KB
• 0001410578-24-001118.txt ( ) — 4786KB
• aeye-20240630.xsd (EX-101.SCH) — 31KB
• aeye-20240630_cal.xml (EX-101.CAL) — 46KB
• aeye-20240630_def.xml (EX-101.DEF) — 106KB
• aeye-20240630_lab.xml (EX-101.LAB) — 307KB
• aeye-20240630_pre.xml (EX-101.PRE) — 203KB
• aeye-20240630x10q_htm.xml (XML) — 604KB

Financial Statements

Financial Statements 1 Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 (unaudited) 2 Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 (unaudited) 3 Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2024 and 2023 (unaudited) 4 Consolidated Statements of Cash Flows for the six months ended June 30, 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 21 Item 4.

Controls and Procedures

Controls and Procedures 21 PART II OTHER INFORMATION 22 Item 1.

Legal Proceedings

Legal Proceedings 22 Item 1A.

Risk Factors

Risk Factors 22 Item 2. Issuer Purchases of Equity Securities 22 Item 6. Exhibits 23

SIGNATURES

SIGNATURES 24 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 June 30, 2024 and December 31, 2023 and for the three- and six-month periods ended June 30, 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- and six-month periods ended June 30, 2024 are not necessarily indicative of results to be expected for any subsequent period. Our fiscal year end is December 31. 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) June 30, December 31, (in thousands, except per share data) 2024 2023 ASSETS Current assets: Cash $ 5,086 $ 9,236 Accounts receivable, net of allowance for doubtful accounts of $ 436 and $ 496 , respectively 5,420 4,828 Prepaid expenses and other current assets 1,050 712 Total current assets 11,556 14,776 Property and equipment, net of accumulated depreciation of $ 301 and $ 251 , respectively 222 218 Right of use assets 474 611 Intangible assets, net of accumulated amortization of $ 8,489 and $ 7,423 , respectively 5,628 5,783 Goodwill 4,001 4,001 Other 123 106 Total assets $ 22,004 $ 25,495 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 2,688 $ 2,339 Operating lease liabilities 211 312 Finance lease liabilities — 7 Deferred revenue 7,050 6,472 Contingent consideration — 2,399 Total current liabilities 9,949 11,529 Long term liabilities: Term loan, net 6,773 6,727 Operating lease liabilities 319 417 De

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 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 the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 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 periodic auditing, human-assisted technological remediations, legal support, and other professional 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 one-time website and mobile application reporting services, and is recognized upon delivery. Consideration payable under PDF remediation arrangements is based on usage. Consideration payable under non-subscription website and mobile application reporting services arrangements is based on fixed fees. The following table presents our revenues disaggregated by sales channel: Six months ended June 30, (in thousands) 2024 2023 Partner and Marketplace $ 9,70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 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 June 30, 2024 and December 31, 2023, which are included in Prepaid expenses and other current assets on our consolidated balance sheets: June 30, December 31, (in thousands) 2024 2023 Deferred costs — current $ 35 $ 20 Deferred costs — noncurrent 44 2 Total deferred costs $ 79 $ 22 Amortization expense associated with sales commissions was included in Selling and marketing expenses on the consolidated statements of operations and totaled $ 6,000 and $ 16,000 for the three- and six-month periods ended June 30, 2024, respectively, and $ 17,000 and $ 36,000 for the three- and six-month periods ended June 30, 2023, respectively. 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 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 and six months ended June 30, 2024 and 2023: Three months ended June 30, Six months ended June 30, (in thousands) 2024 2023 2024 2023 Options $ 1 $ 39 $ 5 $ 116 RSUs 853 900 1,666 1,887 Unrestricted shares of common stock 112 86 1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 (Unaudited) NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Potentially dilutive securities outstanding as of June 30, 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: June 30, (in thousands) 2024 2023 Options 80 134 Restricted stock units 1,470 1,903 Total 1,550 2,037 The following table summarizes the stock option and RSUs activity for the six months ended June 30, 2024: Options RSUs Outstanding at December 31, 2023 112,279 1,707,258 Granted — 200,170 Exercised/Settled ( 25,642 ) ( 376,176 ) Forfeited/Expired ( 6,740 ) ( 61,481 ) Outstanding at June 30, 2024 79,897 1,469,771 Vested at June 30, 2024 79,897 447,117 Unvested at June 30, 2024 — 1,022,654 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 six months ended June 30, 2024, we used $ 2.02 million of the program to repurchase shares. As of June 30, 2024, we had $ 1.86 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 adoption permitted.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 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 was 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. In the second quarter of 2024, we made a $ 2,387,000 cash payment to settl

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