8-K
Audioeye Inc (AEYE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May14, 2020
AUDIOEYE,INC.
(Exact name of registrant as specified in charter)
| Delaware | 20-2939845 |
|---|---|
| State of Other Jurisdiction of Incorporation | IRS Employer Identification No. |
5210 E. Williams Circle, Suite 750
Tucson, Arizona 85711
(Address of principal executive offices / Zip Code)
(866) 331-5324
(Registrant’s telephone number, including area code)
Check the appropriate box below if theForm 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act. |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act. |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act. |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act. |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class Common | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Stock, par value $0.00001<br><br> <br>per share | AEYE | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On May 14, 2020, AudioEye, Inc. (the “Company”) issued a press release reporting its financial results for the fiscal quarter ended March 31, 2020. A copy of the Company’s press release is furnished herewith as Exhibit 99.1.
The information set forth in this Item 2.02 and in Exhibit 99.1 attached hereto is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01. | Financial Statements and Exhibits |
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(d) Exhibits:
| Exhibit Number | Description |
|---|---|
| 99.1 | Press<br> Release of AudioEye, Inc. dated May 14, 2020 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| May 14, 2020 | AudioEye, Inc.<br><br> <br>(Registrant)<br><br> <br><br><br> <br>By /s/ Heath Thompson<br><br> <br>Name: Heath Thompson<br><br> <br>Tittle: Chief Executive Officer |
|---|
Exhibit 99.1
AudioEye Reports First Quarter 2020Results
Seventeenth Straight Quarter of RecordRevenue and Continued New Customer Adoption Drives Significantly Improved Profitability Metrics
TUCSON, Ariz. —****May 14, 2020 — AudioEye, Inc. (NASDAQ: AEYE), an industry-leading software solution provider delivering website accessibility compliance to businesses of all sizes, reported financial results for the first quarter ended March 31, 2020.
First Quarter 2020Financial Results and April Update
| ● | Total revenue increased 115% to a record $4.3M from $2M<br> in the same period a year ago. The increase in revenue was primarily due to continued<br> growth in the Company’s enterprise and vertical partner channels during the period. |
|---|---|
| ● | As of March 31, 2020, monthly recurring revenue (MRR)<br> was approximately $1.4M, which was an increase of 17% compared to approximately $1.2M<br> at December 31, 2019. |
| --- | --- |
| ● | Gross profit increased over 170% to $2.9M (~69% of total<br> revenue) from $1.1M (~54% of total revenue) in the same year-ago period. The increase<br> in gross profit and gross margin was primarily due to increased efficiencies being realized<br> as the Company continues to improve and expand the level of automation in its remediations<br> as well as an increase in revenues. |
| --- | --- |
| ● | Operating expenses increased 45% to $4.6M from $3.2M<br> in the same year-ago period. The increase in total operating expenses was primarily due<br> to increases in sales and marketing expenses as well as research and development and<br> general and administrative expenses. |
| --- | --- |
| ● | Net loss available to common stockholders was $1.7M,<br> or $(0.19) per share, compared to $2.1M, or $(0.28) per share, in the same year-ago period.<br> The improved net loss was primarily due to increased efficiencies being realized as the<br> Company continues to improve and expand the level of automation in its remediations as<br> well as an increase in revenues, which was offset by an increase in total operating expenses. |
| --- | --- |
| ● | At quarter-end, the Company had $1.8M in cash, compared<br> to $2M at December 31, 2019, and no debt. |
| --- | --- |
| ● | Bookings increased 14% to $3.9M from $3.4M in the same<br> year-ago period. The increase in bookings was primarily due to consistent performance<br> in the Company’s enterprise channel and execution against the current sales pipeline<br> as well as improved performance within the Company’s vertical partner channel through<br> deeper penetration within existing partners. |
| --- | --- |
● Deferred revenue increased 83% to $5.3M from $2.9M in the first quarter of 2019.
| ● | Contracts in excess of revenue and deferred revenue increased<br> 88% to $17.2M from $9.2M in the same period last year. |
|---|---|
| ● | As of March 31, 2020, total customer count had grown<br> to over 11,000 customers, which was an over 60% increase compared to the prior quarter<br> and a more than 900% increase compared to the first quarter of 2019. |
| --- | --- |
| ● | As of April 30, 2020, total customer count had grown<br> to over 16,000 customers, and MRR was approximately $1.5M. |
|---|---|
| ● | The Company is reiterating its expectation to achieve<br> cash flow positivity in 2021, assuming normal economic conditions. |
| --- | --- |
First Quarter and Recent Operational Highlights
| ● | Appointed Heath Thompson as Chief Executive Officer,<br> who brings nearly three decades of leadership and engineering experience from organizations<br> ranging from start-ups to large global corporations and possesses a deep background in<br> SaaS and software product businesses. |
|---|---|
| ● | Launched machine-learning powered AudioEye Digital Marketplace,<br> a suite of digital accessibility solutions enabling companies of all sizes to accelerate<br> accessibility easily and affordably. |
| --- | --- |
| ● | Launched free 90-day trial of the AudioEye Pro solution<br> to assist companies managing through COVID-19. |
| --- | --- |
| ● | Continued to position AudioEye as the digital accessibility<br> thought leader, with media coverage in publications targeted to key audiences, including<br> business owners and website designers: Digital Trends; Social Selling News; Information<br> Week and Small Biz Resources. |
| --- | --- |
| ● | Continued to grow Enterprise (direct) sales channel client<br> roster in the first quarter with prominent new customers from the consumer goods, construction,<br> major electronics, state government agencies, financial institutions, and the automotive<br> space among others. |
| --- | --- |
| ● | Continued to solidify existing vertical (indirect) channel<br> partner relationships. Currently, 20 active channel partners offer AudioEye as a preferred<br> digital accessibility solution to their clients. |
| --- | --- |
Financial Outlook
The Company remains confident in its long-term growth prospects as well as the opportunities in the digital accessibility industry as a whole. Both the Board of Directors and Company management remain focused on growing monthly recurring revenue (MRR) as its leading financial indicator. Under normal economic conditions, the Company is reiterating its expectation to achieve cash flow positivity in 2021. This forecast remains subject to change and does not factor in a significant, long-term macroeconomic impact to AudioEye or its customer base as a result of COVID-19.
Management Commentary
AudioEye Executive Chairman Carr Bettis said, “We came into the year with significant sales momentum and increasing channel partner adoption, which continued to build in the first quarter. At March 31, we counted over 11,000 customers and, by the end of April, that number had grown to over 16,000 customers, which is an order of magnitude greater than even just a few quarters ago. We were able to drive our 17^th^ consecutive quarter of record revenue while expanding our margins considerably to nearly 70% and incrementally reducing our cash usage. At March 31, 2020 MRR was $1.4M and at April 30, 2020 was approximately $1.5M. We are reiterating our expectation that under normal economic conditions we expect to be cash flow positive in 2021.”
AudioEye Chief Executive Officer Heath Thompson added, “While we are continuing to perform within our pre-COVID projections, like any business and similar to our customers, we are not entirely immune to the effects of a global pandemic or a related macroeconomic slowdown. However, with the rapid digital transformation taking place across all commercial activity, the need for accessible solutions has become greater than ever, and we’re looking forward to leading that charge.”
Conference Call
AudioEye management will hold a conference call today, May 14, 2020 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results.
AudioEye management will host the call, followed by a question and answer period.
U.S. dial-in number: (877) 407-9208
International number: (201) 493-6784
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at (949) 574-3860.
The conference call will also be webcast live and available for replay, which will be accessible via the investor relations section of the company’s website. The audio recording will remain available via the investor relations section of the company’s website for 90 days.
A telephonic replay of the conference call will also be available after 7:30 p.m. Eastern time on the same day through May 21, 2020.
Toll-free replay number: (844) 512-2921
International replay number: (412) 317-6671
Replay ID: 13701570
About AudioEye
AudioEye is an industry-leading software solution provider delivering immediate ADA and WCAG accessibility compliance at scale. Through patented technology, subject matter expertise and proprietary processes, AudioEye is eradicating all barriers to digital accessibility, helping creators get accessible and supporting them with ongoing advisory and automated upkeep. Trusted by the FCC, ADP, SSA, Uber, and more, AudioEye helps everyone identify and resolve issues of accessibility and enhance user experiences, automating digital accessibility for the widest audiences. AudioEye stands out among its competitors because it delivers Machine Learning/AI-driven accessibility without fundamental changes to site architecture. Join our movement at www.audioeye.com.
Forward-Looking Statements
Any statements in this press release about AudioEye’sexpectations, beliefs, plans, objectives, prospects, financial condition, assumptions or future events or performance are not historicalfacts and are “forward-looking statements” as that term is defined under the federal securities laws. Forward-lookingstatements are often, but not always, made through the use of words or phrases such as “believe”, “anticipate”, “should”, “intend”, “plan”, “will”, “expects”, “estimates”, “projects”, “positioned”, “strategy”, “outlook” , “forecast” and similarwords. You should read the statements that contain these types of words carefully. Such forward-looking statements contained hereininclude, but are not limited to, statements regarding anticipated contributions from less mature lines of business, long-term growthprospects, opportunities in the digital accessibility industry, and our expectation that we will be cash flow positive by the middleof 2021 and the impact from Covid-19 related macroeconomic impact to our customers and to AudioEye. These statements are subjectto a number of risks, uncertainties and other factors that could cause actual results to differ materially from what is expressedor implied in such forward-looking statements, including the variability of AudioEye’s revenue and financial performance;risks associated with product development and technological changes; the acceptance of AudioEye’s products in the marketplaceby existing and potential future customers; competition; general economic conditions; and uncertainties regarding the impact onour business and the overall economy from the coronavirus (COVID-19) outbreak. These and other risks are described more fully inAudioEye’s filings with the Securities and Exchange Commission (the “SEC”), including AudioEye’s AnnualReport on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 30, 2020. There may be events in the futurethat AudioEye is not able to predict accurately or over which AudioEye has no control. Forward-looking statements reflect management’sview as of the date of this press release, and AudioEye urges you not to place undue reliance on these forward-looking statements.AudioEye does not undertake any obligation to update such forward-looking statements to reflect events or uncertainties after thedate hereof.
About Key Operating Metrics
To supplement our financial information presented in accordancewith generally accepted accounting principles in the United States (GAAP), we consider certain operating measures that are notGAAP measures, including monthly recurring revenue, bookings and contracts in excess of revenue and deferred revenue. AudioEyereviews a number of operating metrics such as these to evaluate its business, measure performance, identify trends, formulate businessplans, and make strategic decisions.
We believe these metrics and measures are useful to facilitateperiod-to-period comparisons of our business and to facilitate comparisons of our performance to that of other similar companies.
AudioEye’s bookings represent the contracted amountof money the customer commits to spend with the Company over an agreed amount of time, generally ranging from 12 months up to60 months.
AudioEye’s contracts in excess of revenue and deferredrevenue is the remaining bookings that have not yet been recognized as revenue or deferred revenue. This measure represents thecontractually agreed amount of money that is remaining to be recognized as revenue under contracts and that will be recognizedin subsequent periods, as company fulfills its service obligations.
Monthly recurring revenue for a paid customer account isa contractual determination made by assessing the contractual terms of each paid customer account, as of the date of determination,as to the revenue we expect to generate on an average monthly basis for that paid customer account, assuming no changes to thesubscription and without taking into account any usage above the subscription base, if any, that may be applicable to such subscription.
Vertical Partner is a CMS provider ora company which provides a web-hosting platform for private and public entities and resells the AudioEye Managed service as anaccessibility service offering to its customers. CMS providers who are focused on a specific industry vertical are referred toas Vertical Partners by AudioEye. CMS providers who are vertical agnostic are referred to as Platform partners by AudioEye.
Corporate Contact:
AudioEye, Inc.
Dr. Carr Bettis, Executive Chairman
Investor Contact:
Matt Glover or Tom Colton
(949) 574-3860
-Financial Tables to Follow-
AUDIOEYE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Three months ended March 31, | ||||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
| (In thousands, except for per share data) | ||||||
| Revenue | $ | 4,261 | $ | 1,986 | ||
| Cost of revenue | 1,320 | 922 | ||||
| Gross profit | 2,941 | 1,064 | ||||
| Operating expenses: | ||||||
| Selling and marketing | 1,818 | 1,313 | ||||
| Research and development | 333 | 142 | ||||
| General and administrative | 2,486 | 1,749 | ||||
| Total operating expenses | 4,637 | 3,204 | ||||
| Operating loss | (1,696 | ) | (2,140 | ) | ||
| Other income (expense): | ||||||
| Change in fair value of warrant liability | 28 | - | ||||
| Interest (expense) income, net | 4 | (1 | ) | |||
| Total other (loss) income | 32 | (1 | ) | |||
| Net loss | (1,664 | ) | (2,141 | ) | ||
| Dividends on Series A Convertible preferred stock | (13 | ) | (13 | ) | ||
| Net loss available to common stockholders | $ | (1,677 | ) | $ | (2,154 | ) |
| Net loss per common share-basic and diluted | $ | (0.19 | ) | $ | (0.28 | ) |
| Weighted average common shares outstanding-basic and diluted | 8,877 | 7,611 |
AUDIOEYE, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
| December 31, | |||||
|---|---|---|---|---|---|
| 2019 | |||||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | 1,785 | $ | 1,972 | ||
| Accounts receivable, net | 2,505 | 2,958 | |||
| Unbilled Receivables | 483 | 160 | |||
| Deferred costs, short term | 181 | 183 | |||
| Debt issuance costs, net | 82 | 137 | |||
| Prepaid expenses and other current assets | 234 | 198 | |||
| Total current assets | 5,270 | 5,608 | |||
| Property and equipment, net | 138 | 156 | |||
| Right of use assets | 776 | 827 | |||
| Deferred costs, long term | 137 | 145 | |||
| Intangible assets, net | 1,655 | 1,715 | |||
| Goodwill | 701 | 701 | |||
| Total assets | 8,677 | $ | 9,152 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable and accrued expenses | 2,235 | $ | 973 | ||
| Finance lease liabilities | 53 | 52 | |||
| Operating lease liabilities | 214 | 209 | |||
| Warrant liability | 92 | 120 | |||
| Deferred revenue | 5,143 | 5,372 | |||
| Total current liabilities | 7,737 | 6,726 | |||
| Long term liabilities: | |||||
| Finance lease liabilities | 41 | 52 | |||
| Operating lease liabilities | 600 | 655 | |||
| Deferred revenue | 141 | 153 | |||
| Total liabilities | 8,519 | 7,586 | |||
| Stockholders' equity: | |||||
| Preferred stock, 0.00001 par value, 10,000 shares authorized | |||||
| Series A Convertible Preferred stock, 0.00001 par value, 200 shares authorized, 105 shares issued and outstanding as of March 31, 2020 and December 31, 2019 | 1 | 1 | |||
| Common stock, 0.00001 par value, 50,000 shares authorized, 8,877 shares issued and outstanding as of March 31, 2020 and December 31, 2019 | 1 | 1 | |||
| Additional paid-in capital | 51,746 | 51,490 | |||
| Accumulated deficit | (51,590 | ) | (49,926 | ) | |
| Total stockholders' equity | 158 | 1,566 | |||
| Total liabilities and stockholders' equity | 8,677 | $ | 9,152 |
All values are in US Dollars.