8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

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Date of Report (Date of earliest event reported): November12, 2020

AUDIOEYE, INC.

(Exact name of registrant as specified in charter)

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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	Trading<br><br> <br>Symbol(s)	Name of each exchange<br><br> <br>on which registered
Common Stock, par value, $.00001 per share	AEYE	The Nasdaq Stock Market LLC
Title of each class	Trading Symbol
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Common Stock, par value, $.00001 per share	AEYE

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 Operationsand Financial Condition.

On November 12, 2020, AudioEye, Inc. (the “Company”) issued a press release reporting its financial results for the fiscal quarter ended September 30, 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 Statementsand Exhibits

(d)       Exhibits:

Exhibit Number	Description
99.1	Press Release of AudioEye, Inc. dated November 12, 2020 (furnished herewith)

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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.

November 12, 2020	AudioEye, Inc.
	(Registrant)
	By	/s/ Sachin Barot
	Name: Sachin Barot
	Title: Chief Financial Officer

Exhibit 99.1

AudioEyeReports Third Quarter 2020 Results

Record TotalCustomer Count, MRR and Total Revenue

TUCSON, Ariz. — November12, 2020 — AudioEye, Inc. (NASDAQ: AEYE), an industry-leading digital accessibility platform delivering website accessibility compliance to businesses of all sizes, reported financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 FinancialResults

●	Total revenue increased 92%<br> to a little over $5.3M from $2.8M in the same prior year period. The year-over-year increase<br> in revenue was primarily due to continued growth in the Company’s vertical partner<br> channel, coupled with new business and renewals in the enterprise channel.
●	As of September 30, 2020,<br> monthly recurring revenue (MRR) was about $1.7M, an increase of 67% on a year-over-year<br> basis.
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●	Gross profit increased 132%<br> to $3.8M (~71% of total revenue) from $1.6M (~59% of total revenue) in the same prior<br> year period. The increases in gross profit and gross margin were primarily due to increased<br> revenue and improvement in efficiencies being realized as the Company continues to improve<br> and expand the level of automation in its remediations, offset in part by higher costs<br> for investments to support the revenue growth.
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●	Operating expenses increased<br> 43% to $5.4M from $3.8M in the same prior year period. The increase in total operating<br> expenses was primarily due to increased investments in talent across various functions,<br> product development, sales, marketing, and severance.
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●	Net loss available to common<br> stockholders was $1.1M, or $(0.12) per share, compared to $2.2M, or $(0.27) per share,<br> in the same prior year period. The improvement in net loss reflects the increase in our<br> gross profit as we scale, and also benefit from warrant liability accounting, and partially<br> offset by higher equity compensation costs and severance related charges.
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●	On a Non-GAAP basis, net loss<br> available to common stockholders was about $200K, or $(0.02) per share. The Non-GAAP<br> earnings and EPS reflect adjustments as described further below under “Use of Non-GAAP<br> Financial Measures.”
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●	At quarter-end, the Company<br> had $10.3M in cash, compared to $2.1M at June 30, 2020. This cash balance reflects net<br> proceeds from a public offering of common stock and cash received from exercise of warrants<br> in the third quarter.
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●	As<br> of September 30, 2020, total customer count had grown to about 22,000 customers, which<br> was a 500% increase compared to September 30, 2019.
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●	The Company is reiterating<br> its expectation to grow MRR and become cash flow positive in 2021, subject to ongoing<br> economic conditions.
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Third Quarter and Recent OperationalHighlights

●	Added<br> key executives to help build on and execute upon on the strategic initiatives laid out<br> last November which are designed to accelerate growth in customers, MRR and gross margin:
○	Bryan Rodrigues joined<br> the company as Chief Marketing Officer. Bryan brings 20 years of technology marketing<br> leadership with strong depth in product marketing, branding and growth marketing, having<br> held leadership positions and key roles at Tile, Livescribe, Houghton Mifflin Harcourt,<br> Nike and The McKenna Group.
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○	Russell Griffin joined<br> the Company as Chief Revenue Officer. Russell brings over 15 years of executive sales<br> leadership and is responsible for executing on the Company’s go to market strategy.<br> He has held executive leadership positions at ShipStation and BigCommerce. Russell also<br> spent time at Dell, Rackspace, Pier 1 Hosting, and Hostway, building and developing strategic<br> partnerships and leading enterprise sales organizations.
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●	The Company and digital marketing<br> agency Neil Patel Digital announced their strategic partnership to integrate AudioEye’s<br> digital accessibility platform with Neil Patel’s Ubersuggest SEO platform to show<br> digital marketers how accessibility impacts the performance of SEO.
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●	Selected by HubSpot as the<br> digital accessibility provider for its annual INBOUND event, which was held virtually<br> for the first time. AudioEye’s Toolbar was visible to more than 42,000 attendees,<br> activated more than 14,000 times.
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●	Continued to position AudioEye<br> as a digital accessibility thought leader, with media coverage in targeted publications<br> (see https://www.audioeye.com/posts). Publications referencing or featuring AudioEye<br> included: Forbes, Fast Company, Rewire, EdScoop, Diverse Education and Thrive Global.
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●	Customer retention during<br> the third quarter remained high at an historic 90% rate.
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●	As many Enterprise organizations<br> continue to balance the still-uncertain impact of COVID-19, AudioEye continued to grow<br> its Enterprise (direct) sales channel client roster in the third quarter with prominent<br> new customers from the automotive, fashion and retail industries, among others.
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●	Continued to solidify existing<br> Vertical (indirect) channel partner relationships through deeper penetration within active<br> channel partners who offer AudioEye as a preferred digital accessibility solution to<br> their clients.
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Financial Outlook

The Company remains focused on growing monthly recurring revenue (MRR) as its leading financial indicator. The Company is reiterating its expectation to grow MRR and become cash flow positive in 2021. This expectation remains subject to the overall economic conditions.

Management Commentary

AudioEye’s Director and Interim CEO David Moradi said, “We continue to bring on top tier talent, invest in our scalable technology and expand our market leading position as we pursue our mission to eradicate barriers to digital access. AudioEye remains the market’s most trusted choice when it comes to digital accessibility compliance, as we deliver to our customers unique, truly comprehensive and sustainable digital accessibility solutions through our platform.”

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Executive Chairman Dr. Carr Bettis added, “Our positive momentum continued in the third quarter of 2020 with an increase in our total customer count to about 22,000 customers representing enterprise, vertical partner and marketplace/platform channels. We also saw an increase in total revenue, representing our 19^th^ straight quarter of revenue growth, and an increase in MRR, with MRR at the end of Q3 at approximately $1.7M, an increase of 67% on a year-over-year basis.”

Conference Call

AudioEye management will hold a conference call today, November 12, 2020 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results.

AudioEye management will host the conference 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 November 19, 2020.

Toll-free replay number: (844) 512-2921

International replay number: (412) 317-6671

Replay ID: 13712272

About AudioEye

AudioEye is an industry-leading digital accessibility platform delivering trusted ADA and WCAG accessibility compliance at scale. Through patented technology, subject matter expertise and proprietary processes, AudioEye is eradicating all barriers to digital access, helping creators get accessible and supporting them with ongoing advisory and automated upkeep. Trusted by the FCC, ADP, SSA, Samsung, 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.

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Forward-Looking Statements

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Any statements in this pressrelease about AudioEye’s expectations, beliefs, plans, objectives, prospects, financial condition, assumptions or futureevents or performance are not historical facts and are “forward-looking statements” as that term is defined underthe federal securities laws. Forward-looking statements are often, but not always, made through the use of words or phrases suchas “believe”, “anticipate”, “should”, “intend”, “plan”, “will”, “expects”, “estimates”, “projects”, “positioned”, “strategy”, “outlook”, “forecast” and similar words. You should read the statements that contain these types of words carefully. Such forward-lookingstatements contained herein include, but are not limited to, statements regarding anticipated contributions from less mature linesof business, long-term growth prospects, opportunities in the digital accessibility industry, our expectation that we will growMRR and be cash flow positive in 2021 and the COVID-19 related macroeconomic impact to our customers and to AudioEye. These statementsare subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from whatis expressed or implied in such forward-looking statements, including the variability of AudioEye’s revenue and financialperformance; risks associated with product development and technological changes; the acceptance of AudioEye’s productsin the marketplace by existing and potential future customers; competition; general economic conditions; and uncertainties regardingthe impact on our business and the overall economy from the coronavirus (COVID-19) outbreak. These and other risks are describedmore fully in AudioEye’s filings with the Securities and Exchange Commission (the “SEC”), including AudioEye’sAnnual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 30, 2020, Form 10-Q for the quarterended March 31, 2020 filed with the SEC on May 15, 2020, Form 10-Q for the quarter ended June 30, 2020 filed with the SEC on August13, 2020 and its subsequent filings with the SEC. There may be events in the future that AudioEye is not able to predict accuratelyor over which AudioEye has no control. Forward-looking statements reflect management’s view as of the date of this pressrelease, and AudioEye urges you not to place undue reliance on these forward-looking statements. AudioEye does not undertake anyobligation to update such forward-looking statements to reflect new information, future events or uncertainties or otherwise afterthe date hereof.

About Key Operating Metrics

We consider monthly recurringrevenue (“MRR”) as a key operating metric and a key indicator of our overall business. We also use MRR as (i) oneof the primary methods for planning and forecasting overall expectations and for evaluating, on at least a quarterly and annualbasis, actual results against such expectations; and (ii) as a performance metric for certain executive share-based compensationawards.

We define MRR as the sum of (i) forour enterprise and agency sales channels, the total of the average monthly fee amount under each active paid contract at the dateof determination, plus (ii) for our vertical partners, marketplace and platform sales channels, the recognized monthly feeamount for all paying customers at the date of determination, in each case, assuming no changes to the subscription and withouttaking into account any usage above the subscription or recurring revenue base, if any, that may be applicable to such subscription.This determination includes both annual and monthly contracts for recurring products. Some of our contracts are cancelable, whichmay impact future MRR. MRR excludes revenue from our PDF remediation services business.

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Vertical Partner is a CMS provideror a company which provides a web-hosting platform for private and public entities and resells the AudioEye Managed service asan accessibility service offering to its customers. CMS providers who are focused on a specific industry vertical are referredto as Vertical Partners by AudioEye. CMS providers who are vertical agnostic are referred to as Platform partners by AudioEye.

Use ofNon-GAAP Financial Measures

From time to time, we reviewadjusted financial measures that assist us in comparing our operating performance consistently over time, as such measures removethe impact of certain items, as applicable, such as our capital structure (primarily interest charges), items outside the controlof the management team (taxes), and expenses that do not relate to our core operations, including transaction-related expenses(such as professional and advisory services) and other costs that are expected to be non-recurring. In order to provide investorswith greater insight, and allow for a more comprehensive understanding of the information used in our financial and operationaldecision-making, the Company has supplemented the information presented on a GAAP basis in this press release with the followingnon-GAAP financial measures: Non-GAAP earnings (loss) and Non-GAAP earnings (loss) per diluted share.

These non-GAAP financial measureshave limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of Company resultsas reported under GAAP. The Company compensates for such limitations by relying primarily on our GAAP results and using non-GAAPfinancial measures only as supplemental data. We also provide a reconciliation of non-GAAP to GAAP measures used. Investors areencouraged to carefully review this reconciliation. In addition, because these non-GAAP measures are not measures of financialperformance under GAAP and are susceptible to varying calculations, these measures, as defined by us, may differ from and maynot be comparable to similarly titled measures used by other companies.

We define: (i) Non-GAAPearnings (loss) as net income (loss), less non-cash valuation adjustments to liabilities, plus interest expense, plus share-basedcompensation expense and plus certain severance expense; and (ii) Non-GAAP earnings (loss) per diluted share as net income(loss) per diluted common share, less non-cash valuation adjustments to liabilities, plus interest expense, plus share-based compensationexpense and plus certain severance expense, each on a per share basis. Non-GAAP earnings per diluted share would include incrementalshares in the share count that are considered anti-dilutive in a GAAP net loss position. However, no incremental shares applywhen there is a Non-GAAP loss per diluted share, as is the case for the periods presented in this press release.

Non-GAAP earnings (loss) andNon-GAAP earnings (loss) per diluted share are used to facilitate a comparison of our operating performance on a consistent basisfrom period to period and provide for a more complete understanding of factors and trends affecting our business than GAAP measuresalone. All of the items adjusted in the Non-GAAP earnings (loss) to net loss and the related per share calculations are eitherrecurring non-cash items, or items that management does not consider in assessing our on-going operating performance. Inthe case of the non-cash items, such as share-based compensation expense and valuation adjustments to assets and liabilities,management believes that investors may find it useful to assess our comparative operating performance because the measures withoutsuch items are less susceptible to variances in actual performance resulting from expenses that do not relate to our core operationsand are more reflective of other factors that affect operating performance. In the case of items that do not relate to our coreoperations, management believes that investors may find it useful to assess our operating performance if the measures are presentedwithout these items because their financial impact does not reflect ongoing operating performance.

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Non-GAAP earnings (loss) is nota measure of liquidity under GAAP, or otherwise, and is not an alternative to cash flow from continuing operating activities,despite the advantages regarding the use and analysis of these measures as mentioned above. Non-GAAP earnings (loss) and Non-GAAPearnings (loss) per diluted share, as disclosed in this press release, have limitations as analytical tools, and you should notconsider these measures in isolation or as a substitute for analysis of our results as reported under GAAP; nor are these measuresintended to be measures of liquidity or free cash flow for our discretionary use.

To properly and prudently evaluateour business, we encourage readers to review the GAAP financial statements included elsewhere in this press release, and not relyon any single financial measure to evaluate our business. Reconciliations of Non-GAAP earnings (loss) to net loss, the most directlycomparable GAAP-based measure, as well as Non-GAAP earnings (loss) per diluted share to net loss per diluted share, the most directlycomparable GAAP-based measure, are included in this press release. We strongly urge readers to review these reconciliations, alongwith the consolidated financial statements included elsewhere in this press release.

Corporate Contact:

AudioEye, Inc.

Dr. Carr Bettis, Executive Chairman

cbettis@audioeye.com

Investor Contact:

Matt Glover or Tom Colton

AEYE@gatewayir.com

(949) 574-3860

-FinancialTables to Follow-

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AUDIOEYE,INC.

CONSOLIDATEDSTATEMENTS OF OPERATIONS

(unaudited)

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	Three<br> months ended September 30,						Nine<br> months ended September 30,
(in thousands, except per share<br> data)	2020			2019			2020			2019
Revenue	$	5,341		$	2,776		$	14,885		$	7,198
Cost of revenue		1,551			1,147			4,478			3,193
Gross profit		3,790			1,629			10,407			4,005
Operating expenses:
Selling and marketing		2,028			1,598			5,551			4,257
Research and development		203			149			801			442
General<br> and administrative		3,197			2,040			8,185			5,624
Total operating expenses		5,428			3,787			14,537			10,323
Operating loss		(1,638	)		(2,158	)		(4,130	)		(6,318	)
Other income (expense):
Change in fair value of warrant<br> liability		593			-			120			-
Interest<br> expense		(35	)		(37	)		(141	)		(39	)
Total other income (expense)		558			(37	)		(21	)		(39	)
Net loss		(1,080	)		(2,195	)		(4,151	)		(6,357	)
Dividends on Series A Convertible<br> Preferred Stock		(13	)		(13	)		(39	)		(39	)
Net loss available to common<br> stockholders	$	(1,093	)	$	(2,208	)	$	(4,190	)	$	(6,396	)
Net loss per common share-basic<br> and diluted	$	(0.12	)	$	(0.27	)	$	(0.46	)	$	(0.81	)
Weighted average common shares outstanding-basic<br> and diluted		9,385			8,279			9,067			7,848

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AUDIOEYE,INC.

CONSOLIDATEDBALANCE SHEETS (unaudited)

			December 31,
(in thousands, except per share<br> data)			2019
ASSETS
Current assets:
Cash	10,295		$	1,972
Accounts receivable, net of allowance<br> for doubtful accounts of 79 and 63, respectively	3,457			2,958
Unbilled receivables	34			160
Deferred costs, short term	179			183
Debt issuance costs, net	-			137
Prepaid<br> expenses and other current assets	219			198
Total current assets	14,184			5,608
Property and equipment, net of accumulated depreciation<br> of 179 and 124, respectively	121			156
Right of use assets	671			827
Deferred costs, long term	102			145
Intangible assets, net of accumulated amortization<br> of 4,294 and 3,710, respectively	1,931			1,715
Goodwill	701			701
Total<br> assets	17,710		$	9,152
LIABILITIES AND STOCKHOLDERS'<br> EQUITY
Current liabilities:
Accounts payable and accrued<br> expenses	1,588		$	973
Finance lease liabilities	57			52
Operating lease liabilities	223			209
Warrant liability	-			120
Deferred<br> revenue	5,587			5,372
Total current liabilities	7,455			6,726
Long term liabilities:
Finance lease liabilities	23			52
Operating lease liabilities	486			655
Deferred revenue	110			153
Term loan	1,302			-
Total liabilities	9,376			7,586
Stockholders' equity:
Preferred stock, 0.00001 par<br> value, 10,000 shares authorized
Series A Convertible Preferred<br> Stock, 0.00001 par value, 200 shares designated, 100 and 105 shares issued and outstanding as of September 30, 2020 and December<br> 31, 2019, respectively	1			1
Common stock, 0.00001 par<br> value, 50,000 shares authorized, 9,921 and 8,877 shares issued and outstanding as of September 30, 2020 and December 31,<br> 2019, respectively	1			1
Additional paid-in capital	62,409			51,490
Accumulated<br> deficit	(54,077	)		(49,926	)
Total stockholders' equity	8,334			1,566
Total<br> liabilities and stockholders' equity	17,710		$	9,152

All values are in US Dollars.

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AUDIOEYE,INC.

RECONCILIATIONSOF GAAP to NON-GAAP FINANCIAL MEASURES

(unaudited)

	Three<br> months ended September 30,						Nine<br> months ended September 30,
(in thousands, except per share<br> data)	2020			2019			2020			2019
Non-GAAP Earnings (Loss) Reconciliation
Net loss (GAAP)	$	(1,080	)	$	(2,195	)	$	(4,151	)	$	(6,357	)
Non-cash valuation adjustments<br> to liabilities		(593	)		-			(120	)		-
Interest expense		35			37			141			39
Share-based compensation expense		1,089			273			2,004			997
Severance<br> (1)		360			-			360			-
Non-GAAP earnings (loss)	$	(189	)	$	(1,885	)	$	(1,766	)	$	(5,321	)
Non-GAAP Earnings (Loss) per Diluted<br> Share Reconciliation
Net loss per common share (GAAP) — diluted	$	(0.12	)	$	(0.27	)	$	(0.46	)	$	(0.81	)
Non-cash valuation adjustments<br> to liabilities		(0.06	)		-			(0.01	)		-
Interest expense		-			-			0.02			-
Share-based compensation expense		0.12			0.04			0.22			0.13
Severance<br> (1)		0.04			-			0.04			-
Non-GAAP earnings (loss) per<br> diluted share (2)	$	(0.02	)	$	(0.23	)	$	(0.19	)	$	(0.68	)
Diluted weighted average shares (3)		9,385			8,279			9,067			7,848
(1)	Represents<br> severance expense associated with the move of our technology center to Portland, Oregon,<br> and is exclusive of accrued vacation paid upon termination of employment.
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(2)	Non-GAAP<br> earnings per adjusted diluted share for our common stock is computed using the more dilutive<br> of the two-class method or the if-converted method.
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(3)	The<br> number of diluted weighted average shares used for this calculation is the same as the<br> weighted average common shares outstanding share count when the Company reports a GAAP<br> and non-GAAP net loss.
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