Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2021 | Nov. 01, 2021 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2021 | |
Entity File Number | 001-38640 | |
Entity Registrant Name | AudioEye, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 20-2939845 | |
Entity Address, Address Line One | 5210 East Williams Circle | |
Entity Address, Address Line Two | Suite 750 | |
Entity Address, City or Town | Tucson | |
Entity Address, State or Province | AZ | |
Entity Address, Postal Zip Code | 85711 | |
City Area Code | 866 | |
Local Phone Number | 331-5324 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Trading Symbol | AEYE | |
Security Exchange Name | NASDAQ | |
Entity Central Index Key | 0001362190 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q3 | |
Title of 12(b) Security | Common Stock, par value $0.00001 per share | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 11,354,397 |
BALANCE SHEETS
BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash | $ 21,953 | $ 9,095 |
Accounts receivable, net of allowance for doubtful accounts of $195 and $79, respectively | 3,798 | 5,096 |
Deferred costs, short term | 120 | 152 |
Prepaid expenses and other current assets | 594 | 288 |
Total current assets | 26,465 | 14,631 |
Property and equipment, net of accumulated depreciation of $187 and $209, respectively | 173 | 91 |
Right of use assets | 452 | 617 |
Deferred costs, long term | 49 | 77 |
Intangible assets, net of accumulated amortization of $5,211 and $4,328, respectively | 2,524 | 2,137 |
Goodwill | 701 | 701 |
Total assets | 30,364 | 18,254 |
Current liabilities: | ||
Accounts payable and accrued expenses | 3,131 | 2,190 |
Finance lease liabilities | 62 | 49 |
Operating lease liabilities | 246 | 229 |
Deferred revenue | 6,075 | 6,328 |
Term loan, short term | 0 | 219 |
Total current liabilities | 9,514 | 9,015 |
Long term liabilities: | ||
Finance lease liabilities | 57 | 12 |
Operating lease liabilities | 240 | 427 |
Deferred revenue | 20 | 83 |
Term loan, long term | 0 | 1,083 |
Total liabilities | 9,831 | 10,620 |
Stockholders' equity: | ||
Common stock, $0.00001 par value, 50,000 shares authorized, 11,352 and 10,130 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 1 | 1 |
Additional paid-in capital | 86,822 | 64,716 |
Accumulated deficit | (66,290) | (57,084) |
Total stockholders' equity | 20,533 | 7,634 |
Total liabilities and stockholders' equity | 30,364 | 18,254 |
Series A Preferred Stock | ||
Stockholders' equity: | ||
Preferred stock, value | $ 0 | $ 1 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Allowance for doubtful accounts | $ 195 | $ 79 |
Property plant and equipment, accumulated depreciation | 187 | 209 |
Intangible assets, accumulated amortization | $ 5,211 | $ 4,328 |
Preferred Stock, Par or Stated Value Per Share | $ 0.00001 | $ 0.00001 |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 |
Common Stock, Par or Stated Value Per Share | $ 0.00001 | $ 0.00001 |
Common Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Common Stock, Shares, Issued | 11,352,000 | 10,130,000 |
Common Stock, Shares, Outstanding | 11,352,000 | 10,130,000 |
Series A Preferred Stock | ||
Preferred Stock, Par or Stated Value Per Share | $ 0.00001 | $ 0.00001 |
Preferred Stock, Shares Authorized | 200,000 | 200,000 |
Preferred Stock, Shares Issued | 0 | 90,000 |
Preferred Stock, Shares Outstanding | 0 | 90,000 |
STATEMENTS OF OPERATIONS
STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
STATEMENTS OF OPERATIONS | ||||
Revenue | $ 6,202 | $ 5,341 | $ 18,011 | $ 14,885 |
Cost of revenue | 1,567 | 1,551 | 4,432 | 4,478 |
Gross profit | 4,635 | 3,790 | 13,579 | 10,407 |
Operating expenses: | ||||
Selling and marketing | 4,504 | 2,028 | 10,638 | 5,551 |
Research and development | 1,611 | 203 | 3,950 | 801 |
General and administrative | 3,175 | 3,197 | 9,502 | 8,185 |
Total operating expenses | 9,290 | 5,428 | 24,090 | 14,537 |
Operating loss | (4,655) | (1,638) | (10,511) | (4,130) |
Other income (expense): | ||||
Change in fair value of warrant liability | 0 | 593 | 0 | 120 |
Gain on loan forgiveness | 0 | 0 | 1,316 | 0 |
Interest expense | (2) | (35) | (11) | (141) |
Total other income (expense) | (2) | 558 | 1,305 | (21) |
Net loss | (4,657) | (1,080) | (9,206) | (4,151) |
Dividends on Series A Convertible Preferred Stock | 0 | (13) | (69) | (39) |
Net loss available to common stockholders | $ (4,657) | $ (1,093) | $ (9,275) | $ (4,190) |
Net loss per common share-basic | $ (0.41) | $ (0.12) | $ (0.85) | $ (0.46) |
Net loss per common share-diluted | $ (0.41) | $ (0.12) | $ (0.85) | $ (0.46) |
Weighted average common shares outstanding-basic | 11,329 | 9,385 | 10,929 | 9,067 |
Weighted average common shares outstanding-diluted | 11,329 | 9,385 | 10,929 | 9,067 |
STATEMENTS OF STOCKHOLDERS' EQU
STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common Stock | Preferred Stock | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2019 | $ 1 | $ 1 | $ 51,490 | $ (49,926) | $ 1,566 |
Balance (in shares) at Dec. 31, 2019 | 8,877 | 105 | |||
Stock-based compensation | 256 | 256 | |||
Net loss | (1,664) | (1,664) | |||
Balance at Mar. 31, 2020 | $ 1 | $ 1 | 51,746 | (51,590) | 158 |
Balance (in shares) at Mar. 31, 2020 | 8,877 | 105 | |||
Balance at Dec. 31, 2019 | $ 1 | $ 1 | 51,490 | (49,926) | 1,566 |
Balance (in shares) at Dec. 31, 2019 | 8,877 | 105 | |||
Net loss | (4,151) | ||||
Balance at Sep. 30, 2020 | $ 1 | $ 1 | 62,409 | (54,077) | 8,334 |
Balance (in shares) at Sep. 30, 2020 | 9,921 | 100 | |||
Balance at Mar. 31, 2020 | $ 1 | $ 1 | 51,746 | (51,590) | 158 |
Balance (in shares) at Mar. 31, 2020 | 8,877 | 105 | |||
Common stock issued upon conversion of preferred stock (in shares) | 14 | (5) | |||
Common stock issued in exchange for exercise of warrants and options on a cashless basis (in shares) | 177 | ||||
Common stock issued in exchange for options exercised on a cash basis | 44 | 44 | |||
Common stock issued in exchange for options exercised on a cash basis (in shares) | 45 | ||||
Stock-based compensation | 659 | 659 | |||
Net loss | (1,407) | (1,407) | |||
Balance at Jun. 30, 2020 | $ 1 | $ 1 | 52,449 | (52,997) | (546) |
Balance (in shares) at Jun. 30, 2020 | 9,113 | 100 | |||
Issuance of common stock for cash, net of transaction expenses | 7,824 | 7,824 | |||
Issuance of common stock for cash, net of transaction expenses (in shares) | 473 | ||||
Common stock issued in exchange for exercise of warrants and options on a cashless basis (in shares) | 21 | ||||
Common stock issued upon settlement of restricted stock units (in shares) | 89 | ||||
Common stock issued in exchange for options exercised on a cash basis | 1,047 | 1,047 | |||
Common stock issued in exchange for options exercised on a cash basis (in shares) | 225 | ||||
Stock-based compensation | 1,089 | 1,089 | |||
Net loss | (1,080) | (1,080) | |||
Balance at Sep. 30, 2020 | $ 1 | $ 1 | 62,409 | (54,077) | 8,334 |
Balance (in shares) at Sep. 30, 2020 | 9,921 | 100 | |||
Balance at Dec. 31, 2020 | $ 1 | $ 1 | 64,716 | (57,084) | 7,634 |
Balance (in shares) at Dec. 31, 2020 | 10,130 | 90 | |||
Issuance of common stock for cash, net of transaction expenses | 16,534 | 16,534 | |||
Issuance of common stock for cash, net of transaction expenses (in shares) | 472 | ||||
Common stock issued upon exercise of warrants and options on a cash basis | 148 | 148 | |||
Common stock issued upon exercise of warrants and options on a cash basis (in shares) | 22 | ||||
Common stock issued upon exercise of warrants and options on a cashless basis (in shares) | 121 | ||||
Common stock issued upon settlement of restricted stock units (in shares) | 92 | ||||
Issuance of common stock for services (in shares) | 2 | ||||
Surrender of stock to cover tax liability on settlement of employee stock-based awards | (373) | (373) | |||
Surrender of stock to cover tax liability on settlement of employee stock-based awards (in share) | (16) | ||||
Stock-based compensation | 1,781 | 1,781 | |||
Net loss | (2,765) | (2,765) | |||
Balance at Mar. 31, 2021 | $ 1 | $ 1 | 82,806 | (59,849) | 22,959 |
Balance (in shares) at Mar. 31, 2021 | 10,823 | 90 | |||
Balance at Dec. 31, 2020 | $ 1 | $ 1 | 64,716 | (57,084) | 7,634 |
Balance (in shares) at Dec. 31, 2020 | 10,130 | 90 | |||
Net loss | (9,206) | ||||
Balance at Sep. 30, 2021 | $ 1 | 86,822 | (66,290) | 20,533 | |
Balance (in shares) at Sep. 30, 2021 | 11,352 | ||||
Balance at Mar. 31, 2021 | $ 1 | $ 1 | 82,806 | (59,849) | 22,959 |
Balance (in shares) at Mar. 31, 2021 | 10,823 | 90 | |||
Common stock issued upon conversion of preferred stock | $ (1) | 1 | |||
Common stock issued upon conversion of preferred stock (in shares) | 279 | (90) | |||
Common stock issued upon exercise of warrants and options on a cash basis | 255 | 255 | |||
Common stock issued upon exercise of warrants and options on a cash basis (in shares) | 53 | ||||
Common stock issued upon exercise of warrants and options on a cashless basis (in shares) | 33 | ||||
Common stock issued upon settlement of restricted stock units (in shares) | 78 | ||||
Issuance of common stock for services (in shares) | 13 | ||||
Surrender of stock to cover tax liability on settlement of employee stock-based awards | (39) | (39) | |||
Surrender of stock to cover tax liability on settlement of employee stock-based awards (in share) | (2) | ||||
Stock-based compensation | 1,763 | 1,763 | |||
Net loss | (1,784) | (1,784) | |||
Balance at Jun. 30, 2021 | $ 1 | 84,786 | (61,633) | 23,154 | |
Balance (in shares) at Jun. 30, 2021 | 11,277 | ||||
Common stock issued upon exercise of warrants and options on a cash basis | 218 | 218 | |||
Common stock issued upon exercise of warrants and options on a cash basis (in shares) | 47 | ||||
Common stock issued upon settlement of restricted stock units (in shares) | 22 | ||||
Issuance of common stock for services (in shares) | 11 | ||||
Surrender of stock to cover tax liability on settlement of employee stock-based awards | (63) | (63) | |||
Surrender of stock to cover tax liability on settlement of employee stock-based awards (in share) | (5) | ||||
Stock-based compensation | 1,881 | 1,881 | |||
Net loss | (4,657) | (4,657) | |||
Balance at Sep. 30, 2021 | $ 1 | $ 86,822 | $ (66,290) | $ 20,533 | |
Balance (in shares) at Sep. 30, 2021 | 11,352 |
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (9,206,000) | $ (4,151,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 957,000 | 639,000 |
Loss on impairment of long-lived assets | 10,000 | 0 |
Loss on disposal of property and equipment | 12,000 | 0 |
Stock-based compensation expense | 5,425,000 | 2,004,000 |
Amortization of deferred commissions | 145,000 | 162,000 |
Amortization of debt issuance costs | 0 | 137,000 |
Amortization of right of use assets | 165,000 | 156,000 |
Change in fair value of warrant liability | 0 | (120,000) |
Gain on loan forgiveness | (1,316,000) | 0 |
Provision for accounts receivable | 111,000 | 109,000 |
Changes in operating assets and liabilities: | ||
Accounts receivable and unbilled receivables | 1,187,000 | (482,000) |
Prepaid expenses and other assets | (391,000) | (136,000) |
Accounts payable and accruals | 916,000 | 615,000 |
Operating lease liability | (170,000) | (155,000) |
Deferred revenue | (316,000) | 172,000 |
Net cash used in operating activities | (2,471,000) | (1,050,000) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of equipment | (7,000) | 0 |
Software development costs | (1,213,000) | (659,000) |
Patent costs | (67,000) | (141,000) |
Net cash used in investing activities | (1,287,000) | (800,000) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from common stock offering, net of transaction costs | 16,534,000 | 7,824,000 |
Proceeds from term loan | 0 | 1,302,000 |
Proceeds from exercise of options and warrants | 621,000 | 1,091,000 |
Payments related to settlement of employee shared-based awards | (475,000) | 0 |
Repayments of finance leases | (64,000) | (44,000) |
Net cash provided by financing activities | 16,616,000 | 10,173,000 |
Net increase in cash | 12,858,000 | 8,323,000 |
Cash-beginning of period | 9,095,000 | 1,972,000 |
Cash-end of period | $ 21,953,000 | $ 10,295,000 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2021 | |
BASIS OF PRESENTATION | |
BASIS OF PRESENTATION | NOTE 1 — BASIS OF PRESENTATION The accompanying unaudited interim financial statements of AudioEye, 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 financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 Form 10-K”), as filed with the SEC on March 11, 2021. 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 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. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Our significant accounting policies are presented in “Note 3 – Significant Accounting Policies” in the 2020 Form 10-K. Users of financial information for interim periods are encouraged to refer to the footnotes to the financial statements contained in the 2020 Form 10-K when reviewing interim financial results. Use of Estimates The preparation of 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 related disclosures at the date of the financial statements and during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to stock-based compensation, capitalization of software development costs, allowance for doubtful accounts, and impairment of long-lived assets and goodwill. Actual results may differ from these estimates. Revenue Recognition We derive our revenue primarily from the sale of internally-developed software by a software-as-a-service (“SaaS”) delivery model, as well as from professional services support, through our direct sales force or through third-party resellers. Our SaaS fees include continuous support and maintenance. We recognize revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers We determine revenue recognition through the following five steps: ● Identify the contract with the customer; ● Identify the performance obligations in the contract; NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ● Determine the transaction price; ● Allocate the transaction price to the performance obligations in the contract; and ● Recognize revenue when, or as, the performance obligations are satisfied. 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 (also referred to as “subscription”) revenue is comprised of fixed subscription fees from customer accounts on our platform. SaaS 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 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 Mobile App report and is recognized upon delivery. Consideration payable under these arrangements is based on usage. The following table presents our revenues disaggregated by sales channel: Nine months ended September 30, (in thousands) 2021 2020 Partner and Marketplace $ 9,936 $ 6,781 Enterprise 8,075 8,104 Total revenues $ 18,011 $ 14,885 The Company records accounts receivable for amounts invoiced to customers for which the Company has an unconditional right to consideration as provided under the contractual arrangement. Unbilled receivables include amounts related to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. Deferred revenue includes payments received in advance of performance under the contract. Our unbilled receivables and deferred revenue are reported on an individual contract basis at the end of each reporting period. Unbilled receivables are classified as current or noncurrent based on the timing of when we expect to bill the customer. Deferred revenue is classified as current or noncurrent based on the timing of when we expect to recognize revenue. The table below summarizes our deferred revenue as of September 30, 2021 and December 31, 2020: September 30, December 31, (in thousands) 2021 2020 Deferred revenue - current $ 6,075 $ 6,328 Deferred revenue - noncurrent 20 83 Total deferred revenue $ 6,095 $ 6,411 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) In the nine-month period ended September 30, 2021 we recognized $5,642,000, or 88%, in revenue from deferred revenue outstanding as of December 31, 2020. In the three months ended September 30, 2021, two customers (including affiliates of such customers) accounted for 20% and 11%, respectively, of our total revenue. In the nine months ended September 30, 2021, two customers (including affiliates of such customers) accounted for 20% and 10%, respectively, of our total revenue. In the three months ended September 30, 2020, two customers accounted for 15% and 11%, respectively, of our total revenue. In the nine months ended September 30, 2020, one customer accounted for 16% of our total revenue. Three customers represented 19%, 14% and 11%, respectively, of total accounts receivable as of September 30, 2021. Three customers with long standing relationships with the Company represented 25%, 13% and 13%, respectively, of total accounts receivable as of December 31, 2020. Deferred Costs (Contract acquisition costs) We capitalize initial and renewal sales commissions in the period in which 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, except when the commission payment is expected to provide economic benefit for a period longer than the contract term, such as for new customer or incremental sales where renewals are expected, and renewal commissions are not commensurate with initial commissions. 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 September 30, 2021 and December 31, 2020: September 30, December 31, (in thousands) 2021 2020 Deferred costs - current $ 120 $ 152 Deferred costs - noncurrent 49 77 Total deferred costs $ 169 $ 229 Amortization expense associated with sales commissions was included in selling and marketing expenses on the statements of operations and totaled $46,000 and $145,000 for the three- and nine-month periods ended September 30, 2021, respectively, and $51,000 and $162,000 for the three- and nine-month periods ended September 30, 2020, respectively. There were no impairment losses for these capitalized costs for the three and nine months ended September 30, 2021 and 2020. Stock-Based Compensation The Company periodically issues options, warrants, restricted stock units (“RSUs”), and shares of its common stock as compensation for services received from its employees, directors, and consultants. The fair value of the award is measured on the grant date. The fair value amount is then recognized as expense over the requisite vesting period during which services are required to be provided in exchange for the award. Stock-based compensation expense is recorded by the Company in the same expense classifications in the statements of operations as if such amounts were paid in cash. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The fair value of options and warrants awards is measured on the grant date using a Black-Scholes option pricing model, which includes assumptions that are subjective and are generally derived from external data (such as risk-free rate of interest) and historical data (such as volatility factor, expected term, and forfeiture rates). Future grants of equity awards accounted for as stock-based compensation could have a material impact on reported expenses depending upon their number, value, and vesting period. 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, warrants and RSUs as the restriction period lapses, which is typically a one The following table summarizes the stock-based compensation expense recorded for the three and nine months ended September 30, 2021 and 2020: Three months ended September 30, Nine months ended September 30, (in thousands) 2021 2020 2021 2020 Stock Options $ 143 $ 79 $ 518 $ 200 RSUs 1,602 1,010 4,484 1,804 Unrestricted Shares of Common Stock 136 — 423 — Total $ 1,881 $ 1,089 $ 5,425 $ 2,004 As of September 30, 2021, the outstanding unrecognized stock-based compensation expense related to options and RSUs was $1,060,000 and $12,799,000, respectively, which may be recognized through March 2026, subject to achievement of service, performance, and market conditions. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) In the first quarter of 2021, we granted 100,000 RSUs with performance-based and market-based conditions to our Interim Chief Executive Officer (“CEO”). The performance condition for 50,000 of such RSUs is based on the achievement of Monthly Recurring Revenue (“MRR”) targets. In the nine months ended September 30, 2021, stock-based compensation expense associated with performance-based RSUs awarded to our CEO in current and previous years was zero and $411,000, respectively. We did not record any stock-based compensation expense related to the 50,000 performance-based RSUs awarded to our CEO in 2021 as the achievement of performance targets during the requisite period was not deemed probable. The Company will continue to reassess the probability of achieving the performance conditions on any RSUs that remain outstanding in future periods and record the appropriate expense if necessary. The market condition for the remaining 50,000 RSUs in the award is based on the Company’s stock price targets. The Company used a Monte Carlo simulation to determine the grant-date fair value for the market-based RSUs. The weighted-average assumptions used in the Monte-Carlo simulation were as follows: 5-year historical volatility of 116.95%, 5-year risk-free rate of 0.79%, and a performance period of 5 years. The Company recorded $1,509,000 in stock-based compensation expense associated to market-based RSUs in the nine months ended September 30, 2021, $506,000 of which were related to RSUs granted in the current fiscal year. Earnings (Loss) Per Share (“EPS”) Basic EPS is calculated by dividing net income (loss) available to common stockholders by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted EPS is calculated based on the net income (loss) available to common stockholders and the weighted average number of shares of common stock outstanding during the period, adjusted for the effects of all potential dilutive common stock issuances related to options, warrants, restricted stock units and convertible preferred stock. The dilutive effect of our stock-based awards and warrants is computed using the treasury stock method, which assumes all stock-based awards and warrants are exercised and the hypothetical proceeds from exercise are used to purchase common stock at the average market price during the period. The incremental shares (i.e., the difference between shares assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted EPS calculation. The dilutive effect of our convertible preferred stock is computed using the if-converted method, which assumes conversion at the beginning of the year. However, when a net loss exists, no potential common stock equivalents are included in the computation of the diluted per-share amount because the computation would result in an anti-dilutive per-share amount. Potentially dilutive securities outstanding as of September 30, 2021 and 2020, which were excluded from the computation of basic and diluted net loss per share for the years then ended, are as follows: September 30, ( in thousands) 2021 2020 Preferred stock (1) — 290 Options 213 683 Warrants 41 85 Restricted stock units 1,217 846 Total 1,471 1,904 (1) Represents number of shares of common stock that are issuable upon conversion of outstanding shares of Series A Convertible Preferred Stock. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The following table summarizes the stock option, warrants, and RSUs activity for the nine months ended September 30, 2021: Options Warrants RSUs Outstanding at December 31, 2020 516,911 81,053 958,378 Granted 39,186 — 597,055 Exercised/Settled (265,118) (32,480) (192,218) Forfeited/Expired (78,093) (7,200) (145,726) Outstanding at September 30, 2021 212,886 41,373 1,217,489 Vested at September 30, 2021 78,903 41,373 336,701 Unvested at September 30, 2021 133,983 — 880,788 |
CAPITAL RAISE AND LIQUIDITY
CAPITAL RAISE AND LIQUIDITY | 9 Months Ended |
Sep. 30, 2021 | |
CAPITAL RAISE AND LIQUIDITY | |
CAPITAL RAISE AND LIQUIDITY | NOTE 3 — CAPITAL RAISE AND LIQUIDITY On February 11, 2021, we entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (“Agent”) under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock to or through the Agent as its sales agent, having an aggregate offering price of up to $30,000,000. In the nine months ended September 30, 2021, we sold a total of 471,970 shares of common stock under this Sales Agreement for total proceeds of approximately $16.5 million, net of estimated transaction costs. |
LEASE LIABILITIES AND RIGHT OF
LEASE LIABILITIES AND RIGHT OF USE ASSETS | 9 Months Ended |
Sep. 30, 2021 | |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | NOTE 4 — LEASE LIABILITIES AND RIGHT OF USE ASSETS We determine whether an arrangement is a lease at inception. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Finance Leases The Company has finance leases to purchase computer equipment. The amortization expense of the leased equipment is included in depreciation expense. As of September 30, 2021 and December 31, 2020, the Company’s outstanding finance lease obligations totaled $119,000 and $61,000, respectively. The effective interest rate of the finance leases is estimated at 6.0% based on the implicit rate in the lease agreements. The following summarizes the assets acquired under finance leases, included in property and equipment: September 30, December 31, (in thousands) 2021 2020 Computer equipment $ 256 $ 177 Less: accumulated depreciation (140) (116) Assets acquired under finance leases, net $ 116 $ 61 NOTE 4 — LEASE LIABILITIES AND RIGHT OF USE ASSETS (continued) Operating Leases Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Since our lease arrangements do not provide an implicit rate, we use our estimated incremental borrowing rate for the expected remaining lease term at commencement date in determining the present value of future lease payments. Operating lease expense is recognized on a straight-line basis over the lease term. The Company has operating leases for office space in Tucson, Arizona and Marietta, Georgia. In addition, the Company entered into membership agreements to occupy shared office space in New York, Austin, Texas, Portland, Oregon, and Seattle, Washington. The membership agreements do not qualify as a lease under ASC 842, therefore the Company expenses membership fees as they are incurred. See Note 8 - Commitments and Contingencies for further details on our shared office arrangements. The Company made operating lease payments in the amount of $196,000 during the nine months ended September 30, 2021. The following summarizes the total lease liabilities and remaining future minimum lease payments at September 30, 2021 (in thousands): Year ending December 31, Finance Leases Operating Leases Total 2021 (3 months remaining) $ 19 $ 66 $ 85 2022 61 257 318 2023 40 118 158 2024 7 81 88 Total minimum lease payments 127 522 649 Less: present value discount (8) (36) (44) Total lease liabilities 119 486 605 Current portion of lease liabilities 62 246 308 Long term portion of lease liabilities $ 57 $ 240 $ 297 The following summarizes expenses associated with our finance and operating leases for the nine months ended September 30, 2021 (in thousands): Finance lease expenses: Depreciation expense $ 60 Interest on lease liabilities 6 Total Finance lease expense 66 Operating lease expense 192 Short-term lease and related expenses 174 Total lease expenses $ 432 NOTE 4 — LEASE LIABILITIES AND RIGHT OF USE ASSETS (continued) The following table provides information about the remaining lease terms and discount rates applied as of September 30, 2021: Weighted average remaining lease term (years) Operating Leases 2.31 Finance Leases 2.10 Weighted average discount rate (%) Operating Leases 6.00 Finance Leases 6.00 |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2021 | |
DEBT | |
DEBT | NOTE 5 — DEBT Term loan On April 15, 2020, the Company entered into a loan agreement in the amount of $1,302,000 with Liberty Capital Bank (“Lender”) pursuant to the Paycheck Protection Program (“PPP Loan”) of the CARES Act, which is administered by the Small Business Administration (“SBA”). The loan had a maturity of two years and bore an interest rate of 1.0% per annum. In the second quarter of 2021, the SBA approved the Company’s PPP Loan forgiveness application and paid to the Lender the full amount of the PPP Loan and accrued interest thereon on the Company’s behalf, releasing AudioEye from any obligations. In connection with the full forgiveness of the outstanding principal and interest on our PPP Loan, we recorded a $1,316,000 gain on loan forgiveness in the nine months ended September 30, 2021. |
SERIES A CONVERTIBLE PREFERRED
SERIES A CONVERTIBLE PREFERRED STOCK | 9 Months Ended |
Sep. 30, 2021 | |
Series A Preferred Stock | |
Class of Stock [Line Items] | |
SERIES A CONVERTIBLE PREFERRED STOCK | NOTE 6 — SERIES A CONVERTIBLE PREFERRED STOCK In the second quarter of 2021, all 90,000 shares of the outstanding Series A Convertible Preferred Stock (the “Preferred Stock”) were converted to common stock prior to their authorized redemption date of May 25, 2021, as previously announced by the Company. In connection with the Preferred Stock conversion, we issued 279,137 shares of our common stock. As of September 30, 2021, there were no shares of Preferred Stock outstanding. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2021 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 7 — RELATED PARTY TRANSACTIONS In the second quarter of 2021, we terminated the lease with a company controlled by our Executive Chairman and closed our Scottsdale, AZ office. For the three- and nine-month period ended September 30, 2021, rent payments for this office space totaled zero and $24,000, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2021 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 8 — COMMITMENTS AND CONTINGENCIES Membership agreement to occupy shared office space The Company occupies shared office space in Austin, TX, and Seattle, WA under membership agreements which end in May 2022 and July 2022, respectively. Fees due under these membership agreements are based on the number of contracted seats and the use of optional office services. As of September 30, 2021, minimum fees due under these shared office arrangements totaled $81,000 . NOTE 8 — COMMITMENTS AND CONTINGENCIES (continued) Litigation We may become involved in various routine disputes and allegations incidental to our business operations. While it is not possible to determine the ultimate disposition of these matters, management believes that the resolution of any such matters, should they arise, is not likely to have a material adverse effect on our financial position or results of operations. On October 26, 2020, AudioEye filed a complaint (amended on December 29, 2020) against accessiBe Ltd. (“accessiBe”) in District Court in the Western District of Texas, Waco Division. The complaint alleges infringement of nine of AudioEye’s patents and various claims under the Lanham Act and New York law and seeks damages, costs, and injunctive relief. On November 1, 2021, accessiBe answered denying infringement, alleging invalidity of the patents at issue and counterclaimed with similar claims and remedies. On July 14, 2021, AudioEye filed a second complaint (amended on August 4, 2021) against accessiBe in the same court alleging infringement of six of AudioEye’s patents and seeking damages, costs, and injunctive relief. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2021 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 9 — SUBSEQUENT EVENTS We have evaluated subsequent events occurring after September 30, 2021 and based on our evaluation we did not identify any events that would have required recognition or disclosure in these financial statements, except for the following: In October 2021, we assumed two lease agreements for office space in Miami Beach, Florida, from Sero Capital, LLC (“Sero Capital”), a stockholder who owns more than 10% of the outstanding shares of common stock of the Company. The sole member of Sero Capital is David Moradi, a director and the Company’s Interim Chief Executive Officer and Chief Strategy Officer. Because the office space is predominately used by Mr. Moradi for his work with the Company and is used by other key company executives, the audit committee deemed the lease and the related expense to be appropriately borne by the Company. The audit committee also determined that the material terms of the lease were market and no less favorable than the Company could have received on an arm’s length basis. The lease agreements assigned to the Company expire in May 2024 and provide for aggregate future lease payments totaling $554,000. In connection with the assignment of the leases, the Company paid Sero Capital $32,000 for the assignment of its rights to the security deposit. In November 2021, at the request of David Moradi, the Compensation Committee cancelled the 100,000 RSUs with performance-based and market-based conditions that had been granted to him in the first quarter of 2021. No consideration was provided in exchange for the cancellation, which was performed to replenish the shares available under the 2020 Equity Incentive Plan for additional awards to Company employees. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Use of Estimates | Use of Estimates The preparation of 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 related disclosures at the date of the financial statements and during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to stock-based compensation, capitalization of software development costs, allowance for doubtful accounts, and impairment of long-lived assets and goodwill. Actual results may differ from these estimates. |
Revenue Recognition | Revenue Recognition We derive our revenue primarily from the sale of internally-developed software by a software-as-a-service (“SaaS”) delivery model, as well as from professional services support, through our direct sales force or through third-party resellers. Our SaaS fees include continuous support and maintenance. We recognize revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers We determine revenue recognition through the following five steps: ● Identify the contract with the customer; ● Identify the performance obligations in the contract; NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ● Determine the transaction price; ● Allocate the transaction price to the performance obligations in the contract; and ● Recognize revenue when, or as, the performance obligations are satisfied. 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 (also referred to as “subscription”) revenue is comprised of fixed subscription fees from customer accounts on our platform. SaaS 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 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 Mobile App report and is recognized upon delivery. Consideration payable under these arrangements is based on usage. The following table presents our revenues disaggregated by sales channel: Nine months ended September 30, (in thousands) 2021 2020 Partner and Marketplace $ 9,936 $ 6,781 Enterprise 8,075 8,104 Total revenues $ 18,011 $ 14,885 The Company records accounts receivable for amounts invoiced to customers for which the Company has an unconditional right to consideration as provided under the contractual arrangement. Unbilled receivables include amounts related to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. Deferred revenue includes payments received in advance of performance under the contract. Our unbilled receivables and deferred revenue are reported on an individual contract basis at the end of each reporting period. Unbilled receivables are classified as current or noncurrent based on the timing of when we expect to bill the customer. Deferred revenue is classified as current or noncurrent based on the timing of when we expect to recognize revenue. The table below summarizes our deferred revenue as of September 30, 2021 and December 31, 2020: September 30, December 31, (in thousands) 2021 2020 Deferred revenue - current $ 6,075 $ 6,328 Deferred revenue - noncurrent 20 83 Total deferred revenue $ 6,095 $ 6,411 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) In the nine-month period ended September 30, 2021 we recognized $5,642,000, or 88%, in revenue from deferred revenue outstanding as of December 31, 2020. In the three months ended September 30, 2021, two customers (including affiliates of such customers) accounted for 20% and 11%, respectively, of our total revenue. In the nine months ended September 30, 2021, two customers (including affiliates of such customers) accounted for 20% and 10%, respectively, of our total revenue. In the three months ended September 30, 2020, two customers accounted for 15% and 11%, respectively, of our total revenue. In the nine months ended September 30, 2020, one customer accounted for 16% of our total revenue. Three customers represented 19%, 14% and 11%, respectively, of total accounts receivable as of September 30, 2021. Three customers with long standing relationships with the Company represented 25%, 13% and 13%, respectively, of total accounts receivable as of December 31, 2020. |
Deferred Costs (Contract acquisition costs) | Deferred Costs (Contract acquisition costs) We capitalize initial and renewal sales commissions in the period in which 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, except when the commission payment is expected to provide economic benefit for a period longer than the contract term, such as for new customer or incremental sales where renewals are expected, and renewal commissions are not commensurate with initial commissions. 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 September 30, 2021 and December 31, 2020: September 30, December 31, (in thousands) 2021 2020 Deferred costs - current $ 120 $ 152 Deferred costs - noncurrent 49 77 Total deferred costs $ 169 $ 229 Amortization expense associated with sales commissions was included in selling and marketing expenses on the statements of operations and totaled $46,000 and $145,000 for the three- and nine-month periods ended September 30, 2021, respectively, and $51,000 and $162,000 for the three- and nine-month periods ended September 30, 2020, respectively. There were no impairment losses for these capitalized costs for the three and nine months ended September 30, 2021 and 2020. |
Stock-Based Compensation | Stock-Based Compensation The Company periodically issues options, warrants, restricted stock units (“RSUs”), and shares of its common stock as compensation for services received from its employees, directors, and consultants. The fair value of the award is measured on the grant date. The fair value amount is then recognized as expense over the requisite vesting period during which services are required to be provided in exchange for the award. Stock-based compensation expense is recorded by the Company in the same expense classifications in the statements of operations as if such amounts were paid in cash. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The fair value of options and warrants awards is measured on the grant date using a Black-Scholes option pricing model, which includes assumptions that are subjective and are generally derived from external data (such as risk-free rate of interest) and historical data (such as volatility factor, expected term, and forfeiture rates). Future grants of equity awards accounted for as stock-based compensation could have a material impact on reported expenses depending upon their number, value, and vesting period. 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, warrants and RSUs as the restriction period lapses, which is typically a one The following table summarizes the stock-based compensation expense recorded for the three and nine months ended September 30, 2021 and 2020: Three months ended September 30, Nine months ended September 30, (in thousands) 2021 2020 2021 2020 Stock Options $ 143 $ 79 $ 518 $ 200 RSUs 1,602 1,010 4,484 1,804 Unrestricted Shares of Common Stock 136 — 423 — Total $ 1,881 $ 1,089 $ 5,425 $ 2,004 As of September 30, 2021, the outstanding unrecognized stock-based compensation expense related to options and RSUs was $1,060,000 and $12,799,000, respectively, which may be recognized through March 2026, subject to achievement of service, performance, and market conditions. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) In the first quarter of 2021, we granted 100,000 RSUs with performance-based and market-based conditions to our Interim Chief Executive Officer (“CEO”). The performance condition for 50,000 of such RSUs is based on the achievement of Monthly Recurring Revenue (“MRR”) targets. In the nine months ended September 30, 2021, stock-based compensation expense associated with performance-based RSUs awarded to our CEO in current and previous years was zero and $411,000, respectively. We did not record any stock-based compensation expense related to the 50,000 performance-based RSUs awarded to our CEO in 2021 as the achievement of performance targets during the requisite period was not deemed probable. The Company will continue to reassess the probability of achieving the performance conditions on any RSUs that remain outstanding in future periods and record the appropriate expense if necessary. The market condition for the remaining 50,000 RSUs in the award is based on the Company’s stock price targets. The Company used a Monte Carlo simulation to determine the grant-date fair value for the market-based RSUs. The weighted-average assumptions used in the Monte-Carlo simulation were as follows: 5-year historical volatility of 116.95%, 5-year risk-free rate of 0.79%, and a performance period of 5 years. The Company recorded $1,509,000 in stock-based compensation expense associated to market-based RSUs in the nine months ended September 30, 2021, $506,000 of which were related to RSUs granted in the current fiscal year. |
Earnings (Loss) Per Share ("EPS") | Earnings (Loss) Per Share (“EPS”) Basic EPS is calculated by dividing net income (loss) available to common stockholders by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted EPS is calculated based on the net income (loss) available to common stockholders and the weighted average number of shares of common stock outstanding during the period, adjusted for the effects of all potential dilutive common stock issuances related to options, warrants, restricted stock units and convertible preferred stock. The dilutive effect of our stock-based awards and warrants is computed using the treasury stock method, which assumes all stock-based awards and warrants are exercised and the hypothetical proceeds from exercise are used to purchase common stock at the average market price during the period. The incremental shares (i.e., the difference between shares assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted EPS calculation. The dilutive effect of our convertible preferred stock is computed using the if-converted method, which assumes conversion at the beginning of the year. However, when a net loss exists, no potential common stock equivalents are included in the computation of the diluted per-share amount because the computation would result in an anti-dilutive per-share amount. Potentially dilutive securities outstanding as of September 30, 2021 and 2020, which were excluded from the computation of basic and diluted net loss per share for the years then ended, are as follows: September 30, ( in thousands) 2021 2020 Preferred stock (1) — 290 Options 213 683 Warrants 41 85 Restricted stock units 1,217 846 Total 1,471 1,904 (1) Represents number of shares of common stock that are issuable upon conversion of outstanding shares of Series A Convertible Preferred Stock. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The following table summarizes the stock option, warrants, and RSUs activity for the nine months ended September 30, 2021: Options Warrants RSUs Outstanding at December 31, 2020 516,911 81,053 958,378 Granted 39,186 — 597,055 Exercised/Settled (265,118) (32,480) (192,218) Forfeited/Expired (78,093) (7,200) (145,726) Outstanding at September 30, 2021 212,886 41,373 1,217,489 Vested at September 30, 2021 78,903 41,373 336,701 Unvested at September 30, 2021 133,983 — 880,788 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of disaggregation of revenue | The following table presents our revenues disaggregated by sales channel: Nine months ended September 30, (in thousands) 2021 2020 Partner and Marketplace $ 9,936 $ 6,781 Enterprise 8,075 8,104 Total revenues $ 18,011 $ 14,885 |
Schedule of deferred revenue | The table below summarizes our deferred revenue as of September 30, 2021 and December 31, 2020: September 30, December 31, (in thousands) 2021 2020 Deferred revenue - current $ 6,075 $ 6,328 Deferred revenue - noncurrent 20 83 Total deferred revenue $ 6,095 $ 6,411 |
Schedule of commission cost | The table below summarizes the deferred commission costs as of September 30, 2021 and December 31, 2020: September 30, December 31, (in thousands) 2021 2020 Deferred costs - current $ 120 $ 152 Deferred costs - noncurrent 49 77 Total deferred costs $ 169 $ 229 |
Schedule of stock-based compensation expense | Three months ended September 30, Nine months ended September 30, (in thousands) 2021 2020 2021 2020 Stock Options $ 143 $ 79 $ 518 $ 200 RSUs 1,602 1,010 4,484 1,804 Unrestricted Shares of Common Stock 136 — 423 — Total $ 1,881 $ 1,089 $ 5,425 $ 2,004 |
Schedule of antidilutive securities outstanding excluded from computation of earnings Per share | Potentially dilutive securities outstanding as of September 30, 2021 and 2020, which were excluded from the computation of basic and diluted net loss per share for the years then ended, are as follows: September 30, ( in thousands) 2021 2020 Preferred stock (1) — 290 Options 213 683 Warrants 41 85 Restricted stock units 1,217 846 Total 1,471 1,904 (1) Represents number of shares of common stock that are issuable upon conversion of outstanding shares of Series A Convertible Preferred Stock. |
Summary the stock option, warrants, and RSUs activity | The following table summarizes the stock option, warrants, and RSUs activity for the nine months ended September 30, 2021: Options Warrants RSUs Outstanding at December 31, 2020 516,911 81,053 958,378 Granted 39,186 — 597,055 Exercised/Settled (265,118) (32,480) (192,218) Forfeited/Expired (78,093) (7,200) (145,726) Outstanding at September 30, 2021 212,886 41,373 1,217,489 Vested at September 30, 2021 78,903 41,373 336,701 Unvested at September 30, 2021 133,983 — 880,788 |
LEASE LIABILITIES AND RIGHT O_2
LEASE LIABILITIES AND RIGHT OF USE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | |
Schedule of finance leased assets included in property plant and equipment | The following summarizes the assets acquired under finance leases, included in property and equipment: September 30, December 31, (in thousands) 2021 2020 Computer equipment $ 256 $ 177 Less: accumulated depreciation (140) (116) Assets acquired under finance leases, net $ 116 $ 61 |
Schedule of total remaining future minimum lease payments for finance leases | The following summarizes the total lease liabilities and remaining future minimum lease payments at September 30, 2021 (in thousands): Year ending December 31, Finance Leases Operating Leases Total 2021 (3 months remaining) $ 19 $ 66 $ 85 2022 61 257 318 2023 40 118 158 2024 7 81 88 Total minimum lease payments 127 522 649 Less: present value discount (8) (36) (44) Total lease liabilities 119 486 605 Current portion of lease liabilities 62 246 308 Long term portion of lease liabilities $ 57 $ 240 $ 297 |
Schedule of lease expense | The following summarizes expenses associated with our finance and operating leases for the nine months ended September 30, 2021 (in thousands): Finance lease expenses: Depreciation expense $ 60 Interest on lease liabilities 6 Total Finance lease expense 66 Operating lease expense 192 Short-term lease and related expenses 174 Total lease expenses $ 432 |
Schedule of lease terms and discount rates | The following table provides information about the remaining lease terms and discount rates applied as of September 30, 2021: Weighted average remaining lease term (years) Operating Leases 2.31 Finance Leases 2.10 Weighted average discount rate (%) Operating Leases 6.00 Finance Leases 6.00 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Disaggregate revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||
Partner and Marketplace | $ 9,936 | $ 6,781 | ||
Enterprise | 8,075 | 8,104 | ||
Total revenues | $ 6,202 | $ 5,341 | $ 18,011 | $ 14,885 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Deferred Revenue, by Arrangement (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Deferred revenue - current | $ 6,075 | $ 6,328 |
Deferred revenue - noncurrent | 20 | 83 |
Total deferred revenue | $ 6,095 | $ 6,411 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Deferred commission cost (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Deferred costs - current | $ 120 | $ 152 |
Deferred costs - noncurrent | 49 | 77 |
Accounting Standards Update 2014-09 [Member] | ||
Deferred costs - current | 120 | 152 |
Deferred costs - noncurrent | 49 | 77 |
Total deferred costs | $ 169 | $ 229 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Stock compensation expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Allocated Share-based Compensation Expense | $ 1,881 | $ 1,089 | $ 5,425 | $ 2,004 |
Stock Options | ||||
Allocated Share-based Compensation Expense | 143 | 79 | 518 | 200 |
Restricted Stock Units | ||||
Allocated Share-based Compensation Expense | 1,602 | 1,010 | 4,484 | 1,804 |
Common Stock | ||||
Allocated Share-based Compensation Expense | $ 136 | $ 0 | $ 423 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares shares in Thousands | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 1,471 | 1,904 |
Preferred Stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 0 | 290 |
Stock Options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 213 | 683 |
Warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 41 | 85 |
Restricted Stock Units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 1,217 | 846 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Summary of Stock Option, Warrants, and RSUs Activity (Details) | 9 Months Ended |
Sep. 30, 2021shares | |
Stock Options | |
Number of Options | |
Balance at beginning of the period (in shares) | 516,911 |
Granted | 39,186 |
Exercised/Settled | (265,118) |
Forfeited/Expired | (78,093) |
Balance at end of the period (in shares) | 212,886 |
Vested (in shares) | 78,903 |
Unvested (in shares) | 133,983 |
Number of warrants | |
Exercised/Settled | (133,983) |
Warrants | |
Number of warrants | |
Balance at beginning of the period (In shares) | 81,053 |
Exercised/Settled | (32,480) |
Forfeited/Expired | (7,200) |
Balance at end of the period (In shares) | 41,373 |
Vested (in shares) | 41,373 |
Unvested (in shares) | 41,373 |
Restricted Stock Units | |
Number of Options | |
Unvested (in shares) | 192,218 |
Number of warrants | |
Balance at end of the period (In shares) | 880,788 |
Balance at beginning of the period (In shares) | 958,378 |
Granted | 597,055 |
Exercised/Settled | (192,218) |
Forfeited/Expired | (145,726) |
Balance at end of the period (In shares) | 1,217,489 |
Vested (in shares) | 336,701 |
Unvested (in shares) | 880,788 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | |
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Deferred revenue recognized to revenue | $ 5,642,000 | ||||||
Deferred revenue recognized through the period (as a percent) | 88.00% | ||||||
Amortization of Deferred Sales Commissions | $ 46,000 | $ 51,000 | 145,000 | $ 162,000 | |||
Impairment loss | 0 | 0 | 0 | 0 | |||
Stock-based compensation expense | 1,881,000 | $ 1,089,000 | 5,425,000 | $ 2,004,000 | |||
Stock Options | |||||||
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Outstanding unamortized share-based compensation expense | 1,060,000 | 1,060,000 | |||||
Restricted Stock Units | |||||||
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Outstanding unamortized share-based compensation expense | $ 12,799,000 | $ 12,799,000 | |||||
Performance-based and market-based conditions | |||||||
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 50,000 | 506,000 | |||||
Stock-based compensation expense | $ 1,509,000 | ||||||
Performance-based and market-based conditions | Interim Chief Executive Officer | |||||||
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 100,000 | ||||||
Performance Based Restricted Stock Units (RSUs) [Member] | |||||||
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Volatility rate | 116.95% | ||||||
Risk free interest rate | 0.79% | ||||||
Performance period | 5 years | ||||||
Stock-based compensation expense | $ 50,000 | ||||||
Performance Based Restricted Stock Units (RSUs) [Member] | Interim Chief Executive Officer | |||||||
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Stock-based compensation expense | $ 411,000 | $ 0 | |||||
Monthly Recurring Revenue Targets, Restricted Stock Units [Member] | Interim Chief Executive Officer | |||||||
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 50,000 | ||||||
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Major Customer Number One [Member] | |||||||
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Concentration Risk, Percentage | 20.00% | 15.00% | 20.00% | 16.00% | |||
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | Major Customer Number Two [Member] | |||||||
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Concentration Risk, Percentage | 11.00% | 11.00% | 10.00% | ||||
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Major Customer Number One [Member] | |||||||
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Concentration Risk, Percentage | 19.00% | 25.00% | |||||
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Major Customer Number Two [Member] | |||||||
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Concentration Risk, Percentage | 14.00% | 13.00% | |||||
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Major Customer Number Three [Member] | |||||||
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Concentration Risk, Percentage | 11.00% | 13.00% | |||||
Minimum | |||||||
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Service period | 1 year | ||||||
Maximum | |||||||
Organization Consolidation And Presentation Of Financial Statements Line Items [Line Items] | |||||||
Service period | 3 years |
CAPITAL RAISE AND LIQUIDITY (De
CAPITAL RAISE AND LIQUIDITY (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Feb. 11, 2021 | |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Proceeds from common stock offering, net of transaction costs | $ 16,534,000 | $ 7,824,000 | |
Sales agreement with B. Riley Securities, Inc. | |||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Number of shares sold | 471,970 | ||
Proceeds from common stock offering, net of transaction costs | $ 16,500,000 | ||
Maximum aggregate offering price | $ 30,000,000 |
LEASE LIABILITIES AND RIGHT O_3
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Right to use assets under finance leases (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Lessee, Finance Lease, Description [Abstract] | ||
Computer equipment | $ 256 | $ 177 |
Less: accumulated depreciation | (140) | (116) |
Assets acquired under finance leases, net | $ 116 | $ 61 |
LEASE LIABILITIES AND RIGHT O_4
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Future minimum finance lease payments (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | ||
2021 (3 months remaining) | $ 19,000 | |
2022 | 61,000 | |
2023 | 40,000 | |
2024 | 7,000 | |
Total minimum lease payments | 127,000 | |
Less: present value discount | (8,000) | |
Total lease liabilities | 119,000 | $ 61,000 |
Current portion of lease liabilities | 62,000 | 49,000 |
Long term portion of lease liabilities | $ 57,000 | $ 12,000 |
LEASE LIABILITIES AND RIGHT O_5
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Future minimum operating lease payments (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | ||
2021 (3 months remaining) | $ 66 | |
2022 | 257 | |
2023 | 118 | |
2024 | 81 | |
Total minimum lease payments | 522 | |
Less: present value discount | (36) | |
Total lease liabilities | 486 | |
Current portion of lease obligations | 246 | $ 229 |
Long term portion of lease liabilities | $ 240 | $ 427 |
LEASE LIABILITIES AND RIGHT O_6
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Finance Leases and Operating Leases (Details) $ in Thousands | Sep. 30, 2021USD ($) |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | |
2021 (3 months remaining) | $ 85 |
2022 | 318 |
2023 | 158 |
2024 | 88 |
Total minimum lease payments | 649 |
Less: present value discount | (44) |
Total lease liabilities | 605 |
Current portion of lease liabilities | 308 |
Long term portion of lease liabilities | $ 297 |
LEASE LIABILITIES AND RIGHT O_7
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Lease expenses (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2021USD ($) | |
Finance lease expenses: | |
Depreciation expense | $ 60 |
Interest on lease liabilities | 6 |
Total Finance lease expense | 66 |
Operating lease expense | 192 |
Short-term lease and related expenses | 174 |
Total lease expenses | $ 432 |
LEASE LIABILITIES AND RIGHT O_8
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Remaining lease terms and discount rates (Details) | Sep. 30, 2021 |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | |
Weighted average remaining lease term (years) - Operating Leases | 2 years 3 months 21 days |
Weighted average remaining lease term (years) - Finance Leases | 2 years 1 month 6 days |
Weighted average discount rate (%) - Operating Leases | 6.00% |
Weighted average discount rate (%) - Finance Leases | 6.00% |
LEASE LIABILITIES AND RIGHT O_9
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Additional Information (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | ||
Total finance lease liabilities | $ 119,000 | $ 61,000 |
Effective interest rate of the finance leases (Percentage) | 6.00% | |
Operating lease payments | $ 196,000 |
DEBT (Details)
DEBT (Details) - USD ($) | Apr. 15, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 |
Line of Credit Facility [Line Items] | |||||
Gain on loan forgiveness | $ 0 | $ 0 | $ 1,316,000 | $ 0 | |
PPP Loan | |||||
Line of Credit Facility [Line Items] | |||||
Maturity term of loan | 2 years | ||||
Interest rate (as a percent) | 1.00% | ||||
Agreement amount | $ 1,302,000 | ||||
Gain on loan forgiveness | $ 1,316,000 |
SERIES A CONVERTIBLE PREFERRE_2
SERIES A CONVERTIBLE PREFERRED STOCK - Additional Information (Details) - Series A Preferred Stock - shares | 9 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | |
Class of Stock [Line Items] | ||
Preferred stock outstanding shares | 0 | 90,000 |
Common stock dividends shares | 279,137 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2021 | Sep. 30, 2021 | |
RELATED PARTY TRANSACTIONS | ||
Total rent payments for office space | $ 0 | $ 24,000 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Additional Information (Details) | 9 Months Ended |
Sep. 30, 2021USD ($) | |
COMMITMENTS AND CONTINGENCIES | |
Shared office arrangement minimum fees due | $ 81,000 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) | 1 Months Ended | ||
Nov. 30, 2021shares | Oct. 31, 2021USD ($)item | Sep. 30, 2021USD ($) | |
Subsequent Event [Line Items] | |||
Aggregate future lease payments | $ 127,000 | ||
Subsequent event | Sero Capital LLC | |||
Subsequent Event [Line Items] | |||
Number of lease agreements | item | 2 | ||
Outstanding shares of common stock (In percentage) | 10.00% | ||
Aggregate future lease payments | $ 554,000 | ||
Assignment of rights to security deposit | $ 32,000 | ||
David Moradi | Subsequent event | |||
Subsequent Event [Line Items] | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares | 100,000 |