Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2022 | Jul. 31, 2022 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Jun. 30, 2022 | |
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 | 2022 | |
Document Fiscal Period Focus | Q2 | |
Title of 12(b) Security | Common Stock, par value $0.00001 per share | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 11,447,776 |
BALANCE SHEETS
BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash | $ 9,251 | $ 18,966 |
Accounts receivable, net of allowance for doubtful accounts of $240 and $157, respectively | 5,148 | 5,311 |
Deferred costs, short term | 72 | 103 |
Prepaid expenses and other current assets | 681 | 451 |
Total current assets | 15,152 | 24,831 |
Property and equipment, net of accumulated depreciation of $236 and $210, respectively | 160 | 196 |
Right of use assets | 1,432 | 834 |
Deferred costs, long term | 23 | 34 |
Intangible assets, net of accumulated amortization of $6,246 and $5,285, respectively | 6,548 | 2,622 |
Goodwill | 4,317 | 701 |
Other | 93 | 95 |
Total assets | 27,725 | 29,313 |
Current liabilities: | ||
Accounts payable and accrued expenses | 3,258 | 3,542 |
Finance lease liabilities | 48 | 57 |
Operating lease liabilities | 511 | 415 |
Deferred revenue | 7,093 | 7,068 |
Contingent consideration | 921 | 134 |
Total current liabilities | 11,831 | 11,216 |
Long term liabilities: | ||
Finance lease liabilities | 23 | 45 |
Operating lease liabilities | 984 | 450 |
Deferred revenue | 10 | 5 |
Contingent consideration, long term | 1,888 | 0 |
Total liabilities | 14,736 | 11,716 |
Stockholders' equity: | ||
Preferred stock, $0.00001 par value, 10,000 shares authorized | ||
Common stock, $0.00001 par value, 50,000 shares authorized, 11,481 and 11,435 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | 1 | 1 |
Additional paid-in capital | 90,917 | 88,889 |
Accumulated deficit | (77,929) | (71,293) |
Total stockholders' equity | 12,989 | 17,597 |
Total liabilities and stockholders' equity | $ 27,725 | $ 29,313 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Jun. 30, 2022 | Dec. 31, 2021 |
BALANCE SHEETS | ||
Allowance for doubtful accounts | $ 240 | $ 157 |
Property plant and equipment, accumulated depreciation | 236 | 210 |
Intangible assets, accumulated amortization | $ 6,246 | $ 5,285 |
Preferred Stock, Par or Stated Value Per Share | $ 0.00001 | $ 0.00001 |
Preferred Stock, Shares Authorized | 10,000 | 10,000 |
Common Stock, Par or Stated Value Per Share | $ 0.00001 | $ 0.00001 |
Common Stock, Shares Authorized | 50,000 | 50,000 |
Common Stock, Shares, Issued | 11,481 | 11,435 |
Common Stock, Shares, Outstanding | 11,481 | 11,435 |
STATEMENTS OF OPERATIONS
STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
STATEMENTS OF OPERATIONS | ||||
Revenue | $ 7,569 | $ 6,021 | $ 14,475 | $ 11,809 |
Cost of revenue | 1,841 | 1,512 | 3,551 | 2,865 |
Gross profit | 5,728 | 4,509 | 10,924 | 8,944 |
Operating expenses: | ||||
Selling and marketing | 3,425 | 3,380 | 7,151 | 6,134 |
Research and development | 1,406 | 1,307 | 2,935 | 2,339 |
General and administrative | 3,505 | 2,917 | 7,061 | 6,327 |
Total operating expenses | 8,336 | 7,604 | 17,147 | 14,800 |
Operating loss | (2,608) | (3,095) | (6,223) | (5,856) |
Other income (expense): | ||||
Gain on loan forgiveness | 0 | 1,316 | 0 | 1,316 |
Interest expense | (2) | (5) | (3) | (9) |
Total other income (expense) | (2) | 1,311 | (3) | 1,307 |
Net loss | (2,610) | (1,784) | (6,226) | (4,549) |
Dividends on Series A Convertible Preferred Stock | 0 | (58) | (69) | |
Net loss available to common stockholders | $ (2,610) | $ (1,842) | $ (6,226) | $ (4,618) |
Net loss per common share-basic | $ (0.23) | $ (0.17) | $ (0.54) | $ (0.43) |
Net loss per common share-diluted | $ (0.23) | $ (0.17) | $ (0.54) | $ (0.43) |
Weighted average common shares outstanding-basic | 11,489 | 10,992 | 11,467 | 10,726 |
Weighted average common shares outstanding-diluted | 11,489 | 10,992 | 11,467 | 10,726 |
STATEMENTS OF STOCKHOLDERS' EQU
STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands | Common Stock | Preferred Stock | Additional Paid-in Capital | Accumulated Deficit | Total |
Balance at Dec. 31, 2020 | $ 1,000 | $ 1,000 | $ 64,716,000 | $ (57,084,000) | $ 7,634,000 |
Balance (in shares) at Dec. 31, 2020 | 10,130 | 90 | |||
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 | (373,000) | (373,000) | |||
Surrender of stock to cover tax liability on settlement of employee stock-based awards (in share) | (16) | ||||
Issuance of common stock for cash, net of transaction expenses | 16,534,000 | 16,534,000 | |||
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 | 148,000 | 148,000 | |||
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 | ||||
Stock-based compensation | 1,781,000 | 1,781,000 | |||
Net loss | (2,765,000) | (2,765,000) | |||
Balance at Mar. 31, 2021 | $ 1,000 | $ 1,000 | 82,806,000 | (59,849,000) | 22,959,000 |
Balance (in shares) at Mar. 31, 2021 | 10,823 | 90 | |||
Balance at Dec. 31, 2020 | $ 1,000 | $ 1,000 | 64,716,000 | (57,084,000) | 7,634,000 |
Balance (in shares) at Dec. 31, 2020 | 10,130 | 90 | |||
Net loss | (4,549,000) | ||||
Balance at Jun. 30, 2021 | $ 1,000 | 84,786,000 | (61,633,000) | 23,154,000 | |
Balance (in shares) at Jun. 30, 2021 | 11,277 | ||||
Balance at Mar. 31, 2021 | $ 1,000 | $ 1,000 | 82,806,000 | (59,849,000) | 22,959,000 |
Balance (in shares) at Mar. 31, 2021 | 10,823 | 90 | |||
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 | (39,000) | (39,000) | |||
Surrender of stock to cover tax liability on settlement of employee stock-based awards (in share) | (2) | ||||
Common stock issued upon exercise of warrants and options on a cash basis | 255,000 | 255,000 | |||
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 conversion of preferred stock | $ (1,000) | 1,000 | |||
Common stock issued upon conversion of preferred stock (in Shares) | 279 | (90) | |||
Stock-based compensation | 1,763,000 | 1,763,000 | |||
Net loss | (1,784,000) | (1,784,000) | |||
Balance at Jun. 30, 2021 | $ 1,000 | 84,786,000 | (61,633,000) | 23,154,000 | |
Balance (in shares) at Jun. 30, 2021 | 11,277 | ||||
Balance at Dec. 31, 2021 | $ 1,000 | 88,889,000 | (71,293,000) | 17,597,000 | |
Balance (in shares) at Dec. 31, 2021 | 11,435 | ||||
Common stock issued upon settlement of restricted stock units (in shares) | 35 | ||||
Issuance of common stock for services (in shares) | 8 | ||||
Surrender of stock to cover tax liability on settlement of employee stock-based awards | (25,000) | (25,000) | |||
Surrender of stock to cover tax liability on settlement of employee stock-based awards (in share) | (4) | ||||
Stock-based compensation | 1,145,000 | 1,145,000 | |||
Net loss | (3,616,000) | (3,616,000) | |||
Balance at Mar. 31, 2022 | $ 1,000 | 90,009,000 | (74,909,000) | 15,101,000 | |
Balance (in shares) at Mar. 31, 2022 | 11,474 | ||||
Balance at Dec. 31, 2021 | $ 1,000 | 88,889,000 | (71,293,000) | 17,597,000 | |
Balance (in shares) at Dec. 31, 2021 | 11,435 | ||||
Common stock repurchased for retirement | (410,000) | ||||
Net loss | (6,226,000) | ||||
Balance at Jun. 30, 2022 | $ 1,000 | 90,917,000 | (77,929,000) | 12,989,000 | |
Balance (in shares) at Jun. 30, 2022 | 11,481 | ||||
Balance at Mar. 31, 2022 | $ 1,000 | 90,009,000 | (74,909,000) | 15,101,000 | |
Balance (in shares) at Mar. 31, 2022 | 11,474 | ||||
Common stock issued upon settlement of restricted stock units (in shares) | 103 | ||||
Issuance of common stock for services (in shares) | 11 | ||||
Surrender of stock to cover tax liability on settlement of employee stock-based awards | (133,000) | (133,000) | |||
Surrender of stock to cover tax liability on settlement of employee stock-based awards (in share) | (28) | ||||
Common stock repurchased for retirement | (410,000) | (410,000) | |||
Common stock repurchased for retirement (in Shares) | (79) | ||||
Stock-based compensation | 1,041,000 | 1,041,000 | |||
Net loss | (2,610,000) | (2,610,000) | |||
Balance at Jun. 30, 2022 | $ 1,000 | $ 90,917,000 | $ (77,929,000) | $ 12,989,000 | |
Balance (in shares) at Jun. 30, 2022 | 11,481 |
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (6,226,000) | $ (4,549,000) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 1,009,000 | 600,000 |
Loss on impairment of long-lived assets | 0 | 10,000 |
Loss on disposal of property and equipment | 7,000 | 12,000 |
Stock-based compensation expense | 2,186,000 | 3,544,000 |
Amortization of deferred commissions | 65,000 | 99,000 |
Amortization of right of use assets | 278,000 | 109,000 |
Change in fair value of contingent consideration | 158,000 | 0 |
Gain on loan forgiveness | 0 | (1,316,000) |
Provision for accounts receivable | 111,000 | 76,000 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 489,000 | 1,258,000 |
Prepaid expenses and other assets | (223,000) | (243,000) |
Accounts payable and accruals | (244,000) | 984,000 |
Operating lease liability | (246,000) | (112,000) |
Deferred revenue | (1,010,000) | (405,000) |
Net cash provided by (used in) operating activities | (3,646,000) | 67,000 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of equipment | (22,000) | 0 |
Software development costs | (565,000) | (843,000) |
Patent costs | (17,000) | (50,000) |
Payment for acquisition, net of cash received | (4,734,000) | 0 |
Net cash used in investing activities | (5,338,000) | (893,000) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from common stock offering, net of transaction costs | 0 | 16,534,000 |
Proceeds from exercise of options and warrants | 0 | 403,000 |
Payments related to settlement of employee shared-based awards | (158,000) | (412,000) |
Settlement of contingent consideration | (132,000) | 0 |
Repurchase of common stock | (410,000) | 0 |
Repayments of finance leases | (31,000) | (43,000) |
Net cash provided by (used in) financing activities | (731,000) | 16,482,000 |
Net increase (decrease) in cash | (9,715,000) | 15,656,000 |
Cash-beginning of period | 18,966,000 | 9,095,000 |
Cash-end of period | 9,251,000 | 24,751,000 |
Supplemental disclosures of noncash activities: | ||
Right-of-use assets and operating lease obligations recognized during the period | $ 876,000 | $ 0 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2022 | |
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, 2021 (the “2021 Form 10-K”), as filed with the SEC on March 11, 2022. 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 | 6 Months Ended |
Jun. 30, 2022 | |
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 2 – Significant Accounting Policies” in the 2021 Form 10-K. Users of financial information for interim periods are encouraged to refer to the footnotes to the financial statements contained in the 2021 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, allowance for doubtful accounts, and intangible assets. 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, 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 revenue is comprised of fixed subscription fees from customer accounts on our platform. Our support revenue is comprised of subscription fees for customers which are not on our SaaS platform to access our customer support services. SaaS and support (also referred to as “subscription”) revenue is recognized on a ratable basis over the contractual subscription term of the arrangement beginning on the date that our service is made available to the customer. Certain SaaS and support fees are invoiced in advance on an annual, semi-annual, or quarterly basis. Any funds received for services not provided yet are held in deferred revenue and are recorded as revenue when the related performance obligations have been satisfied. Non-subscription revenue consists primarily of PDF remediation, and Website and Mobile App report services, and is recognized upon delivery. Consideration payable under PDF remediation arrangements is based on usage. Consideration payable under Website and Mobile App report services arrangements is based on fixed fees. The following table presents our revenues disaggregated by sales channel: Six months ended June 30, (in thousands) 2022 2021 Partner and Marketplace $ 7,724 $ 6,552 Enterprise 6,751 5,257 Total revenues $ 14,475 $ 11,809 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. Deferred revenue includes payments received in advance of performance under the contract and is reported on an individual contract basis at the end of each reporting period. 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 June 30, 2022 and December 31, 2021: June 30, December 31, (in thousands) 2022 2021 Deferred revenue - current $ 7,093 $ 7,068 Deferred revenue - noncurrent 10 5 Total deferred revenue $ 7,103 $ 7,073 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) In the six-month period ended June 30, 2022 we recognized $4,601,000, or 65%, in revenue from deferred revenue outstanding as of December 31, 2021. In the three months ended June 30, 2022, one customer (including affiliates of such customer) accounted for 17% of our total revenue. In the six months ended June 30, 2022, one customer accounted for 18% of our total revenue. In the three months ended June 30, 2021, two customers accounted for 20% and 10%, respectively, of our total revenue. In the six months ended June 30, 2021, three customers accounted for 20%, 10%, and 10%, respectively, of our total revenue. One customer with a long-standing relationship with the Company represented 15% of total accounts receivable as of June 30, 2022. Three customers represented 21%, 15% and 10%, respectively, of total accounts receivable as of December 31, 2021. 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. As a practical expedient, we expense sales commissions as incurred when the amortization period of related deferred commission costs would have been one year or less. The table below summarizes the deferred commission costs as of June 30, 2022 and December 31, 2021: June 30, December 31, (in thousands) 2022 2021 Deferred costs - current $ 72 $ 103 Deferred costs - noncurrent 23 34 Total deferred costs $ 95 $ 137 Amortization expense associated with sales commissions was included in selling and marketing expenses on the statements of operations and totaled $29,000 and $65,000 for the three- and six-month periods ended June 30, 2022, respectively, and $52,000 and $99,000 for the three- and six-month periods ended June 30, 2021, respectively. Business Combinations The assets acquired, liabilities assumed and contingent consideration are recorded at their estimated fair value on the acquisition date with subsequent changes recognized in earnings. These estimates are inherently uncertain and are subject to refinement. Management develops estimates based on assumptions as a part of the purchase price allocation process to value the assets acquired and liabilities assumed as of the business combination date. As a result, the Company may recognize adjustments to provisional amounts of assets acquired or liabilities assumed in earnings in the reporting period in which the adjustments are determined. Acquisition-related expenses primarily consist of legal, accounting, and other advisory fees associated and are recorded in the period in which they are incurred. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 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. We recognize forfeitures as they occur. Stock-based compensation expense is recorded in the same expense classifications in the statements of operations as if such amounts were paid in cash. Future grants of equity awards accounted for as stock-based compensation could have a material impact on reported expenses depending upon the number, value, and vesting period. 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 and expected term). 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 six months ended June 30, 2022 and 2021: Three months ended June 30, Six months ended June 30, (in thousands) 2022 2021 2022 2021 Stock Options $ 103 $ 226 $ 210 $ 375 RSUs 889 1,284 1,877 2,882 Unrestricted Shares of Common Stock 49 253 99 287 Total $ 1,041 $ 1,763 $ 2,186 $ 3,544 As of June 30, 2022, the outstanding unrecognized stock-based compensation expense related to options and RSUs was $544,000 and $8,147,000, respectively, which may be recognized through June 2027, subject to achievement of service, performance, and market conditions. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 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. 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 June 30, 2022 and 2021, which were excluded from the computation of basic and diluted net loss per share for the periods then ended, are as follows: June 30, ( in thousands) 2022 2021 Options 174 274 Warrants 29 45 Restricted stock units 1,878 1,125 Total 2,081 1,444 The following table summarizes the stock option, warrants, and RSUs activity for the six months ended June 30, 2022: Options Warrants RSUs Outstanding at December 31, 2021 191,340 30,173 1,033,240 Granted — — 1,025,006 Exercised/Settled — — (136,542) Forfeited/Expired (17,340) (1,600) (43,943) Outstanding at June 30, 2022 174,000 28,573 1,877,761 Vested at June 30, 2022 116,499 28,573 353,434 Unvested at June 30, 2022 57,501 — 1,524,327 Stock Repurchases In the second quarter of 2022, the Board of Directors of the Company approved a program to repurchase up to $3 million of its outstanding shares of common stock. In the six months ended June 30, 2022, we repurchased $410,000 of shares. As of June 30, 2022, we had $2.59 million remaining for the repurchase of shares. Shares repurchased by the Company are accounted for under the constructive retirement method, in which the shares repurchased are immediately retired, as there is no plan to reissue those shares. The Company made an accounting policy election to charge the excess of repurchase price over par value entirely to retained earnings. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Recent Accounting Pronouncements In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805) |
ACQUISITIONS
ACQUISITIONS | 6 Months Ended |
Jun. 30, 2022 | |
ACQUISITIONS | |
ACQUISITIONS | NOTE 3 — ACQUISITIONS Bureau of Internet Accessibility Inc. On March 9, 2022, we entered into a Stock Purchase Agreement (“Purchase Agreement”) to acquire all the outstanding equity interests of Bureau of Internet Accessibility Inc. (“BOIA”), a Delaware corporation which provides web accessibility services including audits, training, remediation and implementation support. The acquisition represents another step forward in strengthening our suite of products and services by adding additional capabilities for enterprise accessibility compliance. The aggregate consideration for the purchase of BOIA was approximately $7.8 million (at fair value), consisting of $5.1 million cash payment at closing and an estimated $2.7 million in aggregate contingent consideration to be paid in cash following the one NOTE 3 — ACQUISITIONS (continued) We accounted for the acquisition of BOIA as business combination in accordance with FASB ASC 805, “Business Combinations” (“ASC 805”). Accordingly, under the acquisition method of accounting, the preliminary purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date as follows: ( in thousands) Balance at March 9, 2022 Assets purchased: Cash $ 398 Accounts receivable 437 Other assets 29 Client relationships (1) 3,600 Internally-developed software (1) 700 Trade name (1) 50 Goodwill (2) 3,616 Total assets purchased 8,830 Liabilities assumed: Accounts payable and accrued liabilities 7 Deferred revenue 1,040 Total liabilities assumed 1,047 Net assets acquired 7,783 Consideration: Cash paid 5,132 Contingent consideration liability (3) 2,651 Total consideration $ 7,783 (1) Acquired intangible assets will be amortized on a straight-line basis over their estimated useful lives of 2 to 7 years. In the six months ended June 30, 2022, amortization expense associated with these acquired intangible assets totaled $221,000. (2) Goodwill represents the excess of purchase price over the estimated fair value of net tangible and intangible assets acquired. (3) The fair value of the contingent consideration liability was determined using the Monte-Carlo simulation. The key assumptions used in the Monte-Carlo simulation were as follows: non-recurring and recurring revenue metrics for the earn-out periods, non-recurring revenue discount rate of 11.75%, recurring revenue discount rate of 10.75%, expected revenue volatility of 28.83%, risk-free rate of 2.84%, buyer specific discount rate of 12.35%, and discount periods of 0.7 year and 1.91 year. The change in the fair value of contingent consideration was $158,000 from the date of BOIA acquisition, March 9, 2022, to the end of the quarter, June 30, 2022, and is included in General and administrative in the accompanying Statement of Operations. The balance of contingent consideration is subject to further change in subsequent periods through settlement based on actual and estimated non-recurring and recurring revenues from the BOIA offering relative to certain thresholds, as well as adjustments for discount periods, discount rates, risk-free rate, volatility, and buyer specific discount rate. The provisional purchase price allocated to goodwill and assumed liabilities are subject to adjustments as information is obtained about facts and circumstances that existed at the acquisition date. In the six months ended June 30, 2022, the Company incurred $240,000 of transaction costs related to the acquisition of BOIA, which is included on our Statement of Operations within General and administrative expenses. NOTE 3 — ACQUISITIONS (continued) Pro Forma Financials The following unaudited pro forma results of operations for the three and six months ended June 30, 2022 and 2021 assumes BOIA had been acquired on January 1, 2021. The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations that would have been realized if the acquisition had been completed on January 1, 2021, nor does it purport to project the results of operations of the combined Company in future periods. The pro forma financial information does not give effect to any anticipated integration costs savings or expenses related to the acquired company and are not necessarily indicative of the results that would have occurred if the business combination had been in effect on the dates indicated. Pro Forma Combined Financials (unaudited) Three months ended June 30, Six months ended June 30, ( in thousands) 2022 2021 2022 2021 Revenue $ 7,569 $ 6,692 $ 15,138 $ 13,019 Net loss attributed to common shareholders (2,568) (1,814) (5,834) (4,725) For purposes of the pro forma disclosures above, results for the three and six months ended June 30, 2022 exclude $240,000 in acquisition expense. Square ADA LLC On December 28, 2021, the Company completed the acquisition of substantially all of the assets of Square ADA LLC (“Square ADA”), a provider of accessibility solution to websites built or hosted by Squarespace, Inc. The aggregate consideration for the purchase of Square ADA was $185,000, consisting of (i) $53,000 paid in cash upon closing, and (ii) $132,000 in contingent consideration paid in cash in the second quarter of 2022. We accounted for the acquisition of Square ADA as an asset acquisition in accordance with ASC 805 and ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. Based on our assessment of the screen test as required by ASU 2017-01, the transaction does not meet the definition of a business as substantially all the fair value of the gross assets acquired is concentrated in one single identifiable intangible asset, the acquired customer relationships. Accordingly, we allocated the total cost of the acquisition to customer relationships following the cost accumulation model. No external direct transaction costs were incurred in connection with Square ADA’s acquisition. |
LEASE LIABILITIES AND RIGHT OF
LEASE LIABILITIES AND RIGHT OF USE ASSETS | 6 Months Ended |
Jun. 30, 2022 | |
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 June 30, 2022 and December 31, 2021, the Company’s outstanding finance lease obligations totaled $71,000 and $102,000, respectively. The effective interest rate of the finance leases is estimated at 6.0% based on the implicit rate in the lease agreements. NOTE 4 — LEASE LIABILITIES AND RIGHT OF USE ASSETS (continued) The following summarizes the assets acquired under finance leases, included in property and equipment, net of disposals: June 30, December 31, (in thousands) 2022 2021 Computer equipment $ 234 $ 256 Less: accumulated depreciation (167) (156) Assets acquired under finance leases, net $ 67 $ 100 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, Marietta, Georgia, Miami Beach, Florida, and New York, New York. The lease for the principal office located in Tucson consists of approximately 5,200 square feet and ends in October 2022. The lease for the Marietta office, which consists of approximately 6,700 square feet, commenced in June 2019 and expires in August 2024. The lease for the Miami Beach office, which consists of approximately 2,739 square feet, commenced in October 2021 and will expire in May 2024. The Company entered into a lease agreement for new office space in New York, New York, consisting of approximately 5,000 square feet. The new lease commenced in January 2022 and will expire in December 2026. Upon commencement of the new lease, we recorded a right-of-use asset and corresponding operating lease liability of $876,000. In addition, the Company entered into membership agreements to occupy shared office space in 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 5 - Commitments and Contingencies for further details on our shared office arrangements. The Company made operating lease payments in the amount of $291,000 and $130,000 during the six months ended June 30, 2022 and 2021, respectively. NOTE 4 — LEASE LIABILITIES AND RIGHT OF USE ASSETS (continued) The following summarizes the total lease liabilities and remaining future minimum lease payments at June 30, 2022 (in thousands): Year ending June 30, Finance Leases Operating Leases Total 2022 (6 months remaining) $ 28 $ 323 $ 351 2023 40 528 568 2024 7 362 369 2025 — 219 219 2026 — 225 225 Total minimum lease payments 75 1,657 1,732 Less: present value discount (4) (162) (166) Total lease liabilities 71 1,495 1,566 Current portion of lease liabilities 48 511 559 Long term portion of lease liabilities $ 23 $ 984 $ 1,007 The following summarizes expenses associated with our finance and operating leases for the six months ended June 30, 2022 and 2021: Six months ended June 30, (in thousands) 2022 2021 Finance lease expenses: Depreciation expense $ 29 $ 42 Interest on lease liabilities 2 4 Total Finance lease expense 31 46 Operating lease expense 323 128 Short-term lease and related expenses 79 104 Total lease expenses $ 433 $ 278 The following table provides information about the remaining lease terms and discount rates applied as of June 30, 2022 and 2021: June 30, 2022 2021 Weighted average remaining lease term (years) Operating Leases 3.40 2.52 Finance Leases 1.57 2.26 Weighted average discount rate (%) Operating Leases 6.00 6.00 Finance Leases 6.00 6.00 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2022 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 5 — 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 2023 and February 2023, respectively. Fees due under these membership agreements are based on the number of contracted seats and the use of optional office services. As of June 30, 2022, minimum fees due under these shared office arrangements totaled $36,000 . NOTE 5 — 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 March 9, 2022, the District Court ordered the case transferred to the Western District of New York. 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. On June 16, 2022, accessiBe filed a complaint against AudioEye in the U.S. District Court for the District of Delaware. The complaint alleges infringement of three of accessiBe’s patents and seeks damages, costs, and injunctive relief. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2022 | |
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, allowance for doubtful accounts, and intangible assets. 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, 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 revenue is comprised of fixed subscription fees from customer accounts on our platform. Our support revenue is comprised of subscription fees for customers which are not on our SaaS platform to access our customer support services. SaaS and support (also referred to as “subscription”) revenue is recognized on a ratable basis over the contractual subscription term of the arrangement beginning on the date that our service is made available to the customer. Certain SaaS and support fees are invoiced in advance on an annual, semi-annual, or quarterly basis. Any funds received for services not provided yet are held in deferred revenue and are recorded as revenue when the related performance obligations have been satisfied. Non-subscription revenue consists primarily of PDF remediation, and Website and Mobile App report services, and is recognized upon delivery. Consideration payable under PDF remediation arrangements is based on usage. Consideration payable under Website and Mobile App report services arrangements is based on fixed fees. The following table presents our revenues disaggregated by sales channel: Six months ended June 30, (in thousands) 2022 2021 Partner and Marketplace $ 7,724 $ 6,552 Enterprise 6,751 5,257 Total revenues $ 14,475 $ 11,809 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. Deferred revenue includes payments received in advance of performance under the contract and is reported on an individual contract basis at the end of each reporting period. 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 June 30, 2022 and December 31, 2021: June 30, December 31, (in thousands) 2022 2021 Deferred revenue - current $ 7,093 $ 7,068 Deferred revenue - noncurrent 10 5 Total deferred revenue $ 7,103 $ 7,073 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) In the six-month period ended June 30, 2022 we recognized $4,601,000, or 65%, in revenue from deferred revenue outstanding as of December 31, 2021. In the three months ended June 30, 2022, one customer (including affiliates of such customer) accounted for 17% of our total revenue. In the six months ended June 30, 2022, one customer accounted for 18% of our total revenue. In the three months ended June 30, 2021, two customers accounted for 20% and 10%, respectively, of our total revenue. In the six months ended June 30, 2021, three customers accounted for 20%, 10%, and 10%, respectively, of our total revenue. One customer with a long-standing relationship with the Company represented 15% of total accounts receivable as of June 30, 2022. Three customers represented 21%, 15% and 10%, respectively, of total accounts receivable as of December 31, 2021. |
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. As a practical expedient, we expense sales commissions as incurred when the amortization period of related deferred commission costs would have been one year or less. The table below summarizes the deferred commission costs as of June 30, 2022 and December 31, 2021: June 30, December 31, (in thousands) 2022 2021 Deferred costs - current $ 72 $ 103 Deferred costs - noncurrent 23 34 Total deferred costs $ 95 $ 137 Amortization expense associated with sales commissions was included in selling and marketing expenses on the statements of operations and totaled $29,000 and $65,000 for the three- and six-month periods ended June 30, 2022, respectively, and $52,000 and $99,000 for the three- and six-month periods ended June 30, 2021, respectively. |
Business Combinations | Business Combinations The assets acquired, liabilities assumed and contingent consideration are recorded at their estimated fair value on the acquisition date with subsequent changes recognized in earnings. These estimates are inherently uncertain and are subject to refinement. Management develops estimates based on assumptions as a part of the purchase price allocation process to value the assets acquired and liabilities assumed as of the business combination date. As a result, the Company may recognize adjustments to provisional amounts of assets acquired or liabilities assumed in earnings in the reporting period in which the adjustments are determined. Acquisition-related expenses primarily consist of legal, accounting, and other advisory fees associated and are recorded in the period in which they are incurred. |
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. We recognize forfeitures as they occur. Stock-based compensation expense is recorded in the same expense classifications in the statements of operations as if such amounts were paid in cash. Future grants of equity awards accounted for as stock-based compensation could have a material impact on reported expenses depending upon the number, value, and vesting period. 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 and expected term). 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 six months ended June 30, 2022 and 2021: Three months ended June 30, Six months ended June 30, (in thousands) 2022 2021 2022 2021 Stock Options $ 103 $ 226 $ 210 $ 375 RSUs 889 1,284 1,877 2,882 Unrestricted Shares of Common Stock 49 253 99 287 Total $ 1,041 $ 1,763 $ 2,186 $ 3,544 As of June 30, 2022, the outstanding unrecognized stock-based compensation expense related to options and RSUs was $544,000 and $8,147,000, respectively, which may be recognized through June 2027, subject to achievement of service, performance, and market conditions. |
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. 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 June 30, 2022 and 2021, which were excluded from the computation of basic and diluted net loss per share for the periods then ended, are as follows: June 30, ( in thousands) 2022 2021 Options 174 274 Warrants 29 45 Restricted stock units 1,878 1,125 Total 2,081 1,444 The following table summarizes the stock option, warrants, and RSUs activity for the six months ended June 30, 2022: Options Warrants RSUs Outstanding at December 31, 2021 191,340 30,173 1,033,240 Granted — — 1,025,006 Exercised/Settled — — (136,542) Forfeited/Expired (17,340) (1,600) (43,943) Outstanding at June 30, 2022 174,000 28,573 1,877,761 Vested at June 30, 2022 116,499 28,573 353,434 Unvested at June 30, 2022 57,501 — 1,524,327 |
Stock Repurchases | Stock Repurchases In the second quarter of 2022, the Board of Directors of the Company approved a program to repurchase up to $3 million of its outstanding shares of common stock. In the six months ended June 30, 2022, we repurchased $410,000 of shares. As of June 30, 2022, we had $2.59 million remaining for the repurchase of shares. Shares repurchased by the Company are accounted for under the constructive retirement method, in which the shares repurchased are immediately retired, as there is no plan to reissue those shares. The Company made an accounting policy election to charge the excess of repurchase price over par value entirely to retained earnings. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805) |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of disaggregation of revenue | The following table presents our revenues disaggregated by sales channel: Six months ended June 30, (in thousands) 2022 2021 Partner and Marketplace $ 7,724 $ 6,552 Enterprise 6,751 5,257 Total revenues $ 14,475 $ 11,809 |
Schedule of deferred revenue | The table below summarizes our deferred revenue as of June 30, 2022 and December 31, 2021: June 30, December 31, (in thousands) 2022 2021 Deferred revenue - current $ 7,093 $ 7,068 Deferred revenue - noncurrent 10 5 Total deferred revenue $ 7,103 $ 7,073 |
Schedule of commission cost | The table below summarizes the deferred commission costs as of June 30, 2022 and December 31, 2021: June 30, December 31, (in thousands) 2022 2021 Deferred costs - current $ 72 $ 103 Deferred costs - noncurrent 23 34 Total deferred costs $ 95 $ 137 |
Schedule of stock-based compensation expense | Three months ended June 30, Six months ended June 30, (in thousands) 2022 2021 2022 2021 Stock Options $ 103 $ 226 $ 210 $ 375 RSUs 889 1,284 1,877 2,882 Unrestricted Shares of Common Stock 49 253 99 287 Total $ 1,041 $ 1,763 $ 2,186 $ 3,544 |
Schedule of antidilutive securities outstanding excluded from computation of earnings Per share | Potentially dilutive securities outstanding as of June 30, 2022 and 2021, which were excluded from the computation of basic and diluted net loss per share for the periods then ended, are as follows: June 30, ( in thousands) 2022 2021 Options 174 274 Warrants 29 45 Restricted stock units 1,878 1,125 Total 2,081 1,444 |
Summary the stock option, warrants, and RSUs activity | The following table summarizes the stock option, warrants, and RSUs activity for the six months ended June 30, 2022: Options Warrants RSUs Outstanding at December 31, 2021 191,340 30,173 1,033,240 Granted — — 1,025,006 Exercised/Settled — — (136,542) Forfeited/Expired (17,340) (1,600) (43,943) Outstanding at June 30, 2022 174,000 28,573 1,877,761 Vested at June 30, 2022 116,499 28,573 353,434 Unvested at June 30, 2022 57,501 — 1,524,327 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
ACQUISITIONS | |
Schedule of purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date | ( in thousands) Balance at March 9, 2022 Assets purchased: Cash $ 398 Accounts receivable 437 Other assets 29 Client relationships (1) 3,600 Internally-developed software (1) 700 Trade name (1) 50 Goodwill (2) 3,616 Total assets purchased 8,830 Liabilities assumed: Accounts payable and accrued liabilities 7 Deferred revenue 1,040 Total liabilities assumed 1,047 Net assets acquired 7,783 Consideration: Cash paid 5,132 Contingent consideration liability (3) 2,651 Total consideration $ 7,783 (1) Acquired intangible assets will be amortized on a straight-line basis over their estimated useful lives of 2 to 7 years. In the six months ended June 30, 2022, amortization expense associated with these acquired intangible assets totaled $221,000. (2) Goodwill represents the excess of purchase price over the estimated fair value of net tangible and intangible assets acquired. (3) The fair value of the contingent consideration liability was determined using the Monte-Carlo simulation. The key assumptions used in the Monte-Carlo simulation were as follows: non-recurring and recurring revenue metrics for the earn-out periods, non-recurring revenue discount rate of 11.75%, recurring revenue discount rate of 10.75%, expected revenue volatility of 28.83%, risk-free rate of 2.84%, buyer specific discount rate of 12.35%, and discount periods of 0.7 year and 1.91 year. The change in the fair value of contingent consideration was $158,000 from the date of BOIA acquisition, March 9, 2022, to the end of the quarter, June 30, 2022, and is included in General and administrative in the accompanying Statement of Operations. The balance of contingent consideration is subject to further change in subsequent periods through settlement based on actual and estimated non-recurring and recurring revenues from the BOIA offering relative to certain thresholds, as well as adjustments for discount periods, discount rates, risk-free rate, volatility, and buyer specific discount rate. |
Schedule of unaudited pro forma results of operations | Pro Forma Combined Financials (unaudited) Three months ended June 30, Six months ended June 30, ( in thousands) 2022 2021 2022 2021 Revenue $ 7,569 $ 6,692 $ 15,138 $ 13,019 Net loss attributed to common shareholders (2,568) (1,814) (5,834) (4,725) |
LEASE LIABILITIES AND RIGHT O_2
LEASE LIABILITIES AND RIGHT OF USE ASSETS (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
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, net of disposals: June 30, December 31, (in thousands) 2022 2021 Computer equipment $ 234 $ 256 Less: accumulated depreciation (167) (156) Assets acquired under finance leases, net $ 67 $ 100 |
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 June 30, 2022 (in thousands): Year ending June 30, Finance Leases Operating Leases Total 2022 (6 months remaining) $ 28 $ 323 $ 351 2023 40 528 568 2024 7 362 369 2025 — 219 219 2026 — 225 225 Total minimum lease payments 75 1,657 1,732 Less: present value discount (4) (162) (166) Total lease liabilities 71 1,495 1,566 Current portion of lease liabilities 48 511 559 Long term portion of lease liabilities $ 23 $ 984 $ 1,007 |
Schedule of lease expense | The following summarizes expenses associated with our finance and operating leases for the six months ended June 30, 2022 and 2021: Six months ended June 30, (in thousands) 2022 2021 Finance lease expenses: Depreciation expense $ 29 $ 42 Interest on lease liabilities 2 4 Total Finance lease expense 31 46 Operating lease expense 323 128 Short-term lease and related expenses 79 104 Total lease expenses $ 433 $ 278 |
Schedule of lease terms and discount rates | The following table provides information about the remaining lease terms and discount rates applied as of June 30, 2022 and 2021: June 30, 2022 2021 Weighted average remaining lease term (years) Operating Leases 3.40 2.52 Finance Leases 1.57 2.26 Weighted average discount rate (%) Operating Leases 6.00 6.00 Finance Leases 6.00 6.00 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Disaggregate revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||
Partner and Marketplace | $ 7,724 | $ 6,552 | ||
Enterprise | 6,751 | 5,257 | ||
Total revenues | $ 7,569 | $ 6,021 | $ 14,475 | $ 11,809 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Deferred Revenue, by Arrangement (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Dec. 31, 2021 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Deferred revenue - current | $ 7,093 | $ 7,068 |
Deferred revenue - noncurrent | 10 | 5 |
Total deferred revenue | $ 7,103 | $ 7,073 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Deferred commission cost (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Dec. 31, 2021 |
Deferred costs - current | $ 72 | $ 103 |
Deferred costs - noncurrent | 23 | 34 |
Accounting Standards Update 2014-09 [Member] | ||
Deferred costs - current | 72 | 103 |
Deferred costs - noncurrent | 23 | 34 |
Total deferred costs | $ 95 | $ 137 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Stock compensation expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Stock-based compensation expense | $ 1,041 | $ 1,763 | $ 2,186 | $ 3,544 |
Stock Options | ||||
Stock-based compensation expense | 103 | 226 | 210 | 375 |
Restricted Stock Units | ||||
Stock-based compensation expense | 889 | 1,284 | 1,877 | 2,882 |
Common Stock | ||||
Stock-based compensation expense | $ 49 | $ 253 | $ 99 | $ 287 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Dec. 31, 2021 | |
Summary Of Significant Accounting Policies | |||||
Deferred revenue recognized to revenue | $ 4,601,000 | ||||
Deferred revenue recognized through the period (as a percent) | 65% | ||||
Amortization of Deferred Sales Commissions | $ 29,000 | $ 52,000 | 65,000 | $ 99,000 | |
Share repurchases, authorized amount | 3,000,000 | 3,000,000 | |||
Number of shares repurchased | 410,000 | 410,000 | |||
Number of remaining for repurchase of shares | 2,590,000 | 2,590,000 | |||
Stock Options | |||||
Summary Of Significant Accounting Policies | |||||
Outstanding unamortized share-based compensation expense | 544,000 | 544,000 | |||
Restricted Stock Units | |||||
Summary Of Significant Accounting Policies | |||||
Outstanding unamortized share-based compensation expense | $ 8,147,000 | $ 8,147,000 | |||
Maximum | |||||
Summary Of Significant Accounting Policies | |||||
Service period | 3 years | ||||
Minimum | |||||
Summary Of Significant Accounting Policies | |||||
Service period | 1 year | ||||
Major Customer Number One [Member] | Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | |||||
Summary Of Significant Accounting Policies | |||||
Concentration Risk, Percentage | 17% | 20% | 18% | ||
Major Customer Number One [Member] | Customer Concentration Risk [Member] | Accounts Receivable [Member] | |||||
Summary Of Significant Accounting Policies | |||||
Concentration Risk, Percentage | 15% | 20% | 21% | ||
Major Customer Number Two [Member] | Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | |||||
Summary Of Significant Accounting Policies | |||||
Concentration Risk, Percentage | 10% | ||||
Major Customer Number Two [Member] | Customer Concentration Risk [Member] | Accounts Receivable [Member] | |||||
Summary Of Significant Accounting Policies | |||||
Concentration Risk, Percentage | 10% | 15% | |||
Major Customer Number Three [Member] | Customer Concentration Risk [Member] | Accounts Receivable [Member] | |||||
Summary Of Significant Accounting Policies | |||||
Concentration Risk, Percentage | 10% | 10% |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares shares in Thousands | 6 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 2,081 | 1,444 |
Stock Options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 174 | 274 |
Warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 29 | 45 |
Restricted Stock Units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 1,878 | 1,125 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Summary of Stock Option, Warrants, and RSUs Activity (Details) | 6 Months Ended |
Jun. 30, 2022 shares | |
Stock Options | |
Number of Options | |
Balance at beginning of the period (in shares) | 191,340 |
Forfeited/Expired | (17,340) |
Balance at end of the period (in shares) | 174,000 |
Vested (in shares) | 116,499 |
Unvested (in shares) | 57,501 |
Number of warrants | |
Exercised/Settled | (57,501) |
Warrants | |
Number of warrants | |
Balance at beginning of the period (In shares) | 30,173 |
Forfeited/Expired | (1,600) |
Balance at end of the period (In shares) | 28,573 |
Vested (in shares) | 28,573 |
Unvested (in shares) | 28,573 |
Restricted Stock Units | |
Number of Options | |
Unvested (in shares) | 136,542 |
Number of warrants | |
Balance at end of the period (In shares) | 1,524,327 |
Balance at beginning of the period (In shares) | 1,033,240 |
Granted | 1,025,006 |
Exercised/Settled | (136,542) |
Forfeited/Expired | (43,943) |
Balance at end of the period (In shares) | 1,877,761 |
Vested (in shares) | 353,434 |
Unvested (in shares) | 1,524,327 |
ACQUISITIONS - Bureau of Intern
ACQUISITIONS - Bureau of Internet Accessibility Inc (Details) - Bureau of Internet Accessibility Inc - USD ($) $ in Thousands | 4 Months Ended | |
Mar. 09, 2022 | Jun. 30, 2022 | |
Business Acquisition [Line Items] | ||
Aggregate consideration | $ 7,783 | |
Cash payment | 5,132 | |
Contingent consideration | $ 2,651 | $ 158,000 |
Term for first aggregate contingent consideration to be paid | 1 year | |
Term for second aggregate contingent consideration to be paid | 2 years |
ACQUISITIONS - Bureau of Inte_2
ACQUISITIONS - Bureau of Internet Accessibility Inc - Tangible and intangible assets acquired and liabilities assumed (Details) - USD ($) | 3 Months Ended | 4 Months Ended | 6 Months Ended | ||
Mar. 09, 2022 | Jun. 30, 2022 | Jun. 30, 2022 | Jun. 30, 2022 | Dec. 31, 2021 | |
Assets purchased: | |||||
Goodwill | $ 4,317,000 | $ 4,317,000 | $ 4,317,000 | $ 701,000 | |
Consideration: | |||||
Transaction costs | $ 240,000 | 240,000 | |||
Bureau of Internet Accessibility Inc | |||||
Assets purchased: | |||||
Cash | $ 398,000 | ||||
Accounts receivable | 437,000 | ||||
Other assets | 29,000 | ||||
Goodwill | 3,616,000 | ||||
Total assets purchased | 8,830,000 | ||||
Liabilities assumed: | |||||
Accounts payable and accrued liabilities | 7,000 | ||||
Deferred revenue | 1,040,000 | ||||
Total liabilities assumed | 1,047,000 | ||||
Net assets acquired | 7,783,000 | ||||
Consideration: | |||||
Cash paid | 5,132,000 | ||||
Contingent consideration liability | 2,651,000 | $ 158,000,000 | |||
Total consideration | 7,783,000 | ||||
Transaction costs | $ 240,000 | ||||
Bureau of Internet Accessibility Inc | Customer Relationships | |||||
Assets purchased: | |||||
Intangible assets | 3,600,000 | ||||
Bureau of Internet Accessibility Inc | Internally-developed software | |||||
Assets purchased: | |||||
Intangible assets | 700,000 | ||||
Bureau of Internet Accessibility Inc | Trade name | |||||
Assets purchased: | |||||
Intangible assets | $ 50,000 |
ACQUISITIONS - Bureau of Inte_3
ACQUISITIONS - Bureau of Internet Accessibility Inc - Tangible and intangible assets acquired and liabilities assumed (parenthetical) (Details) | 6 Months Ended | |
Mar. 09, 2022 Y | Jun. 30, 2022 USD ($) | |
Business Acquisition [Line Items] | ||
Amortization expense | $ | $ 221,000 | |
Bureau of Internet Accessibility Inc | Discount rate | ||
Business Acquisition [Line Items] | ||
Fair value of the contingent consideration liability, Measurement Input | 12.35 | |
Bureau of Internet Accessibility Inc | Discount rate | Recurring | ||
Business Acquisition [Line Items] | ||
Fair value of the contingent consideration liability, Measurement Input | 10.75 | |
Bureau of Internet Accessibility Inc | Discount rate | Non-recurring | ||
Business Acquisition [Line Items] | ||
Fair value of the contingent consideration liability, Measurement Input | 11.75 | |
Bureau of Internet Accessibility Inc | Volatility rate | ||
Business Acquisition [Line Items] | ||
Fair value of the contingent consideration liability, Measurement Input | 28.83 | |
Bureau of Internet Accessibility Inc | Risk-free interest rate | ||
Business Acquisition [Line Items] | ||
Fair value of the contingent consideration liability, Measurement Input | 2.84 | |
Bureau of Internet Accessibility Inc | Discount periods | Recurring | ||
Business Acquisition [Line Items] | ||
Fair value of the contingent consideration liability, Measurement Input | 1.91 | |
Bureau of Internet Accessibility Inc | Discount periods | Non-recurring | ||
Business Acquisition [Line Items] | ||
Fair value of the contingent consideration liability, Measurement Input | 0.7 | |
Maximum | Bureau of Internet Accessibility Inc | ||
Business Acquisition [Line Items] | ||
Useful life | 7 years | |
Minimum | Bureau of Internet Accessibility Inc | ||
Business Acquisition [Line Items] | ||
Useful life | 2 years |
ACQUISITIONS - Pro Forma Financ
ACQUISITIONS - Pro Forma Financials (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Pro Forma Financials | ||||
Revenue | $ 7,569,000 | $ 6,692,000 | $ 15,138,000 | $ 13,019,000 |
Net loss attributed to common shareholders | (2,568,000) | $ (1,814,000) | (5,834,000) | $ (4,725,000) |
Transaction costs | $ 240,000 | $ 240,000 |
ACQUISITIONS - Square ADA LLC (
ACQUISITIONS - Square ADA LLC (Details) - USD ($) | 3 Months Ended | ||
Jun. 30, 2022 | Dec. 31, 2021 | Dec. 28, 2021 | |
Business Acquisition [Line Items] | |||
Contingent consideration | $ 921,000 | $ 134,000 | |
Square ADA | |||
Business Acquisition [Line Items] | |||
Aggregate Consideration for acquisition | 185,000 | ||
Cash payment | 53,000 | ||
Contingent consideration | $ 132,000 | ||
External direct transaction costs | $ 0 |
LEASE LIABILITIES AND RIGHT O_3
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Right to use assets under finance leases (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Dec. 31, 2021 |
Lessee, Finance Lease, Description [Abstract] | ||
Computer equipment | $ 234 | $ 256 |
Less: accumulated depreciation | (167) | (156) |
Assets acquired under finance leases, net | $ 67 | $ 100 |
LEASE LIABILITIES AND RIGHT O_4
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Future minimum finance lease payments (Details) - USD ($) | Jun. 30, 2022 | Dec. 31, 2021 |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | ||
2022 (6 months remaining) | $ 28,000 | |
2023 | 40,000 | |
2024 | 7,000 | |
2025 | 0 | |
2026 | 0 | |
Total minimum lease payments | 75,000 | |
Less: present value discount | (4,000) | |
Total lease liabilities | 71,000 | $ 102,000 |
Current portion of lease liabilities | 48,000 | 57,000 |
Long term portion of lease liabilities | $ 23,000 | $ 45,000 |
LEASE LIABILITIES AND RIGHT O_5
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Future minimum operating lease payments (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Dec. 31, 2021 |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | ||
2022 (6 months remaining) | $ 323 | |
2023 | 528 | |
2024 | 362 | |
2025 | 219 | |
2026 | 225 | |
Total minimum lease payments | 1,657 | |
Less: present value discount | (162) | |
Total lease liabilities | 1,495 | |
Current portion of lease obligations | 511 | $ 415 |
Long term portion of lease liabilities | $ 984 | $ 450 |
LEASE LIABILITIES AND RIGHT O_6
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Finance Leases and Operating Leases (Details) $ in Thousands | Jun. 30, 2022 USD ($) |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | |
2022 (6 months remaining) | $ 351 |
2023 | 568 |
2024 | 369 |
2025 | 219 |
2026 | 225 |
Total minimum lease payments | 1,732 |
Less: present value discount | (166) |
Total lease liabilities | 1,566 |
Current portion of lease liabilities | 559 |
Long term portion of lease liabilities | $ 1,007 |
LEASE LIABILITIES AND RIGHT O_7
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Lease expenses (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Finance lease expenses: | ||
Depreciation expense | $ 29 | $ 42 |
Interest on lease liabilities | 2 | 4 |
Total Finance lease expense | 31 | 46 |
Operating lease expense | 323 | 128 |
Short-term lease and related expenses | 79 | 104 |
Total lease expenses | $ 433 | $ 278 |
LEASE LIABILITIES AND RIGHT O_8
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Remaining lease terms and discount rates (Details) | Jun. 30, 2022 | Jun. 30, 2021 |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | ||
Weighted average remaining lease term (years) - Operating leases | 3 years 4 months 24 days | 2 years 6 months 7 days |
Weighted average remaining lease term (years) - Finance leases | 1 year 6 months 25 days | 2 years 3 months 3 days |
Weighted average discount rate (%) - Operating leases | 6% | 6% |
Weighted average discount rate (%) - Finance leases | 6% | 6% |
LEASE LIABILITIES AND RIGHT O_9
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Additional Information (Details) | 6 Months Ended | |||||
Jun. 30, 2022 USD ($) ft² | Jun. 30, 2021 USD ($) | Jan. 31, 2022 USD ($) ft² | Dec. 31, 2021 USD ($) | Oct. 31, 2021 ft² | Jun. 30, 2019 ft² | |
Total finance lease liabilities | $ 71,000 | $ 102,000 | ||||
Effective interest rate of the finance leases (Percentage) | 6% | |||||
Operating lease payments | $ 291,000 | $ 130,000 | ||||
Operating Lease, Liability | $ 1,495,000 | |||||
Marietta Georgia | ||||||
Area of Land | ft² | 2,739 | 6,700 | ||||
Operating Lease, Liability | $ 876,000 | |||||
Georgia | ||||||
Area of Land | ft² | 5,200 | |||||
NEW YORK | ||||||
Area of Land | ft² | 5,000 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Additional Information (Details) | 6 Months Ended |
Jun. 30, 2022 USD ($) | |
COMMITMENTS AND CONTINGENCIES | |
Shared office arrangement minimum fees due | $ 36,000 |