Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Feb. 28, 2023 | Jun. 30, 2022 | |
Document and Entity Information | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2022 | ||
Entity File Number | 333-177463 | ||
Entity Registrant Name | AudioEye, Inc. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 20-2939845 | ||
Entity Address, Address Line One | 5210 E. 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 Well-known Seasoned Issuer | No | ||
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 | ||
Entity Central Index Key | 0001362190 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2022 | ||
Document Fiscal Period Focus | FY | ||
Title of 12(b) Security | Common Stock, par value $0.00001 per share | ||
Amendment Flag | false | ||
ICFR Auditor Attestation Flag | false | ||
Security Exchange Name | NASDAQ | ||
Entity Common Stock, Shares Outstanding | 11,652,726 | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 42,411,494 | ||
Auditor Name | MaloneBailey, LLP | ||
Auditor Location | Houston, Texas | ||
Auditor Firm ID | 206 |
BALANCE SHEETS
BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash | $ 6,904 | $ 18,966 |
Accounts receivable, net of allowance for doubtful accounts of $468 and $157, respectively | 5,418 | 5,311 |
Deferred costs, short term | 49 | 103 |
Prepaid expenses and other current assets | 595 | 451 |
Total current assets | 12,966 | 24,831 |
Property and equipment, net of accumulated depreciation of $254 and $210, respectively | 161 | 196 |
Right of use assets | 1,154 | 834 |
Deferred costs, long term | 12 | 34 |
Intangible assets, net of accumulated amortization of $5,978 and $5,285, respectively | 6,041 | 2,622 |
Goodwill | 4,001 | 701 |
Other | 93 | 95 |
Total assets | 24,428 | 29,313 |
Current liabilities: | ||
Accounts payable and accrued expenses | 2,452 | 3,542 |
Finance lease liabilities | 38 | 57 |
Operating lease liabilities | 468 | 415 |
Deferred revenue | 7,125 | 7,068 |
Contingent consideration | 979 | 134 |
Total current liabilities | 11,062 | 11,216 |
Long term liabilities: | ||
Finance lease liabilities | 7 | 45 |
Operating lease liabilities | 745 | 450 |
Deferred revenue | 73 | 5 |
Contingent consideration, long term | 1,952 | 0 |
Total liabilities | 13,839 | 11,716 |
Stockholders' equity: | ||
Preferred stock, $0.00001 par value, 10,000 shares authorized | ||
Common stock, $0.00001 par value, 50,000 shares authorized, 11,551 and 11,435 shares issued and outstanding as of December 31, 2022 and 2021, respectively | 1 | 1 |
Additional paid-in capital | 93,070 | 88,889 |
Accumulated deficit | (82,482) | (71,293) |
Total stockholders' equity | 10,589 | 17,597 |
Total liabilities and stockholders' equity | $ 24,428 | $ 29,313 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
BALANCE SHEETS | ||
Allowance for doubtful accounts | $ 468,000 | $ 157,000 |
Property and equipment, accumulated depreciation | 254,000 | 210,000 |
Intangible assets, accumulated amortization | $ 5,978,000 | $ 5,285,000 |
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized | 10,000 | 10,000 |
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized | 50,000 | 50,000 |
Common stock, shares, issued | 11,551 | 11,435 |
Common stock, shares, outstanding | 11,551 | 11,435 |
STATEMENTS OF OPERATIONS
STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
STATEMENTS OF OPERATIONS | ||
Revenue | $ 29,913 | $ 24,503 |
Cost of revenue | 7,219 | 6,121 |
Gross profit | 22,694 | 18,382 |
Operating expenses: | ||
Selling and marketing | 13,657 | 14,621 |
Research and development | 6,085 | 5,304 |
General and administrative | 13,381 | 13,970 |
Total operating expenses | 33,123 | 33,895 |
Operating loss | (10,429) | (15,513) |
Other income (expense): | ||
Gain on loan forgiveness | 0 | 1,316 |
Interest expense, net | (4) | (12) |
Total other income (expense) | (4) | 1,304 |
Net loss | (10,433) | (14,209) |
Dividends on Series A Convertible Preferred Stock | 0 | (69) |
Net loss available to common stockholders | $ (10,433) | $ (14,278) |
Net loss per common share-basic | $ (0.91) | $ (1.29) |
Net loss per common share-diluted | $ (0.91) | $ (1.29) |
Weighted average common shares outstanding-basic | 11,477 | 11,040 |
Weighted average common shares outstanding-diluted | 11,477 | 11,040 |
STATEMENTS OF STOCKHOLDERS' EQU
STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common stock | Preferred stock | Additional Paid in Capital | Accumulated Deficit | Total |
Balance at Dec. 31, 2020 | $ 1 | $ 1 | $ 64,716 | $ (57,084) | $ 7,634 |
Balance (in shares) at Dec. 31, 2020 | 10,130 | 90 | |||
Common stock issued upon settlement of restricted stock units (in shares) | 283 | ||||
Issuance of common stock for services (in shares) | 32 | ||||
Surrender of stock to cover tax liability on settlement of employee stock-based awards | (622) | (622) | |||
Surrender of stock to cover tax liability on settlement of employee stock-based awards (in shares) | (43) | ||||
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 | 644 | 644 | |||
Common stock issued upon exercise of warrants and options on a cash basis (in shares) | 126 | ||||
Common stock issued upon exercise of warrants and options on a cashless basis (in shares) | 156 | ||||
Common stock issued upon conversion of preferred stock | $ (1) | 1 | |||
Common stock issued upon conversion of preferred stock (in shares) | 279 | (90) | |||
Stock-based compensation | 7,616 | 7,616 | |||
Net loss | (14,209) | (14,209) | |||
Balance at Dec. 31, 2021 | $ 1 | 88,889 | (71,293) | 17,597 | |
Balance (in shares) at Dec. 31, 2021 | 11,435 | ||||
Common stock issued upon settlement of restricted stock units (in shares) | 285 | ||||
Issuance of common stock for services (in shares) | 43 | ||||
Surrender of stock to cover tax liability on settlement of employee stock-based awards | (385) | (385) | |||
Surrender of stock to cover tax liability on settlement of employee stock-based awards (in shares) | (73) | ||||
Common stock repurchased for retirement | (756) | (756) | |||
Common stock repurchased for retirement (in shares) | (139) | ||||
Stock-based compensation | 4,566 | 4,566 | |||
Net loss | (10,433) | (10,433) | |||
Balance at Dec. 31, 2022 | $ 1 | $ 93,070 | $ (82,482) | $ 10,589 | |
Balance (in shares) at Dec. 31, 2022 | 11,551 |
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (10,433,000) | $ (14,209,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 2,111,000 | 1,322,000 |
Gain on loan forgiveness | 0 | (1,316,000) |
Loss on disposal or impairment of long-lived assets | 51,000 | 22,000 |
Stock-based compensation expense | 4,566,000 | 7,616,000 |
Amortization of deferred commissions | 113,000 | 189,000 |
Amortization of right of use assets | 556,000 | 265,000 |
Change in fair value of contingent consideration | 346,000 | 0 |
Provision for accounts receivable | 356,000 | 73,000 |
Changes in operating assets and liabilities: | ||
Accounts receivable and unbilled receivables | (26,000) | (288,000) |
Prepaid expenses and other assets | (151,000) | (355,000) |
Accounts payable and accruals | (1,045,000) | 1,312,000 |
Operating lease liability | (528,000) | (273,000) |
Deferred revenue | (915,000) | 662,000 |
Net cash used in operating activities | (4,999,000) | (4,980,000) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of equipment | (72,000) | (82,000) |
Software development costs | (1,160,000) | (1,425,000) |
Patent costs | (17,000) | (64,000) |
Payment for acquisition | (4,484,000) | (53,000) |
Net cash used in investing activities | (5,733,000) | (1,624,000) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from common stock offering, net of transaction costs | 0 | 16,534,000 |
Repurchase of common stock | (756,000) | 0 |
Settlement of contingent consideration | (132,000) | 0 |
Proceeds from exercise of options and warrants | 0 | 644,000 |
Payments related to settlement of employee stock-based awards | (385,000) | (622,000) |
Repayments of finance leases | (57,000) | (81,000) |
Net cash provided (used in) by financing activities | (1,330,000) | 16,475,000 |
Net increase (decrease) in cash and cash equivalents | (12,062,000) | 9,871,000 |
Cash and cash equivalents-beginning of period | 18,966,000 | 9,095,000 |
Cash and cash equivalents-end of period | 6,904,000 | 18,966,000 |
SUPPLEMENTAL CASH FLOW DISCLOSURES | ||
Interest paid | 4,000 | 8,000 |
Income taxes paid | (8,000) | (7,000) |
Non-cash investing and financing activities: | ||
Right-of-use assets and operating lease obligations recognized during the year | 876,000 | 482,000 |
Contingent consideration recorded in connection with acquisition | 2,585,000 | 134,000 |
Equipment acquired from finance leases | $ 0 | $ 122,000 |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 12 Months Ended |
Dec. 31, 2022 | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS AudioEye, Inc. (“we”, “us”, “our”, “AudioEye” or the “Company”) operates in one segment as a provider of patented, Internet content publication and distribution software and related services that enables conversion of digital content into accessible formats and allows for real time distribution to end users on any Internet connected device. The Company’s focus is to create more comprehensive access to Internet, and other media to all people regardless of their device, location, or disabilities. Our common stock is listed on The Nasdaq Capital Market under the symbol “AEYE” since September 4, 2018. Prior to September 4, 2018, our common stock was listed on the OTCQB and the OTC Bulletin Board since April 15, 2013 under the same symbol. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2022 | |
SIGNIFICANT ACCOUNTING POLICIES | |
SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation This summary of significant accounting policies is presented to assist in understanding the Company’s financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been consistently applied in the preparation of the financial statements. The Company has a fiscal year ending on December 31. All amounts in the financial statements, notes and tables have been rounded to the nearest thousand dollars, except share and per share amounts, unless otherwise indicated. 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 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; ● 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 but receive other 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: Year ended December 31, (in thousands) 2022 2021 Partner and Marketplace $ 15,972 $ 13,638 Enterprise 13,941 10,865 Total revenues $ 29,913 $ 24,503 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 December 31, 2022 and 2021: As of December 31, (in thousands) 2022 2021 Deferred revenue - current $ 7,125 $ 7,068 Deferred revenue - noncurrent 73 5 Total deferred revenue $ 7,198 $ 7,073 In the year ended December 31, 2022 we recognized $6,970,000, or 99%, in revenue from deferred revenue outstanding as of December 31, 2021. We had one major customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 17% of our revenue in the year ended December 31, 2022, and two major customers which accounted for approximately 20% and 10%, respectively, of our revenue in the fiscal year ended December 31, 2021. One customer represented 22% of total accounts receivable as of December 31, 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 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 December 31, 2022 and 2021: As of December 31, (in thousands) 2022 2021 Deferred costs – current $ 49 $ 103 Deferred costs - noncurrent 12 34 Total deferred costs $ 61 $ 137 Amortization expense associated with sales commissions was included in selling and marketing expenses on the statements of operations and totaled $113,000 and $189,000 for the years ended December 31, 2022 and 2021, respectively. Cost of Revenue Cost of revenue consists primarily of employee-related costs, including payroll, benefits and stock-based compensation expense for our technology operations and customer experience teams, fees paid to our managed hosting providers and other third-party service providers, amortization of capitalized software development costs and acquired technology, and allocated overhead costs. Cash and Cash Equivalents The Company considers cash and any short-term, highly liquid investments with maturities of three months or less as cash and cash equivalents. Allowance for Doubtful Accounts The Company adjusts accounts receivable down to net realizable value with its allowance methodology. In determining the allowance for doubtful accounts for estimated losses, aged receivables are analyzed periodically by management. Each identified receivable is reviewed based upon historical collection experience, financial condition of the client and the status of any open or unresolved issues with the client preventing the payment thereof. Corrective action, if necessary, is taken by the Company to resolve open issues related to unpaid receivables. The allowance for doubtful accounts was $468,000 and $157,000 at December 31, 2022 and 2021, respectively. The Company believes that its reserve is adequate, however results may differ in future periods. For the years ended December 31, 2022 and 2021, bad debt expense totaled $356,000 and $73,000, respectively. Property and Equipment Property and equipment includes office and computer equipment, as well as furniture and fixtures. Property and equipment are carried at the cost of acquisition and depreciated using the straight-line method over their estimated useful lives, which typically is 3 years. Costs associated with repairs and maintenance are expensed as incurred. Upon disposition of property and equipment, the cost and the related accumulated depreciation associated with the disposed asset are removed from the accounts and any gain or loss on disposition is included in the results of operations in the year of disposal. Total property and equipment acquired by cash and through finance leases totaled $64,000 and zero, respectively, in the year ended December 31, 2022, and $92,000 and $122,000, respectively, in the year ended December 31, 2021. Depreciation expense was $86,000 and $97,000 for the years ended December 31, 2022 and 2021, respectively. Capitalized Software Development Costs In accordance with ASC 350-40, the Company capitalizes certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use when both the preliminary project stage is completed, and it is probable that the software will be used as intended, until the software is available for general release. Capitalized software costs include (i) external direct costs of materials and services utilized in developing or obtaining computer software, and (ii) compensation and related benefits for employees who are directly associated with the software project. Capitalized software costs are included in intangible assets on our balance sheet and amortized on a straight-line basis when placed into service over the estimated useful lives of the software, which is typically three years. Amortization expense is included in cost of revenue on the statements of operations and totaled $1,201,000 and $845,000 for the years ended December 31, 2022 and 2021, respectively. The Company reviews the carrying value for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Refer to Note 4 – Intangible Assets for additional information regarding our Capitalized Software Development Costs. Patents We capitalize patent application costs, including registration, documentation, and other legal fees associated with the application, which are incurred through the months the patent application is filed. Costs associated with provisional application filings are expensed as incurred. Costs incurred to renew or extend the term of recognized intangible assets, including patent annuities and fees, and costs incurred in prosecuting alleged infringements of our patents are expensed as incurred. Patents are included in intangible assets on our balance sheet. We amortize capitalized patent costs on a straight-line basis over their estimated useful lives, which generally ranges from 5 to 10 years, beginning with the date the patents are issued. We evaluate the capitalized costs for impairment and write off the carrying value of abandoned patents or patent applications. We also write off capitalized costs associated to patents not granted. Refer to Note 4 – Intangible Assets for additional information regarding our patents. Goodwill, Intangible Assets and Long-Lived Assets Goodwill is tested for impairment at least annually, and more frequently upon the occurrence of certain events that may indicate that the carrying value of goodwill may not be recoverable. Events or circumstances that could trigger an impairment test include, but are not limited to, a significant adverse change in the business climate or in legal factors, an adverse action or assessment by a regulator, a loss of key personnel, significant changes in the strategy for our overall business, significant negative industry or economic trends, significant underperformance relative to operating performance indicators, a significant decline in market capitalization and significant changes in competition. We complete our annual impairment test during the fourth quarter of each year, at the reporting unit level, which is at the company level as a whole, since we operate in one single reporting segment. Intangible assets with a finite life are amortized over their estimated useful lives. We evaluate the need for an impairment charge relating to long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We consider the following to be some examples of indicators that may trigger an impairment review: (i) actual undiscounted cash flows significantly below historical or projected future undiscounted cash flows for the associated assets; (ii) significant changes in the manner or use of the assets or in our overall strategy with respect to the manner or use of the assets or changes in our overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; and (v) a significant decline in our stock price for a sustained period of time. Once we determine that a potential impairment indicator exists, we perform the test for recoverability by comparing the estimated future undiscounted cash flows associated with the intangible assets with the intangible asset’s carrying amount. Where the carrying value of the intangible asset exceeds the future undiscounted cash flows associated with the intangible assets, it is determined that the value of those intangible assets cannot be recovered. For an intangible asset failing the recoverability test, an impairment charge is recorded for the difference between the carrying value and the estimated fair value. No impairment losses were incurred during the years ended December 31, 2022 and 2021. Fair Value of Financial Instruments Fair value is an estimate of the exit price, representing the amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date). Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market participant assumptions in the absence of observable market information. Assets and liabilities required to be measured at fair value are categorized based upon the level of judgment associated with the inputs used to measure their value in one of the following three categories: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company. Level 3: Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. The table below provides information on our assets and liabilities that are measured at fair value on a recurring basis: Fair Value (in thousands) Fair Value Hierarchy Contingent consideration (1), December 31, 2022 $ 2,931 Level 3 Contingent consideration (2), December 31, 2021 $ 134 Level 3 (1) Contingent consideration is a liability recorded in connection with the acquisition of the Bureau of Internet Accessibility Inc. (“BOIA”) in the first quarter of 2022 (refer to Note 3 – Acquisitions for additional information on the BOIA acquisition). The fair value of the contingent consideration was determined by management with the assistance of an independent third-party valuation specialist using the Monte-Carlo simulation. (2) Contingent consideration is a liability recorded in connection with the acquisition of substantially all of the assets of Square ADA LLC (“Square ADA”) in the fourth quarter of 2021(refer to Note 3 – Acquisitions for additional information on the Square ADA acquisition). The fair value of the contingent consideration was determined by management based on the estimated monthly recurring revenue from converted customers as of the sixth month anniversary of the closing date. The liability was fully settled in the second quarter of 2022. Stock-Based Compensation The Company periodically issues options, 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. The fair value of options 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). We estimate the fair value of restricted stock unit awards with time- or performance-based vesting using the value of our common stock on the grant date. We estimate the fair value of market-based restricted stock unit awards as of the grant date using the Monte Carlo simulation model. We expense the compensation cost associated with time-based options and RSUs as the restriction period lapses, which is typically a one Income Taxes We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse. The Company has net operating loss carryforwards available to reduce future taxable income. Future tax benefits for these net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. To the extent that the Company will not realize a future tax benefit, a valuation allowance is established. 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, and restricted 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 December 31, 2022 and 2021, which were excluded from the computation of basic and diluted net loss per share for the years then ended, are as follows: December 31, (in thousands) 2022 2021 Options 156 191 Warrants — 30 Restricted stock units 1,803 1,033 Total 1,959 1,254 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 twelve months ended December 31, 2022, we used $0.8 million of the program in repurchasing shares. As of December 31, 2022, we had $2.24 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. The Company made an accounting policy election to charge the excess of repurchase price over par value entirely to retained earnings. Loss Contingencies We are subject to the possibility of various loss contingencies arising in the normal course of business. We consider the likelihood of the loss or impairment of an asset or the incurrence of a liability as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether to accrue for a loss contingency and adjust any previous accrual. 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) liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. Adoption of the ASU should be applied prospectively. The Company elected to early adopt ASU 2021-08 on a prospective basis during the first quarter of 2022. The adoption did not have a material effect on our financial statements. |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 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 aggregate consideration for the purchase of BOIA was approximately $7.5 million (at fair value), consisting of $5.1 million cash payment at closing, $0.2 million cash received in the third quarter of 2022 resulting from net working capital adjustments, and an estimated $2.6 million in aggregate contingent consideration to be paid in cash following the one 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 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 Customer relationships (1) 3,600 Internally-developed software (1) 700 Trade name (1) 50 Goodwill (2) 3,300 Total assets purchased 8,514 Liabilities assumed: Accounts payable and accrued liabilities 7 Deferred revenue 1,040 Total liabilities assumed 1,047 Net assets acquired 7,467 Consideration: Cash paid, net of proceeds from working capital adjustment 4,882 Contingent consideration liability (3) 2,585 Total consideration $ 7,467 (1) Acquired intangible assets will be amortized on a straight-line basis over their estimated useful lives of 2 to 7 years . In the twelve months ended December 31, 2022, amortization expense associated with these acquired intangible assets totaled $578,000 . (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 11.5% , recurring revenue discount rate of 10.5% , expected revenue volatility of 24.65% , risk-free rate of 1.58% , buyer specific discount rate of 9.0% , and discount periods of 1.01 year and 2.22 year. The change in the fair value of contingent consideration was $346,000 from the date of BOIA acquisition, March 9, 2022, to the end of the fiscal year, December 31, 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. In the twelve months ended December 31, 2022, the Company incurred $247,000 of transaction costs related to the acquisition of BOIA, which is included on our Statement of Operations within General and administrative expenses. Pro Forma Financials The following unaudited pro forma results of operations for the years ended December 31, 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. Pro Forma Combined Financials (unaudited) Year ended December 31, (in thousands) 2022 2021 Revenue $ 30,576 $ 27,374 Net loss attributed to common shareholders (9,688) (14,105) For purposes of the pro forma disclosures above, results for the year ended December 31, 2022 exclude $247,000 in acquisition expense and $346,000 in expense related to change in the fair value of contingent consideration. 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. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2022 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | NOTE 4 — INTANGIBLE ASSETS Intangible assets as of December 31, 2022 and 2021 consisted of the following: December 31, (in thousands) 2022 2021 Finite-lived assets: Patents $ 3,860 $ 3,887 Capitalized software development costs 4,324 3,833 Customer relationships 3,785 187 Trade name 50 — Accumulated amortization (5,978) (5,285) Intangible assets, net $ 6,041 $ 2,622 As of December 31, 2022 and 2021, capitalized cost associated with pending patents totaled $26,000 and 53,000, respectively. For the year ended December 31, 2022, software development costs capitalized totaled $1,160,000. In addition, we recorded $700,000 in internally-developed software costs in connection with the BOIA acquisition. For the year ended December 31, 2021, software development costs capitalized totaled $1,425,000. In 2022, we recorded $3,600,000 in customer relationships in connection with the acquisition of BOIA. In 2021, we recorded $187,000 in customer relationships in connection with the acquisition of Square ADA. We amortize our customer relationships on a straight-line basis over the estimated useful lives, which ranges from two The following table summarizes amortization expense associated with intangible assets for the fiscal years ended December 31, 2022 and 2021: Year ended December 31, (in thousands) 2022 2021 Patents $ 295 $ 379 Capitalized software development costs 1,201 845 Customer relationships 509 1 Trade name 20 — Total amortization expense $ 2,025 $ 1,225 The weighted average remaining useful life of our finite-lived intangible assets (in years) as of December 31, 2022 are as follows: Weighted average remaining amortization period (in years) Patents 3.6 Capitalized software development costs 2.2 Customer relationships 6.1 Trade name 1.2 For the years ended December 31, 2022 and 2021, loss on impairment of long-lived assets totaled zero. |
LEASE LIABILITIES AND RIGHT OF
LEASE LIABILITIES AND RIGHT OF USE ASSETS | 12 Months Ended |
Dec. 31, 2022 | |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | NOTE 5 — 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 December 31, 2022 and 2021, the Company’s outstanding finance lease obligations totaled $45,000 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. The following summarizes the assets acquired under finance leases included in property and equipment, net of disposals: As of December 31, (in thousands) 2022 2021 Computer equipment $ 214 $ 256 Less: accumulated depreciation (172) (156) Assets acquired under finance leases, net $ 42 $ 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, and Miami Beach, Florida. The lease for the principal office located in Tucson consists of approximately 627 square feet and ends in October 2024. The lease for the Marietta office, which consists of approximately 6,700 square feet, commenced in June 2019 and expires in August 2024. In the second quarter of 2021, we terminated the lease with a company controlled by our Executive Chairman and closed our Scottsdale, Arizona office. In October 2021, the Company entered into a lease agreement for new office space in Miami Beach, Florida, consisting of approximately 2,739 square feet. The new lease commenced on October 5, 2021 and will expire in May 2024. Upon commencement of the new lease, we recorded a right-of-use asset and corresponding operating lease liability of $482,000. Refer to Note 8 – Related Party Transactions for additional information on this office lease. 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. The Company made operating lease payments in the amount of $614,000 and $310,000 during the years ended December 31, 2022 and 2021, respectively. The following summarizes the total lease liabilities and remaining future minimum lease payments at December 31, 2022 (in thousands): Finance Operating Year ending December 31, Leases Leases Total 2023 $ 40 $ 528 $ 568 2024 7 362 369 2025 — 219 219 2026 — 225 225 Total minimum lease payments 47 1,334 1,381 Less: present value discount (2) (121) (123) Total lease liabilities $ 45 $ 1,213 $ 1,258 Current portion of lease liabilities $ 38 $ 468 $ 506 Long term portion of lease liabilities $ 7 $ 745 $ 752 The following summarizes expenses associated with our finance and operating leases for the years ended December 31, 2022 and 2021: Year ended December 31, (in thousands) 2022 2021 Finance lease expenses: Depreciation expense $ 52 $ 77 Interest on lease liabilities 4 8 Total Finance lease expense 56 85 Operating lease expense 642 304 Short-term lease and related expenses 188 217 Total lease expenses $ 886 $ 606 The following table provides information about the remaining lease terms and discount rates applied as of December 31, 2022 and 2021: As of December 31, 2022 2021 Weighted average remaining lease term (years) Operating leases 3.12 2.27 Finance leases 1.17 1.92 Weighted average discount rate (%) Operating leases 6.00 6.00 Finance leases 6.00 6.00 |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2022 | |
DEBT | |
DEBT | NOTE 6 — DEBT As of December 31, 2022, the Company had no debt outstanding. 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 twelve months ended December 31, 2021. |
REDEMPTION OF SERIES A CONVERTI
REDEMPTION OF SERIES A CONVERTIBLE PREFERRED STOCK | 12 Months Ended |
Dec. 31, 2022 | |
Series A Preferred Stock | |
REDEMPTION OF SERIES A CONVERTIBLE PREFERRED STOCK | |
REDEMPTION OF SERIES A CONVERTIBLE PREFERRED STOCK | NOTE 7 — REDEMPTION OF 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. These shares of Preferred Stock were issued at $10 per share, accrued 5% in cumulative annual dividends, and were convertible into the Company’s common stock at a price of $4.385 per share. In connection with the conversion of the 90,000 shares of Preferred Stock in 2021, we issued 279,137 shares of our common stock. As of December 31, 2022 and 2021, the Company had no shares of Preferred Stock outstanding. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2022 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 8 — RELATED PARTY TRANSACTIONS Office leases As discussed in Note 5 – Lease Liabilities and Right of Use Assets, in the fourth quarter of 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 Chief Executive Officer. Because the office space is predominately used by Mr. Moradi and other key company executives for their work with the Company, the audit committee deemed the assumption of the lease from Sero Capital 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 provided for aggregate future lease payments totaling $554,000. In connection with the assignment of the leases, in 2021 the Company paid Sero Capital $32,000 for the assignment of its rights to the security deposit. In the second quarter of 2021, we terminated a lease with a company controlled by our Executive Chairman and closed our Scottsdale, AZ office. For the years ended December 31, 2022 and 2021, rent payments for this office space totaled zero and $24,000, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2022 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 9 — COMMITMENTS AND CONTINGENCIES 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 against accessiBe Ltd. (“accessiBe”) in District Court in the Western District of Texas, Waco Division, which was subsequently transferred to the Western District of New York. On July 14, 2021, AudioEye filed a second complaint against accessiBe in District Court in the Western District of Texas, Waco Division. On June 16, 2022, accessiBe filed a complaint against AudioEye in the U.S. District Court for the District of Delaware. On October 24, 2022, AudioEye and accessiBe announced a global settlement of all pending legal disputes, and the three complaints have been dismissed without prejudice. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2022 | |
STOCK-BASED COMPENSATION | |
STOCK-BASED COMPENSATION | NOTE 10 — STOCK-BASED COMPENSATION On December 9, 2020, the 2020 Equity Incentive Plan (the “2020 Plan”) was approved, replacing the 2019 Equity Incentive Plan. The 2020 Plan, as amended on May 20, 2022, provides for the issuance of up to 2,500,000 shares of the Company’s common stock to the Company’s employees, non-employee directors, consultants and advisors. Awards under the 2020 Plan can be granted in the form of stock options, stock appreciation rights, restricted stock, stock units, other stock-based awards and cash incentive awards. Outstanding awards issued under previous equity incentive plans will continue to be governed by their respective terms until exercised, expired or otherwise terminated or canceled, but no further equity awards will be made under those plans. The following table summarizes the stock-based compensation expense recorded for the years ended December 31, 2022 and 2021: Year ended December 31, (in thousands) 2022 2021 Stock Options $ 403 $ 634 RSUs 3,934 6,509 Unrestricted Shares of Common Stock 229 473 Total $ 4,566 $ 7,616 As of December 31, 2022, the outstanding unrecognized stock-based compensation expense related to options and restricted stock units (“RSUs”) was $334,000 and $5,706,000, respectively, which may be recognized through June 2027, subject to achievement of service, performance, and market conditions. As of December 31, 2022, there was no remaining unamortized stock-based compensation expense related to warrants. Stock Options Options granted under our equity incentive plans generally have terms of five years, and typically vest and become fully exercisable ratably over three years of continuous service to the Company from the date of grant. The following table summarizes the stock option activity for the years ended December 31, 2022 and 2021: Weighted Intrinsic Weighted Average Value Number of Average Remaining of Options Exercise Price Term Exercisable Options Outstanding at December 31, 2020 516,911 $ 7.24 2.70 294,894 $ 9,610,000 Granted 39,186 24.78 4.93 Exercised (268,836) 3.73 Forfeited/Expired (95,921) 12.88 Outstanding at December 31, 2021 191,340 $ 12.94 3.96 83,070 $ 71,000 Granted — — — Exercised — — Forfeited/Expired (35,286) 13.53 Outstanding at December 31, 2022 156,054 $ 12.81 3.01 108,460 $ — Exercisable as of December 31, 2022 108,460 $ 10.19 3.03 $ — There were no options granted in 2022. For options granted in 2021, stock-based compensation was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions: 2021 Expected life 3.25 years Risk-free interest rate 0.34 % Weighted average volatility factor 100.60 % Dividend yield — Restricted Stock Units We issue RSUs to employees, officers, directors, and consultants of the Company. The restrictions on time-based RSUs generally lapse over a one The following table summarizes the RSU activity for year ended December 31, 2022: Weighted Average Number of Grant Date RSUs Fair Value Vested Unvested Restricted stock units outstanding as of December 31, 2021 1,033,240 $ 13.10 340,539 692,701 Granted 1,219,904 3.77 Settled (285,033) 11.51 Forfeited/Canceled (165,456) 15.05 Restricted stock units outstanding at December 31, 2022 1,802,655 $ 6.92 411,668 1,390,987 In the third quarter of 2020, we granted 260,000 RSUs with performance-based and market-based conditions to our Chief Executive Officer (“CEO”). The performance condition for 105,000 of such RSUs is based on the achievement of Monthly Recurring Revenue (“MRR”) targets. For the years ended December 31, 2022 and 2021, we recorded $154,000 and $471,000, respectively, in stock-based compensation expense associated with 55,000 RSUs, the performance target for which achievement during the requisite period was deemed probable. The Company will continue to reassess the probability of achieving the performance conditions in future periods and record the appropriate expense if necessary. The market condition for the remaining 155,000 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 5 In the first quarter of 2021, we granted 100,000 RSUs with performance-based and market-based conditions to our CEO. The performance condition for 50,000 of such RSUs is based on the achievement of an MRR targets. The market condition for the remaining 50,000 RSUs in the award is based on a target for the Company’s stock price. 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 5 In the second quarter of 2022, we granted 400,000 time-based RSUs to our CEO, which will vest over four different dates through August 20, 2025, subject to his continued employment with the Company. For the year ended December 31, 2022, we recorded $331,000 in stock-based compensation expense related to these time-based RSUs. Warrants The following table summarizes the warrant activity for the years ended December 31, 2022 and 2021: Weighted Intrinsic Weighted Average Value Number of Average Remaining of Warrants Exercise Price Term Warrants Outstanding at December 31, 2020 81,053 6.25 0.94 1,587,000 Exercised (38,880) 6.25 Forfeited/Expired (12,000) 6.25 Outstanding at December 31, 2021 30,173 $ 6.25 0.71 $ 23,000 Exercised — — Forfeited/Expired (30,173) 6.25 Outstanding at December 31, 2022 — $ — — $ — |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2022 | |
INCOME TAXES | |
INCOME TAXES | NOTE 11 — INCOME TAXES For the years ended December 31, 2022 and 2021, federal and state income tax expense totaled zero. The Company has net operating loss carryforwards available to reduce future taxable income. At December 31, 2022, the Company had U.S. federal net operating loss carry forwards of $57,880,000 , of which (i) $25,202,000 expire at various dates through fiscal 2038, (ii) $17,477,000 can be carried forward indefinitely under the provisions of the Tax Cuts and Jobs Act (TCJA) and are able to offset 100% of taxable income due to the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), and (iii) $15,201,000 were generated in or after 2021 and can be carried forward indefinitely but will only be able to offset up to 80% of taxable income in any given year. At this time, the Company is unable to determine if it will be able to benefit from its deferred tax asset. There are limitations on the utilization of net operating loss carryforwards, including a requirement that losses be offset against future taxable income, if any. In addition, there are limitations imposed by certain transactions, which are deemed to be ownership changes. Accordingly, our net deferred tax asset was zero as of December 31, 2022 and 2021 as the Company established a full valuation allowance of $18,938,000 and $17,319,000, respectively. Significant components of our deferred tax assets and liabilities as of December 31, 2022 and 2021 consist of the following: December 31, (in thousands) 2022 2021 Deferred tax assets: Intangible assets $ — $ 295 Bad debt expense 123 41 Accrued compensation expense 36 15 Deferred revenue and costs 223 — Capitalized research and development costs 1,442 — Stock-based compensation 2,523 1,789 Interest expense 1 — Operating lease liability 331 255 State NOL carryforwards 3,085 3,122 Federal NOL carryforwards 12,155 12,299 State tax credit carryforwards 71 — Federal tax credit carryforwards 57 — Total Deferred Tax Assets 20,047 17,816 Valuation allowance (18,938) (17,319) Net deferred tax assets 1,109 497 Deferred tax liabilities: Property and equipment (141) (270) Intangible assets (665) — Deferred revenue and costs — (8) Right of use assets (303) (219) Total deferred tax liabilities (1,109) (497) Net deferred tax asset (liability) $ — $ — The Company is subject to U.S. federal income tax as well as income taxes in multiple state and local jurisdictions. The Company has concluded all U.S. federal tax matters for years through December 31, 2018. All material state and local income tax matters have been concluded for years through December 31, 2017. The Company is no longer subject to IRS examination for the tax years ended on or before December 31, 2018; however, carryforward losses that were generated through the tax year ended December 31, 2018 may still be adjusted by the IRS if they are used in a future period. The Company had no reserve for uncertain tax positions as of December 31, 2022 and 2021. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2022 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 12 — SUBSEQUENT EVENTS We have evaluated subsequent events occurring after December 31, 2022 and based on our evaluation we did not identify any events that would have required recognition or disclosure in these financial statements. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation This summary of significant accounting policies is presented to assist in understanding the Company’s financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been consistently applied in the preparation of the financial statements. The Company has a fiscal year ending on December 31. All amounts in the financial statements, notes and tables have been rounded to the nearest thousand dollars, except share and per share amounts, unless otherwise indicated. |
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 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; ● 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 but receive other 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: Year ended December 31, (in thousands) 2022 2021 Partner and Marketplace $ 15,972 $ 13,638 Enterprise 13,941 10,865 Total revenues $ 29,913 $ 24,503 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 December 31, 2022 and 2021: As of December 31, (in thousands) 2022 2021 Deferred revenue - current $ 7,125 $ 7,068 Deferred revenue - noncurrent 73 5 Total deferred revenue $ 7,198 $ 7,073 In the year ended December 31, 2022 we recognized $6,970,000, or 99%, in revenue from deferred revenue outstanding as of December 31, 2021. We had one major customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 17% of our revenue in the year ended December 31, 2022, and two major customers which accounted for approximately 20% and 10%, respectively, of our revenue in the fiscal year ended December 31, 2021. One customer represented 22% of total accounts receivable as of December 31, 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 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 December 31, 2022 and 2021: As of December 31, (in thousands) 2022 2021 Deferred costs – current $ 49 $ 103 Deferred costs - noncurrent 12 34 Total deferred costs $ 61 $ 137 Amortization expense associated with sales commissions was included in selling and marketing expenses on the statements of operations and totaled $113,000 and $189,000 for the years ended December 31, 2022 and 2021, respectively. |
Cost of Revenue | Cost of Revenue Cost of revenue consists primarily of employee-related costs, including payroll, benefits and stock-based compensation expense for our technology operations and customer experience teams, fees paid to our managed hosting providers and other third-party service providers, amortization of capitalized software development costs and acquired technology, and allocated overhead costs. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers cash and any short-term, highly liquid investments with maturities of three months or less as cash and cash equivalents. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts The Company adjusts accounts receivable down to net realizable value with its allowance methodology. In determining the allowance for doubtful accounts for estimated losses, aged receivables are analyzed periodically by management. Each identified receivable is reviewed based upon historical collection experience, financial condition of the client and the status of any open or unresolved issues with the client preventing the payment thereof. Corrective action, if necessary, is taken by the Company to resolve open issues related to unpaid receivables. The allowance for doubtful accounts was $468,000 and $157,000 at December 31, 2022 and 2021, respectively. The Company believes that its reserve is adequate, however results may differ in future periods. For the years ended December 31, 2022 and 2021, bad debt expense totaled $356,000 and $73,000, respectively. |
Property and Equipment | Property and Equipment Property and equipment includes office and computer equipment, as well as furniture and fixtures. Property and equipment are carried at the cost of acquisition and depreciated using the straight-line method over their estimated useful lives, which typically is 3 years. Costs associated with repairs and maintenance are expensed as incurred. Upon disposition of property and equipment, the cost and the related accumulated depreciation associated with the disposed asset are removed from the accounts and any gain or loss on disposition is included in the results of operations in the year of disposal. Total property and equipment acquired by cash and through finance leases totaled $64,000 and zero, respectively, in the year ended December 31, 2022, and $92,000 and $122,000, respectively, in the year ended December 31, 2021. Depreciation expense was $86,000 and $97,000 for the years ended December 31, 2022 and 2021, respectively. |
Capitalized Software Development Costs | Capitalized Software Development Costs In accordance with ASC 350-40, the Company capitalizes certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use when both the preliminary project stage is completed, and it is probable that the software will be used as intended, until the software is available for general release. Capitalized software costs include (i) external direct costs of materials and services utilized in developing or obtaining computer software, and (ii) compensation and related benefits for employees who are directly associated with the software project. Capitalized software costs are included in intangible assets on our balance sheet and amortized on a straight-line basis when placed into service over the estimated useful lives of the software, which is typically three years. Amortization expense is included in cost of revenue on the statements of operations and totaled $1,201,000 and $845,000 for the years ended December 31, 2022 and 2021, respectively. The Company reviews the carrying value for impairment whenever facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Refer to Note 4 – Intangible Assets for additional information regarding our Capitalized Software Development Costs. |
Patents | Patents We capitalize patent application costs, including registration, documentation, and other legal fees associated with the application, which are incurred through the months the patent application is filed. Costs associated with provisional application filings are expensed as incurred. Costs incurred to renew or extend the term of recognized intangible assets, including patent annuities and fees, and costs incurred in prosecuting alleged infringements of our patents are expensed as incurred. Patents are included in intangible assets on our balance sheet. We amortize capitalized patent costs on a straight-line basis over their estimated useful lives, which generally ranges from 5 to 10 years, beginning with the date the patents are issued. We evaluate the capitalized costs for impairment and write off the carrying value of abandoned patents or patent applications. We also write off capitalized costs associated to patents not granted. Refer to Note 4 – Intangible Assets for additional information regarding our patents. |
Goodwill, Intangible Assets and Long-Lived Assets | Goodwill, Intangible Assets and Long-Lived Assets Goodwill is tested for impairment at least annually, and more frequently upon the occurrence of certain events that may indicate that the carrying value of goodwill may not be recoverable. Events or circumstances that could trigger an impairment test include, but are not limited to, a significant adverse change in the business climate or in legal factors, an adverse action or assessment by a regulator, a loss of key personnel, significant changes in the strategy for our overall business, significant negative industry or economic trends, significant underperformance relative to operating performance indicators, a significant decline in market capitalization and significant changes in competition. We complete our annual impairment test during the fourth quarter of each year, at the reporting unit level, which is at the company level as a whole, since we operate in one single reporting segment. Intangible assets with a finite life are amortized over their estimated useful lives. We evaluate the need for an impairment charge relating to long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We consider the following to be some examples of indicators that may trigger an impairment review: (i) actual undiscounted cash flows significantly below historical or projected future undiscounted cash flows for the associated assets; (ii) significant changes in the manner or use of the assets or in our overall strategy with respect to the manner or use of the assets or changes in our overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; and (v) a significant decline in our stock price for a sustained period of time. Once we determine that a potential impairment indicator exists, we perform the test for recoverability by comparing the estimated future undiscounted cash flows associated with the intangible assets with the intangible asset’s carrying amount. Where the carrying value of the intangible asset exceeds the future undiscounted cash flows associated with the intangible assets, it is determined that the value of those intangible assets cannot be recovered. For an intangible asset failing the recoverability test, an impairment charge is recorded for the difference between the carrying value and the estimated fair value. No impairment losses were incurred during the years ended December 31, 2022 and 2021. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair value is an estimate of the exit price, representing the amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date). Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market participant assumptions in the absence of observable market information. Assets and liabilities required to be measured at fair value are categorized based upon the level of judgment associated with the inputs used to measure their value in one of the following three categories: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company. Level 3: Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. The table below provides information on our assets and liabilities that are measured at fair value on a recurring basis: Fair Value (in thousands) Fair Value Hierarchy Contingent consideration (1), December 31, 2022 $ 2,931 Level 3 Contingent consideration (2), December 31, 2021 $ 134 Level 3 (1) Contingent consideration is a liability recorded in connection with the acquisition of the Bureau of Internet Accessibility Inc. (“BOIA”) in the first quarter of 2022 (refer to Note 3 – Acquisitions for additional information on the BOIA acquisition). The fair value of the contingent consideration was determined by management with the assistance of an independent third-party valuation specialist using the Monte-Carlo simulation. (2) Contingent consideration is a liability recorded in connection with the acquisition of substantially all of the assets of Square ADA LLC (“Square ADA”) in the fourth quarter of 2021(refer to Note 3 – Acquisitions for additional information on the Square ADA acquisition). The fair value of the contingent consideration was determined by management based on the estimated monthly recurring revenue from converted customers as of the sixth month anniversary of the closing date. The liability was fully settled in the second quarter of 2022. |
Stock-Based Compensation | Stock-Based Compensation The Company periodically issues options, 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. The fair value of options 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). We estimate the fair value of restricted stock unit awards with time- or performance-based vesting using the value of our common stock on the grant date. We estimate the fair value of market-based restricted stock unit awards as of the grant date using the Monte Carlo simulation model. We expense the compensation cost associated with time-based options and RSUs as the restriction period lapses, which is typically a one |
Income Taxes | Income Taxes We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse. The Company has net operating loss carryforwards available to reduce future taxable income. Future tax benefits for these net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. To the extent that the Company will not realize a future tax benefit, a valuation allowance is established. |
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, and restricted 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 December 31, 2022 and 2021, which were excluded from the computation of basic and diluted net loss per share for the years then ended, are as follows: December 31, (in thousands) 2022 2021 Options 156 191 Warrants — 30 Restricted stock units 1,803 1,033 Total 1,959 1,254 |
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 twelve months ended December 31, 2022, we used $0.8 million of the program in repurchasing shares. As of December 31, 2022, we had $2.24 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. The Company made an accounting policy election to charge the excess of repurchase price over par value entirely to retained earnings. |
Loss Contingencies | Loss Contingencies We are subject to the possibility of various loss contingencies arising in the normal course of business. We consider the likelihood of the loss or impairment of an asset or the incurrence of a liability as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether to accrue for a loss contingency and adjust any previous accrual. |
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) liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. Adoption of the ASU should be applied prospectively. The Company elected to early adopt ASU 2021-08 on a prospective basis during the first quarter of 2022. The adoption did not have a material effect on our financial statements. |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of disaggregation of revenues | Year ended December 31, (in thousands) 2022 2021 Partner and Marketplace $ 15,972 $ 13,638 Enterprise 13,941 10,865 Total revenues $ 29,913 $ 24,503 |
Schedule of deferred revenue | As of December 31, (in thousands) 2022 2021 Deferred revenue - current $ 7,125 $ 7,068 Deferred revenue - noncurrent 73 5 Total deferred revenue $ 7,198 $ 7,073 |
Schedule of deferred commission costs | As of December 31, (in thousands) 2022 2021 Deferred costs – current $ 49 $ 103 Deferred costs - noncurrent 12 34 Total deferred costs $ 61 $ 137 |
Schedule of our assets and liabilities that are measured at fair value on a recurring basis | Fair Value (in thousands) Fair Value Hierarchy Contingent consideration (1), December 31, 2022 $ 2,931 Level 3 Contingent consideration (2), December 31, 2021 $ 134 Level 3 (1) Contingent consideration is a liability recorded in connection with the acquisition of the Bureau of Internet Accessibility Inc. (“BOIA”) in the first quarter of 2022 (refer to Note 3 – Acquisitions for additional information on the BOIA acquisition). The fair value of the contingent consideration was determined by management with the assistance of an independent third-party valuation specialist using the Monte-Carlo simulation. (2) Contingent consideration is a liability recorded in connection with the acquisition of substantially all of the assets of Square ADA LLC (“Square ADA”) in the fourth quarter of 2021(refer to Note 3 – Acquisitions for additional information on the Square ADA acquisition). The fair value of the contingent consideration was determined by management based on the estimated monthly recurring revenue from converted customers as of the sixth month anniversary of the closing date. The liability was fully settled in the second quarter of 2022. |
Schedule of antidilutive securities outstanding excluded from computation of earnings per share | December 31, (in thousands) 2022 2021 Options 156 191 Warrants — 30 Restricted stock units 1,803 1,033 Total 1,959 1,254 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
ACQUISITIONS | |
Schedule of fair value of tangible and intangible assets acquired and liabilities assumed | (in thousands) Balance at March 9, 2022 Assets purchased: Cash $ 398 Accounts receivable 437 Other assets 29 Customer relationships (1) 3,600 Internally-developed software (1) 700 Trade name (1) 50 Goodwill (2) 3,300 Total assets purchased 8,514 Liabilities assumed: Accounts payable and accrued liabilities 7 Deferred revenue 1,040 Total liabilities assumed 1,047 Net assets acquired 7,467 Consideration: Cash paid, net of proceeds from working capital adjustment 4,882 Contingent consideration liability (3) 2,585 Total consideration $ 7,467 (1) Acquired intangible assets will be amortized on a straight-line basis over their estimated useful lives of 2 to 7 years . In the twelve months ended December 31, 2022, amortization expense associated with these acquired intangible assets totaled $578,000 . (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 11.5% , recurring revenue discount rate of 10.5% , expected revenue volatility of 24.65% , risk-free rate of 1.58% , buyer specific discount rate of 9.0% , and discount periods of 1.01 year and 2.22 year. The change in the fair value of contingent consideration was $346,000 from the date of BOIA acquisition, March 9, 2022, to the end of the fiscal year, December 31, 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) Year ended December 31, (in thousands) 2022 2021 Revenue $ 30,576 $ 27,374 Net loss attributed to common shareholders (9,688) (14,105) |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
INTANGIBLE ASSETS | |
Schedule of finite-Lived intangible assets | December 31, (in thousands) 2022 2021 Finite-lived assets: Patents $ 3,860 $ 3,887 Capitalized software development costs 4,324 3,833 Customer relationships 3,785 187 Trade name 50 — Accumulated amortization (5,978) (5,285) Intangible assets, net $ 6,041 $ 2,622 |
Schedule of amortization expense associated with intangible assets | Year ended December 31, (in thousands) 2022 2021 Patents $ 295 $ 379 Capitalized software development costs 1,201 845 Customer relationships 509 1 Trade name 20 — Total amortization expense $ 2,025 $ 1,225 |
Schedule of weighted average remaining useful life of finite-lived intangible assets | The weighted average remaining useful life of our finite-lived intangible assets (in years) as of December 31, 2022 are as follows: Weighted average remaining amortization period (in years) Patents 3.6 Capitalized software development costs 2.2 Customer relationships 6.1 Trade name 1.2 |
LEASE LIABILITIES AND RIGHT O_2
LEASE LIABILITIES AND RIGHT OF USE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | |
Schedule of finance leases included in property plant and equipment | As of December 31, (in thousands) 2022 2021 Computer equipment $ 214 $ 256 Less: accumulated depreciation (172) (156) Assets acquired under finance leases, net $ 42 $ 100 |
Schedule of total lease liabilities remaining future minimum lease payments | The following summarizes the total lease liabilities and remaining future minimum lease payments at December 31, 2022 (in thousands): Finance Operating Year ending December 31, Leases Leases Total 2023 $ 40 $ 528 $ 568 2024 7 362 369 2025 — 219 219 2026 — 225 225 Total minimum lease payments 47 1,334 1,381 Less: present value discount (2) (121) (123) Total lease liabilities $ 45 $ 1,213 $ 1,258 Current portion of lease liabilities $ 38 $ 468 $ 506 Long term portion of lease liabilities $ 7 $ 745 $ 752 |
Schedule of finance and operating lease liabilities | Year ended December 31, (in thousands) 2022 2021 Finance lease expenses: Depreciation expense $ 52 $ 77 Interest on lease liabilities 4 8 Total Finance lease expense 56 85 Operating lease expense 642 304 Short-term lease and related expenses 188 217 Total lease expenses $ 886 $ 606 |
Schedule of lease terms and discount rates | As of December 31, 2022 2021 Weighted average remaining lease term (years) Operating leases 3.12 2.27 Finance leases 1.17 1.92 Weighted average discount rate (%) Operating leases 6.00 6.00 Finance leases 6.00 6.00 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
STOCK-BASED COMPENSATION | |
Schedule of stock-based compensation expense | Year ended December 31, (in thousands) 2022 2021 Stock Options $ 403 $ 634 RSUs 3,934 6,509 Unrestricted Shares of Common Stock 229 473 Total $ 4,566 $ 7,616 |
Schedule of share-based compensation stock options activity | Weighted Intrinsic Weighted Average Value Number of Average Remaining of Options Exercise Price Term Exercisable Options Outstanding at December 31, 2020 516,911 $ 7.24 2.70 294,894 $ 9,610,000 Granted 39,186 24.78 4.93 Exercised (268,836) 3.73 Forfeited/Expired (95,921) 12.88 Outstanding at December 31, 2021 191,340 $ 12.94 3.96 83,070 $ 71,000 Granted — — — Exercised — — Forfeited/Expired (35,286) 13.53 Outstanding at December 31, 2022 156,054 $ 12.81 3.01 108,460 $ — Exercisable as of December 31, 2022 108,460 $ 10.19 3.03 $ — |
Schedule of weighted average assumptions for estimating the stock-based compensation | 2021 Expected life 3.25 years Risk-free interest rate 0.34 % Weighted average volatility factor 100.60 % Dividend yield — |
Schedule of non-vested restricted stock shares activity | Weighted Average Number of Grant Date RSUs Fair Value Vested Unvested Restricted stock units outstanding as of December 31, 2021 1,033,240 $ 13.10 340,539 692,701 Granted 1,219,904 3.77 Settled (285,033) 11.51 Forfeited/Canceled (165,456) 15.05 Restricted stock units outstanding at December 31, 2022 1,802,655 $ 6.92 411,668 1,390,987 |
Schedule of other share-based compensation, activity | Weighted Intrinsic Weighted Average Value Number of Average Remaining of Warrants Exercise Price Term Warrants Outstanding at December 31, 2020 81,053 6.25 0.94 1,587,000 Exercised (38,880) 6.25 Forfeited/Expired (12,000) 6.25 Outstanding at December 31, 2021 30,173 $ 6.25 0.71 $ 23,000 Exercised — — Forfeited/Expired (30,173) 6.25 Outstanding at December 31, 2022 — $ — — $ — |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
INCOME TAXES | |
Schedule of deferred tax assets and liabilities | December 31, (in thousands) 2022 2021 Deferred tax assets: Intangible assets $ — $ 295 Bad debt expense 123 41 Accrued compensation expense 36 15 Deferred revenue and costs 223 — Capitalized research and development costs 1,442 — Stock-based compensation 2,523 1,789 Interest expense 1 — Operating lease liability 331 255 State NOL carryforwards 3,085 3,122 Federal NOL carryforwards 12,155 12,299 State tax credit carryforwards 71 — Federal tax credit carryforwards 57 — Total Deferred Tax Assets 20,047 17,816 Valuation allowance (18,938) (17,319) Net deferred tax assets 1,109 497 Deferred tax liabilities: Property and equipment (141) (270) Intangible assets (665) — Deferred revenue and costs — (8) Right of use assets (303) (219) Total deferred tax liabilities (1,109) (497) Net deferred tax asset (liability) $ — $ — |
ORGANIZATION AND DESCRIPTION _2
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) | 12 Months Ended |
Dec. 31, 2022 segment | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | |
Number of operating segments | 1 |
SIGNIFICANT ACCOUNTING POLICI_4
SIGNIFICANT ACCOUNTING POLICIES - Disaggregated by sales (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
SIGNIFICANT ACCOUNTING POLICIES | ||
Partner and Marketplace | $ 15,972 | $ 13,638 |
Enterprise | 13,941 | 10,865 |
Total revenues | $ 29,913 | $ 24,503 |
SIGNIFICANT ACCOUNTING POLICI_5
SIGNIFICANT ACCOUNTING POLICIES - Deferred revenue (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
SIGNIFICANT ACCOUNTING POLICIES | ||
Deferred revenue - current | $ 7,125 | $ 7,068 |
Deferred revenue - noncurrent | 73 | 5 |
Total deferred revenue | $ 7,198 | $ 7,073 |
SIGNIFICANT ACCOUNTING POLICI_6
SIGNIFICANT ACCOUNTING POLICIES - Deferred commission costs (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
SIGNIFICANT ACCOUNTING POLICIES | ||
Deferred costs - current | $ 49 | $ 103 |
Deferred costs - noncurrent | 12 | 34 |
Total deferred costs | $ 61 | $ 137 |
SIGNIFICANT ACCOUNTING POLICI_7
SIGNIFICANT ACCOUNTING POLICIES - Fair value on a recurring basis (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
SIGNIFICANT ACCOUNTING POLICIES | ||
Contingent consideration | $ 979 | $ 134 |
Level 3 | Recurring | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Contingent consideration | $ 2,931 | $ 134 |
SIGNIFICANT ACCOUNTING POLICI_8
SIGNIFICANT ACCOUNTING POLICIES - Potentially dilutive securities excluded from computation of earnings per share (Details) - shares shares in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
SIGNIFICANT ACCOUNTING POLICIES | ||
Antidilutive securities excluded from computation of earnings per share amount | 1,959 | 1,254 |
Stock Options | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Antidilutive securities excluded from computation of earnings per share amount | 156 | 191 |
Warrants | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Antidilutive securities excluded from computation of earnings per share amount | 30 | |
Restricted stock units | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Antidilutive securities excluded from computation of earnings per share amount | 1,803 | 1,033 |
SIGNIFICANT ACCOUNTING POLICI_9
SIGNIFICANT ACCOUNTING POLICIES - Additional information (Details) | 12 Months Ended | |
Dec. 31, 2022 USD ($) segment | Dec. 31, 2021 USD ($) | |
SIGNIFICANT ACCOUNTING POLICIES | ||
Deferred revenue outstanding | $ 6,970,000 | |
Deferred revenue outstanding (as a percent) | 99% | |
Amortization of deferred sales commissions | $ 113,000 | $ 189,000 |
Allowance for doubtful accounts | 468,000 | 157,000 |
Bad debt expense | $ 356,000 | 73,000 |
Estimated useful life of property and equipment | 3 years | |
Property and equipment acquired by cash | $ 64,000 | 92,000 |
Equipment acquired from finance leases | 0 | 122,000 |
Amortization expense | 2,025,000 | 1,225,000 |
Depreciation expense | 86,000 | 97,000 |
Impairment loss on intangibles | $ 0 | 0 |
Number of reportable segments | segment | 1 | |
Repurchase of outstanding shares of common stock | $ 3,000,000 | |
Amount used for repurchasing of shares | 756,000 | 0 |
Number of remaining for repurchase of shares | 2,240,000 | |
Capitalized software development | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Amortization expense | $ 1,201,000 | 845,000 |
Useful life | 3 years | |
Patents | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Amortization expense | $ 295,000 | $ 379,000 |
Maximum | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Useful life | 7 years | |
Service period for compensation cost expense | 3 years | |
Maximum | Patents | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Useful life | 10 years | |
Minimum | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Useful life | 2 years | |
Service period for compensation cost expense | 1 year | |
Minimum | Patents | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Useful life | 5 years | |
One customer | Customer concentration risk | Sales revenue, net | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Concentration risk percentage | 17% | 20% |
One customer | Customer concentration risk | Accounts receivable | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Concentration risk percentage | 22% | 21% |
Two customer | Customer concentration risk | Sales revenue, net | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Concentration risk percentage | 10% | |
Two customer | Customer concentration risk | Accounts receivable | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Concentration risk percentage | 15% | |
Three customer | Customer concentration risk | Accounts receivable | ||
SIGNIFICANT ACCOUNTING POLICIES | ||
Concentration risk percentage | 10% |
ACQUISITIONS - Bureau of Intern
ACQUISITIONS - Bureau of Internet Accessibility Inc (Details) - Bureau of internet accessibility Inc - USD ($) | 10 Months Ended | |
Mar. 09, 2022 | Dec. 31, 2022 | |
ACQUISITIONS | ||
Aggregate consideration | $ 7,467,000 | |
Cash payment | 5,100,000 | |
Cash received from net working capital adjustments | 200,000 | |
Contingent consideration | $ 2,585,000 | $ 346,000 |
Term for first aggregate contingent consideration to be paid in cash | 1 year | |
Term for second aggregate contingent consideration to be paid in cash | 2 years |
ACQUISITIONS - Bureau of Inte_2
ACQUISITIONS - Bureau of Internet Accessibility Inc - Tangible and intangible assets acquired and liabilities assumed (Details) - USD ($) | 10 Months Ended | ||
Mar. 09, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Assets purchased: | |||
Goodwill | $ 4,001,000 | $ 701,000 | |
Bureau of internet accessibility Inc | |||
Assets purchased: | |||
Cash | $ 398,000 | ||
Accounts receivable | 437,000 | ||
Other assets | 29,000 | ||
Goodwill | 3,300,000 | ||
Total assets purchased | 8,514,000 | ||
Liabilities assumed: | |||
Accounts payable and accrued liabilities | 7,000 | ||
Deferred revenue | 1,040,000 | ||
Total liabilities assumed | 1,047,000 | ||
Net assets acquired | 7,467,000 | ||
Consideration: | |||
Cash paid, net of proceeds from working capital adjustment | 4,882,000 | ||
Contingent consideration liability | 2,585,000 | $ 346,000 | |
Total consideration | 7,467,000 | ||
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) | 10 Months Ended | 12 Months Ended | |
Mar. 09, 2022 USD ($) Y | Dec. 31, 2022 USD ($) | Dec. 31, 2022 USD ($) | |
ACQUISITIONS | |||
Amortization expense | $ 578,000 | $ 578,000 | |
Transaction costs | 247,000 | ||
Bureau of internet accessibility Inc | |||
ACQUISITIONS | |||
Contingent consideration liability | $ 2,585,000 | $ 346,000 | |
Transaction costs | $ 247,000 | ||
Bureau of internet accessibility Inc | Discount rate | |||
ACQUISITIONS | |||
Fair value of the contingent consideration liability, Measurement input | 9 | ||
Bureau of internet accessibility Inc | Discount rate | Recurring | |||
ACQUISITIONS | |||
Fair value of the contingent consideration liability, Measurement input | 10.5 | ||
Bureau of internet accessibility Inc | Discount rate | Non-recurring | |||
ACQUISITIONS | |||
Fair value of the contingent consideration liability, Measurement input | 11.5 | ||
Bureau of internet accessibility Inc | Volatility rate | |||
ACQUISITIONS | |||
Fair value of the contingent consideration liability, Measurement input | 24.65 | ||
Bureau of internet accessibility Inc | Risk-free interest rate | |||
ACQUISITIONS | |||
Fair value of the contingent consideration liability, Measurement input | 1.58 | ||
Bureau of internet accessibility Inc | Discount periods | Recurring | |||
ACQUISITIONS | |||
Fair value of the contingent consideration liability, Measurement input | Y | 2.22 | ||
Bureau of internet accessibility Inc | Discount periods | Non-recurring | |||
ACQUISITIONS | |||
Fair value of the contingent consideration liability, Measurement input | Y | 1.01 | ||
Maximum | |||
ACQUISITIONS | |||
Useful life | 7 years | ||
Maximum | Bureau of internet accessibility Inc | |||
ACQUISITIONS | |||
Useful life | 7 years | ||
Minimum | |||
ACQUISITIONS | |||
Useful life | 2 years | ||
Minimum | Bureau of internet accessibility Inc | |||
ACQUISITIONS | |||
Useful life | 2 years |
ACQUISITIONS - Pro Forma Financ
ACQUISITIONS - Pro Forma Financials (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Pro Forma Financials | ||
Revenue | $ 30,576,000 | $ 27,374,000 |
Net loss attributed to common shareholders | (9,688,000) | $ (14,105,000) |
Acquisition expense | 247,000 | |
Expense related to change in the fair value of contingent consideration | $ 346,000 |
ACQUISITIONS - Square ADA LLC (
ACQUISITIONS - Square ADA LLC (Details) - USD ($) | Dec. 28, 2021 | Dec. 31, 2022 | Dec. 31, 2021 |
ACQUISITIONS | |||
Contingent consideration | $ 979,000 | $ 134,000 | |
Square ADA | |||
ACQUISITIONS | |||
Aggregate consideration for acquisition | $ 185,000 | ||
Cash payment | 53,000 | ||
Contingent consideration | 132,000 | ||
External direct transaction costs | $ 0 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 12 Months Ended | ||
Mar. 09, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
INTANGIBLE ASSETS | |||
Accumulated amortization | $ (5,978,000) | $ (5,285,000) | |
Intangible assets, net | 6,041,000 | 2,622,000 | |
Capitalized software development cost | 1,160,000 | ||
Internally developed software cost | $ 700,000 | ||
Minimum | |||
INTANGIBLE ASSETS | |||
Useful life | 2 years | ||
Maximum | |||
INTANGIBLE ASSETS | |||
Useful life | 7 years | ||
Patents | |||
INTANGIBLE ASSETS | |||
Intangible assets, gross | $ 3,860,000 | 3,887,000 | |
Capitalized costs | $ 26,000 | 53,000 | |
Patents | Minimum | |||
INTANGIBLE ASSETS | |||
Useful life | 5 years | ||
Patents | Maximum | |||
INTANGIBLE ASSETS | |||
Useful life | 10 years | ||
Capitalized software development costs | |||
INTANGIBLE ASSETS | |||
Intangible assets, gross | $ 4,324,000 | 3,833,000 | |
Capitalized costs | $ 1,425,000 | ||
Useful life | 3 years | ||
Customer relationships | |||
INTANGIBLE ASSETS | |||
Intangible assets, gross | $ 3,785,000 | $ 187,000 | |
Trade name | |||
INTANGIBLE ASSETS | |||
Intangible assets, gross | 50,000 | ||
Bureau of internet accessibility Inc | Minimum | |||
INTANGIBLE ASSETS | |||
Useful life | 2 years | ||
Bureau of internet accessibility Inc | Maximum | |||
INTANGIBLE ASSETS | |||
Useful life | 7 years | ||
Bureau of internet accessibility Inc | Customer relationships | |||
INTANGIBLE ASSETS | |||
Intangible assets, gross | $ 3,600,000 |
INTANGIBLE ASSETS - Amortizatio
INTANGIBLE ASSETS - Amortization expense (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
INTANGIBLE ASSETS | ||
Total amortization expense | $ 2,025,000 | $ 1,225,000 |
Patents | ||
INTANGIBLE ASSETS | ||
Total amortization expense | 295,000 | 379,000 |
Capitalized software development costs | ||
INTANGIBLE ASSETS | ||
Total amortization expense | 1,201,000 | 845,000 |
Customer relationships | ||
INTANGIBLE ASSETS | ||
Total amortization expense | 509,000 | $ 1,000 |
Trade name | ||
INTANGIBLE ASSETS | ||
Total amortization expense | $ 20,000 |
INTANGIBLE ASSETS - Weighted av
INTANGIBLE ASSETS - Weighted average remaining useful life (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
INTANGIBLE ASSETS | ||
Loss on impairment of long-lived assets | $ 0 | $ 0 |
Patents | ||
INTANGIBLE ASSETS | ||
Weighted average remaining amortization period (in years) | 3 years 7 months 6 days | |
Capitalized software development costs | ||
INTANGIBLE ASSETS | ||
Weighted average remaining amortization period (in years) | 2 years 2 months 12 days | |
Customer relationships | ||
INTANGIBLE ASSETS | ||
Weighted average remaining amortization period (in years) | 6 years 1 month 6 days | |
Trade name | ||
INTANGIBLE ASSETS | ||
Weighted average remaining amortization period (in years) | 1 year 2 months 12 days |
LEASE LIABILITIES AND RIGHT O_3
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Right to use assets under finance leases (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Lessee, Finance Lease, Description [Abstract] | ||
Computer equipment | $ 214 | $ 256 |
Less: accumulated depreciation | (172) | (156) |
Assets acquired under finance leases, net | $ 42 | $ 100 |
LEASE LIABILITIES AND RIGHT O_4
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Future minimum finance leases payments (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | ||
2023 | $ 40,000 | |
2024 | 7,000 | |
Total minimum lease payments | 47,000 | |
Less: present value discount | (2,000) | |
Total lease liabilities | 45,000 | $ 102,000 |
Current portion of lease liabilities | 38,000 | 57,000 |
Long term portion of lease liabilities | $ 7,000 | $ 45,000 |
LEASE LIABILITIES AND RIGHT O_5
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Future minimum operating leases payments (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | ||
2023 | $ 528 | |
2024 | 362 | |
2025 | 219 | |
2026 | 225 | |
Total minimum lease payments | 1,334 | |
Less: present value discount | (121) | |
Total lease liabilities | 1,213 | |
Current portion of lease obligations | 468 | $ 415 |
Long term portion of lease liabilities | $ 745 | $ 450 |
LEASE LIABILITIES AND RIGHT O_6
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Finance Leases and Operating Leases (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | |
2023 | $ 568 |
2024 | 369 |
2025 | 219 |
2026 | 225 |
Total minimum lease payments | 1,381 |
Less: present value discount | (123) |
Total lease liabilities | 1,258 |
Current portion of lease liabilities | 506 |
Long term portion of lease liabilities | $ 752 |
LEASE LIABILITIES AND RIGHT O_7
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Lease expenses (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Finance lease expenses: | ||
Depreciation expense | $ 52 | $ 77 |
Interest on lease liabilities | 4 | 8 |
Total Finance lease expense | 56 | 85 |
Operating lease expense | 642 | 304 |
Short-term lease and related expenses | 188 | 217 |
Total lease expenses | $ 886 | $ 606 |
LEASE LIABILITIES AND RIGHT O_8
LEASE LIABILITIES AND RIGHT OF USE ASSETS - Remaining lease terms and discount rates (Details) | Dec. 31, 2022 | Dec. 31, 2021 |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | ||
Weighted average remaining lease term (years) - Operating Leases | 3 years 1 month 13 days | 2 years 3 months 7 days |
Weighted average remaining lease term (years) - Finance Leases | 1 year 2 months 1 day | 1 year 11 months 1 day |
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) | 12 Months Ended | ||||
Dec. 31, 2022 USD ($) ft² | Dec. 31, 2021 USD ($) | Jan. 31, 2022 USD ($) ft² | Oct. 31, 2021 USD ($) ft² | Jun. 30, 2019 ft² | |
LEASE LIABILITIES AND RIGHT OF USE ASSETS | |||||
Total finance lease liabilities | $ 45,000 | $ 102,000 | |||
Effective interest rate of finance leases | 6% | ||||
Operating lease payments | $ 614,000 | $ 310,000 | |||
Operating Lease, Liability | $ 1,213,000 | ||||
Marietta Georgia | |||||
LEASE LIABILITIES AND RIGHT OF USE ASSETS | |||||
Area of land | ft² | 2,739 | 6,700 | |||
Operating Lease, Liability | $ 482,000 | ||||
Georgia | |||||
LEASE LIABILITIES AND RIGHT OF USE ASSETS | |||||
Area of land | ft² | 627 | ||||
New York | |||||
LEASE LIABILITIES AND RIGHT OF USE ASSETS | |||||
Area of land | ft² | 5,000 | ||||
Operating Lease, Liability | $ 876,000 |
DEBT (Details)
DEBT (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Apr. 15, 2020 | |
DEBT | |||
Debt outstanding | $ 0 | ||
Gain on loan forgiveness | $ 0 | $ 1,316,000 | |
PPP Loan | |||
DEBT | |||
Maturity term of loan | 2 years | ||
Interest rate (as a percent) | 1% | ||
Agreement amount | $ 1,302,000 | ||
Gain on loan forgiveness | $ 1,316,000 |
REDEMPTION OF SERIES A CONVER_2
REDEMPTION OF SERIES A CONVERTIBLE PREFERRED STOCK (Details) - Series A Preferred Stock - $ / shares | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2021 | |
REDEMPTION OF SERIES A CONVERTIBLE PREFERRED STOCK | |||
Preferred stock issued on conversion | 90,000 | ||
Preferred stock issue per share | $ 10 | ||
Preferred stock dividend rate (in percentage) | 5% | ||
Redemption price (in dollars per share) | $ 4.385 | ||
Preferred stock outstanding shares | 0 | 0 | 90,000 |
Common stock, shares converted | 279,137 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
RELATED PARTY TRANSACTIONS | |||
Total rent payments for office space | $ 0 | $ 24,000 | |
Aggregate future lease payments | $ 614,000 | 310,000 | |
Sero Capital LLC | |||
RELATED PARTY TRANSACTIONS | |||
Interest rate | 10% | ||
Aggregate future lease payments | $ 554,000 | ||
Security deposit | $ 32,000 | $ 32,000 |
STOCK-BASED COMPENSATION - Stoc
STOCK-BASED COMPENSATION - Stock-based compensation expense (Details) - 2020 - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
STOCK-BASED COMPENSATION | ||
Stock-based compensation expense | $ 4,566 | $ 7,616 |
Stock Options | ||
STOCK-BASED COMPENSATION | ||
Stock-based compensation expense | 403 | 634 |
Restricted stock units | ||
STOCK-BASED COMPENSATION | ||
Stock-based compensation expense | 3,934 | 6,509 |
Unrestricted Shares of Common Stock | ||
STOCK-BASED COMPENSATION | ||
Stock-based compensation expense | $ 229 | $ 473 |
STOCK-BASED COMPENSATION - St_2
STOCK-BASED COMPENSATION - Stock option activity (Details) - Options - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Number of Options | |||
Balance at beginning of the period (in shares) | 191,340 | 516,911 | |
Granted | 39,186 | ||
Exercised/Settled | (268,836) | ||
Forfeited/Expired | (35,286) | (95,921) | |
Balance at end of the period (in shares) | 156,054 | 191,340 | 516,911 |
Vested (in shares) | 108,460 | 83,070 | 294,894 |
Weighted Average Exercise Price | |||
Outstanding at beginning of the period (in dollars per share) | $ 12.94 | $ 7.24 | |
Granted (in dollars per share) | 24.78 | ||
Exercised (in dollars per share) | 3.73 | ||
Forfeited/Expired | 13.53 | 12.88 | |
Outstanding at end of the period (in dollars per share) | 12.81 | $ 12.94 | $ 7.24 |
Exercisable (in dollars per share) | $ 10.19 | ||
Weighted Average Remaining Term | |||
Outstanding, Weighted Average Remaining Term | 3 years 3 days | 3 years 11 months 15 days | 2 years 8 months 12 days |
Granted Weighted Average Remaining Term | 0 years | 4 years 11 months 4 days | |
Exercised Weighted Average Remaining Term | 3 years 10 days | ||
Intrinsic Value of Options | |||
Outstanding, Intrinsic Value of Options (in dollars) | $ 71,000 | $ 9,610,000 | |
Outstanding, Intrinsic Value of Options (in dollars) | $ 71,000 | $ 9,610,000 |
STOCK-BASED COMPENSATION - St_3
STOCK-BASED COMPENSATION - Stock-based compensation, weighted average assumptions (Details) | 12 Months Ended |
Dec. 31, 2021 | |
STOCK-BASED COMPENSATION | |
Expected life | 3 years 3 months |
Risk-free interest rate (as a percent) | 0.34% |
Weighted average volatility factor (as a percent) | 100.60% |
STOCK-BASED COMPENSATION - Rest
STOCK-BASED COMPENSATION - Restricted stock unit activity (Details) - Restricted stock units - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Number of RSUs | ||
Balance at beginning of the period (In shares) | 1,033,240 | |
Granted | 1,219,904 | |
Settled | (285,033) | |
Forfeited/Cancelled | (165,456) | |
Balance at end of the period (In shares) | 1,802,655 | 1,033,240 |
Weighted Average Grant Date Fair Value | ||
Balance at beginning of the period (in dollars per share) | $ 13.10 | |
Granted (in dollars per share) | 3.77 | |
Settled (in dollars per share) | 11.51 | |
Forfeited/Expired (in dollars per share) | 15.05 | |
Balance at end of the period (in dollars per share) | $ 6.92 | $ 13.10 |
Vested (in shares) | 411,668 | 340,539 |
Unvested (in shares) | 1,390,987 | 692,701 |
STOCK-BASED COMPENSATION - Re_2
STOCK-BASED COMPENSATION - Restricted stock units (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||
Jun. 30, 2022 | Dec. 31, 2021 | Mar. 31, 2021 | Sep. 30, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | |
STOCK-BASED COMPENSATION | ||||||
Stock-based compensation expense | $ 4,566,000 | $ 7,616,000 | ||||
Weighted average volatility factor (as a percent) | 100.60% | |||||
Risk-free interest rate (as a percent) | 0.34% | |||||
Performance period | 3 years 3 months | |||||
Restricted stock units | ||||||
STOCK-BASED COMPENSATION | ||||||
Granted | 100,000 | 100,000 | 260,000 | |||
Performance-based | ||||||
STOCK-BASED COMPENSATION | ||||||
Granted | 50,000 | 105,000 | 55,000 | |||
Stock-based compensation expense | $ 154,000 | $ 471,000 | ||||
Market-based | ||||||
STOCK-BASED COMPENSATION | ||||||
Granted | 50,000 | 155,000 | 50,000 | |||
Stock-based compensation expense | $ 96,000 | $ 1,141,000 | ||||
Weighted average volatility factor (as a percent) | 116.95% | 136.52% | ||||
Share-based compensation options historical period | 5 years | 5 years | ||||
Risk-free interest rate (as a percent) | 0.79% | 0.26% | ||||
Share-based compensation options risk-free period | 5 years | 5 years | ||||
Performance period | 5 years | 5 years | ||||
Time-based RSU | ||||||
STOCK-BASED COMPENSATION | ||||||
Granted | 400,000 | |||||
Stock-based compensation expense | $ 331,000 |
STOCK-BASED COMPENSATION - Warr
STOCK-BASED COMPENSATION - Warrants activity (Details) - Warrants - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Number of warrants | |||
Balance at beginning of the period (In shares) | 30,173 | 81,053 | |
Exercised/Settled | (38,880) | ||
Forfeited/Expired | (30,173) | (12,000) | |
Balance at end of the period (In shares) | 30,173 | 81,053 | |
Weighted Average Exercise Price | |||
Balance at beginning of the period (in dollars per share) | $ 6.25 | $ 6.25 | |
Exercised (in dollars per share) | 6.25 | ||
Forfeited/Expired (in dollars per share) | $ 6.25 | 6.25 | |
Balance at end of the period (in dollars per share) | $ 6.25 | $ 6.25 | |
Weighted Average Remaining Term | |||
Outstanding (In years) | 0 years | 8 months 15 days | 11 months 8 days |
Intrinsic Value of Warrants | |||
Balance at beginning of the period (In dollars) | $ 23,000 | $ 1,587,000 | |
Balance at end of the period (In dollars) | $ 23,000 | $ 1,587,000 |
STOCK-BASED COMPENSATION - Addi
STOCK-BASED COMPENSATION - Additional information (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 09, 2020 | |
STOCK-BASED COMPENSATION | |||
Common stock, shares authorized | 50,000,000 | 50,000,000 | |
2020 | |||
STOCK-BASED COMPENSATION | |||
Common stock, shares authorized | 2,500,000 | ||
Common stock | |||
STOCK-BASED COMPENSATION | |||
Issuance of common stock for services (in shares) | 43,000 | 32,000 | |
Warrants | |||
STOCK-BASED COMPENSATION | |||
Number of shares, exercised | 38,880 | ||
Stock Options | |||
STOCK-BASED COMPENSATION | |||
Unrecognized stock-based compensation expense | $ 334,000 | ||
Share-based compensation options granted period | 5 years | ||
Share-based compensation options exercisable period | 3 years | ||
Restricted stock units | |||
STOCK-BASED COMPENSATION | |||
Unrecognized stock-based compensation expense | $ 5,706,000 | ||
Market based RSU's Grant date fair value | $ 1,311,000 | ||
Restricted stock units | Minimum | |||
STOCK-BASED COMPENSATION | |||
Share-based compensation options granted period | 1 year | ||
Restricted stock units | Maximum | |||
STOCK-BASED COMPENSATION | |||
Share-based compensation options granted period | 3 years | ||
Warrants | |||
STOCK-BASED COMPENSATION | |||
Unrecognized stock-based compensation expense | $ 0 | ||
Series A Preferred Stock | |||
STOCK-BASED COMPENSATION | |||
Preferred stock dividend rate (in percentage) | 5% | ||
Common stock, shares converted | 279,137 | ||
Preferred stock issued on conversion | 90,000 |
INCOME TAXES - Additional infor
INCOME TAXES - Additional information (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
INCOME TAXES | ||
Federal and state income tax expense | $ 0 | $ 0 |
U S Federal net operating loss carryforward | 57,880,000 | |
Net deferred tax assets | 0 | 0 |
Valuation allowance | 18,938,000 | 17,319,000 |
Net operating loss set off (CARES ACT) | 17,477,000 | |
Income tax expense (Benefit), CARES Act | 15,201,000 | |
Reserve for uncertain tax positions | 0 | $ 0 |
2038 | ||
INCOME TAXES | ||
U S Federal net operating loss carryforward | $ 25,202,000 |
INCOME TAXES - Deferred tax ass
INCOME TAXES - Deferred tax assets and liabilities (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Deferred tax assets: | ||
Intangible assets | $ 295,000 | |
Bad debt expense | $ 123,000 | 41,000 |
Accrued compensation expense | 36,000 | 15,000 |
Deferred revenue and costs | 223,000 | |
Capitalized research and development costs | 1,442,000 | |
Stock-based compensation | 2,523,000 | 1,789,000 |
Interest expense | 1,000 | |
Operating lease liability | 331,000 | 255,000 |
State NOL carryforwards | 3,085,000 | 3,122,000 |
Federal NOL carryforwards | 12,155,000 | 12,299,000 |
State tax credit carryforwards | 71,000 | |
Federal tax credit carryforwards | 57,000 | |
Total Deferred Tax Assets | 20,047,000 | 17,816,000 |
Valuation allowance | (18,938,000) | (17,319,000) |
Net deferred tax assets | 1,109,000 | 497,000 |
Deferred tax liabilities: | ||
Property and equipment | (141,000) | (270,000) |
Intangible assets | (665,000) | |
Deferred revenue and costs | (8,000) | |
Right of use assets | (303,000) | (219,000) |
Total deferred tax liabilities | (1,109,000) | (497,000) |
Net deferred tax asset (liability) | $ 0 | $ 0 |