Business Context and Reporting Period
Company: AudioEye, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: August 14, 2019
Reporting Period: Specific events occurring on August 14, 2019.
Key Financial Metrics and Transactions
This filing details capital raising activities and debt financing rather than standard periodic financial results (revenue, profit, or cash flow).
- Warrant Exercise Proceeds: Approximately $2.1 million in cash received from the exercise of 1,212,136 shares of Common Stock at discounted prices.
- Debt Facility: Entered into a $2.0 million unsecured credit facility with Sero Capital LLC.
- Interest Rate: 10% per annum on the credit facility.
- Equity Issuance: Issued a warrant to the lender for up to 146,667 shares at an exercise price of $6.00 per share.
Material Changes and Agreements
The filing reports three definitive material agreements entered into on August 14, 2019:
- Warrant Repricing: Amended 2015 and 2018 warrants to allow exercise at discounted prices ($1.63 and $4.07 per share, respectively) if exercised by August 16, 2019. Otherwise, prices revert to $2.50 and $6.25.
- Board Composition Change: Entered a Letter Agreement with Sero Capital LLC (significant stockholder) granting the right to designate two directors to the Board while holding at least 30% of voting power. This right reduces to one director below 30% and ceases below 5%.
- Loan Agreement: Established a $2.0 million revolving credit facility with Sero Capital LLC, maturing August 14, 2020. Interest may be paid in cash or stock.
Guidance, Outlook, and Corrections
Guidance Correction (Item 7.01): The Company issued a correction regarding a statement made during its August 14, 2019 earnings call concerning fiscal 2020 revenue growth.
- Incorrect Statement: Management previously stated that even with no growth in bookings, revenue would be up approximately 130% next year.
- Corrected Statement: Management clarified that even with no growth in bookings, revenue will be up approximately 30% next year.
- Outlook: Management maintains "very high growth expectations" for the following year, citing the effect of the backlog on its SaaS business model.
Investor Verification Checklist
- Verify the total dilution impact from the 1,212,136 shares issued via warrant exercises and the potential issuance of 146,667 shares via the new lender warrant.
- Confirm the current utilization of the $2.0 million credit facility and any accrued interest obligations.
- Review the updated Board of Directors composition to confirm the appointment of the two directors designated by Sero Capital LLC.
- Assess the impact of the corrected 30% revenue growth projection on valuation models compared to the previously stated 130% figure.