AEYE Q3 10Q

AEYE released their 10Q. Revenue was up a lot as they already preannounced. Below are some quick highlights from the filing:

For the three months ended September 30, 2014 and 2013, revenue was $4,836,286 and $344,414, respectively, consisting primarily of revenues from various levels of licensing, website design and maintenance. Revenues increased due to increased demand for our services and nonmonetary sales of our licenses.

As you might guess the majority of these sales were non-cash:

For the three and nine months ended September 30, 2014, the Company sold an aggregate of nineteen and thirty-six licenses, respectively, with a fair value of $225,000 per license, in exchange for either a license to their intellectual property or prepaid services. The licenses exchanged were determined to meet the aforementioned criteria. During the three and nine months ended September 30, 2014, nonmonetary revenue of $4,275,000 and $8,100,000, respectively, was recognized. This resulted in an increase to intangible assets and prepaid expenses of $2,025,000 and $6,075,000, respectively.

That leaves about $561K in cash sales, which is still pretty solid. Out of the $4.275M in non-monetary revenue, $2.925M was for service exchanges while $1.35M was for license exchanges. I did not see any more detail on this.

As of 9/30, cash was $2.15M up from $514K at 6/30. I believe this was mostly due to the warrant/options exercise at the beginning of the quarter. Accounts receivables was up $50K to $696K.

It looks like they are still giving away a ton of options. See this quarter’s activity (at least they could issue them at higher exercise prices):

On July 1, 2014, the Company awarded 262,500 options, which vest over three years. The options have an exercise price of $0.35 per share and an expiration date of July 1, 2019. The fair value on the grant date of the options was $54,788 and it is being recognized over the vesting period of the options.

On July 21, 2014, the Company awarded 22,000 options, which vest over three years. The options have an exercise price of $0.91 per share and an expiration date of July 21, 2019. The fair value on the grant date of the options was $12,882 and it is being recognized over the vesting period of the options.

On July 22, 2014, the Company awarded 250,000 options, of which 20% vested immediately and 20% vest every 90 days thereafter, with an exercise price of $0.65 per share and an expiration date of July 22, 2019. The fair value on the grant date of the options was $97,876 and it is being recognized over the vesting period of the options.

On July 23, 2014, the Company awarded 125,000 options, which vest over three years. The options have an exercise price of $1.07 per share and an expiration date of July 23, 2019. The fair value on the grant date of the options was $80,905 and it is being recognized over the vesting period of the options.

On July 28, 2014, the Company awarded 75,000 options, which vest over three years. The options have an exercise price of $0.92 per share and an expiration date of July 28, 2019. The fair value on the grant date of the options was $42,981 and it is being recognized over the vesting period of the options.

On August 18, 2014, the Company awarded 60,000 options, which vest over three years. The options have an exercise price of $0.65 per share and an expiration date of August 18, 2019. The fair value on the grant date of the options was $25,067 and it is being recognized over the vesting period of the options.

On September 2, 2014, the Company awarded 130,000 options, which vest over three years. The options have an exercise price of $0.70 per share and an expiration date of September 2, 2019. The fair value on the grant date of the options was $58,548 and it is being recognized over the vesting period of the options.

On September 5, 2014, the Company awarded 1,220,000 options, which vest over three years. The options have an exercise price of between and $0.65 and $0.70 per share and an expiration date of September 5, 2019. The fair value on the grant date of the options was $593,826 and it is being recognized over the vesting period of the options.

On September 8, 2014, the Company awarded 25,000 options, which vest over three years. The options have an exercise price of $0.775 per share and an expiration date of September 5, 2019. The fair value on the grant date of the options was $11,750 and it is being recognized over the vesting period of the options.

On September 12, 2014, the Company awarded 25,000 options, which vest over three years. The options have an exercise price of $0.78 per share and an expiration date of September 12, 2019. The fair value on the grant date of the options was $11,945 and it is being recognized over the vesting period of the options.

And they kept issuing stock and options after the quarter ended:

NOTE 10: SUBSEQUENT EVENTS

On October 3, 2014, the Company awarded 300,000 options, which vest twenty percent upon grant and twenty percent every ninety days thereafter. The options have an exercise price of $0.60 per share and an expiration date of October 3, 2017.

On October 10, 2014 the Company issued 50,000 shares of common stock for services.

On October 16, 2014, the Company awarded 37,500 options, which vest over three years. The options have an exercise price of $0.65 per share and an expiration date of October 16, 2019.

On October 20, 2014, the Company awarded 115,000 options, which vest over three years. The options have an exercise price of $0.61 per share and an expiration date of October 20, 2019.

See the filing here:

https://www.sec.gov/Archives/edgar/data/1362190/000110465914…

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I had a busy morning today so I was only able to “half” listen to the earnings call today. However, I found it interesting that they really spoke for a long time about what services etc they are receiving for their license “exchanges” recently.

I joined a bit late so my takeaways are pretty limited, but it seemed that they were describing the non cash services they had received at the beginning of the prepared statement, and then one of the analysts asked about them as well. I’ll need to give the replay another listen at some point since I wasn’t able to give my full attention to the call and can’t very accurately repeat what they described, but I do suggest anyone that is invested in AEYE to also give it a listen. I haven’t looked at the 10-Q so I don’t know anything beyond what wouter so dutifully summarized for us above, including whether there is any more info on their non cash services received.

Earlier this year, they had said they expected to be cash flow positive for 2014. I think it’s safe to say that won’t happen unless you include the proceeds from the warrants they received this quarter. They did say today that they expect to be cash flow positive on a quarterly basis in one of the next two quarters (either Q4 2014 or Q1 2015). I’m assuming it won’t happen until Q1 2015 at the earliest.

An analyst also asked at what point in time will cash revenues exceed non-cash revenues. I didn’t expect them to answer this one, but they answered pretty matter of factly that it will happen in the next two quarters…now while that sounds like great news suggesting that cash revenue will spike up suddenly becoming half of the $4.8 million in revenue they just announced…however there is the possibility that this simply means that they will do a lot less non-cash revenue and that cash revenue will grow, but be 50% of a much smaller total revenue (including cash and non-cash revenue) number. Time will tell

full disclosure - I went against my better judgement (most likely) and bought some more shares after the call. Just the possibility that total revenue stays at the levels it is at now and cash revenue becomes 50% of that could lead to outsized returns, despite the ton of options they are giving away. I very intentionally bought these shares in a taxable brokerage account, so if I’m wrong, at least I’ll have some tax losses I can use.

-mekong

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