More thoughts on AEYE

Yesterday, I bought more AEYE. I think that I may have overdone it a little based on what we know about the company at this point. I’ll be looking to sell some to reduce my position size to 2.5%. Here are my additional thoughts:

  1. I really like the revenue growth. It appears that they may be breaking out. Let’s see if the acceleration of sales growth continues.

  2. The market that they are in is already huge. The market is websites of which there are hundreds of millions. They only need to capture a very small fraction to be very successful.

  3. I also like their business model. From what I understand, their model is very scalable. That is they can quickly add new customers without a lot of incremental spending. We should really find out how automated their audio file creation works and how much manual effort is required.

Now, there are some very good reasons to be cautious. I am in an angel investing group and we get about 50 applications for funding every quarter. So I have had the opportunity to evaluate a few hundred start ups. Because we get so many companies applying and because we can’t hear them all pitch at our in person pitch events, we have developed a process for ranking the companies. Our rankings are based on 4 criteria: market, product/service, management, and terms of the deal. The top ranked companies come to our meeting and give a short presentation. If we are still interested, we meet with them for about an hour afterwards to ask more questions and to learn more about the business and the management team. Then we form a team and do several weeks of due diligence on the company.

AEYE is at a similar stage as some of the companies that I often see. They have revenue but they are just starting out in getting sales traction. They have been starved for cash for several years. I went back and looked just how much cash they had a different points.
12/31/09: $6000
12/31/10: $3600
12/31/11: $32,000
12/31/12: $12,000
12/31/13: $1.847M
03/31/14: $492,000

So they have been scraping by for 5 years. Here are a few things more thoughts:

  1. How much spending will be required for them to catch up on things that they really should have spent on but didn’t because they didn’t have cash?

  2. How effective will be the management team be at managing their cash once they get more?

  3. How experienced is the management team? The CEO is 36 and the CTO (is this his brother? they have the same last name) is 31. How good are they at leading, attracting talent, making good business decisions? Do they have prior successes or will this be the first real company that they are running?

  4. How good will the management team be at raising more money? They will need it to grow this business.

  5. How much of a distraction will fund raising be? Ideally, management should be focused on running and growing the business. The more time they need to raise money, the less they can spend on the operations.

  6. How good is the product? We know they’ve recently received some big orders. Did they get them because their product is really good or because they have established connections with powerful decision makers or a combination of the two? For continued growth, the product better be damned good.

  7. The licensing is a big part of their strategy. How strong are the patents? Do they give them both freedom to operate as well as the ability to block others? Both are needed to successfully execute a licensing strategy.

In my opinion, if one doesn’t know the answers to the above (and is comfortable with then answers), then one should not go overboard on investing in this company. Even then, it’s still a small, risky company. For me, a 2.5% allocation seems like a good maximum for now.



Yesterday, I bought more AEYE

I dipped my toe in yesterday as well. I would guess a lot of yesterday’s massive rise in price was due to readers on this board. The stock seems to be taking a break today, down nearly 12% from the peak of yesterday’s frenzy.


Thank you for your post Chris.

Very well thought out and asking some good solid questions. I appreciate voices of caution and reason, especially when evaluating such small companies. I am one of those who, in the past (hopefully past), has run with the bulls and gotten trampled. So I am both hopeful and hesitant with AEYE. I have not started a position in this stock as of this post, but have come to the point where I am ready to take a starter position in it.

Since I have found this board, I am much more cautious and do a much better job in due diligence with my investment decisions. Still far from perfect, but better. The lively debate on this company has been particularly valuable to me. I am learning to listen to the contrarian (sp) opinion and see if those points are valid to my investment decisions. Thank you to all who have chimed in on AEYE, especially those with less bullish views. You all are making me a better investor.




Great post! I had not heard of AEYE until Saul’s earlier post but I do like the revenue growth, market potential, and business model. You raised excellent questions that will hopefully stimulate thought and discussion. I have not taken a position in AEYE but will continue to follow it for a potential future investment.

Thank you,

Hey Chris -

All good questions. Some of them we can’t answer or won’t know the answer til later and for some the answer may be more subjective.

But this one we do have some insight… from my earlier post, linking to a page with info about management.

6) How experienced is the management team? The CEO is 36 and the CTO (is this his brother? they have the same last name) is 31. How good are they at leading, attracting talent, making good business decisions? Do they have prior successes or will this be the first real company that they are running?

also, here…

Sean Bradley is the brother of the CEO. per the latest 10-K:

Family Relationships

Nathaniel Bradley and Sean Bradley are brothers. Other than that, there are no family relationships among our directors or executive officers.

Along with Jim Crawford, COO, and Paul Arena, current Executive Chairman of the Board, it appears they have all worked together in some capacity for many years through various companies. and augme technologies being main ones. they merged together a few years back.

a brief history can be pieced together at the above link and an even briefer answer is given in the investor FAQ of

When was Hipcricket incorporated?
Founded in 1999 the Company provided strategic services and mobile technology to leading consumers and healthcare brands. The Company, formerly known as Modavox, Inc., changed its name to Augme Technologies™, Inc. in February 2010. Augme® then changed it’s name to Hipcricket in September 2013. Hipcricket is a Delaware Corporation.

as far as what they do:

What does Hipcricket® do?
Hipcricket provides a unified mobile engagement platform that drives awareness, sales, and loyalty. The AD LIFE platform has been used by internationally recognized brands and agencies to power over 400,000 campaigns across SMS, 2D/QR codes, mobile websites, advertising networks, social media, and branded apps.
Hipcricket (OTC.BB: HIPP) is headquartered in Bellevue, WA.

the stock is down 72% YTD and has a 5 year return of -96%.

per Nathaniel Bradley’s, (CEO of AudioEye), linkedin page he was chief technology and product officer at from Jan 2004 until March 2013.

Nathaniel Bradley was last listed as an executive in their 10-Ks in the 2010 annual report.

Nathaniel Bradley – Chief Technology Officer

Nathaniel has been recognized as a leading entrepreneur and innovator in the new media technology industry and has developed internet communications technology solutions for many leading organizations. He has provided technical leadership and management of several successful interactive media applications on behalf of clientele including Genentech, Allergan, Merrill Lynch, NAACP, The University of Phoenix, New York Times, and State governments of Arizona and New Mexico. Previous to his service with Augme®, Nathaniel founded Kino Digital, LLC, Kino Communications, LLC and AudioEye, Inc a Delaware corporation with patent pending accessibility and audio publication Software Company. Prior to his entrepreneurial endeavors Nathaniel was a General Manager for Intercontinental Hotels and Resorts and served as a Marketing and operational manager for The Westin La Paloma Resort & Spa in Tucson, Arizona.

i did notice that James Crawford, currently listed as COO of AudioEye, was lasted listed as a director for Augme technologies (later renamed in the 2011 10-K. see below

James G. Crawford, Director

Mr. Crawford has served as a director since March 2006. He served as Director of Interactive Production from March 2006 to July 2006, when he began to serve as our Chief Technology Officer. He held this position until he was appointed Chief Information Officer in April 2007. Prior to joining our company, Mr. Crawford was a founding member of Kino Interactive, LLC, a developer of enhanced communication software and digital media solutions, and AudioEye, a provider of proprietary web navigation tools for the learning disabled and visually impaired. Mr. Crawford was appointed to our board in conjunction with the merger that was consummated on February 28, 2006 between our company, Kino Acquisition Sub, Inc. and Kino Interactive, LLC. We believe that Mr. Crawford’s experience as a member of Kino’s management and background in technology makes him qualified to serve as a director.

Also, the writeup for James Crawford in the 2010 10-K gave a little more info about his professional past:

A founding member of both Audio Eye, Inc and Kino Communications, LLC, Mr. Crawford raised the seed capital through private investment to fund Kino’s initial move into the Streaming Media sector in 2001. With the 2006 merger of Kino Interactive and Surfnet Media (which became Augme) Mr. Crawford became Director of Interactive Production overseeing the production of the Interactive Product line, as well as managing the content management system that powered the radio platform. In March of 2006 he joined the Board of Directors for Augme and assisted the company in maneuvering through the initial challenges of the merger, becomingChief Technology Officer in July of 2006. As CTO, Mr. Crawford worked on the development of the company’s new radio platform, as well as leading the effort to upgrade the company’s server infrastructure. Mr. Crawford also developed and managed the Stream Syndicate product line managing high end clients such as ABC Disney, New Times Media, and more. In April, 2007, Mr. Crawford became the Company’s Chief Information Officer to focus in more on internal product development.

There is also mention of Kino Interactive on Bradley’s linkedin page. so it would seem the connections between management at Audioeye go back quite a ways.

I also noticed that Paul Arena, current chairman executive of the board was also the CEO at Augme, a few years back.

there is a very convoluted connection between a lot of these companies. Modavox, Augme,, the various Kino companies.

I’m not sure what conclusions to draw if any at this point, just thought i would share what I am finding in trying to learn more about management.

best of luck,


also a bit more on Paul Arena, executive chairman of BOD:

on May 22, 2013 Augme filed the below 8-K that detailed they would need to restate several of their financial statements going back to 2011.…

oddly, there is no one listed as CFO for this company in 2009 or 2010, but in 2011 Paul Arena is listed as CEO of the company and Principle Financial Officer.

Paul R. Arena, Chief Executive Officer, Principal Financial Officer, Corporate Secretary and Director

Mr. Arena has served as a director and officer since June 2010. Mr. Arena has over 28 years of investment and business experience. Prior to joining our Company, from February 2002 through March 2010, Mr. Arena served as a director of Geos Communications, Inc., (formerly i2 Telecom International, Inc.) where, he was the founder and at various times, he also served as Chairman of the Board until March 2010, Chief Financial Officer until August 2009, President until August 2008 and Chief Executive Officer until April 2009. From May 2000 to present, he served as Chairman of the Board, Chief Executive Officer, President and owner of AIM Group, Inc., an investment holding company. Mr. Arena also founded and served in various executive capacities, including Chairman of the Board and Chief Executive Officer, at Cereus Technology Partners, Inc. and its subsidiaries (May 1991 to April 2000). We believe that Mr. Arena’s executive management experience with companies that do business over the Internet and background in financial business transactions makes him qualified to serve as a director.

then I found that the latest 10-K for AudioEye says this about current CFO Edward O’Donnell:

Edward O’Donnell: Mr. O’Donnell joined our company in February 2013 and has served as our Chief Financial Officer since April 2013. Mr. O’Donnell has over 20 years of executive experience in accounting, finance, investor relations, SEC reporting and taxation. From December 2010 until January 2013, Mr. O’Donnell served as Vice President of Finance for Augme Technologies, Inc. (OTC.BB: AUGT), which provides strategic services and mobile marketing technology to leading consumer and healthcare brands. From January 2007 until November 2010, Mr. O’Donnell served as Chief Financial Officer of Carlyle Capital Group LLC, a venture capital and private equity firm. Previously, Mr. O’Donnell also served as Senior Vice President of Finance & Investor Relations of ACTV, Inc. (NASDAQ: IATV), where he developed the investor relations department before the company was purchased by OpenTV, a subsidiary of Liberty Media. Previously, Mr. O’Donnell was a member of Aloysius Lyons, LLC. Aloysius Lyons, LLC filed for protection under Chapter 7 of the federal bankruptcy laws in 2007. Aloysius Lyons, LLC received a discharge relating to the matter in 2009 and has been dissolved. Mr. O’Donnell is a Certified Public Accountant in New York and a member of NYSSCPAs and AICPA. Mr. O’Donnell received his undergraduate degree in Accountancy from Villanova University in 1991 and his MBA from Columbia Business School in 2003. We believe that Mr. O’Donnell’s extensive education and background in accounting and finance makes him qualified to serve as our Chief Financial Officer.

Looking up Edward O’Donnell’s LinkedIn page provides the following information…

VP of Finance
Augme Technologies
Public Company; 51-200 employees; augt.ob; Marketing and Advertising industry
December 2010 – September 2012 (1 year 10 months)

there was not mention of this position in the 10Ks I looked at during this time period.

So this is a bit concerning to me. Because both of these guys were supposedly responsible for financial operations at their last company during a time when they needed to make significant restatements to their financials.

All that is in the past. But it is part of the answer to Chris’s question he posed above:

6) How experienced is the management team? The CEO is 36 and the CTO (is this his brother? they have the same last name) is 31. How good are they at leading, attracting talent, making good business decisions? Do they have prior successes or will this be the first real company that they are running?

Audioeye seems to be performing very well, but give them some time. don’t go in too heavy too fast would be my advice. i think there is some info here that warrants consideration.

It doesn’t necessarily mean Audioeye is a bad investment. it might prove to be a great investment. but just thought i should share what i am finding.

best of luck,



Thank you very much for your two posts on the executive team. Very interesting.


“The Company is engaged in a pilot program to audio-enable websites for one of the largest telecommunications companies in the U.S.”

In light of the discussion about the management and their track record, as well as all the patents, It looks to me like this could be a takeover candidate within a couple of years.

The above quote came from their pre-announcement on July 2. Could this be the preliminary to takeover discussions. One of the largest telecomms, could it be Verizon, that doesn’t seem like their style. AT&T, any other thoughts, about the telecomm or what buyer might benefit via a takeover?


Could this be the preliminary to takeover discussions

I don’t know why you think that way. I didn’t see any sign of taking over in the press release. Additionally, being taken over at this stage definitely is not a good deal for share holders who bought in in the last week or so. Given some time (years) this co. has the potential to be big if - a big if – the management team can handle the growth.

On the other hand, I am not sure of the management team’s track record. The companies they were involved with before AEYE don’t seem to be very successful businesses.

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Hi Gaucho,

Here’s a nice report that should make you feel better about your potential overweight. This guy thinks $5 is a good price but quien sabe?…

The management team also worries me but I did see the present CFO got his MBA from Columbia Business school so, yeah Alma Mater!
PS Sitting on .25% of my somewhat risky portfolio and waiting to see how this plays out

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