AudioEye, Inc. (AEYE)

[236tydeaw9542h]

Two releases in two days announcing “cash” contracts. Does anyone else feel it ironic and somewhat telling how no disclosure of "cash revenues" or "non monetary" revenues were made in the company’s prior financial press release: http://finance.yahoo.com/news/audioeye-inc-reports-net-income-122800395.html

“Non monetary”, “cash revenues”, no mention to be found. Almost as if seemingly irrelevant and not worth pointing out? Not deemed material in their eyes? All that appeared worth mentioning was the top line revenue which created the perception of tremendous growth? Led directly the shares trading much higher causing many to pay prices far north of the current price.

The CEO’s quote in the original release makes no mention whatsoever of these details, but he appears quick to want to talk about the $3M in revenues yet omits how a staggering 97% of them are non monetary license exchanges, and then ups their guidance for the year?

Well low and behold, his last two releases specifically talk only about cash sales. It would appear he most certainly now wants to make the distinction in revenues perhaps acknowledging there is in fact a big difference, maybe not all revenues are equal? 

Look at this from their first release: “Revenue for the three months ended June 30, 2014 totaled $3,013,033, which represented a 1,405% increase when compared with revenue of $200,232 in the second quarter of 2013. On a sequential basis, revenue for the second quarter of 2014 increased 192% when compared with revenue of $1,032,886 in the first quarter of 2014.” WOW! Even a Seeking Alpha article was written stating this 1400% year over year growth.

Problem is that what was stated can.only be considered inherently misleading because aren’t they comparing cash revenues last year with predominantly non monetary revenues this year? Again, may be permissible under Gaap, but is it misleading? Shouldn’t apples be only compared to apples and not oranges? Why no mention that cash revenues in the Q actually dropped to $87k or down 50% in the same period? Doesn’t sound as good does it?

I’m of the opinion that only when investors began to ask questions seeing what’s really behind their “supposed” growth, do they now two days in a row issue a release specifically pointing out they sold something for cash. To me, these last two releases trigger thought of the proverbial “kid getting caught with his hand in the cookie jar”.  

I find it hard to believe this wasn’t calculated and as though we may be being playing for fools. Management didn't think we deserved to be told the difference between a non monetary sale and an actual cash sale when it helped them and its lack of disclosure played in their favor, so why now? I think the answer is painfully clear.

I would like to still like to know if the company the CEO's father is involved with, La Frontera AZ, three press releases mentioning them, was responsible for either the original $225,000 cash license sale or any of the $1M in cash sales announced yesterday? Without that one cash “paid for” license serving as the basis for determining fair value, allowing the subsequent 19 license exchanges to be considered revenues under creative Gaap accounting, the company’s quarterly filings and press releases would let’s just say…look very different. Suffice it to say, the company’s stock price may as well.
 
Fool me once, shame on you. Fool me twice, shame on you? Just my opinions based on my findings. If I made a mistake or you disagree, by all means let me know so I may correct it or we can discuss it. While at it, can anyone identify another public company who is currently accounting for revenues based on these license exchanges, just one as a reference?