AUDIOEYE INC

Previous wording

Our intellectual property is primarily comprised of copyrights, trademarks, trade secrets, issued patents and pending patent applications. We have a patent portfolio comprised of twenty-five (25) issued patents in the United States and three (3) pending US patent applications. The commercial value of these patents is unknown.

Current wording

Our intellectual property is primarily comprised of copyrights, trademarks, trade secrets, issued patents and pending patent applications. We have a patent portfolio comprised of twenty-six (26) issued patents in the United States and three (3) pending US patent applications. The commercial value of these patents is unknown.

Previous wording

In the nine months ended September 30, 2025, total revenue increased by 17% over the prior year comparable period. As of September 30, 2025, Annual Recurring Revenue (“ARR”) was approximately $38.7 million, which represented an increase of 7% year-over-year. Refer to Other Key Operating Metrics below for details on how we calculate ARR.

Current wording

In the three months ended March 31, 2026, total revenue increased by 8% over the prior year comparable period. As of March 31, 2026, Annual Recurring Revenue (“ARR”) was approximately $41.2 million, which represented an increase of 11% year-over-year. Refer to “Other Key Operating Metrics” below for details on how we calculate ARR.

Previous wording

As of September 30, 2025, AudioEye had approximately 123,000 customers, a 2% decrease from 126,000 customers at September 30, 2024. The decrease in customer count was attributable to a contract renegotiation within our Partner and Marketplace channel.

Current wording

As of March 31, 2026, AudioEye had approximately 127,000 customers, a 7% increase from 119,000 customers at March 31, 2025. The increase in customer count was attributable to an increase in our Partner and Marketplace channel customers.

Previous wording

In the nine months ended September 30, 2025, revenue from our Partner and Marketplace channel grew 11% over the prior year comparable period. This channel represented about 58% of ARR as of September 30, 2025. In nine months ended September 30, 2025, total Enterprise channel revenue grew 26% over the prior year comparable period. The Enterprise channel represented about 42% of ARR as of September 30, 2025.

Current wording

In the three months ended March 31, 2026, revenue from our Partner and Marketplace channel grew 8% over the prior year comparable period. The Partner and Marketplace channel represented about 59% of ARR as of March 31, 2026. In three months ended March 31, 2026, total Enterprise channel revenue grew 9% over the prior year comparable period. The Enterprise channel represented about 41% of ARR as of March 31, 2026.

Previous wording

We had one customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 13% of our total revenue in each of the three and nine months ended September 30, 2025.

Current wording

We had one customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 13% and 14% of our total revenue in the three months ended March 31, 2026 and 2025, respectively.

Previous wording

The Company continued to invest in research and development in the third quarter of 2025. Total research and development cost, as defined under Research and Development Expenses section in the Results of Operations below, was 16% of total revenue in the nine months ended September 30, 2025. Total research and development cost in the nine months ended September 30, 2025 decreased from the prior year comparable period primarily due to lower personnel cost.

Current wording

The Company continued to invest in research and development in the first quarter of 2026. Total research and development cost, as defined under the “Research and Development Expenses” section in the “Results of Operations” below, was 15% of total revenue in the three months ended March 31, 2026. Total research and development cost in the three months ended March 31, 2026 decreased from the prior year comparable perioddue to lower personnel cost.

Previous wording

Our unaudited consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP” or “GAAP”). The discussion of the results of our operations compares the three and nine months ended September 30, 2025 with the three and nine months ended September 30, 2024.

Current wording

Our unaudited consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP” or “GAAP”). The discussion of the results of our operations compares the three months ended March 31, 2026 with the three months ended March 31, 2025.

Previous wording

The Partner and Marketplace channel consists of our CMS partners, platform & agency partners, authorized resellers and the Marketplace. This channel serves small and medium sized businesses that are on a partner or reseller’s web-hosting platform or that purchase our solutions from our Marketplace.

Current wording

The Partner and Marketplace channel consists of our Content Management System (“CMS”) partners, platform & agency partners, authorized resellers and the Marketplace. This channel serves small and medium sized businesses that are on a partner or reseller’s web-hosting platform or that purchase our solutions from our Marketplace.

Previous wording

For the three and nine months ended September 30, 2025, total revenue increased by 15% and 17%, respectively, over the prior year comparable periods. The increase in Partner and Marketplace channel revenue for the three and nine months ended September 30, 2025 was primarily due to continued expansion with existing partners. The increase in Enterprise channel revenue for the three and nine months ended September 30, 2025 was driven primarily by new customer relationships, including additions from business and asset acquisitions.

Current wording

For the three months ended March 31, 2026, total revenue increased by 8% over the prior year comparable period. The 8% increase in Partner and Marketplace channel revenue for the three months ended March 31, 2026 was primarily due to continued expansion with

Previous wording

For the three and nine months ended September 30, 2025, cost of revenue increased by 27% and 22%, respectively, over the prior year comparable periods. The increase in cost of revenue for each period was primarily due to increased costs incurred for service delivery, additional costs attributable to business and asset acquisitions, and higher amortization expense related to our capitalized software development costs.

Current wording

For the three months ended March 31, 2026, cost of revenue increased by 15% over the prior year comparable period. The increase in cost of revenue was primarily due to higher costs incurred for service delivery supporting our increased revenue, additional costs attributable to asset acquisitions, and higher amortization expense related to our capitalized software development costs.

Previous wording

For the three and nine months ended September 30, 2025, gross profit increased by 11% and 16%, respectively, over the prior year comparable periods. The increase in gross profit for each period was a result of increased revenue.

Current wording

For the three months ended March 31, 2026, gross profit increased by 7% over the prior year comparable periods. The increase in gross profit was a result of increased revenue from new customers exceeding the incremental fulfilment cost.

Previous wording

For the three and nine months ended September 30, 2025, selling and marketing expenses increased by 16% and 22%, respectively, over the prior year comparable periods. The increase in selling and marketing expenses for each period resulted primarily from higher third-party marketing expenses, additional costs associated with business and asset acquisitions, and higher personnel costs.

Current wording

For the three months ended March 31, 2026, selling and marketing expenses increased by 4% over the prior year comparable period. The increase in selling and marketing expenses resulted primarily from higher third-party marketing expensesand personnel costs.

Previous wording

For the three and nine months ended September 30, 2025, R&D expenses decreased by 3% and 6%, respectively, from the prior year comparable periods. The decrease for each period was driven by lower personnel cost. For the three and nine months ended September 30, 2025, capitalized R&D cost increased by 5% and 4%, respectively, over the prior year comparable periods due to engineering personnel spending more time on product development than in the prior year comparable periods. For the three months ended September 30, 2025, total R&D cost, which includes both R&D expenses and capitalized R&D costs, decreased by 1% from the prior year comparable period. For the nine months ended September 30, 2025, total R&D cost decreased by 3% from the prior year comparable period.

Current wording

For the three months ended March 31, 2026, R&D expenses decreased by 4% from the prior year comparable period. The decrease was driven by lower personnel cost. For the three months ended March 31, 2026, capitalized R&D cost remained consistent with the prior year comparable period due to engineering personnel spending a similar level of effort on product development. For the three months ended March 31, 2026, total R&D cost, which includes both R&D expenses and capitalized R&D costs, decreased by 3% from the prior year comparable period.

Previous wording

In the nine months ended September 30, 2025, selling and marketing expense and general and administrative expense increased from the prior year comparable period. The increase in selling and marketing expense was mainly driven byhigher third-party marketing expense. The increase in general and administrative expenses in the nine months ended September 30, 2025 was due primarily to higher amortization expense associated with our intangible assets, as well as increases in personnel costs, including stock compensation expense, and in litigation expenses.

Current wording

For the three months ended March 31, 2026, general and administrative expenses increased by 38% from the prior year comparable period. The increase in general and administrative expense was due primarily to an increase in litigation expense by $1,110,000, as well as to higher stock compensation expense and amortization expense associated with our intangible assets.

Previous wording

Change in fair value of contingent consideration consists of non-cash valuation adjustments to contingent consideration liabilities recognized in connection with a business combination or an asset acquisition.

Current wording

Change in fair value of contingent consideration consists of non-cash valuation adjustments to contingent consideration liabilities recognized in connection with the acquisition of ADA Site Compliance, which was accounted for as a business combination.

Previous wording

On March 31, 2025, upon entering into a new credit facility with Western Alliance Bank, the Company paid the full $7.0 million in outstanding principal on its previous term loan with SG Credit Partners. In the nine months ended September 30, 2025, in connection with the termination of this term loan, we recognized a $300,000 loss on extinguishment of debt, which included $144,000 in prepayment and other fees and the unamortized portion of related debt discount and debt issuance costs.

Current wording

On March 31, 2025, upon entering into a new credit facility with Western Alliance Bank, the Company paid the full $7.0 million in outstanding principal on its previous term loan with SG Credit Partners. In the three months ended March 31, 2025, in connection with the termination of the SG Credit Partners term loan, we recognized a $300,000 loss on extinguishment of debt, which included prepayment and other fees and the unamortized portion of related debt discount and debt issuance costs.

Previous wording

We define ARR as the sum of (i) for our Enterprise channel, the total of the annualized recurring fee at the date of determination under each active contract, plus (ii) for our Partner and Marketplace channel, the annual or monthly recurring fee for all active customers at the date of determination, in each case, assuming no changes to the subscription, multiplied by 12 if applicable. Recurring fees are defined as revenues expected to be generated from services typically offered as a subscription service or annual service offering such as our automation and platform, periodic auditing, human-assisted technological fixes, legal support and professional service offerings and other services that reoccur on a multi-year contract. This determination includes both annual and monthly contracts for recurring products. Some of our contracts are terminable prior to the expected term, which may impact future ARR. ARR excludes non-recurring fees, which are defined as revenue expected to be generated from services typically not offered as a subscription service or annual service offering such as our PDF remediation services business, one-time mobile application reports, and other miscellaneous services that are offered as non-subscription services or are expected to be one-time in nature. As of September 30, 2025, ARR was $38.7 million, which represents an increase of 7% year-over-year, driven by growth in both our Partner and Marketplace channel and Enterprise channel.

Current wording

the date of determination, in each case, assuming no changes to the subscription, multiplied by 12 if applicable. Recurring fees are defined as revenues expected to be generated from services typically offered as a subscription service or annual service offering such as our automation and platform, periodic auditing, human-assisted technological fixes, legal support and professional service offerings and other services that reoccur on a multi-year contract. This determination includes both annual and monthly contracts for recurring products. Some of our contracts are terminable prior to the expected term, which may impact future ARR. ARR excludes non-recurring fees, which are defined as revenue expected to be generated from services typically not offered as a subscription service or annual service offering such as our PDF remediation services business, one-time mobile application reports, and other miscellaneous services that are offered as non-subscription services or are expected to be one-time in nature. As of March 31, 2026, ARR was $41.2 million, which represents an increase of 11% year-over-year, driven by growth in both our Partner and Marketplace channel and Enterprise channel.

Previous wording

As of September 30, 2025, we had $4,550,000 in cash and cash equivalents and working capital of ($23,000). The $0.6 million decrease in working capital in the nine months ended September 30, 2025 was primarily due toa portion of our term loan being classified as a current liability.

Current wording

As of March 31, 2026, we had $8,563,000 in cash and cash equivalents and working capital of $440,000. The $2.2 million increase in working capital in the three months ended March 31, 2026 was primarily due to $3.6 million in proceeds drawn from the remaining subsequent term loan advances available to the Company, partially offset by the increase in accrued expenses and in aportion of our term loan being classified as a current liability.

Previous wording

In January 2025, the Board of Directors adopted a share repurchase program authorizing the repurchase of up to $12.5 million of our common stock through January 24, 2027. The program may be amended, suspended, or discontinued at any time and does not commit the Company to repurchase any shares of its common stock. Shares repurchased under the program are subsequently retired and restored to the status of authorized but unissued shares of common stock. In the nine months ended September 30, 2025, we used $3.59 million of the program to repurchase shares. As of September 30, 2025, we had $8.91 million remaining for the repurchase of shares.

Current wording

In January 2025, the Board of Directors adopted a share repurchase program authorizing the repurchase of up to $12.5 million of our common stock through January 24, 2027. The program may be amended, suspended, or discontinued at any time and does not commit the Company to repurchase any shares of its common stock. Shares repurchased under the program are subsequently retired and restored to the status of authorized but unissued shares of common stock. In the three months ended March 31, 2026, we used $475,000 of the program to repurchase shares. As of March 31, 2026, we had $7.45 million remaining for the repurchase of shares.

Previous wording

As of September 30, 2025, we had $13.4 million outstanding under the term loan, $13.0 million of which is classified as a noncurrent liability. The term loan matures on March 31, 2030, and has required quarterly principal payments due beginning on April 10, 2026.

Current wording

As of March 31, 2026, we had $17.0 million outstanding under the term loan, $16.2 million of which is classified as a noncurrent liability. The term loan matures on March 31, 2030, and requires quarterly principal payments beginning on April 10, 2026. Refer to Note 3 – Debt to our consolidated financial statements for additional information regarding our credit facility.

Previous wording

For the nine months ended September 30, 2025, in relation to the prior year comparable period, cash provided by operating activities increased primarily due to payments in the prior year period towards our contingent consideration associated with a business acquisition, of which $710,000 was classified as cash used in operating activities, whereas no payment of contingent consideration occurredin the current year period. The increase was partially offset by timing of collections on accounts receivable in the current year period.

Current wording

For the three months ended March 31, 2026, in relation to the prior year comparable period, cash provided by operating activities increased primarily due to timing of payments and the increase in revenue.

Previous wording

For the nine months ended September 30, 2025, in relation to the prior year comparable period, cash used in investing activities decreased primarily due to the acquisition of ADA Site Compliance in the third quarter of 2024, for which we paid $3.1 million, net of cash acquired, whereas payments towards asset acquisitions in the current year period totaled $2.0 million.

Current wording

For the three months ended March 31, 2026, in relation to the prior year comparable period, cash used in investing activities decreased primarily due to a reduction in payments associated acquisitions in the current year period.

Previous wording

Our critical accounting estimates, as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, relate to goodwill, intangible assets and contingent consideration recognized in connection with a business combination. There have been no material changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Current wording

Our critical accounting estimates, as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, relate to contingent consideration recognized in connection with business combinations and asset acquisitions. There have been no material changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.