AUDIOEYE INC

Previous wording

At its core, AudioEye’s offering provides ongoing testing, automated fixes, and 24/7 monitoring that continually improves conformance with Web Content Accessibility Guidelines (“WCAG”). This in turn helps businesses and organizations comply with WCAG standards as well as applicable U.S. and foreign accessibility laws. Our technology is capable of immediately identifying and fixing most of the common accessibility errors and addresses a wide range of disabilities including dyslexia, color blindness, epilepsy and more. AudioEye also offers additional solutions to provide for enhanced compliance and accessibility, including periodic auditing, custom fixes by experts, and legal support services. Our solutions may be purchased through a subscription service on a month-to-month basis or with one or multi-year terms. We also offer PDF remediation services, as well as mobile application and audit reporting services, including Voluntary Product Accessibility Template (VPAT) audits, to help our customers with their digital accessibility needs.

Current wording

At its core, AudioEye’s offering provides ongoing testing, automated fixes, and 24/7 monitoring that continually improves conformance with Web Content Accessibility Guidelines (“WCAG”). This in turn helps businesses and organizations comply with WCAG standards as well as applicable U.S. and foreign accessibility laws. Our technology is capable of immediately identifying and fixing most of the common accessibility errors and addresses a wide range of disabilities including dyslexia, color blindness, epilepsy and more. AudioEye also offers additional solutions to provide for enhanced compliance and accessibility, including periodic auditing, custom fixes by experts, and legal support services. Our solutions may be purchased through a subscription service on a month-to-month basis or with one or multi-year terms. We also offer PDF remediation services, as well as website and mobile application reporting services, including Voluntary Product Accessibility Template (VPAT) audits, to help our customers with their digital accessibility needs.

Previous wording

In the three months ended June 30, 2026, total revenue increased by 9% over the prior year comparable period. As of June 30, 2026, Annual Recurring Revenue (“ARR”) was approximately $42.3 million, which represented an increase of 11% year-over-year. Refer to “Other Key Operating Metrics” below for details on how we calculate ARR.

Current wording

In the three months ended September 30, 2026, total revenue increased by 7% over the prior year comparable period. As of September 30, 2026, Annual Recurring Revenue (“ARR”) was approximately $43.3 million, which represented an increase of 12% year-over-year. Refer to “Other Key Operating Metrics” below for details on how we calculate ARR.

Previous wording

As of June 30, 2026, AudioEye had approximately 129,000 customers, a 7% increase from 120,000 customers at June 30, 2025. The increase in customer count was attributable to an increase in our Partner and Marketplace channel customers.

Current wording

As of September 30, 2026, AudioEye had approximately 130,000 customers, a 6% increase from 123,000 customers at September 30, 2025. The increase in customer count was attributable to an increase in both our Partner and Marketplace channel customers and our Enterprise channel customers.

Previous wording

In the three months ended June 30, 2026, revenue from our Partner and Marketplace channel grew 16% over the prior year comparable period, primarily due to continued expansion with existing partners. The Partner and Marketplace channel represented about 59% of ARR as of June 30, 2026. In three months ended June 30, 2026, total Enterprise channel revenue remained consistent with the prior year comparable period, as the growth in recurring revenue was mostly offset by attrition of customers added through acquisition and a reduction in non-recurring revenue. The Enterprise channel represented about 41% of ARR as of June 30, 2026.

Current wording

In the three months ended September 30, 2026, revenue from our Partner and Marketplace channel grew 14% over the prior year comparable period, primarily due to continued expansion with existing partners. The Partner and Marketplace channel represented about 59% of ARR as of September 30, 2026. In the three months ended September 30, 2026, total Enterprise channel revenue decreased 1% from the prior year comparable period, primarily due to a reduction in non-recurring revenue. The Enterprise channel represented about 41% of ARR as of September 30, 2026.

Previous wording

We had two customers (including, for each such customer, the customer’s affiliates) which accounted for 10% and 13% of our total revenue, respectively, or 23% in aggregate, in the three months ended June 30,2026. One customer accounted for 13% of our total revenue in the six months ended June 30, 2026.

Current wording

We had two customers (including, for each such customer, the customer’s affiliates) which accounted for 11% and 12% of our total revenue, respectively, or 23% in aggregate, in the three months ended September 30, 2026. One customer accounted for 13% of our total revenue in the nine months ended September 30, 2026.

Previous wording

The Company continued to invest in research and development in the second quarter of 2026. Total research and development cost, as defined under the “Research and Development Expenses” section in the “Results of Operations” below, was 12% of total revenue in the three months ended June 30, 2026. In the three months ended June 30, 2026, research and development expenses decreased from the prior year comparable period primarily due to a reduction in employee headcount as a result of efficiency gains from newly implemented AI tools and automation.

Current wording

The Company continued to invest in research and development in the third quarter of 2026. Total research and development cost, as defined under the “Research and Development Expenses” section in the “Results of Operations” below, was 12% of total revenue in the three months ended September 30, 2026. In the three months ended September 30, 2026, research and development expenses decreased

Previous wording

In the three months ended June 30, 2026, selling and marketing expense decreased from the prior year comparable period. The decrease in selling and marketing expense was mainly driven by a reduction in marketing personnel resulting from efficiencies gained with the implementation of AI tools and automation, partially offset byhigher third-party marketing expenses.

Current wording

In the three months ended September 30, 2026, selling and marketing expenses decreased from the prior year comparable period. The decrease in selling and marketing expenses was mainly driven by a reduction in marketing personnel resulting from efficiencies gained with the implementation of AI tools and automation.

Previous wording

In the three months ended June 30, 2026, general and administrative expense increased from the prior year comparable period. The increase in general and administrative expenses was due primarily to higher litigation expense, severance associated with a reduction in headcount, and amortization expenses.

Current wording

In the three months ended September 30, 2026, general and administrative expenses increased from the prior year comparable period. The increase in general and administrative expenses was due primarily to higher personnel costs, partially offset by lower litigation expenses.

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 six months ended June 30, 2026 with the three and six months ended June 30, 2025.

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 and nine months ended September 30, 2026 with the three and nine months ended September 30, 2025.

Previous wording

For each of the three and six months ended June 30, 2026, total revenue increased by 9% over the prior year comparable periods. The 16% and 12% increases in Partner and Marketplace channel revenue for the three and six months ended June 30, 2026, respectively, were primarily due to continued expansion with existing partners.

Current wording

For the three and nine months ended September 30, 2026, total revenue increased by 7% and 8%, respectively, over the prior year comparable periods. The 14% and 13% increases in Partner and Marketplace channel revenue for the three and nine months ended September 30, 2026, respectively, were primarily due to continued expansion with existing partners.

Previous wording

For the three months ended June 30, 2026, Enterprise channel revenue remained consistent with the prior year comparable period as the growth in recurring revenue was mostly offset by attrition of customers added through acquisition and a reduction in non-recurring revenue. The 4% increase in Enterprise channel revenue for the six months ended June 30, 2026 was driven primarily by new customer relationships.

Current wording

For the three months ended September 30, 2026, Enterprise channel revenue decreased by 1% from the prior year comparable period, primarily due to a reduction in non-recurring revenue. For the nine months ended September 30, 2026, Enterprise channel revenue increased by 2% over the prior year comparable period, driven primarily by the growth in recurring revenue resulting from new customer relationships.

Previous wording

For the three and six months ended June 30, 2026, gross profit increased by 11% and 9%, respectively, over the prior year comparable periods. The increases in gross profit were primarily a result of increased revenue from new customers exceeding the incremental fulfilment cost.

Current wording

For the three and nine months ended September 30, 2026, gross profit increased by 15% and 11%, respectively, over the prior year comparable periods. The increases in gross profit were primarily a result of increased revenue attributed to new customers and to the continued expansion with existing partners.

Previous wording

For the three months ended June 30, 2026, selling and marketing expenses decreased by 4% from the prior year comparable period. The decrease in selling and marketing expenses resulted primarily from a reduction in marketing personnel resulting from efficiencies gained with the implementation of AI tools and automation, partially offset byan increase in third-party marketing expenses. Selling and marketing expenses for the six months ended June 30, 2026 were consistent with the prior year comparable period.

Current wording

For the three and nine months ended September 30, 2026, selling and marketing expenses decreased by 9% and 3%, respectively, from the prior year comparable periods. The decreases in selling and marketing expenses were primarily due to a reduction in marketing personnel resulting from efficiencies gained with the implementation of AI tools and automation. The decrease in selling and marketing expenses for the nine months ended September 30, 2026 was partially offset byan increase in third-party marketing expenses.

Previous wording

For the three and six months ended June 30, 2026, R&D expenses decreased by 29% and 17%, respectively, from the prior year comparable periods. The decreases were primarily driven by a reduction in employee headcount as a result of efficiency gains from newly implemented AI tools and automation. For the three and six months ended June 30, 2026, capitalized R&D cost decreased by 23% and 13%, respectively, from the prior year comparable periods primarily due to a reduction in engineering personnel. For the three and six months ended June 30, 2026, total R&D cost, which includes both R&D expenses and capitalized R&D costs, decreased by 27% and 16%, respectively, from the prior year comparable periods.

Current wording

For the three and nine months ended September 30, 2026, R&D expenses decreased by 20% and 18%, respectively, from the prior year comparable periods. The decreases were primarily driven by a reduction in employee headcount as a result of efficiency gains from newly implemented AI tools and automation. For the three and nine months ended September 30, 2026, capitalized R&D cost decreased by 9% and 12%, respectively, from the prior year comparable periods primarily due to a reduction in engineering personnel. For the three and nine months ended September 30, 2026, total R&D cost, which includes both R&D expenses and capitalized R&D costs, decreased by 17% and 16%, respectively, from the prior year comparable periods.

Previous wording

For the three and six months ended June 30, 2026, no change in fair value of contingent consideration was recorded.

Current wording

For the three and nine months ended September 30, 2026, no change in fair value of contingent consideration was recorded in earnings.

Previous wording

For the three and six months ended June 30, 2026, interest expense, net increased by 9% and 5%, respectively, from the prior year comparable periods. The increases in interest expense were attributable to the increase in outstanding principal balance on our term loan, as we drew the remaining $3.6 million in subsequent term loan advances in the first quarter of 2026.

Current wording

For the three and nine months ended September 30, 2026, interest expense, net increased by 12% and 8%, respectively, from the prior year comparable periods. The increases in interest expense were attributable to the increase in outstanding principal balance on our term loan, as we drew the remaining $3.6 million in subsequent term loan advances in the first quarter of 2026.

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 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. No loss on extinguishment of debt was incurred in the three and six months ended June 30, 2026.

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. No loss on extinguishment of debt was incurred in the three and nine months ended September 30, 2026.

Previous wording

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 June 30, 2026, ARR was $42.3 million, which represents an increase of 11% year-over-year, driven by growth in both our Partner and Marketplace channel and Enterprise channel.

Current wording

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 website and 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, 2026, ARR was $43.3 million, which represents an increase of 12% year-over-year, driven by growth in both our Partner and Marketplace channel and our Enterprise channel.

Previous wording

As of June 30, 2026, we had $8,717,000 in cash and cash equivalents and working capital of $974,000. The $2.8 million increase in working capital in the six months ended June 30, 2026 was primarily due to our $3.6 million draw of the remaining subsequent term loan advances available to the Company, partially offset by the $0.8 million increase in deferred revenue.

Current wording

As of September 30, 2026, we had $9.3 million in cash and cash equivalents and working capital of $3.0 million. The $4.8 million increase in working capital in the nine months ended September 30, 2026 was primarily due to our $3.6 million draw of the remaining subsequent term loan advances available to the Company.

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 six months ended June 30, 2026, we used $475,000 of the program to repurchase shares. As of June 30, 2026, we had $7.45 million remaining for the repurchase of shares under the program.

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 “2025 Program”). In the nine months ended September 30, 2026, we used $475,000 of the 2025 Program to repurchase shares. As of September 30, 2026, we had $7.45 million remaining for the repurchase of shares under the 2025 Program. In October 2026, the Board of Directors adopted a new program to repurchase up to $15.0 million of our outstanding shares of common stock through October 18, 2027. This program replaced the 2025 Program, which the Board of Directors terminated in connection with the approval of the new program. The new 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 any repurchase program are subsequently retired and restored to the status of authorized but unissued shares of common stock.

Previous wording

As of June 30, 2026, we had $16.8 million outstanding under the term loan, $15.9 million of which is classified as a noncurrent liability. The term loan matures on March 31, 2030, and requires quarterly principal payments which began on April 10, 2026. Refer to Note 3 – Debt to our consolidated financial statements for additional information regarding our credit facility. As of June 30, 2026, we were in compliance with all covenants under the credit facility.

Current wording

As of September 30, 2026, we had $16.6 million in principal outstanding under the term loan, $15.7 million of which is classified as a noncurrent liability. The term loan matures on March 31, 2030, and requires quarterly principal payments which began on April 10, 2026. Refer to Note 3 – Debt to our consolidated financial statements for additional information regarding our credit facility. As of September 30, 2026, we were in compliance with allcovenants under the credit facility. In October 2026, the Company entered into a Fifth Loan Modification Agreement with the Lender, which amended certain restrictions on permitted stock repurchases under the Credit Facility Agreement. See Part II, Item 5. “Other Information” for additional information regarding the Fifth Loan Modification Agreement.

Previous wording

For the six months ended June 30, 2026, in relation to the prior year comparable period, cash provided by operating activities increased primarily due to the timing of customer payments.

Current wording

For the nine months ended September 30, 2026, in relation to the prior year comparable period, cash provided by operating activities increased primarily due to an increase in customer collections and a decrease in personnel cost resulting from a reduction in headcount.

Previous wording

For the six months ended June 30, 2026, in relation to the prior year comparable period, cash used in investing activities decreased primarily due to a reduction in the current year period in payments associated with acquisitions.

Current wording

For the nine months ended September 30, 2026, in relation to the prior year comparable period, cash used in investing activities decreased primarily due to a reduction in the current year period in payments associated with acquisitions.

Previous wording

For the six months ended June 30, 2026, in relation to the prior year comparable period, cash provided by financing activities decreased primarily due to lower net proceeds from credit facility activity, partially offset by a reduction in repurchases of common stock and lower payments related to settlement of employee share-based awards. In thesix months ended June 30, 2026 and 2025, we received $3.6 million and $13.4 million, respectively, in proceeds from term loan borrowings under the credit facility with Western Alliance Bank. In thefirst quarter of 2025, we used a portion of the term loan borrowings to repay our previous $7.0 million term loan, as well as costs associated with the issuance and termination of our previous credit facilities.

Current wording

For the nine months ended September 30, 2026, in relation to the prior year comparable period, cash provided by financing activities increased primarily due to a reduction in repurchases of common stock and lower payments related to settlement of employee share-based awards, partially offset by lower net proceeds from credit facility activity. In thenine months ended September 30, 2026 and 2025, we received $3.6 million and $13.4 million, respectively, in proceeds from term loan borrowings under the credit facility with Western Alliance Bank. In thefirst quarter of 2025, we used a portion of the term loan borrowings to repay our previous $7.0 million term loan, as well as costs associated with the issuance and termination of our previous credit facility.