AUDIOEYE INC

Previous wording

For the three months ended March 31, 2025, total revenue increased by 20% over the prior year comparable period. As of March 31, 2025, Annual Recurring Revenue (“ARR”) was approximately $37.1 million, which represented an increase of 16% year-over-year. Refer to Other Key Operating Metrics below for details on how we calculate ARR.

Current wording

In the six months ended June 30, 2025, total revenue increased by 18% over the prior year comparable period. As of June 30, 2025, Annual Recurring Revenue (“ARR”) was approximately $38.2 million, which represented an increase of 14% year-over-year. Refer to Other Key Operating Metrics below for details on how we calculate ARR.

Previous wording

As of March 31, 2025, AudioEye had approximately 119,000 customers, a 6% increase from 112,000 customers at March 31, 2024. The increase in customer count is attributed to both our Partner and Marketplace and Enterprise channels.

Current wording

As of June 30, 2025, AudioEye had approximately 120,000 customers, a 1% decrease from 121,000 customers at June 30, 2024. The decrease in customer count was attributable to a contract renegotiation within our Partner and Marketplace channel.

Previous wording

In the three months ended March 31, 2025, revenue from our Partner and Marketplace channel grew 17% over the prior year comparable period. This channel represented about 58% of ARR as of March 31, 2025. In three months ended March 31, 2025, total Enterprise channel revenue grew 26% over the prior year comparable period. The Enterprise channel represented about 42% of ARR as of March 31, 2025.

Current wording

In the six months ended June 30, 2025, revenue from our Partner and Marketplace channel grew 13% over the prior year comparable period. This channel represented about 57% of ARR as of June 30, 2025. In six months ended June 30, 2025, total Enterprise channel revenue grew 27% over the prior year comparable period. The Enterprise channel represented about 43% of ARR as of June 30, 2025.

Previous wording

We had one customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 14% and 16% of our total revenue in the three months ended March 31, 2025 and 2024, respectively.

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 and six months ended June 30, 2025, respectively.

Previous wording

The Company continued to invest in research and development in the first quarter of 2025. Total research and development cost, as defined under Research and Development Expenses section in the Results of Operations below, was 17% of total revenue in the three months ended March 31, 2025. Total research and development cost 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 second quarter of 2025. Total research and development cost, as defined under Research and Development Expenses section in the Results of Operations below, was 17% of total revenue in the six months ended June 30, 2025. Total research and development cost decreased from the prior year comparable period primarily due to lower personnel cost.

Previous wording

In the three months ended March 31, 2025, selling and marketing expense increased from the prior year comparable period. This increase was mainly driven byhigher third-party marketing expense. The increase in general and administrative expenses in the three months

Current wording

In the six months ended June 30, 2025, selling and marketing expense increased from the prior year comparable period. This increase was mainly driven byhigher third-party marketing expense. The increase in general and administrative expenses in the six months ended

Previous wording

ended March 31, 2025 was due primarily to an increase in litigation expenses, as well as transaction costs and severance incurred in connection with business acquisitions.

Current wording

June 30, 2025 was due primarily to an increase in litigation expenses and higher amortization expense associated with our intangible assets.

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 months ended March 31, 2025 with the three months ended March 31, 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 and six months ended June 30, 2025 with the three and six months ended June 30, 2024.

Previous wording

For the three months ended March 31, 2025, total revenue increased by 20% over the prior year comparable period. The increase in Partner and Marketplace channel revenue for the three months ended March 31, 2025 was primarily due to continued expansion with

Current wording

For the three and six months ended June 30, 2025, total revenue increased by 16% and 18%, respectively, over the prior year comparable periods. The increase in Partner and Marketplace channel revenue for the three and six months ended June 30, 2025 was primarily due to continued expansion with existing partners. The increase in Enterprise channel revenue for the three and six months ended June 30, 2025 was driven primarily by an increase in Enterprise customers.

Previous wording

For the three months ended March 31, 2025, cost of revenue increased by 13% over the prior year comparable period. The increase in cost of revenue was primarily due to additional costs attributable to ADA Site Compliance, which was acquired in September 2024, and higher amortization expense related to our capitalized software development costs.

Current wording

For the three and six months ended June 30, 2025, cost of revenue increased by 27% and 20%, 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.

Previous wording

For the three months ended March 31, 2025, gross profit increased by 22% over the prior year comparable period. The increase in gross profit was a result of increased revenue.

Current wording

For the three and six months ended June 30, 2025, gross profit increased by 14% and 18%, respectively, over the prior year comparable periods. The increase in gross profit for each period was a result of increased revenue.

Previous wording

For the three months ended March 31, 2025, selling and marketing expenses increased by 24% over the prior year comparable period. The increase in selling and marketing expenses resulted primarily from higher third-party marketing expenses and additional costs associated with ADA Site Compliance, which was acquired in September 2024.

Current wording

For the three and six months ended June 30, 2025, selling and marketing expenses increased by 28% and 26%, 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.

Previous wording

For the three months ended March 31, 2025, R&D expenses decreased by 13% from the prior year comparable period. This decrease was driven by lower personnel cost. For the three months ended March 31, 2025, capitalized R&D cost decreased by 4% over the prior year comparable period. The decrease in capitalized R&D cost was the result of engineering personnel spending less time on product

Current wording

For the three and six months ended June 30, 2025, R&D expenses decreased by 2% and 7%, respectively, from the prior year comparable periods. The decrease for each period was driven by lower personnel cost. For the three and six months ended June 30, 2025, capitalized R&D cost increased by 11% and 3%, 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 June 30, 2025, total R&D cost, which includes both R&D expenses and capitalized R&D costs, increased by 2% from the prior year comparable period. For the six months ended June 30, 2025, total R&D cost decreased by 5% from the prior year comparable period.

Previous wording

For the three months ended March 31, 2025, general and administrative expenses increased by 45% over the prior year comparable period. The increase in general and administrative expense was due primarily to a $617,000 increase in litigation expense, as well as transaction costs and severance incurred in connection with business acquisitions.

Current wording

For the three and six months ended June 30, 2025, general and administrative expenses increased by 24% and 33%, respectively, over the prior year comparable periods. The increase in general and administrative expense for each period was due primarily to an increase in litigation expense by $213,000 and $830,000 for the three and six months ended June 30, 2025, respectively, as well as higher personnel cost and amortization expense associated with our intangible assets.

Previous wording

For the three months ended March 31, 2025, interest expense, net increased by 16% over the prior year comparable period. The increase in interest expense, net was primarily attributable to a reduction in interest income from investment in money market funds.

Current wording

For the three and six months ended June 30, 2025, interest expense, net increased by 3% and 8%, respectively, over the prior year comparable periods. The increase in interest expense, net for each period was primarily attributable to a reduction in interest income from investment in money market funds.

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 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 six months ended June 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.

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 March 31, 2025, ARR was $37.1 million, which represents an increase of 16% year-over-year, driven by growth in both our Partner and Marketplace channel and Enterprise channel.

Current 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 June 30, 2025, ARR was $38.2 million, which represents an increase of 14% year-over-year, driven by growth in both our Partner and Marketplace channel and Enterprise channel.

Previous wording

As of March 31, 2025, we had $8,265,000 in cash and cash equivalents and working capital of $3,585,000. The $3.0 million increase in working capital in the three months ended March 31, 2025 was primarily due tothe new credit facility with Western Alliance Bank, under which we obtained a $12 million term loan and used a portion of the proceeds to pay our previous $7.0 million term loan with SG Credit Partners in full.

Current wording

As of June 30, 2025, we had $6,869,000 in cash and cash equivalents and working capital of $1,384,000. The $0.8 million increase in working capital in the six months ended June 30, 2025 was primarily due tothe new credit facility with Western Alliance Bank, under which we have obtained $13.4 million in term loan advances and used a portion of the proceeds to pay our previous $7.0 million term loan with SG Credit Partners in full.

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. No repurchases have been made under this program to date.

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 six months ended June 30, 2025, we used $1.76 million of the program to repurchase shares. As of June 30, 2025, we had $10.74 million remaining for the repurchase of shares.

Previous wording

For the three months ended March 31, 2025, in relation to the prior year comparable period, cash used in investing activities increased primarily due to the acquisition of Criterion 508 Solutions, Inc., for which we paid $0.3 million, net of cash acquired.

Current wording

For the six months ended June 30, 2025, in relation to the prior year comparable period, cash used in investing activities increased primarily due to $1.7 million in net payments towards asset acquisitions.

Previous wording

For the three months ended March 31, 2025, in relation to the prior year comparable period, cash provided by financing activities increased primarily due to proceeds from a new $12 million credit facility, which were partially offset by the repayment of our previous $7 million term loan. In addition, in thethree months ended March 31, 2024 the Company paid $1.7 million to repurchase shares of its common stock, whereas no such stock repurchases occurredin thethree months ended March 31, 2025.

Current wording

For the six months ended June 30, 2025, in relation to the prior year comparable period, cash provided by financing activities increased primarily due to $13.4 million in proceeds from term loan borrowings under the new credit facility with Western Alliance Bank, which were partially offset by the repayment of our previous $7.0 million term loan. In addition, in thesix months ended June 30, 2024, the Company paid $1.7 millionto settle the contingent consideration associated with the acquisition of Bureau of Internet Accessibility Inc., whereas no such payment of contingent consideration occurredin thesix months ended June 30, 2025.

Previous wording

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States. The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported and

Current wording

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States. The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported and disclosed in our consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates under different assumptions or conditions.