[10-Q] AUDIOEYE INC Quarterly Earnings Report
AudioEye, Inc. reported third‑quarter 2025 results showing continued growth and a narrower loss. Revenue rose to $10.227 million, up 15% year over year, with gross profit of $7.915 million. The company posted a net loss of $554,000 (basic and diluted loss per share $0.04), improving from a $1.2 million loss a year ago.
For the first nine months of 2025, revenue reached $29.817 million, up 17%. Annual Recurring Revenue was approximately $38.7 million as of September 30, 2025, up 7% year over year, reflecting gains in both Enterprise and Partner & Marketplace channels. One customer accounted for about 13% of revenue in the period.
Cash and equivalents were $4.55 million with working capital of ($23,000). The company had $13.401 million outstanding on its term loan under a new credit facility that allows up to $20 million in borrowings and a $3 million revolver. Deferred revenue (current) was $7.463 million. AudioEye repurchased $3.59 million of stock year‑to‑date, leaving $8.91 million available under its authorization.
- None.
- None.
Insights
Solid growth, narrower loss; leverage and buybacks shape the balance sheet.
AudioEye grew Q3 revenue to
Liquidity shows cash of
Capital returns continued with
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from [ ] to [ ]
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
The |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of October 31, 2025,
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PART I | FINANCIAL INFORMATION | 1 |
Item 1. | Financial Statements | 1 |
Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 (unaudited) | 2 | |
Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 (unaudited) | 3 | |
Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2025 and 2024 (unaudited) | 4 | |
Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (unaudited) | 6 | |
Notes to Consolidated Financial Statements (unaudited) | 7 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 26 |
Item 4. | Controls and Procedures | 26 |
PART II | OTHER INFORMATION | 28 |
Item 1. | Legal Proceedings | 28 |
Item 1A. | Risk Factors | 28 |
Item 2. | Issuer Purchases of Equity Securities | 28 |
Item 5. | Other Information | 29 |
Item 6. | Exhibits | 29 |
SIGNATURES | 30 |
Table of Contents
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
The financial information set forth below with respect to the consolidated financial statements as of September 30, 2025 and December 31, 2024 and for the three- and nine-month periods ended September 30, 2025 and 2024 is unaudited. This financial information, in the opinion of our management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data. The results of operations for the three- and nine-month periods ended September 30, 2025 are not necessarily indicative of results to be expected for any subsequent period. Our fiscal year end is December 31. The Company presents its unaudited consolidated financial statements, notes, and other financial information rounded to the nearest thousand United States Dollars (“U.S. Dollar”), except for per share data.
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AUDIOEYE, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
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(in thousands, except per share data) | 2025 | 2024 | |||||
ASSETS | |||||||
Current assets: |
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Cash and cash equivalents | $ | | $ | | |||
Accounts receivable, net of allowance for doubtful accounts of $ |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net of accumulated depreciation of $ |
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Intangible assets, net of accumulated amortization of $ |
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Total assets | $ | | $ | | |||
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Accounts payable and accrued expenses | $ | | $ | | |||
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Deferred revenue |
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Term loan, current | | — | |||||
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total liabilities and stockholders’ equity | $ | | $ | | |||
See Notes to Unaudited Consolidated Financial Statements
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AUDIOEYE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended September 30, | Nine months ended September 30, | ||||||||||||
(in thousands, except per share data) |
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Revenue | $ | | $ | | $ | | $ | | |||||
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Gross profit |
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Operating expenses: |
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Selling and marketing |
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Research and development |
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General and administrative |
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Change in fair value of contingent consideration | ( |
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Total operating expenses |
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Operating loss |
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Other expense: |
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Interest expense, net | ( |
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Loss on extinguishment of debt |
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Total other expense | ( | ( | ( | ( | |||||||||
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Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||
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Net loss per common share-basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||
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Weighted average common shares outstanding-basic and diluted |
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See Notes to Unaudited Consolidated Financial Statements
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AUDIOEYE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
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Common stock | Paid-in | Accumulated | ||||||||||||
(in thousands) |
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| Amount | Capital |
| Deficit |
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Balance, December 31, 2024 |
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Common stock issued upon settlement of restricted stock units | | — | — | — | — | |||||||||
Common stock issued upon exercise of options on a cash basis | | — | | — | | |||||||||
Issuance of common stock for services | | — | — | — | — | |||||||||
Surrender of stock to cover tax liability on settlement of employee stock-based awards | ( | — | ( | — | ( | |||||||||
Stock-based compensation | — | — | | — | | |||||||||
Net loss |
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Balance, March 31, 2025 | | $ | | $ | | $ | ( | $ | | |||||
Common stock issued upon exercise of options on a cashless basis | | — | — | — | — | |||||||||
Common stock issued upon settlement of restricted stock units | | — | — | — | — | |||||||||
Issuance of common stock for services | | — | — | — | — | |||||||||
Common stock issued pursuant to employee stock purchase plan | | — | | — | | |||||||||
Surrender of stock to cover tax liability on settlement of employee stock-based awards | ( | — | ( | — | ( | |||||||||
Common stock repurchased for retirement | ( | — | — | ( | ( | |||||||||
Stock-based compensation | — | — | | — | | |||||||||
Net loss | — | — | — | ( | ( | |||||||||
Balance, June 30, 2025 | | $ | | $ | | $ | ( | $ | | |||||
Common stock issued upon settlement of restricted stock units | | — | — | — | — | |||||||||
Issuance of common stock for services | | — | — | — | — | |||||||||
Surrender of stock to cover tax liability on settlement of employee stock-based awards | ( | — | ( | — | ( | |||||||||
Common stock repurchased for retirement | ( | — | — | ( | ( | |||||||||
Stock-based compensation | — | — | | — | | |||||||||
Net loss | — | — | — | ( | ( | |||||||||
Balance, September 30, 2025 | | $ | | $ | | $ | ( | $ | | |||||
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AUDIOEYE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited) (continued)
Additional | ||||||||||||||
Common stock | Paid-in | Accumulated | ||||||||||||
(in thousands) |
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Balance, December 31, 2023 | | $ | | $ | | $ | ( | $ | | |||||
Common stock issued upon settlement of restricted stock units | | — | — | — |
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Issuance of common stock for services | | — | — | — | — | |||||||||
Surrender of stock to cover tax liability on settlement of employee stock-based awards | ( | — | ( | — | ( | |||||||||
Common stock repurchased for retirement | ( | — | — | ( |
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Stock-based compensation | — | — | | — | | |||||||||
Net loss | — | — | — | ( |
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Balance, March 31, 2024 | | $ | | $ | | $ | ( | $ | | |||||
Issuance of common stock for cash, net of transaction expenses | | — | | — | | |||||||||
Common stock issued upon exercise of options on a cashless basis | | — | — | — | — | |||||||||
Common stock issued upon settlement of restricted stock units | | — | — | — | — | |||||||||
Issuance of common stock for services | | — | — | — | — | |||||||||
Common stock issued pursuant to employee stock purchase plan | | — | | — | | |||||||||
Surrender of stock to cover tax liability on settlement of employee stock-based awards | ( | — | ( | — | ( | |||||||||
Common stock repurchased for retirement | ( | — | — | ( | ( | |||||||||
Stock-based compensation | — | — | | — | | |||||||||
Net loss | — | — | — | ( | ( | |||||||||
Balance, June 30, 2024 | | $ | | $ | | $ | ( | $ | | |||||
Issuance of common stock for cash, net of transaction expenses | | — | | — | | |||||||||
Common stock issued upon exercise of options on a cashless basis | | — | — | — | — | |||||||||
Common stock issued upon settlement of restricted stock units | | — | — | — | — | |||||||||
Issuance of common stock for services | | — | — | — | — | |||||||||
Surrender of stock to cover tax liability on settlement of employee stock-based awards | ( | — | ( | — | ( | |||||||||
Stock-based compensation | — | — | | — | | |||||||||
Net loss | — | — | — | ( | ( | |||||||||
Balance, September 30, 2024 | | $ | | $ | | $ | ( | $ | | |||||
See Notes to Unaudited Consolidated Financial Statements
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AUDIOEYE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine months ended September 30, | |||||||
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CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net loss | $ | ( | $ | ( | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization |
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Loss on disposal or impairment of long-lived assets | | | |||||
Loss on extinguishment of debt | | — | |||||
Stock-based compensation expense | | | |||||
Amortization of deferred commissions | | | |||||
Amortization of debt discount and issuance costs |
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Amortization of right-of-use assets | | | |||||
Change in fair value of contingent consideration |
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Provision for accounts receivable | | | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | ( | | |||||
Prepaid expenses and other assets | ( | ( | |||||
Accounts payable and accruals |
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Operating lease liability |
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Deferred revenue |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchase of equipment |
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Software development costs |
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Patent costs | ( | ( | |||||
Payment for acquisitions, net | ( | ( | |||||
Net cash used in investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from common stock offering, net of transaction costs | — | | |||||
Proceeds from term loan, net of lender fees | | — | |||||
Payments for costs directly attributable to the issuance of term loan | ( | — | |||||
Repayment of term loan | ( | — | |||||
Payments for debt extinguishment costs | ( | — | |||||
Proceeds from exercise of options | | — | |||||
Proceeds from employee stock purchase plan | | | |||||
Payments related to settlement of employee shared-based awards | ( | ( | |||||
Settlement of contingent consideration | — | ( | |||||
Repurchase of common stock | ( | ( | |||||
Repayments of finance leases |
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Net cash provided by (used in) financing activities |
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Net decrease in cash and cash equivalents |
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Cash and cash equivalents - beginning of period |
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Cash and cash equivalents - end of period | $ | | $ | | |||
See Notes to Unaudited Consolidated Financial Statements
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AUDIOEYE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
NOTE 1 — BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of AudioEye, Inc. and its wholly-owned subsidiaries, ADA Site Compliance, LLC, Criterion 508 Solutions, Inc., and Ability, Inc. (“we”, “our” or the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”) and the rules of the Securities and Exchange Commission (the “SEC”), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “2024 Form 10-K”), as filed with the SEC on March 12, 2025.
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Certain information and disclosures normally contained in the audited consolidated financial statements as reported in the Company’s Annual Report on Form 10-K have been condensed or omitted in accordance with the SEC’s rules and regulations for interim reporting.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Our significant accounting policies are presented in “Note 2 – Significant Accounting Policies” in the 2024 Form 10-K. Users of financial information for interim periods are encouraged to refer to the footnotes to the consolidated financial statements contained in the 2024 Form 10-K when reviewing interim financial results.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the consolidated financial statements and during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to stock-based compensation, allowance for doubtful accounts, intangible assets, and contingent consideration. Actual results may differ from these estimates.
Revenue Recognition
We derive our revenue primarily from the sale of internally developed software by a software-as-a-service (“SaaS”) delivery model, as well as from professional services, through our direct sales force or through third-party resellers. Our SaaS fees include support and maintenance.
We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
We determine revenue recognition through the following five steps:
| ● | Identify the contract with the customer; |
| ● | Identify the performance obligations in the contract; |
| ● | Determine the transaction price; |
| ● | Allocate the transaction price to the performance obligations in the contract; and |
| ● | Recognize revenue when, or as, the performance obligations are satisfied. |
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AUDIOEYE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Performance obligations are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised to the customer.
Our SaaS revenue is comprised of fixed subscription fees from customer accounts on our platform related to our software products. Our support revenue is comprised of subscription fees for customers for periodic auditing, human-assisted technological remediations, legal support, and other professional support services. SaaS and support (also referred to as “subscription”) revenue is recognized on a ratable basis over the contractual subscription term of the arrangement beginning on the date that our service is made available to the customer. Certain SaaS and support fees are invoiced in advance on an annual, semi-annual, or quarterly basis. Any funds received for services not provided yet are held in deferred revenue and are recorded as revenue when the related performance obligations have been satisfied. Our subscription agreements are generally non-cancelable, although clients typically have the right to terminate their contracts for cause if we fail to perform material obligations.
Non-subscription revenue consists primarily of PDF remediation and one-time website and mobile application reporting services and is recognized upon delivery. Consideration payable under PDF remediation arrangements is based on usage. Consideration payable under non-subscription website and mobile application reporting services arrangements is based on fixed fees.
The following tables present our revenues disaggregated by sales channel:
Three months ended September 30, | ||||||
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Partner and Marketplace | $ | |
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Enterprise |
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Total revenues | $ | | $ | | ||
Nine months ended September 30, | |||||||
(in thousands) |
| 2025 |
| 2024 | |||
Partner and Marketplace | $ | |
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Enterprise |
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Total revenues | $ | | $ | | |||
The Company records accounts receivable for amounts invoiced to customers for which the Company has an unconditional right to consideration as provided under the contractual arrangement. Deferred revenue includes payments received in advance of performance under the contract and is reported on an individual contract basis at the end of each reporting period. Deferred revenue is classified as current or noncurrent based on the timing of when we expect to recognize revenue.
The table below summarizes our deferred revenue as of September 30, 2025 and December 31, 2024:
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Deferred revenue - current | $ | | $ | | |||
Deferred revenue - noncurrent | | | |||||
Total deferred revenue |
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In the three-month period ended September 30, 2025, we recognized $
We had
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AUDIOEYE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
As of September 30, 2025 and December 31, 2024,
Deferred Costs (Contract Acquisition Costs)
We capitalize initial and renewal sales commissions in the period the commission is earned, which generally occurs when a customer contract is obtained, and amortize deferred commission costs on a straight-line basis over the expected period of benefit, which we have deemed to be the contract term. As a practical expedient, we expense sales commissions as incurred when the amortization period of related deferred commission costs would have been one year or less.
The table below summarizes the deferred commission costs as of September 30, 2025 and December 31, 2024, which are included in Prepaid expenses and other current assets (current portion) and Other assets (noncurrent portion) on our consolidated balance sheets:
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Deferred costs – current | $ | | $ | | |||
Deferred costs - noncurrent |
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Total deferred costs | $ | | $ | | |||
Amortization expense associated with sales commissions was included in Selling and marketing expenses on the consolidated statements of operations and totaled $
Business Combinations
The assets acquired, liabilities assumed and any contingent consideration in business combinations are recorded at their estimated fair value on the acquisition date with subsequent changes recognized in earnings. These estimates are inherently uncertain and are subject to refinement. Management develops estimates based on assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed as of the business combination date. As a result, the Company may recognize adjustments to provisional amounts of assets acquired or liabilities assumed in earnings in the reporting period in which the adjustments are determined.
Acquisition-related expenses primarily consist of legal, accounting, and other advisory fees and are recorded in the period in which they are incurred.
Asset Acquisitions
Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions. The Company allocates the cost of the acquisition to the individual assets acquired and liabilities assumed on a relative fair value basis and goodwill is not recognized in an asset acquisition. Direct transaction costs are capitalized as a component of the cost of the acquisition.
Intangible Assets
Intangible assets include patents, capitalized software development costs, and customer relationships. Intangible assets with finite lives are amortized on a straight-line basis over their respective estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Intangible assets determined to have indefinite useful lives are not amortized but are tested for impairment annually and more frequently if events occur or circumstances change that indicate an asset may be impaired.
As of September 30, 2025 and December 31, 2024, intangible assets included $
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AUDIOEYE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Debt Discount and Debt Issuance Costs
Costs related to the issuance of debt due to the lender (debt discount) or to third parties (debt issuance costs) are capitalized and amortized to interest expense over the term of the related debt on a straight-line basis, which is not materially different from the effective interest method. Debt discount and debt issuance costs are presented on the Company’s consolidated balance sheets as a direct deduction from the carrying amount of our term loan.
Employee Stock Purchase Plan
In May 2022, the stockholders of the Company approved the Company’s Employee Stock Purchase Plan (the “ESPP”), which provides for the issuance of up to
Under the ESPP, a participant may not be granted rights to purchase more than $
Stock-Based Compensation
The Company periodically issues options, restricted stock units (“RSUs”), and shares of its common stock as compensation for services received from its employees, directors, and consultants. The fair value of the award is measured on the grant date. The fair value amount is then recognized as expense over the requisite vesting period during which services are required to be provided in exchange for the award. We recognize forfeitures as they occur. Stock-based compensation expense is recorded in the same expense classifications in the consolidated statements of operations as if such amounts were paid in cash.
The fair value of option awards is measured on the grant date using a Black-Scholes option pricing model, which includes assumptions that are subjective and are generally derived from external data (such as risk-free rate of interest) and historical data (such as volatility factor and expected term).
We estimate the fair value of restricted stock unit awards with time- or performance-based vesting using the value of our common stock on the grant date. We estimate the fair value of market-based restricted stock unit awards as of the grant date using the Monte Carlo simulation model.
We expense the compensation cost associated with time-based options and RSUs as the restriction period lapses, which is typically a - to
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AUDIOEYE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The following table summarizes the stock-based compensation expense recorded for the three and nine months ended September 30, 2025 and 2024:
Three months ended September 30, | Nine months ended September 30, | |||||||||||
(in thousands) |
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Options | $ | — | $ | — | $ | — | $ | | ||||
RSUs |
| |
| |
| |
| | ||||
Unrestricted shares of common stock | | | | | ||||||||
Employee stock purchase plan | — | — | | | ||||||||
Total | $ | | $ | | $ | | $ | | ||||
As of September 30, 2025, the unrecognized stock-based compensation expense related to outstanding RSUs totaled $
The following table summarizes the stock option and RSUs activity for the nine months ended September 30, 2025:
| Options |
| RSUs | |
Outstanding at December 31, 2024 |
| |
| |
Granted |
| — |
| |
Exercised/Settled |
| ( |
| ( |
Forfeited/Expired |
| ( |
| ( |
Outstanding at September 30, 2025 |
| |
| |
Vested at September 30, 2025 | | | ||
Unvested at September 30, 2025 | — | |
Earnings (Loss) Per Share (“EPS”)
Basic EPS is calculated by dividing net income (loss) available to common stockholders by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted EPS is calculated based on the net income (loss) available to common stockholders and the weighted average number of shares of common stock outstanding during the period, adjusted for the effects of all potential dilutive common stock issuances related to options and restricted stock units. The dilutive effect of our stock-based awards is computed using the treasury stock method, which assumes all stock-based awards are exercised and the hypothetical proceeds from exercise are used to purchase common stock at the average market price during the period. The incremental shares (i.e., the difference between shares assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted EPS calculation. However, when a net loss exists, no potential common stock equivalents are included in the computation of the diluted per-share amount because the computation would result in an anti-dilutive per-share amount.
Potentially dilutive securities outstanding as of September 30, 2025 and 2024, which were excluded from the computation of basic and diluted net loss per share for the periods then ended, are as follows:
September 30, | |||||
(in thousands) |
| 2025 |
| 2024 | |
Options |
| |
| | |
Restricted stock units |
| |
| |
|
Total |
| |
| |
|
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AUDIOEYE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock Repurchases
In January 2025, the Board of Directors adopted a share repurchase program authorizing the repurchase of up to $
Shares repurchased by the Company are immediately retired. The Company made an accounting policy election to charge the excess of repurchase price over par value entirely to retained earnings.
Fair Value of Financial Instruments
Fair value is an estimate of the exit price, representing the amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date). Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market participant assumptions in the absence of observable market information. Assets and liabilities required to be measured at fair value are categorized based upon the level of judgment associated with the inputs used to measure their value in one of the following three categories:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company.
Level 3: Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability.
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments.
The table below provides information on our Level 3 liabilities that are measured at fair value on a recurring basis:
(in thousands) |
| Nine Months Ended | |
Contingent consideration | September 30, 2025 | ||
Balance at December 31, 2024 | $ | | |
Additions (1) | | ||
Change in fair value of contingent consideration (2) | ( | ||
Balance at September 30, 2025 | $ | | |
| (1) | Represents the value of the contingent consideration liability recorded in connection with an asset acquisition in the second quarter of 2025. The fair value of the contingent consideration was determined by management based on estimated recurring revenue from acquired customer relationships. We expect to settle the liability in the fourth quarter of 2026. |
| (2) | Represents the change in fair value of contingent consideration recorded in connection with the acquisition of ADA Site Compliance, LLC (“ADA Site Compliance”) in the third quarter of 2024. The fair value of the contingent consideration was determined by management with the assistance of an independent third-party valuation specialist using the Monte-Carlo simulation. Refer to Note 3 – Acquisitions for additional information on the ADA Site Compliance acquisition. |
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AUDIOEYE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements
In September 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the recognition and disclosure framework for internal-use software costs, removing the previous “development stage” model and introducing a more judgment-based approach. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and for interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of ASU 2025-06 on its consolidated condensed financial statements and related disclosures.
In July 2025, FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient to measure credit losses on accounts receivable and contract assets. This ASU is effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the timing of the adoption and the impact of this ASU on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. The ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We plan to adopt ASU 2023-09 in our fiscal year 2025 annual financial statements. The adoption of this ASU will not affect the Company’s consolidated results of operations, financial position or cash flows.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to enhance disclosures about significant segment expenses for public entities reporting segment information under ASC Topic 280. The amendments require public entities to disclose significant expense categories for each reportable segment, other segment items, the title and position of the chief operating decision-maker, and interim disclosures of certain segment-related information previously required only on an annual basis. The amendments clarify that entities reporting single segments must disclose both the new and existing segment disclosures under Topic 280, and a public entity is permitted to disclose multiple measures of segment profit or loss if certain criteria are met. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of ASU 2023-07 did not have a significant impact on the Company's consolidated financial statements. See Note 7, Segment Information, for the required disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40) to improve the disclosures about a public entity’s expenses and provide more detailed information about the types of expenses included in certain expense captions in the consolidated financial statements. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and the amendments in this update should be applied either prospectively to financial statements issued for reporting periods after the effective date of this update or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the impact of the new standard on the disclosures in its consolidated financial statements.
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AUDIOEYE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
NOTE 3 — ACQUISITIONS
ADA Site Compliance, LLC
On September 27, 2024, we entered into a Membership Interest Purchase Agreement and acquired all the outstanding equity interests of ADA Site Compliance, LLC (“ADA Site Compliance”), which provides audits and best practices to help organizations create websites that are accessible and compliant to Web Content Accessibility Guidelines (“WCAG”) standards. The acquisition provided an opportunity to expand on ADA Site Compliance’s existing customer relationships by migrating customers to AudioEye’s products and further expanding revenue. The aggregate consideration for the purchase of ADA Site Compliance was approximately $
We accounted for the acquisition of ADA Site Compliance as a business combination in accordance with FASB ASC 805, “Business Combinations” (“ASC 805”). Accordingly, under the acquisition method of accounting, we completed the purchase price allocation to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date as follows:
(in thousands) |
| Balance at September 27, 2024 | |
Assets purchased: |
|
| |
Cash | $ | | |
Accounts receivable, net |
| | |
Other assets |
| | |
Customer relationships (1) |
| | |
Goodwill (2) |
| | |
Total assets purchased |
| | |
Liabilities assumed: |
|
| |
Accounts payable and accrued liabilities |
| | |
Deferred revenue |
| | |
Total liabilities assumed |
| | |
Net assets acquired |
| | |
Consideration: |
|
| |
Cash paid |
| | |
Note payable (3) | | ||
Contingent consideration liability (4) |
| | |
Total consideration | $ | | |
| (1) | Represents an acquired intangible asset that will be amortized on a straight-line basis over its estimated useful life of |
| (2) | Goodwill represents the excess of purchase price over the estimated fair value of net tangible and intangible assets acquired. The amount of goodwill expected to be deductible for tax purposes is $ |
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AUDIOEYE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
| (3) | Represents the fair value of the Note Payable in the aggregate principal amount of $ |
| (4) | The fair value of the ADA Site Compliance contingent consideration liability was determined using the Monte-Carlo simulation. The key assumptions used in the Monte-Carlo simulation were as follows: ARR and NRR metrics for the earn-out period, NRR discount rate of |
Pro Forma Financials
The following unaudited pro forma results of operations for the three and nine months ended September 30, 2025 and 2024 assumes ADA Site Compliance had been acquired on January 1, 2024.
The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations that would have been realized if the acquisition had been completed on January 1, 2024, nor does it purport to project the results of operations of the combined Company in future periods. The pro forma financial information does not give effect to any anticipated integration costs savings or expenses related to the acquired company.
| Pro Forma Combined Financials (unaudited) | ||||||||||||
| Three months ended September 30, |
| Nine months ended September 30, | ||||||||||
(in thousands) | 2025 |
| 2024 |
| 2025 |
| 2024 | ||||||
Revenue | $ | | $ | | $ | | $ | | |||||
Net loss attributed to common shareholders |
| ( | ( | ( | ( | ||||||||
For purposes of the pro forma disclosures above, results for the nine months ended September 30, 2025 exclude $
Asset Acquisition
In the second quarter of 2025, we completed an acquisition that does not meet the definition of a business based on our assessment of the screening test as required by ASU 2017-01, as substantially all the fair value of the gross assets acquired is concentrated in one single identifiable intangible asset, customer relationships. In connection with this asset acquisition, we recognized $
NOTE 4 — DEBT
Term Loan and Revolving Credit Facility with Western Alliance Bank
On March 31, 2025, the Company entered into a Loan and Security Agreement (the “Credit Facility Agreement”) with Western Alliance Bank, an Arizona corporation (the “Lender”). The Credit Facility Agreement provides for borrowings of up to $
The outstanding Term Advances and the Revolving Facility bear interest on the outstanding daily balance at a floating rate equal to
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AUDIOEYE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
For each Term Advance, the Company is obligated to pay interest-only payments with respect to such Term Advance through April 9, 2026. Beginning on April 10, 2026, the Company shall repay each outstanding Term Advance in (i) quarterly principal payments in the amount of
The Company incurred $
In the three months ended September 30, 2025, amortization of debt discount and debt issuance costs (associated with the Western Alliance Bank credit facility) totaled $
The Credit Facility Agreement is secured by substantially all of our assets and contains certain customary financial covenants, including the requirements that the Company maintain at all times from the closing date through and including the calendar quarter ended June 30, 2026, (a) unrestricted and unencumbered cash held in accounts with the Lender equal to at least $
As of September 30, 2025, the outstanding principal balance of our term loan totaled $
As of September 30, 2025, future principal payments of debt based on the principal balance then outstanding are as follows (in thousands):
Year ending December 31, | Term Loan | ||
2025 | $ | — | |
2026 | | ||
2027 | | ||
2028 | | ||
2029 | | ||
2030 | | ||
Total repayments | $ | | |
Term Loan with SG Credit Partners
On November 30, 2023, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with SG Credit Partners, Inc., a Delaware corporation. The Loan Agreement provided for a $
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AUDIOEYE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
The Company paid a commitment fee equal to $
On March 31, 2025, the Company paid $
NOTE 5 — COMMITMENTS AND CONTINGENCIES
Litigation
We may become involved in various routine disputes and allegations incidental to our business operations. While it is not possible to determine the ultimate disposition of these matters, management believes that the resolution of any such matters, should they arise, is not likely to have a material adverse effect on our financial position or results of operations.
Operating Leases
The Company has operating leases for office space in Tucson, Arizona, and New York, New York. The following summarizes the total lease liabilities and remaining future minimum lease payments at September 30, 2025 (in thousands):
Year ending December 31, | Operating Leases | ||
2025 (3 months remaining) | $ | | |
2026 | | ||
Total minimum lease payments |
| | |
Less: present value discount |
| ( | |
Total lease liabilities | $ | | |
Current portion of lease liabilities | $ | | |
Long term portion of lease liabilities | $ | | |
NOTE 6 — SEGMENT INFORMATION
The Company has a reportable segment focused around the sale of similar products and related services. This reportable segment derives revenues from customers by selling subscriptions for our digital accessibility platform delivering website accessibility compliance and providing services related to digital accessibility.
The Company’s chief operating decision-maker (the "CODM”), who is the chief executive officer, assesses performance for the reportable segment and decides how to allocate resources using net income as the primary measure of profitability. The CODM is not regularly provided with specific segment expenses, but focuses on revenue, gross margin, and net income. Expense information, including cost of revenue, can be easily computed from the provided information. These segment measures of profitability are shown in the consolidated statements of operations. The measure of segment assets is reported on the consolidated balance sheets as total assets.
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AUDIOEYE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
(Unaudited)
NOTE 7 — SUBSEQUENT EVENTS
We have evaluated subsequent events occurring after September 30, 2025, and based on our evaluation we did not identify any events that would have required recognition or disclosure in these consolidated financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, should be read in conjunction with our consolidated financial statements and related notes in Part I, Item 1 of this report.
As used in this quarterly report, the terms “we,” “us,” “our” and similar references refer to AudioEye, Inc., unless otherwise indicated.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you may be able to identify forward-looking statements by terms such as “may,” “should,” “will,” “forecasts,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential” or “continue,” the negative of these terms and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements, and are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions and speak only as of the date on which they are made.
Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations and intentions and other factors discussed in “Part I, Item 1A. Risk Factors” contained in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Risk factors that could cause actual results to differ from those contained in the forward-looking statements include but are not limited to risks related to:
| ● | the uncertain market acceptance of our existing and future products; |
| ● | our need for, and the availability of, additional capital in the future to fund our operations and the development of new products; |
| ● | the success, timing and financial consequences of new strategic relationships, acquisitions or licensing agreements we may enter into; |
| ● | rapid changes in Internet-based applications that may affect the utility and commercial viability of our products; |
| ● | the timing and magnitude of expenditures we may incur in connection with our ongoing product development activities; |
| ● | judicial applications of accessibility laws to the internet; |
| ● | the level of competition from our existing competitors and from new competitors in our marketplace; and |
| ● | the regulatory environment for our products and services. |
Readers of this report are cautioned not to rely on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. This cautionary note is applicable to all forward-looking statements contained in this report.
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AudioEye Solutions
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 and mobile application and audit reporting services to help our customers with their digital accessibility needs.
Intellectual Property
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.
We plan to continue to invest in research and development and expand our portfolio of proprietary intellectual property.
Our Annual Report filed on Form 10-K for the year ended December 31, 2024 as filed with the SEC on March 12, 2025 provides additional information about our business and operations.
Executive Overview
AudioEye is an industry-leading digital accessibility platform delivering Americans with Disabilities Act (“ADA”) and WCAG compliance at scale. Our solutions advance accessibility with patented technology that reduces barriers, expands access for individuals with disabilities, and enhances the user experience for a broader audience. In the three months ended September 30, 2025, we continued to focus on product innovation and expanding revenue.
We have two sales channels to deliver our product, the Partner and Marketplace channel and the Enterprise channel. AudioEye continues to focus on recurring revenue growth in both channels, while still offering our website and mobile application reporting services and PDF remediation services that provide non-recurring revenue.
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.
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.
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.
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.
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.
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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 by higher 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.
We provide further commentary on our Results of Operations below.
Results of Operations
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.
Our results of operations in these interim periods are not necessarily indicative of the results which may be expected for any subsequent period. Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
Three months ended September 30, | Change |
| ||||||||||
(in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Revenue | $ | 10,227 |
| $ | 8,925 |
| $ | 1,302 | 15 | % | ||
Cost of revenue |
| 2,312 |
|
| 1,823 |
|
| 489 | 27 | % | ||
Gross profit |
| 7,915 |
|
| 7,102 |
|
| 813 | 11 | % | ||
Operating expenses: |
|
|
|
|
|
|
| |||||
Selling and marketing |
| 3,649 |
|
| 3,148 |
|
| 501 | 16 | % | ||
Research and development |
| 1,118 |
|
| 1,151 |
|
| (33) | (3) | % | ||
General and administrative |
| 3,506 |
|
| 3,794 |
|
| (288) | (8) | % | ||
Change in fair value of contingent consideration |
| (40) |
|
| — |
|
| (40) | 100 | % | ||
Total operating expenses |
| 8,233 |
|
| 8,093 |
|
| 140 | 2 | % | ||
Operating loss |
| (318) |
|
| (991) |
|
| 673 | (68) | % | ||
Interest expense, net |
| (236) |
| (211) |
| (25) | 12 | % | ||||
Net loss | $ | (554) |
| $ | (1,202) |
| $ | 648 | (54) | % | ||
Nine months ended September 30, | Change |
| ||||||||||
(in thousands) |
| 2025 |
| 2024 |
| $ |
| % | ||||
Revenue | $ | 29,817 | $ | 25,478 | $ | 4,339 | 17 | % | ||||
Cost of revenue |
| 6,545 |
| 5,348 |
| 1,197 | 22 | % | ||||
Gross profit |
| 23,272 |
| 20,130 |
| 3,142 | 16 | % | ||||
Operating expenses: |
|
|
|
|
|
|
| |||||
Selling and marketing |
| 11,169 |
| 9,122 |
| 2,047 | 22 | % | ||||
Research and development |
| 3,471 |
| 3,694 |
| (223) | (6) | % | ||||
General and administrative |
| 10,998 |
| 9,445 |
| 1,553 | 16 | % | ||||
Change in fair value of contingent consideration |
| (1,350) |
| (12) |
| (1,338) | 11,150 | % | ||||
Total operating expenses |
| 24,288 |
| 22,249 |
| 2,039 | 9 | % | ||||
Operating loss |
| (1,016) |
| (2,119) |
| 1,103 | (52) | % | ||||
Other expense: | ||||||||||||
Interest expense, net | (709) | (647) | (62) | 10 | % | |||||||
Loss on extinguishment of debt | (300) | — | (300) | 100 | % | |||||||
Total other expense | (1,009) | (647) | (362) | 56 | % | |||||||
Net loss | $ | (2,025) | $ | (2,766) | $ | 741 | (27) | % | ||||
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Revenue
The following table presents our revenues disaggregated by sales channel:
| Three months ended September 30, |
| Change |
| ||||||||
(in thousands) |
| 2025 |
| 2024 |
| $ |
| % | ||||
Partner and Marketplace | $ | 5,582 |
| $ | 5,226 |
| $ | 356 | 7 | % | ||
Enterprise |
| 4,645 |
|
| 3,699 |
|
| 946 | 26 | % | ||
Total revenues | $ | 10,227 |
| $ | 8,925 |
| $ | 1,302 | 15 | % | ||
| Nine months ended September 30, |
| Change |
| ||||||||
(in thousands) | 2025 | 2024 | $ | % |
| |||||||
Partner and Marketplace | $ | 16,501 | $ | 14,930 | $ | 1,571 | 11 | % | ||||
Enterprise |
| 13,316 |
| 10,548 |
| 2,768 | 26 | % | ||||
Total revenue | $ | 29,817 | $ | 25,478 | $ | 4,339 | 17 | % | ||||
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.
The Enterprise channel consists of our larger customers and organizations, including those with non-platform custom websites, who generally engage directly with AudioEye sales personnel for custom pricing and solutions. This channel also includes federal, state and local government agencies.
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.
Cost of Revenue and Gross Profit
Three months ended September 30, |
| Change |
| |||||||||
(in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Revenue | $ | 10,227 |
| $ | 8,925 |
| $ | 1,302 | 15 | % | ||
Cost of Revenue |
| 2,312 |
|
| 1,823 |
|
| 489 | 27 | % | ||
Gross profit | $ | 7,915 |
| $ | 7,102 |
| $ | 813 | 11 | % | ||
Nine months ended September 30, | Change |
| ||||||||||
(in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Revenue | $ | 29,817 | $ | 25,478 | $ | 4,339 | 17 | % | ||||
Cost of Revenue |
| 6,545 |
| 5,348 |
| 1,197 | 22 | % | ||||
Gross profit | $ | 23,272 | $ | 20,130 | $ | 3,142 | 16 | % | ||||
Cost of revenue consists primarily of compensation and related benefits costs for our customer experience team, as well as a portion of our technology operations team that supports the delivery of our services, fees paid to our managed hosting and other third-party service providers, amortization of capitalized software development costs and patent costs, and allocated overhead costs.
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.
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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.
Selling and Marketing Expenses
| Three months ended September 30, |
| Change |
| ||||||||
(in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Selling and marketing | $ | 3,649 | $ | 3,148 |
| $ | 501 | 16 | % | |||
| Nine months ended September 30, | Change | ||||||||||
(in thousands) | 2025 |
| 2024 |
| $ |
| % |
| ||||
Selling and marketing | $ | 11,169 | $ | 9,122 | $ | 2,047 | 22 | % | ||||
Selling and marketing expenses consist primarily of compensation and benefits related to our sales and marketing staff, as well as third-party advertising and marketing expenses.
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.
Research and Development Expenses
| Three months ended September 30, |
| Change |
| ||||||||
(in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Research and development expense | $ | 1,118 |
| $ | 1,151 |
| $ | (33) | (3) | % | ||
Plus: Capitalized research and development cost |
| 452 |
|
| 432 |
|
| 20 | 5 | % | ||
Total research and development cost | $ | 1,570 |
| $ | 1,583 |
| $ | (13) | (1) | % | ||
| Nine months ended September 30, | Change | ||||||||||
(in thousands) | 2025 |
| 2024 |
| $ |
| % |
| ||||
Research and development expense | $ | 3,471 | $ | 3,694 | $ | (223) | (6) | % | ||||
Plus: Capitalized research and development cost |
| 1,430 |
| 1,379 |
| 51 | 4 | % | ||||
Total research and development cost | $ | 4,901 |
| 5,073 | $ | (172) | (3) | % | ||||
Research and development (“R&D”) expenses consist primarily of compensation and related benefits, independent contractor costs, and an allocated portion of general overhead costs related to our employees involved in research and development activities. Total research and development cost includes the amount of research and development expense reported within operating expenses as well as research and development cost that was capitalized during the fiscal period.
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.
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General and Administrative Expenses
Three months ended September 30, | Change |
| ||||||||||
(in thousands) |
| 2025 |
| 2024 |
| $ |
| % | ||||
General and administrative | $ | 3,506 | $ | 3,794 | $ | (288) |
| (8) | % | |||
Nine months ended September 30, | Change | |||||||||||
(in thousands) | 2025 |
| 2024 | $ |
| % |
| |||||
General and administrative | $ | 10,998 | $ | 9,445 | $ | 1,553 | 16 | % | ||||
General and administrative expenses consist primarily of compensation and benefits related to our executives, directors and corporate support functions, and general corporate expenses including legal fees, occupancy and transaction costs.
For the three months ended September 30, 2025, general and administrative expenses decreased by 8% from the prior year comparable period. The decrease in general and administrative expense was due primarily to business combination costs incurred in connection with the ADA Site Compliance acquisition in the third quarter of 2024 and a decrease in litigation expense by $233,000. For the nine months ended September 30, 2025, general and administrative expenses increased by 16% over the prior year comparable period. The increase in general and administrative expense was due primarily to higher amortization expense associated with our intangible assets, as well as higher personnel cost, including stock compensation expense, and an increase in litigation expense by $597,000.
Change in Fair Value of Contingent Consideration
Three months ended September 30, | Change |
| ||||||||||
(in thousands) |
| 2025 |
| 2024 |
| $ |
| % | ||||
Change in fair value of contingent consideration | $ | (40) | $ | — | $ | (40) |
| 100 | % | |||
Nine months ended September 30, | Change | |||||||||||
(in thousands) | 2025 |
| 2024 | $ |
| % |
| |||||
Change in fair value of contingent consideration | $ | (1,350) | $ | (12) | $ | (1,338) | 11,150 | % | ||||
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.
For the three and nine months ended September 30, 2025, the change in fair value of contingent consideration was due to a reduction in the estimated earnout payable in connection with the acquisition of ADA Site Compliance in the third quarter of 2024.
Interest Expense
| Three months ended September 30, |
| Change |
| ||||||||
(in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Interest expense, net | $ | (236) |
| $ | (211) |
| $ | (25) | 12 | % | ||
| Nine months ended September 30, |
| Change |
| ||||||||
(in thousands) | 2025 |
| 2024 | $ |
| % |
| |||||
Interest expense, net | $ | (709) | $ | (647) | $ | (62) | 10 | % | ||||
Interest expense, net consists primarily of interest on our term loan, offset by interest income from investment in money market funds.
For the three and nine months ended September 30, 2025, interest expense, net increased by 12% and 10%, 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.
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Loss on Extinguishment of Debt
| Three months ended September 30, |
| Change |
| ||||||||
(in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Loss on extinguishment of debt | $ | — |
| $ | — |
| $ | — | — | % | ||
| Nine months ended September 30, |
| Change |
| ||||||||
(in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Loss on extinguishment of debt | $ | (300) |
| $ | — |
| $ | (300) | 100 | % | ||
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.
Other Key Operating Metrics
We consider annual recurring revenue (“ARR”) as a key operating metric and a key indicator of our overall business. We also use ARR as one of the primary methods for planning and forecasting overall expectations and for evaluating, on at least a quarterly and annual basis, actual results against such expectations.
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.
Liquidity and Capital Resources
Working Capital
(in thousands) | September 30, 2025 |
| December 31, 2024 | ||||
Current assets | $ | 11,861 | $ | 12,120 | |||
Current liabilities |
| (11,884) |
| (11,571) | |||
Working capital | $ | (23) | $ | 549 | |||
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 to a portion of our term loan being classified as a current liability.
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.
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.
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As of November 4, 2025, we had no off-balance sheet arrangements, and we believe that the Company has sufficient liquidity to continue as a going concern through the next twelve months.
While the Company has been successful in raising capital, there is no assurance that it will be successful at raising additional capital in the future. Additionally, if the Company’s plans are not achieved and/or if significant unanticipated events occur, the Company may have to further modify its business plan, which may require us to raise additional capital or reduce expenses.
Cash Flows
Nine months ended September 30, | |||||||
(in thousands) |
| 2025 |
| 2024 | |||
Net cash provided by operating activities |
| $ | 2,220 | $ | 2,166 | ||
Net cash used in investing activities |
| (3,527) |
| (4,603) | |||
Net cash provided by (used in) financing activities |
| 206 |
| (1,321) | |||
Net decrease in cash and cash equivalents | $ | (1,101) | $ | (3,758) | |||
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 occurred in the current year period. The increase was partially offset by timing of collections on accounts receivable in the current year period.
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.
For the nine months ended September 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. The increase was partially offset by a $3.5 million capital raised under an ATM offering in the nine months ended September 30, 2024, whereas there were no offering proceeds in the nine months ended September 30, 2025, as well as by a $1.8 million increase in stock repurchases in the current period.
Critical Accounting Policies and Estimates
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.
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that there is reasonable assurance that the information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange
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Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Exchange Act Rules 13a-15(e) and 15d-15(e). In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, projections of any evaluation of effectiveness of our disclosure controls and procedures to future periods are subject to the risk that controls or procedures may become inadequate because of changes in conditions, or that the degree of compliance with the controls or procedures may deteriorate.
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company’s senior management, including the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures to provide reasonable assurance of achieving the desired objectives of the disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2025.
Changes in Internal Controls over Financial Reporting
During the quarter ended September 30, 2025, there were no material changes in our internal control over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We may become involved in various routine disputes and allegations incidental to our business operations. While it is not possible to determine the ultimate disposition of these matters, our management believes that the resolution of any such matters, should they arise, is not likely to have a material adverse effect on our financial position or results of operations.
Item 1A. Risk Factors
You should carefully consider the factors discussed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”), which could materially affect our business, financial condition and results of operations. There have been no material changes to the risk factors set forth in the 2024 Form 10-K. The risks described in our 2024 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations.
Item 2. Issuer Purchases of Equity Securities
The following table sets forth information with respect to our repurchases of common stock during the three months ended September 30, 2025:
|
| Maximum Number | ||||||||
of Shares (or | ||||||||||
Total Number of | Approximate Dollar | |||||||||
Shares Purchased | Value) that May | |||||||||
as Part of Publicly | Yet Be Purchased | |||||||||
Total Number of | Average Price | Announced Plans or | under the Plans or | |||||||
| Shares Purchased |
| Paid per Share |
| Programs |
| Programs (2) | |||
July 1 - July 31, 2025: |
|
|
| |||||||
Employee transactions (1) |
| 7,349 | $ | 11.81 |
| — | $ | — | ||
Share repurchase program (2) | 65,813 | 12.10 | 65,813 | 9,939,000 | ||||||
August 1 - August 31, 2025: |
| |||||||||
Employee transactions (1) |
| 30,276 | 11.49 |
| — |
| — | |||
Share repurchase program (2) | 73,728 | 11.53 | 73,728 | 9,089,000 | ||||||
September 1 - September 30, 2025: | ||||||||||
Employee transactions (1) | 13,002 | 13.01 | — | — | ||||||
Share repurchase program (2) | 14,000 | 12.49 | 14,000 | 8,914,000 | ||||||
Total: | ||||||||||
Employee transactions (1) | 50,627 | $ | 11.93 | — | $ | — | ||||
Share repurchase program (2) | 153,541 | $ | 11.86 | 153,541 | $ | 8,914,000 | ||||
| (1) | Consists of shares surrendered by employees to satisfy tax withholding obligations in connection with the settlement of restricted stock units. |
| (2) | 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. Shares repurchased under the program will be subsequently retired. The average price paid per share includes any broker fees. |
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Item 5. Other Information
Rule 10b5-1 Trading Plans
During the three months ended September 30, 2025, no director or executive officer
Item 6. Exhibits
| Incorporation by Reference | |||||||||
Exhibit No. |
| Description |
| Form |
| Date of Filing |
| Exhibit No. |
| Filed Herewith |
3.1 | Restated Certificate of Incorporation of AudioEye, Inc., dated as of May 24, 2024 | 8-K | May 24, 2024 | 3.3 | ||||||
3.2 | By-Laws of AudioEye, Inc. (as amended as of May 22, 2024) | 10-Q | July 29, 2024 | 3.3 | ||||||
10.1 | Second Loan Modification Agreement, dated as of August 13, 2025, by and among Western Alliance Bank, AudioEye, Inc., ADA Site Compliance, LLC and Criterion 508 Solutions, Inc. | X | ||||||||
31.1 | Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||||||
31.2 | Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||||||
32.1 | Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||
101.INS | Inline XBRL Instance Document | |||||||||
| ||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||
| ||||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||
| ||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||
| ||||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||
| ||||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||
104 | Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AUDIOEYE, INC. | ||||
Date: | November 4, 2025 |
| By: | /s/ David Moradi |
David Moradi | ||||
Principal Executive Officer | ||||
Date: | November 4, 2025 | By: | /s/ Kelly Georgevich | |
Kelly Georgevich | ||||
Principal Financial Officer | ||||
30
FAQ
How did AudioEye (AEYE) perform in Q3 2025?
What was AudioEye’s ARR and customer concentration as of Q3 2025?
What is AEYE’s liquidity and debt position?
How much deferred revenue did AudioEye report?
What share repurchases did AEYE complete and what remains?
What drove revenue growth across channels?
What were nine‑month 2025 results for AEYE?
