Audioeye Inc 10-K for FY2025
Audioeye Inc (AEYE)
About this 10-K
Audioeye Inc filed this 10-K on March 12, 2026, covering the fiscal year ended December 31, 2025 (FY2025).
Headline figures
Fiscal year ended December 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $40.31M
- up 14.5% from $35.2M a year earlier
- Net loss
- $3.08M
- compared with a net loss of $4.25M a year earlier
- Diluted EPS
- -$0.25
- compared with -$0.36 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the fiscal year ended
For the transition period from [ ] to [ ]
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Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to Section 12(g) of the Act:
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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 past 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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act.
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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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of the voting and non-voting common equity held by non-affiliates on the last trading day of registrant’s most recently completed second quarter ended as of June 30, 2025 was $
As of February 28, 2026,
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of its fiscal year ended December 31, 2025 are incorporated by reference in Part III of this annual report on Form 10-K.
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report 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 this Annual Report. 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 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.
As used in this annual report, the terms “we,” “us,” “our,” “AudioEye,” the “Company” and similar references refer to AudioEye, Inc. and its wholly-owned subsidiaries, ADA Site Compliance, LLC, Criterion 508 Solutions, Inc., Ability, Inc., and Equally AI Ltd.
PART I
Item 1. Business
Overview
AudioEye is an industry-leading digital accessibility platform delivering website accessibility compliance at all price points to businesses of all sizes. 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. We believe that, when implemented, our solution offers businesses and organizations the opportunity to reach more customers, improve brand image, build additional brand loyalty, and, most importantly, provide an accessible and usable web experience to the expansive and ever-growing global population of individuals with disabilities.
AudioEye primarily generates revenue through the sale of subscriptions for our software-as-a-service (“SaaS”) accessibility solutions. Our solutions are backed by machine-learning/AI-driven technology that finds and fixes common accessibility errors. Our core and supplemental solutions are designed to help websites and applications achieve and sustain substantial conformance with AudioEye’s interpretation of the Web Content Accessibility Guidelines (“WCAG”) which are web accessibility standards published by the Web Accessibility Initiative of the World Wide Web Consortium, the main international standards organization for the internet. Our solutions help mitigate a customer’s risk of costly digital accessibility-related legal action. AudioEye customers may purchase solutions directly through the AudioEye Marketplace, through a platform partner or an agency, such as Duda, that integrates our solutions into their marketplace, through a vertical Content Management System (“CMS”) partner, through an authorized reseller, or by working directly with the AudioEye sales team.
AudioEye stands out among its competitors because it offers automated and human assisted technological fixes and continuous monitoring of accessibility issues without fundamental changes to the website architecture. We recognize that automation alone cannot fix all accessibility issues, which is why we also offer certified accessibility experts, who can provide human assisted technological testing and custom fixes. Our solution is currently trusted by some of the largest and most influential companies in the world, including Samsung, Landry’s, Calvin Klein and others. Government agencies, such as the Federal Communications Commission, use our software with their digital platforms. We also work with government agencies at the state and local level.
Industry Background
If not coded properly, a website or application may not offer full access to content or functionality for individuals with disabilities, including users of assistive technology (“AT”), such as a screen reader. As a result, those sites may exclude potential users and customers. As discussed in more detail below, these sites also may not comply with U.S. and foreign laws requiring accessibility and digital inclusion, such as Title III of the Americans with Disabilities Act, Section 508 of the Rehabilitation Act, and California’s Unruh Civil Rights Act.
Traditional solutions addressing web accessibility may be costly and difficult to implement. Historically, the process for achieving compliance has been driven by costly consulting services and has not fully utilized emerging technologies to reduce the compliance cost burden or keep up with the fast pace of new content creation. At the same time, web accessibility efforts have generally focused on a limited number of disability use cases, leaving many users’ accessibility needs for digital inclusion unaddressed. Businesses may have been reluctant to invest further in web accessibility solutions due to a perceived lack of return on the significant investment required to design and implement a thorough and usable compliance solution.
Other solutions have been developed to help users access websites, but these often require the installation of a plug-in or software on the user’s computer. Similarly, some are tailored to either single or a limited number of use cases and lack a holistic approach for addressing compliance and accessibility. Further, some companies focus on automation alone, whereas our solutions take a comprehensive approach involving both technology and experts.
AudioEye Solutions
At its core, AudioEye’s offering provides ongoing testing, automated fixes, and 24/7 monitoring that continually improves conformance with 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
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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.
AudioEye Customers
Our current and potential customer base includes a very broad range of private and public sector customers, including:
| ● | Small- and medium-sized businesses; |
| ● | Corporate enterprises; |
| ● | Non-profit organizations; |
| ● | Federal government agencies, whose electronic and information technology must be accessible to people with disabilities, including employees and members of the public, pursuant to Section 508 of the Rehabilitation Act of 1973; and |
| ● | Federal, state, and local governments and agencies, which often have laws and regulations that require accessibility for people with disabilities. |
AudioEye Channels / Go-to-market:
We manage customers through two primary channels, Enterprise and Partner and Marketplace. 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. 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 an AudioEye solution from our Marketplace.
We had one major customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 13% and 15% of our revenue in the years ended December 31, 2025 and 2024, respectively.
Our typical market sectors include, but are not limited to:
| ● | Finance and banking institutions; |
| ● | Travel and hospitality companies; |
| ● | Public and private transportation companies; |
| ● | Retail and ecommerce companies; |
| ● | Educational institutions; |
| ● | Food services companies; and |
| ● | SaaS service or solution providers. |
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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-six (26) 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.
Competition
Most of our competition falls within the following categories:
| ● | There are a small number of web accessibility audit and tracking platform providers that purport to analyze websites for accessibility concerns. While these providers may sometimes identify issues, they typically do not provide fixes or specific recommendations. |
| ● | Currently, other technology providers attempt to apply compliance remediation strictly through automation technology and accessibility toolbars. |
| ● | There are a substantial number of consulting service providers offering website and application accessibility. Each generally provides an analysis of the various compliance issues associated with its clients’ websites. They ultimately provide resources and assistance in applying fixes and changes at the source. |
Competitive Strengths
Our management believes the following competitive strengths will enable our success in the accessibility marketplace:
| ● | Unique patented technology. AudioEye builds all its products with the primary goal of enhancing the user experience regardless of the end-user’s ability. AudioEye is a marketplace technology leader providing a comprehensive accessibility solution that addresses every aspect of accessibility. |
| ● | AudioEye’s software automatically removes digital access barriers every day and automatically tests for more WCAG criteria than any competitor. AudioEye’s Issue Reporting dashboard allows non-technical users to easily understand accessibility issues on their websites and the impact these issues have on site visitor experiences. |
| ● | Broad price points and offerings. With a free 14-day trial for our base offering, AudioEye allows website owners to test our solution before choosing their preferred option. Our offerings range from low-cost to standard plans, to our customized, enterprise-wide solutions. |
| ● | Unique combination of advanced technology and expert-driven services. Our management believes that AudioEye addresses the problem of web accessibility holistically and provides a combination of leading-edge technology and high-quality specialized expertise, both offered as subscription services. Our solutions are designed to provide our customers with reliable and sustainable website accessibility compliance solutions; which lead to cost-savings and reduced time-to-market. We believe that the AudioEye solution allows our customers to focus not only on achieving compliance, but also helping maintain compliance and building inclusive digital experiences for their users throughout the life of the subscription. |
| ● | We offer greater transparency in marketing our offerings. We believe there is no fully automated solution on the market that can provide 100% compliance. Our offerings provide automated fixes with additional human assisted technologically |
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| driven enhancements. We think that as the industry develops, opaque products with unsubstantiated claims will ultimately fail. |
| ● | Highly experienced inventors, technologists, and product development team. Our team comprises experienced software and SaaS developers and technologists. |
Legal and Regulatory Framework
Many courts and the U.S. Department of Justice (“DOJ”) hold that Titles II and III of the Americans with Disabilities Act (“ADA”), together with Sections 504 and 508 of the Rehabilitation Act of 1973, require public and private websites and mobile applications to be accessible to people with disabilities. On April 24, 2024, the DOJ finalized regulations under Title II of ADA, mandating that state and local government websites and mobile applications adhere to the WCAG 2.1 Level AA standards. On May 9, 2024, the U.S. Department of Health and Human Services (“HHS”) published a rule to add, among other things, specific requirements about web and mobile application accessibility under Section 504 of the Rehabilitation Act that would apply to recipients of Federal financial assistance.
Title III of the ADA governs private businesses and prohibits discrimination on the basis of disability in the provision of services, programs, and activities by public accommodations. While the law governing website and mobile application accessibility is still developing, many courts have held that websites and mobile applications fall within Title III’s scope. Some courts hold that Title III applies to all customer-facing websites and mobile applications, while others apply a “nexus” approach, which requires websites and mobile applications to comply with Title III if the website or mobile application is associated with a physical location. The U.S. Supreme Court has yet to articulate a unified approach, so some degree of uncertainty remains. Similarly, while the DOJ has taken the position that Title III applies to websites and mobile applications, the DOJ has not promulgated regulations laying out compliance standards for websites and mobile applications under Title III of the ADA. In the absence of clear guidance, litigants generally measure accessibility using the WCAG, which are promulgated by the World Wide Web Consortium.
This growing focus on website and mobile application accessibility is also reflected by other federal and state laws. The California Unruh Civil Right Act also prohibits discrimination on the basis of disability, and California Government code Section 11546.7 requires state agency directors to certify that their websites comply with the WCAG. In 2010, Congress enacted the 21st Century Communications and Video Accessibility Act in an effort to update telecommunications protections for people with disabilities. Furthermore, the Department of Transportation has issued rules interpreting and implementing the Air Carrier Access Act and setting forth website accessibility standards for air carriers. This focus on website accessibility is growing internationally as well, with over 100 countries having ratified the U.N. Convention on the Rights of Persons with Disabilities.
The European Accessibility Act (EAA) became effective in June 2025, requiring digital products and services, including websites, e-commerce, and mobile apps, to meet accessibility standards across the European Union (“EU”). Certain businesses operating in the EU must ensure compliance or risk penalties.
Although the WCAG does not carry force of law, courts may order defendants to substantially comply with the WCAG as a remedy for accessibility violations. Settlements and consent decrees often generally require the same. We therefore design our products and services to help customer websites and mobile applications achieve and sustain substantial conformance with our interpretation of the informative guidance supplied through the WCAG, and we continue to improve and update our products and services as new guidance emerges.
Lawsuits alleging website or mobile application accessibility claims typically follow a similar pattern. Both private commercial businesses and governmental agencies are regularly targeted for alleged violations. With an increasing amount of business taking place remotely, ensuring compliance with the relevant accessibility statutes is becoming increasingly important.
Employees
AudioEye is comprised of highly talented, empathic, and effective individuals working to make the web more accessible.
AudioEye provides employees with the technology and resources required to have a high-quality remote work experience while remaining connected to teams in other locations. We expect to continue a hybrid of virtual and in-person work in the future.
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As of December 31, 2025, we had 116 full-time employees. We use a variety of methods for recruiting, including in-house recruiting resources and employee referrals, and we believe our mission allows us to recruit and retain high-quality talent.
We utilize independent contractors to supplement our staff, as needed. None of our employees are represented by a labor union or subject to a collective bargaining agreement. The Company has never experienced a work stoppage and believes that its employee relations are positive.
Corporate Information
AudioEye, Inc. was formed as a Delaware corporation on May 20, 2005. We file reports with the Securities and Exchange Commission (“SEC”) and make available, free of charge, on or through our website at www.audioeye.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. In addition, the SEC maintains a website at www.sec.gov containing reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
Item 1A. Risk Factors
Investing in our securities involves a variety of risks and uncertainties, known and unknown, including, among others, those discussed below. Each of the following risks should be carefully considered, together with all the other information included in this Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, our consolidated financial statements and the related notes and in our other filings with the SEC. Furthermore, additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. Our business, financial condition, operating results, cash flow and prospects could be materially and adversely affected by any of these risks or uncertainties.
Risks Relating to Our Business and Industry
We have a history of generating significant losses and may not be able to achieve and sustain profitability.
To date, we have not been profitable, and we may never achieve profitability on a full-year or consistent basis. We incurred net losses of $3,077,000 for the year ended December 31, 2025. As of December 31, 2025, we had an accumulated deficit of $103,398,000. If we continue to experience losses, we may not be able to continue our operations, and investors may lose their entire investment.
We continue to pursue business through a variety of channels. These channels may result in the use of a significant amount of our management resources and costs, and we cannot guarantee we will fully realize the expected benefits.
We continue to pursue business through a variety of channels. Although we may devote significant resources and costs to the development of these sales channels, we may struggle to successfully identify the channel partners, or to successfully conclude transactions with the channel partners. Should we be unable to identify, conclude or maintain important channel partnerships, or if our partners are unable to meet our expectations, our business prospects and operations could be adversely affected as a result of the devotion of significant managerial effort and Company costs required. In addition, there can be no assurance that we would fully realize the potential benefit of the relationships. If we cannot do so, we may be unable to meet future revenue expectations.
Our future development will require additional capital, and we may be unable to obtain needed capital or financing on satisfactory terms, or at all, which would prevent us from fully developing our business and generating revenues.
As of December 31, 2025, we had $5.3 million in cash. Our business plan will require additional capital expenditures, and our capital outlays could increase substantially over the next several years as we implement our business plan. As a result, we may need to raise additional capital through future private or public equity offerings, strategic alliances or debt financing. Our future capital requirements will depend on many factors, including, among others: market conditions, sales and marketing costs, mergers and acquisition activity, if any, costs of litigation in enforcing our intellectual property rights, and information technology development and acquisition costs. No assurance can be given that we can successfully raise additional equity or debt capital, or that such financing will be available to us on favorable terms, if at all.
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We have a credit facility that includes certain financial and liquidity covenants. We cannot guarantee we will meet these covenants, obtain sufficient capital to repay the debt on a timely basis or obtain refinancing of the debt on satisfactory terms, or at all, all of which could have a material adverse effect on our business.
On March 31, 2025, we entered into a Loan and Security Agreement (the “Credit Facility Agreement”) with Western Alliance Bank (the “Lender”). The Credit Facility Agreement provides for borrowings of up to $20.0 million, including (i) a term loan facility, comprising of a $12.0 million term loan advance funded on March 31, 2025, and subsequent term loan advances available upon request through March 31, 2026 in an aggregate principal amount not to exceed $5.0 million; and (ii) a revolving line of credit in an aggregate outstanding amount not to exceed $3.0 million. Borrowings under the Credit Facility Agreement mature on March 31, 2030. The Credit Facility Agreement is secured by substantially all of our assets and contains certain customary financial covenants, including the requirements that we maintain (a) a minimum cash balance held in accounts with the Lender; (b) a certain ratio of total committed debt to Annual Recurring Revenue; (c) a certain ratio of aggregate funded indebtedness to adjusted EBITDA; and (d) a minimum Fixed Charge Coverage Ratio. We cannot guarantee that we will always meet these covenants or that we can obtain sufficient capital to repay the loan on a timely basis, or obtain refinancing of the loan on satisfactory terms, or at all. Further, these covenants may restrict or limit our ability to enter into certain arrangements or make certain expenditures.
Weakened global economic conditions including current and ongoing microeconomic uncertainty may adversely affect our industry, business and results of operations.
Our overall performance depends in part on worldwide economic and geopolitical conditions. The United States and other key international economies have experienced cyclical downturns from time to time in which economic activity was impacted by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies and overall uncertainty with respect to the economy. These economic conditions can arise suddenly, and the full impact of such conditions can remain uncertain. In addition, geopolitical developments can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets. Moreover, these conditions can affect the rate of IT spending and could adversely affect our customers’ ability or willingness to purchase our software, delay prospective customers’ purchasing decisions, reduce the value or duration of their subscription contracts, affect attrition rates, or decrease our ability to collect on accounts receivable, all of which could adversely affect our future sales and operating results.
We are, have been, and may in the future be, party to litigation, which could have a material adverse effect on our financial position or results of operations.
We are subject to disputes and allegations related to our business operations. Because we are in a technology industry, these disputes may involve claims of intellectual property infringement or misappropriation. We also are, and previously have been, involved in securities law litigation. These and other types of litigation can be very expensive, and we cannot assure you that our insurance policies will cover the costs. Because it is not possible to determine when and whether these disputes and allegations may arise or the ultimate disposition of such matters, the resolution of any such matters, should they arise, could have a material adverse effect on our financial position or results of operations.
Market interest rates could remain high or continue to increase our interest costs on future debt and could adversely affect our stock price.
If interest rates remain high or continue to increase, so could our interest costs for any new debt. Our $13.4 million term loan outstanding as of December 31, 2025 bears interest payable in cash on a monthly basis of 3.25% in excess of the term SOFR rate, which is defined as the greater of (i) 2.30% and (ii) the 1-month Term SOFR Reference Rate. Consequently, our interest payment obligations are subject to fluctuations in market interest rates. This increased cost is outside of our control, and we can provide no assurance that we can refinance the indebtedness on favorable terms, or at all. We may also incur additional variable interest rate indebtedness in the future. Rising interest rates could limit our ability to refinance debt when it matures or cause us to pay higher interest rates upon refinancing and increased interest expense on refinanced indebtedness, assuming we can refinance the indebtedness.
We may pursue new strategic opportunities, including acquisitions, which may result in the use of a significant amount of our management resources or significant costs, and we may not be able to consummate those opportunities or on beneficial terms.
We have entered into in the past, and are continuing to seek, strategic opportunities, which may include acquisitions, to help us pursue our business objectives. Although we may devote significant time and resources in pursuit of such transactions, we may struggle to successfully identify such opportunities, or to successfully conclude transactions. Should we be unable to identify or conclude
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important strategic transactions, our business prospects and operations could be adversely affected as a result of the devotion of significant managerial effort required, and the challenges of achieving our objectives in the absence of strategic opportunities. In addition, we may incur significant costs in connection with seeking acquisitions or other strategic opportunities regardless of whether the transaction is completed.
Even if we are able to consummate these opportunities, we may not be able to do so on terms that are beneficial to AudioEye. They may also impact our financial position and capital needs which, among other actions, could require us to raise additional capital, which could result in dilution to our stockholders or result in restrictions on our activities, and could cause substantial fluctuations in our results of operations.
We may not be able to successfully integrate newly acquired businesses or other strategic relationships, such matters involve various risks, and we may not be able to fully realize the potential benefit of such opportunities.
We may not be able to integrate acquisitions or strategic relationships that we complete, or successfully realize their full benefit. There are inherent risks in integrating these opportunities, which may include:
| ● | the assumption of liabilities of the acquired businesses that could be greater than anticipated; |
| ● | incurring significantly higher than anticipated capital expenditures and operating expenses following the acquisition; |
| ● | failing to integrate the operations, customers and personnel of the acquired company or business; |
| ● | the diversion of financial and management resources from existing operations; |
| ● | the potential loss of key employees or existing customers or adverse effects on existing business relationships with suppliers and customers; |
| ● | incorrect estimates made in the accounting for acquisitions, incurrence of non-recurring charges, and write-off of significant amounts of goodwill or other assets that could adversely affect our operating results; |
| ● | unforeseen risks and liabilities associated with businesses acquired, including any unknown vulnerabilities in acquired technology or compromises of acquired data; and |
| ● | failing to achieve the anticipated benefits of the acquisition. |
Fully integrating an acquired company or business into our operations may take a significant amount of time. We cannot assure you that we will be successful in overcoming these risks or any other problems encountered with acquisitions. To the extent we do not successfully avoid or overcome the risks or problems related to any acquisitions, our results of operations and financial condition could be adversely affected.
Our business plan may not be realized. If our business plan proves to be unsuccessful, our business may fail, and you may lose your entire investment.
Our operations are subject to all of the risks inherent in the establishment of a growing business enterprise with a limited operating history. The likelihood of our success must be considered in light of the problems, expenses, complications, and delays frequently encountered in connection with the development of a new business. Unanticipated events may occur that could affect the actual results achieved during the forecast periods. Consequently, the actual results of operations during the forecast periods will vary from the forecasts, and such variations may be material. In addition, the degree of uncertainty increases with each successive year presented in our business plan. We cannot assure you that we will succeed in the anticipated operation of our business plan. If our business plan proves to be unsuccessful, our business may fail, and you may lose some or all of your investment.
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We have experienced and will continue to experience competition as more companies seek to provide products and services similar to our products and services and seek to take advantage of changes in technologies. Because larger and better-financed competitors may affect our ability to compete in the marketplace and achieve profitability, our business may fail.
Competition in our market is intense, and we expect competition for our products and services to become even more intense. We compete directly against other companies offering similar products and services that compete or will compete directly with our proposed products and services. We also compete against established vendors in our markets. These companies may incorporate other competitive technologies into their product offerings, whether developed internally or by third parties. There are also established consultants who offer services to help their customers obtain compliance with accessibility standards. In many cases these consultants compete for the same funding from our prospective customers. Furthermore, recent advances in different technologies, such as artificial intelligence, large language models, and multi-modal models, may impact our industry, and it is unclear whether we or our competitors will be able to take advantage of these advances.
For the foreseeable future, many of our competitors may be larger, better-financed companies that may develop products superior to our current and proposed products, which could create significant competitive advantages for those companies. Our future success depends on our ability to compete effectively with our competitors or other technologies. As a result, we may have difficulty competing with larger, established competitors. Generally, these competitors may have:
| ● | substantially greater financial, technical, and marketing resources; |
| ● | a larger customer base; |
| ● | better name recognition; |
| ● | access to different and evolving technologies; and |
| ● | more expansive or different product offerings. |
These competitors may command a larger market share than we do, which may enable them to establish a stronger competitive position, in part, through greater marketing opportunities. Further, our competitors may be able to respond more quickly than we are to new or emerging technologies and changes in user preferences and to devote greater resources to developing new products and offering new services. These competitors may develop products or services that are comparable or superior to ours. If we fail to address competitive developments quickly and effectively, we may not be able to remain a viable business.
Advances in artificial intelligence may intensify competition and reduce demand for our solutions.
The web accessibility market is evolving, and artificial intelligence is an important driver of that evolution. We incorporate artificial intelligence (“AI”) into our automated accessibility services, and competition in this area may increase over time.
Established technology companies and new market entrants may develop AI capabilities that are more accurate, faster, more comprehensive, or less expensive than our own. Additionally, platform providers, content management system vendors, and browser or device manufacturers may integrate AI-driven accessibility features directly into their core products, which could reduce demand for third-party solutions like ours.
The pace of AI development makes it difficult to predict which technologies or competitors will emerge as most prominent in our market. Our investments in AI research and development may not keep pace with those of better-resourced competitors, and improvements to our AI capabilities may not always result in products that customers prefer over alternatives.
If we are unable to differentiate our solutions or compete effectively, our revenue, customer retention, and growth prospects could be adversely affected.
If we are not able to adequately protect our patented rights, our operations may be negatively impacted.
Our ability to compete largely depends on the superiority, uniqueness and value of our technology and intellectual property. To protect our intellectual property rights, we rely on a combination of patent, trademark, copyright, and trade secret laws, confidentiality
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agreements with our employees and third parties, and protective contractual provisions. We cannot assure you that infringement or invalidity claims (or claims for indemnification resulting from infringement claims) will not be asserted or prosecuted against us or that any such assertions or prosecutions will not materially adversely affect our business.
Regardless of whether any future claims are valid or can be successfully asserted, defending against such claims could cause us to incur significant costs, could jeopardize or substantially delay a successful outcome in any future litigation, and could divert resources away from our other activities. In addition, assertion of infringement claims could result in injunctions that prevent us from distributing our products. In addition to challenges against our existing patents, any of the following could also reduce the value of our intellectual property now, or in the future:
| ● | our applications for patents, trademarks, and copyrights relating to our business may not be granted and, if granted, may be challenged or invalidated; |
| ● | issued trademarks, copyrights or patents may not provide us with any competitive advantages; |
| ● | our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology; or |
| ● | our efforts may not prevent the development and design by others of products or technologies similar to, competitive with, or superior to those that we develop. |
Also, we may not be able to effectively protect our intellectual property rights in certain foreign countries where we may do business in the future or from which competitors may operate. Obtaining patents will not necessarily protect our technology or prevent our international competitors from developing similar products or technologies. Our inability to adequately protect our patented rights may have a negative impact on our operations and revenues.
In addition, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights in Internet-related businesses are uncertain and still evolving. Because of the growth of the Internet and Internet-related businesses, patent applications are continuously and simultaneously being filed in connection with Internet-related technology. There are a significant number of U.S. and foreign patents and patent applications in our areas of interest, and we believe that there has been, and is likely to continue to be, significant litigation in the industry regarding patent and other intellectual property rights.
We may commence legal proceedings against third parties who we believe are infringing on our intellectual property rights, and if we are forced to litigate to defend our intellectual property rights, or to defend claims by third parties against us relating to intellectual property rights, legal fees and court injunctions could adversely affect our financial condition and potentially end our business.
We expect an increase in the number of third parties who could violate our patents as the market develops new uses of similar products and consumers continue to increase their adoption of technology and integrate it into their daily lives. There may be the potential need to enter into additional active litigation to defend and enforce our patents. These legal proceedings could continue for several years and may require significant expenditures for legal fees and other expenses. In the event we are not successful through appeal and do not subsequently obtain monetary and injunctive relief, these litigation matters may significantly reduce our financial resources and have a material impact on our ability to continue our operations. The time and effort required of our management to effectively pursue or defend these litigation matters may adversely affect our ability to operate our business, since time spent on matters related to the lawsuits would take away from the time spent on managing and operating the business. We cannot assure you any such potential lawsuits will result in an outcome that is favorable to our stockholders or the Company.
The current legal environment for our products and services remains unclear.
We cannot assure you that our existing or planned product and service offerings will be in compliance with local, state, and/or federal U.S. laws or the laws of any foreign jurisdiction where we operate or may operate in the future. Further, the legal, regulatory and judicial framework relating to the accessibility of websites may change. We cannot assure you that we will not unintentionally violate new laws or that existing laws will not be modified, that new laws and regulations will not be enacted in the future, or that judicial application of existing laws and regulations might change, which may cause us to be in violation of such laws or render our product and service offerings less needed. More aggressive domestic or international regulation of the Internet may materially and adversely affect our business, financial condition, operating results, and future prospects.
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Our business greatly depends on the growth of online services, Internet of Things (“IOT”), kiosks, streaming, and other next-generation Internet-based applications, and there is a risk that such growth may not occur as expected, or at all, which would harm our business.
The Internet may ultimately prove not to be a viable commercial marketplace for such applications for several reasons, including:
| ● | unwillingness of consumers to shift to and use other such next-generation Internet-based applications; |
| ● | refusal to purchase our products and services; |
| ● | perception by end-users with respect to product and service quality and performance; |
| ● | limitations on access and ease of use; |
| ● | congestion leading to delayed or extended response times; |
| ● | inadequate development of Internet infrastructure to keep pace with increased levels of use; and |
| ● | increased government regulations. |
Because of these and other factors, the growth of online services, IOT, kiosks, streaming, and other next-generation Internet-based applications may be impeded or not occur as expected. As a result, our business and operations could be adversely impacted.
If the market for our online services does not grow as anticipated, our business would be adversely affected.
While other next-generation Internet-based applications have grown rapidly in personal and professional use, we cannot assure you that the adoption of our products and services will grow at a comparable rate or grow at all.
Our success is dependent on our employees, some of whom are relatively new in their positions with the Company.
Our success has depended, and continues to depend, on the efforts and talents of our senior management team and employees, including our engineers, product managers, sales and marketing personnel, and professional services personnel. Some of our employees are relatively new to their positions, and we can provide no assurance that our management team will be able to effectively work together or with all of our employees. If they are unable to do so or our new employees do not work effectively, there may be delays in execution of our business and operating strategies.
Our expansion into new products, services, technologies, and geographic regions subjects us to additional business, legal, financial, and competitive risks.
We may have limited or no experience in our newer market segments, and our customers may not adopt our new offerings. These offerings may present new and difficult technology challenges, and we may be subject to claims if customers of these offerings experience service disruptions or failures or other quality issues. In addition, profitability, if any, in our newer activities may be lower than in our older activities, and we may not be successful enough in these newer activities to recoup our investments in them. If any of these were to occur, it could damage our reputation, limit our growth, and negatively affect our operating results.
We face risks related to system interruption and lack of redundancy.
We experience occasional system interruptions and delays that make our websites and services unavailable or slow to respond and prevent us from efficiently providing services to third parties, which may reduce our net sales and the attractiveness of our products and services. If we are unable to continually add software and hardware, effectively upgrade our systems and network infrastructure, and take other steps to improve the efficiency of our systems, it could cause system interruptions or delays and adversely affect our operating results.
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Our computer and communications systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, earthquakes, acts of war or terrorism, acts of God, computer viruses, physical or electronic break-ins, and similar events or disruptions. Any of these events could cause system interruption, delays, and loss of critical data, and could prevent us from providing services, which could make our product and service offerings less attractive and subject us to liability. Our systems are not fully redundant, and our disaster recovery planning may not be sufficient. In addition, we may have inadequate insurance coverage to compensate for any related losses. Any of these events could damage our reputation and be expensive to remedy.
Government regulation is evolving, and unfavorable changes could harm our business.
We are subject to general business regulations and laws, as well as regulations and laws specifically governing the Internet, e-commerce, electronic devices, and other services. Existing and future laws and regulations may impede our growth. These regulations and laws may cover website accessibility, taxation, privacy, data protection, pricing, content, copyrights, distribution, mobile communications, electronic device certification, electronic waste, energy consumption, environmental regulation, electronic contracts and other communications, competition, consumer protection, web services, the provision of online payment services, information reporting requirements, unencumbered Internet access to our services, the design and operation of websites, and the characteristics and quality of products and services. It is not clear how existing laws governing issues such as property ownership, libel, and personal privacy apply to the Internet, e-commerce, digital content, and web services. Unfavorable regulations and laws could diminish the demand for our products and services and increase our cost of doing business.
We may be subject to risks related to government contracts and related procurement regulations.
Our contracts with U.S., as well as state, local, and foreign, government entities are subject to various procurement regulations and other requirements relating to their formation, administration, and performance. We may be subject to audits and investigations relating to our government contracts, and any violations could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, refunding or suspending of payments, forfeiture of profits, payment of fines, and suspension or debarment from future government business. In addition, such contracts may provide for termination by the government at any time, without cause.
If we do not successfully adapt, enhance or develop new products and services in a cost-effective manner to meet customer demand in the rapidly evolving market for next-generation Internet-based applications and services, our business may fail.
The market for next-generation Internet-based applications and services is characterized by rapidly changing technology, evolving industry standards, changes in customer needs, and frequent new service and product introductions. Our future success will depend, in part, on our ability to use new technologies effectively, to continue to develop our technical expertise and proprietary technology, to enhance our existing products and services, and to develop new products and services that meet changing customer needs on a timely and cost-effective basis. We may not be able to adapt quickly enough to changing technology, customer requirements, and industry standards. If we fail to use new technologies effectively, to develop our technical expertise and new products and services, or to enhance existing products and services on a timely basis, either internally or through arrangements with third parties, our product and service offerings may fail to meet customer needs, which would adversely affect our revenues and prospects for growth.
In addition, if we are unable to, for technological, legal, financial, or other reasons, adapt in a timely manner to changing market conditions or customer requirements, we could lose customers, strategic alliances, and market share. Sudden changes in user and customer requirements and preferences, the frequent introduction of new products and services embodying new technologies, and the emergence of new industry standards and practices could render our existing products, services and systems obsolete. The emerging nature of products and services in the technology and communications industry and their rapid evolution will require that we continually improve the performance, features, and reliability of our products and services. Our survival and success will depend, in part, on our ability to:
| ● | design, develop, launch and/or license our planned products, services, and technologies that address the increasingly sophisticated and varied needs of our prospective customers; and |
| ● | respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. |
The development of products and services and other patented technology involves significant technological and business risks and requires substantial expenditures and lead time. We may be unable to use new technologies effectively. Updating our technology internally and licensing new technology from third parties may also require us to incur significant additional expenditures.
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If our products and services do not continue to gain market acceptance, we may not be able to fund future operations.
A number of factors may affect the market acceptance of our products or services or any other products or services we develop or acquire, including, among others:
| ● | the price of our products or services relative to other competitive products and services; |
| ● | the perception by users of the effectiveness of our products and services; |
| ● | our ability to fund our sales and marketing efforts; and |
| ● | the effectiveness of our sales and marketing efforts. |
If our products and services do not continue to gain market acceptance, we may not be able to fund future operations, including the development of new products and services and/or our sales and marketing efforts for our current products and services, which inability would have a material adverse effect on our business, financial condition, and operating results.
We continually develop new products and product enhancements and actively capitalize software development costs, while making educated assumptions to anticipate the attributed revenue to be derived from each development or enhancement. If our assumptions are incorrect or if we are unable to accurately attribute revenue to each respective product or product enhancement, we may have to account for impairment, thus causing us to reverse the capitalized expenditures.
Our product developers are consistently programming new products and enhancements to existing products. Under applicable accounting guidance, we make determinations to estimate the useful life of each of these products and enhancements. Based on these determinations, we amortize software expenses over a pre-determined period of time. Should our estimates turn out to be inaccurate or should the business fail to attract new revenue in relation to each respective product or product enhancement, we may have to reverse or write off the related capitalized expenses.
Our products and services are highly technical and may contain undetected errors, which could cause harm to our reputation and adversely affect our business.
Our products and services are highly technical and complex and, when deployed, may contain errors or defects. Despite testing, some errors in our products and services may only be discovered after they have been installed and used by customers. Any errors or defects discovered in our products and services after commercial release could result in failure to achieve market acceptance, loss of revenue or delay in revenue recognition, loss of customers, and increased service and warranty cost, any of which could adversely affect our business, operating results and financial condition. In addition, we could face claims for product liability, tort, or breach of warranty. The performance of our products and services could have unforeseen or unknown adverse effects on the networks over which they are delivered as well as on third-party applications and services that utilize our products and services, which could result in legal claims against us, harming our business. Furthermore, we expect to provide implementation, consulting, and other technical services in connection with the implementation and ongoing maintenance of our products and services, which typically involves working with sophisticated software, computing systems, and communications systems. Many of our contracts with customers contain provisions relating to warranty disclaimers and liability limitations, but such provisions may not be upheld. Defending a lawsuit, regardless of its merit, is costly and may divert our management’s attention and adversely affect the market’s perception of us and our products and services. In addition, if our business liability insurance coverage proves inadequate or future coverage is unavailable on acceptable terms or at all, our business, operating results and financial condition could be adversely impacted.
Malfunctions of third-party communications infrastructure, hardware and software expose us to a variety of risks we cannot control, and those risks could result in harm to our business.
Our business depends upon the capacity, reliability and security of the infrastructure owned by third parties over which our product offerings are deployed. We have no control over the operation, quality or maintenance of a significant portion of that infrastructure or over whether those third parties will upgrade or improve their equipment. We do depend on these companies to maintain the operational integrity of our integrated connections. If one or more of these companies is unable or unwilling to supply or expand its levels of service in the future, our operations could be adversely impacted. System interruptions or increases in response time could result in a loss of potential or existing users and, if sustained or repeated, could reduce the appeal of the networks to users. In addition, users depend on real-time communications; outages caused by increased traffic could result in delays and system failures. These types
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of occurrences could cause users to perceive that our products and services do not function properly and could therefore adversely affect our ability to attract and retain strategic partners and customers.
Security and privacy breaches, computer viruses, and cyber-attacks could harm our business, financial condition, results of operations, or reputation.
Security and privacy breaches, computer malware and cyber-attacks have become more prevalent, including in our industry. In addition, security and privacy laws are becoming more prevalent and pervasive. Our corporate systems, third-party systems and security measures may be breached due to the actions of outside parties, employee or company error, malfeasance, a combination of these, or otherwise, and, as a result, an unauthorized party may obtain access to our data or any third-party data we may possess, including privacy data. Any such security breach could require us to comply with various breach notification laws and may expose us to litigation, remediation and investigation costs, increased costs for security measures, loss of revenue, damage to our reputation, and potential liability.
System failure or interruption or our failure to meet increasing demands on our systems could harm our business.
The success of our product and service offerings depends on the uninterrupted operation of various systems, secure data centers, and other computer and communication networks that we use or establish. To the extent the number of users of networks utilizing our future products and services suddenly increases, the technology platform and hosting services which will be required to accommodate a higher volume of traffic may result in slower response times, service interruptions or delays or system failures. The deployment of our products, services, systems and operations will also be vulnerable to damage or interruption from:
| ● | power loss, transmission cable cuts and other telecommunications failures; |
| ● | damage or interruption caused by fire, earthquake and other natural disasters; |
| ● | computer viruses or software defects; and |
| ● | physical or electronic break-ins, sabotage, intentional acts of vandalism, terrorist attacks and other events beyond our control. |
System interruptions or failures and increases or delays in response time could result in a loss of potential or existing users and, if sustained or repeated, could reduce the appeal of our products and services to users. These types of occurrences could cause users to perceive that our products and services do not function properly and could therefore adversely affect our ability to attract and retain strategic partners and customers.
Fraud, impersonation, and social engineering schemes could result in financial loss or reputational harm.
We are subject to the risk of fraudulent schemes in which third parties pose as Company executives, board members, or trusted counterparties to induce unauthorized payments, wire transfers, or the disclosure of sensitive business information. These schemes typically exploit human judgment rather than technical vulnerabilities and may not be preventable through cybersecurity measures alone. Fraudulent parties may use publicly available information, including our SEC filings and press releases, to make such communications appear credible.
Although we maintain internal controls designed to detect and prevent unauthorized transactions, there can be no assurance that these controls will be effective in all circumstances. A successful scheme could result in material financial loss, legal liability, and reputational harm, and any such losses may not be fully covered by our insurance policies.
We do not expect to pay any dividends to holders of our common stock for the foreseeable future, which will affect the extent to which our investors realize any future gains on their investment.
We do not anticipate that we will pay any dividends to holders of our common stock in the foreseeable future. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.
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We will need to recruit and retain additional qualified personnel to successfully grow our business.
Our future success will depend in part on our ability to attract and retain qualified operations, marketing and sales personnel as well as technical personnel. Inability to attract and retain such personnel could adversely affect our business. Competition for technical, sales, marketing and executive personnel is intense, particularly in the technology and Internet sectors. We cannot assure you that we will be able to attract or retain such personnel.
If we fail to maintain effective internal control over financial reporting and effective disclosure controls and procedures, we may not be able to report financial results accurately or on a timely basis, or to detect fraud, which could have a material adverse effect on our business and stock price.
In connection with this annual report, our management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures and of the effectiveness of our internal control over financial reporting. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures and our internal control over financial reporting were effective as of December 31, 2025.
Nonetheless, failure to maintain established internal control over financial reporting or to maintain effective disclosure controls and procedures could adversely impact our public disclosures regarding our business, financial condition or results of operations. Upon review of the required internal control over financial reporting, our management and/or our auditors have in the past and may in the future identify material weaknesses and/or significant deficiencies that need to be addressed. Any actual or perceived weaknesses or conditions that need to be addressed in our internal control over financial reporting and disclosure of management’s assessment of the Company’s internal control over financial reporting could adversely impact the price of and our ability to list our common stock and may lead to stockholder claims and regulatory action against us. Failure to maintain effective internal controls in the future could also result in a material misstatement of our annual or quarterly consolidated financial statements that would not be prevented or detected on a timely basis and that could cause us to restate our consolidated financial statements for a prior period, cause investors to lose confidence in our consolidated financial statements and/or limit our ability to raise capital.
Additionally, any such failure may also negatively impact our operating results and financial condition, impair our ability to timely file our periodic and other reports with the SEC, consume a significant amount of management’s time, and cause us to incur substantial additional costs relating to the implementation of remedial measures.
Risks Related to the Market for Our Common Stock
Although our shares of common stock are listed on the Nasdaq Capital Market, historically we have had a limited trading volume and a higher price volatility. This may result in reduced liquidity of our common stock.
Although our shares of common stock are listed on the Nasdaq Capital Market under the symbol “AEYE,” historically trading volume in our common stock has been limited. In addition, our stock has also historically seen significant price volatility, which may reduce the liquidity of our common stock. The sale of a significant number of shares of common stock at any particular time could be difficult to achieve at the market prices prevailing immediately before such shares are offered and may limit your liquidity options.
If we cannot continue to satisfy the continuing listing criteria of the Nasdaq Capital Market, the exchange may subsequently delist our common stock.
The Nasdaq Capital Market requires us to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of our common stock. Generally, we must maintain a minimum amount of stockholders’ equity and a minimum number of holders of our securities, as well as meet certain disclosure and corporate governance requirements. If we fail to meet any of the continuing listing requirements, our common stock may be subject to delisting. If our common stock is delisted and we are not able to list our common stock on another national securities exchange, we expect our securities would be quoted on an over-the-counter market. If this were to occur, our stockholders could face significant material adverse consequences, including limited availability of market quotations for our common stock and reduced liquidity for the trading of our securities. In addition, we could experience a decreased ability to issue additional securities and obtain additional financing in the future.
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The market price for our common stock may fluctuate significantly, which could result in substantial losses by our investors.
The market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:
| ● | the outcomes of potential future patent litigation; |
| ● | our ability to monetize our future patents; |
| ● | changes in our industry; |
| ● | announcements of technological innovations, new products or product enhancements by us or others; |
| ● | announcements by us or others of significant strategic partnerships, out-licensing, in-licensing, joint ventures, acquisitions or capital commitments; |
| ● | changes in laws or regulations or judicial interpretation of the application of accessibility-related laws and regulations to the internet; |
| ● | our failure to meet any financial covenants, to have sufficient liquidity to repay any of our indebtedness, or to refinance our indebtedness on favorable terms, or at all; |
| ● | changes in earnings estimates or recommendations by security analysts, if our common stock is covered by analysts; |
| ● | investors’ general perception of us; |
| ● | future issuances of common stock; |
| ● | investors’ future resales of our securities; |
| ● | the addition or departure of key personnel; |
| ● | general market conditions, including the volatility of market prices for shares of technology companies, generally, and other factors, including factors unrelated to our operating performance; and |
| ● | the other factors described in this “Risk Factors” section. |
These factors and any corresponding price fluctuations may materially and adversely affect the market price of our common stock and result in substantial losses by our investors.
Further, the stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations in the past. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock.
Price volatility of our common stock might be worse if the trading volume of our common stock is low. In the past, following periods of market volatility, stockholders have often instituted securities class action litigation. We have previously been the target of securities litigation and may in the future be subject to additional securities litigation, which could result in substantial costs to us and divert resources and attention of management from our business, even if we are successful in any such litigation. Future sales of our common stock could also reduce the market price of such stock.
Moreover, the liquidity of our common stock is limited, not only in terms of the number of shares that can be bought and sold at a given price, but by delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of us, if any. These factors may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and ask prices for our common stock. In addition, without a large float, our common stock is less liquid than the stock
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of companies with broader public ownership and, as a result, the trading price of our common stock may be more volatile. In the absence of an active public trading market, an investor may be unable to liquidate its investment in our common stock. Trading of a relatively small volume of our common stock may have a greater impact on the trading price of our stock than would be the case if our public float were larger. We cannot predict the prices at which our common stock will trade in the future.
Sales or the availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline and adversely affect our ability to raise capital.
If our stockholders sell substantial amounts of our common stock in the public market, including pursuant to our currently effective Registration Statement on Form S-3, such sales or the anticipation of such sales could cause the market price of our common stock to fall. Such circumstances, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
Issuance of additional shares of common stock in future financings will result in the dilution of our existing stockholders and may also result in a reduction in the market price of our common stock.
Our Certificate of Incorporation authorizes the issuance of up to 50,000,000 shares of common stock with a $0.00001 par value per share and 10,000,000 shares of preferred stock with a $0.00001 par value per share, of which, as of December 31, 2025, approximately 12,383,000 shares of common stock were issued and outstanding. As of December 31, 2025, we also had outstanding options to purchase an aggregate of approximately 7,000 shares of our common stock, and unvested, or vested but not yet settled, restricted stock units covering an aggregate of approximately 989,000 shares of common stock. The exercise of such options and the settlement of such restricted stock units would further increase the number of our outstanding shares of common stock.
From time to time, we may adopt new equity compensation plans or increase the number of shares available for issuance in connection with our existing equity compensation plans. Our board of directors may also choose to issue some or all of our available shares to provide additional financing or acquire businesses.
The issuance of any shares under our equity compensation plans, for acquisition, licensing or financing efforts, upon exercise of options, or settlement of restricted stock units, will dilute the interests of our holders of common stock and cause a reduction in the proportionate ownership and voting power of all then current stockholders. Any such issuances may also result in a reduction in the market price of our common stock.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.
We are subject to financial reporting and other requirements that place significant demands on our resources.
We are subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires us to conduct an annual management assessment of the effectiveness of our internal control over financial reporting. These reporting and other obligations place significant demands on our management, administrative, operational, internal audit and accounting resources. Any failure to maintain effective internal controls could have a material adverse effect on our business, operating results and stock price. Moreover, effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. We may also face claims by our investors, which could harm our business and financial condition.
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Risks Relating to Our Charter Documents and Capital Structure
A small number of “insider” stockholders have significant influence over stockholder actions.
As of January 31, 2026, our directors and executive officers beneficially owned an aggregate of 3,134,426 of our outstanding shares of common stock, which represents approximately 25% of the aggregate voting power of our outstanding shares of common stock. As of January 31, 2026, our Chief Executive Officer beneficially owned over 21% of the voting power of our outstanding shares of common stock. Through their collective ownership of our outstanding stock, such insider holders, if they were to act together, would have significant influence over the voting of our shares at all meetings of stockholders and, because the common stock does not have cumulative voting rights, to determining the outcome of the election of all of our directors and determining corporate and stockholder action on other matters. The interests of our controlling stockholders may not coincide with our interests or the interests of other stockholders. In addition, this concentration of ownership may delay or prevent future transactions or a change in control of our company.
Provisions of our Certificate of Incorporation and bylaws could discourage potential acquisition proposals and could deter or prevent a change in control.
Some provisions in our Certificate of Incorporation and bylaws, as well as statutes, may have the effect of delaying, deterring or preventing a change in control. These provisions, including those providing for the possible issuance of shares of our preferred stock, which may be divided into series and with the preferences, limitations and relative rights to be determined by our board of directors, and the right of the board of directors to amend the bylaws, may make it more difficult for other persons, without the approval of our board of directors, to make a tender offer or otherwise acquire a substantial number of shares of our common stock or to launch other takeover attempts that a stockholder might consider to be in his or her best interest. These provisions could limit the price that some investors might be willing to pay in the future for shares of our common stock.
Delaware law may delay or prevent takeover attempts by third parties and therefore inhibit our stockholders from realizing a premium on their stock.
We are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law. These provisions prevent any stockholder who owns 15% or more of our outstanding shares of common stock from engaging in certain business combinations with us for a period of three years following the time that the stockholder acquired such stock ownership unless certain approvals were or are obtained from our board of directors or from the holders of 66 2/3% of our outstanding shares of common stock (excluding the shares of our common stock owned by the 15% or more stockholder). Our board of directors can use these and other provisions to discourage, delay or prevent a change in the control of our company or a change in our management. Any delay or prevention of a change of control transaction or a change in our board of directors or management could deter potential acquirers or prevent the completion of a transaction in which our stockholders could receive a substantial premium over the then current market price of our shares. These provisions could also limit the price that investors might be willing to pay for shares of our common stock.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K. These risks include, among other things: operational risks, intellectual property theft, fraud, extortion, harm to employees or customers and violation of data privacy or security laws.
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We describe whether and how risks from identified cybersecurity threats are reasonably likely to
Cybersecurity Governance
We did not experience any material cybersecurity incidents during the fiscal year ended December 31, 2025.
Item 2. Properties
The Company’s principal offices are located at 5210 E. Williams Circle, Suite 750, Tucson, Arizona 85711, consisting of approximately 627 square feet under a lease agreement that expires in October 2026.
The Company also occupies shared office space in several locations under membership agreements which provide for membership fees based on the number of contracted seats.
The Company believes that its space is adequate for its current needs and that suitable alternative space is available to accommodate expansion of the Company’s operations.
Item 3. Legal Proceedings
In the normal course of business, we are subject to proceedings, lawsuits, regulatory agency inquiries, and other claims. All such matters are subject to uncertainties and outcomes that are not predictable with assurance. While these matters could materially affect operating results when resolved in future periods, management believes that, after final disposition, including anticipated insurance recoveries in certain cases, any monetary liability or financial impact to the Company beyond that provided for in the consolidated balance sheet as of December 31, 2025, would not be material to our financial position or annual results of operations.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common Stock Information
AudioEye, Inc. was formed as a Delaware corporation on May 20, 2005. Our common stock has been listed on The Nasdaq Capital Market under the symbol “AEYE” since September 4, 2018.
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. As of December 31, 2025, we had $7.93 million remaining for the repurchase of shares.
On January 31, 2026, there were 126 holders of record of our common stock, and a greater number of beneficial holders of our common stock for whom shares were held in a “nominee” or “street” name.
The following table sets forth information with respect to our repurchases of common stock during the three months ended December 31, 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) | ||
October 1 - October 31, 2025: |
| | | | |
| | |
| |
Employee transactions (1) |
| 1,645 | | $ | 13.85 |
| — | | $ | — |
November 1 - November 30, 2025: |
| | | | | | | | | |
Employee transactions (1) |
| 2,891 | | | 12.37 |
| — | |
| — |
Share repurchase program (2) | | 53,733 | | | 12.17 | | 53,733 | | | 8,261,000 |
December 1 - December 31, 2025: | | | | | | | | | | |
Employee transactions (1) | | 9,599 | | | 11.68 | | — | | | — |
Share repurchase program (2) | | 27,398 | | | 12.24 | | 27,398 | | | 7,925,000 |
Total: | | | | | | | | | | |
Employee transactions (1) | | 14,135 | | $ | 12.07 | | — | | $ | — |
Share repurchase program (2) | | 81,131 | | $ | 12.19 | | 81,131 | | $ | 7,925,000 |
| (1) | Includes shares surrendered by employees to satisfy tax withholding obligations in connection with the settlement restricted stock units or the issuance of unrestricted shares of common stock. |
| (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. |
The transfer agent of our common stock is Equiniti Trust Company. Its address is 1100 Centre Pointe Curve, Suite 101, Mendota Heights, MN 55120-4100, and its telephone number is 1-800-468-9716.
Dividend Policy
Dividends to preferred stockholders take precedence over any dividends to common stockholders. Holders of our common stock are entitled to receive ratably such dividends, if any, as may be declared by our board of directors out of funds legally available therefor. We have not declared or paid any dividends on our preferred or common stock since our inception, and we presently anticipate that earnings, if any, will be retained for development of our business. There are no restrictions in our Certificate of Incorporation or
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By-laws that prevent us from declaring dividends. Any future declaration of dividends will be at the discretion of our board of directors and will depend upon, among other things, our future earnings, operating and financial condition, and capital requirements.
Item 6. [RESERVED]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our audited consolidated financial statements and the related notes for the years ended December 31, 2025 and 2024 that appear elsewhere in this annual report on Form 10-K. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include but are not limited to those discussed below and elsewhere in this annual report on Form 10-K, particularly in “Risk Factors.” The forward-looking statements included in this annual report on Form 10-K are made only as of the date hereof.
Executive Overview
AudioEye is an industry-leading digital accessibility platform delivering Americans with Disabilities Act (“ADA”) and Web Content Accessibility Guidelines (“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 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.
For the year ended December 31, 2025, total revenue increased by 15% over the prior year. As of December 31, 2025, Annual Recurring Revenue (“ARR”) was approximately $40.0 million, which represented an increase of 9% from December 31, 2024. Refer to “Other Key Operating Metrics” below for details on how we calculate ARR.
As of December 31, 2025, AudioEye had approximately 131,000 customers, an increase from 127,000 customers at December 31, 2024. The increase in customer count was attributable to an increase in customers in our Partner and Marketplace channel.
In the twelve months ended December 31, 2025, revenue from our Partner and Marketplace channel grew 10% over the prior year. This channel represented about 58% of ARR at December 31, 2025. In the twelve months ended December 31, 2025, total Enterprise channel revenue increased by 21% over the prior year. The Enterprise channel represented about 42% of ARR at December 31, 2025.
We had one major customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 13% and 15% of our revenue in the years ended December 31, 2025 and 2024, respectively.
The Company continued to invest in research and development in 2025. Total research and development cost, as defined under the “Research and Development” section in the “Results of Operations” below, was 16% of total revenue in 2025. Total research and development cost decreased from the prior year due to lower personnel cost.
For the year ended December 31, 2025, both selling and marketing expense and general and administrative expense increased over the prior year. The increase in selling and marketing expense was mainly driven by higher investment in third-party marketing services. The increase in general and administrative expense for the year ended December 31, 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 litigation expenses.
We provide further commentary on our Results of Operation below.
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Results of Operations
Our 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 year ended December 31, 2025 with the year ended December 31, 2024. Our results of operations in these 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.
| | Year ended December 31, | | Change |
| |||||||
(in thousands) | | 2025 | | 2024 | | $ | | % | | |||
Revenue | | $ | 40,311 | | $ | 35,201 | | $ | 5,110 | | 15 | % |
Cost of revenue | |
| 8,755 | |
| 7,261 | |
| 1,494 | | 21 | % |
Gross profit | |
| 31,556 | |
| 27,940 | |
| 3,616 | | 13 | % |
Operating expenses: | |
| | |
| | |
| | | | |
Selling and marketing | |
| 14,897 | |
| 12,668 | |
| 2,229 | | 18 | % |
Research and development | |
| 4,590 | |
| 5,077 | |
| (487) | | (10) | % |
General and administrative | |
| 15,249 | |
| 13,445 | |
| 1,804 | | 13 | % |
Change in fair value of contingent consideration | |
| (1,350) | |
| 140 | |
| (1,490) | | (1,064) | % |
Total operating expenses | |
| 33,386 | |
| 31,330 | |
| 2,056 | | 7 | % |
Operating loss | |
| (1,830) | |
| (3,390) | |
| 1,560 | | (46) | % |
Other expense: | | | | | | | | | | | | |
Interest expense, net | | | (947) | | | (864) | | | (83) | | 10 | % |
Loss on extinguishment of debt | | | (300) | | | — | | | (300) | | 100 | % |
Total other expense | | | (1,247) | | | (864) | | | (383) | | 44 | % |
| | | | | | | | | | | | |
Net loss | | $ | (3,077) | | $ | (4,254) | | $ | 1,177 | | (28) | % |
Revenue
The following table presents our revenues disaggregated by sales channel:
| Year ended December 31, | | Change |
| |||||||
(in thousands) | 2025 | | 2024 | | $ | | % |
| |||
Partner and Marketplace | $ | 22,233 | | $ | 20,249 | | $ | 1,984 | | 10 | % |
Enterprise |
| 18,078 | |
| 14,952 | |
| 3,126 | | 21 | % |
Total revenue | $ | 40,311 | | $ | 35,201 | | $ | 5,110 | | 15 | % |
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 year ended December 31, 2025, total revenue increased by 15% over the prior year. The 10% increase in Partner and Marketplace channel revenue was the result of continued expansion with existing partners and the execution of new partnerships agreements in the year. The 21% increase in Enterprise channel revenue was driven primarily by new customer relationships, including from our expansion into the European Union.
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Cost of Revenue and Gross Profit
| | Year ended December 31, | | Change |
| |||||||
(in thousands) | | | 2025 | | 2024 | | $ | | % |
| ||
Revenue | | $ | 40,311 | | $ | 35,201 | | $ | 5,110 | | 15 | % |
Cost of revenue | |
| 8,755 | |
| 7,261 | |
| 1,494 | | 21 | % |
Gross profit | | $ | 31,556 | | $ | 27,940 | | $ | 3,616 | | 13 | % |
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 year ended December 31, 2025, cost of revenue increased by 21% over the prior year. The increase in cost of revenue was primarily due to increased costs incurred for service delivery, which were in line with the increase in revenue, and higher amortization expense related to our capitalized software development costs.
For the year ended December 31, 2025, gross profit increased by 13% over the prior year. The increase in gross profit was a result of increased revenue.
Selling and Marketing Expenses
| | Year ended December 31, | | Change | | |||||||
(in thousands) | | 2025 | | 2024 | | $ | | % |
| |||
Selling and marketing | | $ | 14,897 | | $ | 12,668 | | $ | 2,229 | | 18 | % |
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 year ended December 31, 2025, selling and marketing expenses increased by 18% over the prior year. The increase in selling and marketing expenses resulted primarily from higher investment in third-party marketing services and higher personnel costs.
Research and Development Expenses
| | Year ended December 31, | | Change | | |||||||
(in thousands) | | 2025 | | 2024 | | $ | | % |
| |||
Research and development expense | | $ | 4,590 | | $ | 5,077 | | $ | (487) | | (10) | % |
Plus: Capitalized research and development cost | |
| 1,876 | |
| 1,771 | |
| 105 | | 6 | % |
Total research and development cost | | $ | 6,466 | |
| 6,848 | | $ | (382) | | (6) | % |
Research and development (“R&D”) expenses consist primarily of compensation and related benefits 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 development cost that was capitalized during the fiscal period.
For the year ended December 31, 2025, R&D expenses decreased by 10% from the prior year. This decrease was driven by lower personnel cost resulting from a reduction in headcount. For the year ended December 31, 2025, capitalized R&D cost increased by 6% from the prior year. The increase in capitalized R&D cost was the result of engineering personnel spending more time on product development than in previous year. Total R&D cost, which includes both R&D expenses and capitalized R&D costs, decreased 6% from 2024 to 2025.
General and Administrative Expenses
| | Year ended December 31, | | Change | | |||||||
(in thousands) | | 2025 | | 2024 | | $ | | % |
| |||
General and administrative | | $ | 15,249 | | $ | 13,445 | | $ | 1,804 | | 13 | % |
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General and administrative expenses consist primarily of compensation and benefits related to our executives, directors and corporate support functions, general corporate expenses including legal fees, occupancy and transaction costs.
For the year ended December 31, 2025, general and administrative expenses increased by 13% over the prior year. The increase in general and administrative expenses 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 $715,000.
Change in Fair Value of Contingent Consideration
| | Year ended December 31, | | Change | | |||||||
(in thousands) | | 2025 | | 2024 | | $ | | % |
| |||
Change in fair value of contingent consideration | | $ | (1,350) | | $ | 140 | | $ | (1,490) | | (1,064) | % |
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 year ended December 31, 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. We do not expect further changes in fair value of contingent consideration associated with ADA Site Compliance in future periods.
Interest Expense, Net
| | Year ended December 31, | | Change |
| |||||||
(in thousands) | | 2025 | | 2024 | | $ | | % |
| |||
Interest expense, net | | $ | (947) | | $ | (864) | | $ | (83) | | 10 | % |
Interest expense, net consists primarily of interest on our term loan, offset by interest income from investment in money market funds.
For the year ended December 31, 2025, interest expense, net increased by 10% over the prior year. The increase in interest expense, net was primarily attributable to a reduction in interest income from investment in money market funds.
Loss on Extinguishment of Debt
| | Year ended December 31, | | 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. For the year ended December 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.
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
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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 December 31, 2025, ARR was $40.0 million, which represents an increase of 9% year-over-year, driven by growth in both our Partner and Marketplace channel and Enterprise channel.
Liquidity and Capital Resources
Working Capital
(in thousands) | | December 31, 2025 | | December 31, 2024 | | ||
Current assets | | $ | 12,622 | | $ | 12,120 | |
Current liabilities | |
| (14,416) | |
| (11,571) | |
Working capital | | $ | (1,794) | | $ | 549 | |
As of December 31, 2025, we had $5.3 million in cash and cash equivalents, and working capital of ($1,794,000). The $2.3 million decrease in working capital in 2025 was primarily due to an increase in deferred revenue associated with new customers, accrued liabilities related to asset acquisitions, and 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 year ended December 31, 2025, we used $4.57 million of the program to repurchase shares. As of December 31, 2025, we had $7.93 million remaining for the repurchase of shares.
As of December 31, 2025, we had $13.4 million outstanding under the term loan, $12.9 million of which is classified as a noncurrent liability. The term loan matures on March 31, 2030, and requires quarterly principal payments due beginning on April 10, 2026. Refer to Note 6 – Debt to our consolidated financial statements for additional information regarding our credit facility.
As of March 12, 2026, we have 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. We expect to continue to invest in our product and in sales and marketing to capture market demand. In 2025, cash provided by operating activities totaled $4.8 million. We expect cash provided by operating activities to continue to improve in 2026, driven mainly by the anticipated revenue growth.
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
| | Year ended December 31, | | ||||
(in thousands) | | 2025 | | 2024 | | ||
Net cash provided by operating activities | | $ | 4,753 | | $ | 2,731 | |
Net cash used in investing activities | |
| (4,196) | |
| (7,214) | |
Net cash provided by (used in) financing activities | |
| (920) | |
| 898 | |
Net decrease in cash and cash equivalents | | $ | (363) | | $ | (3,585) | |
For the year ended December 31, 2025, in relation to the prior year, cash provided by operating activities increased primarily as a result of the increase in revenue.
For the year ended December 31, 2025, in relation to the prior year, cash used in investing activities decreased primarily due to a reduction in payments towards business and asset acquisitions. In 2024, we paid $5.3 million in connection with the acquisition of ADA Site Compliance, net of cash acquired, whereas payments towards asset acquisitions in 2025 totaled $2.2 million.
For the year ended December 31, 2025, in relation to the prior year, the change to cash used in financing activities from cash provided by financing activities was primarily due to an increase in common stock repurchases from $2.0 million in 2024 to $4.6 million in 2025. This impact was partially offset by a net improvement in other financing activities, as 2025 net proceeds from debt refinancing
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of $5.7 million exceeded the net 2024 impact of $4.9 million, which was comprised of net common stock offering proceeds of $6.6 million reduced by $1.7 million in cash outlays for settlement of contingent consideration.
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.
The critical accounting estimates discussed below are estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations.
Contingent Consideration Recognized in Connection with Business Combinations and Asset Acquisitions
We recognize the contingent consideration liability resulting from a business combination based on its fair value, which is determined both initially and at the end of each reporting period preceding the end of the measurement period using the Monte-Carlo simulation model. The model incorporates key assumptions, including non-recurring and recurring revenue metrics. Changes in estimated revenue and outcomes different from estimates could cause a significant adjustment to earnings in a reporting period as the fair value of the liability is highly dependent on management’s estimate.
The fair value of the contingent consideration liability resulting from an asset acquisition is determined by management based on estimated recurring revenue from acquired customer relationships. Subsequent changes in the estimated amount of consideration are recognized as an adjustment to the cost of the acquired asset. Changes in estimated revenue and outcomes different from estimates could cause a significant adjustment to the cost of acquired assets in a reporting period as the fair value of the liability is highly dependent on management’s estimate.
Refer to Note 2 - Significant Accounting Policies to our consolidated financial statements for a complete discussion of the significant accounting policies and methods used in the preparation of our consolidated financial statements, including our accounting policies related to intangible assets.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
Our Financial Statements begin on page F-1 of this Annual Report on Form 10-K and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Conclusions of Management Regarding Effectiveness of Disclosure Controls and Procedures
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 December 31, 2025.
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Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company and all related information appearing in our Annual Report on Form 10-K. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those policies and procedures that:
| 1. | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
| 2. | provide reasonable assurance that the transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of management and/or of our Board of Directors; and |
| 3. | provide reasonable assurance regarding the prevention or timely detection of any unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness in future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management (with the participation of our Chief Executive Officer and our Chief Financial Officer) conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2025 using the criteria established in Internal Control — 2013 Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our management has concluded that our internal control over financial reporting was effective as of December 31, 2025.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report is not subject to attestation by our registered, public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2025, there were no changes to our internal control over financial reporting that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting, except as disclosed above.
Item 9B. Other Information
Rule 10b5-1 Trading Plans
During the three months ended December 31, 2025, no director or executive officer adopted,
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item is hereby incorporated by reference to the definitive proxy statement for our 2026 Annual Meeting of Stockholders, which proxy statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after December 31, 2025.
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We have adopted a Code of Business Conduct and Ethics, including provisions enumerated in Item 406 of Regulation S-K (the “finance code of ethics”). The finance code of ethics is publicly available in the Code of Business Conduct and Ethics on the Governance Documents section of our website, which may be accessed from our homepage at www.audioeye.com. If we make any substantive amendments to the finance code of ethics or grant any waiver, including any implicit waiver, from a provision of the code to our Chief Executive Officer, Chief Financial Officer, or Corporate Controller, we will disclose the nature of that amendment or that waiver in the Governance Documents section of our website.
Item 11. Executive Compensation
The information required by this item is hereby incorporated by reference to the definitive proxy statement for our 2026 Annual Meeting of Stockholders, which proxy statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after December 31, 2025.
Item 12. Security Ownership of Certain Beneficial Owners, Management and Related Stockholder Matters
The information required by this item is hereby incorporated by reference to the definitive proxy statement for our 2026 Annual Meeting of Stockholders, which proxy statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after December 31, 2025.
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required by this item is hereby incorporated by reference to the definitive proxy statement for our 2026 Annual Meeting of Stockholders, which proxy statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after December 31, 2025.
Item 14. Principal Accountant Fees and Services
The information required by this item is hereby incorporated by reference to the definitive proxy statement for our 2026 Annual Meeting of Stockholders, which proxy statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after December 31, 2025.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
| a) | The following documents are filed as part of this report: |
| (1) | Financial Statements — See Index to Financial Statements on page F-1 below and the financial pages that follow. |
| (2) | Financial Statements Schedules — As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, we are not required to provide this information. |
| (3) | Exhibits — The following exhibits are either filed herewith or have previously been filed with the Securities and Exchange Commission and are referred to and incorporated herein by reference to such filings: |
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10.9* | 8-K | December 10, 2020 | 10.4 | | |
| | | | | |
10.10* | Form of Incentive Stock Option Award Agreement under the AudioEye, Inc. 2020 Equity Incentive Plan | 8-K | December 10, 2020 | 10.5 | |
| | | | | |
10.11* | 8-K | December 10, 2020 | 10.6 | | |
| | | | | |
10.12* | Form of Other Stock-Based Award Agreement under the AudioEye, Inc. 2020 Equity Incentive Plan | 8-K | December 10, 2020 | 10.7 | |
| | | | | |
10.13* | 8-K | May 24, 2022 | 10.2 | | |
| | | | | |
10.14* | 8-K | April 8, 2022 | 10.1 | | |
| | | | | |
10.15* | 8-K | December 28, 2023 | 10.1 | | |
| | | | | |
10.16* | 8-K | August 24, 2020 | 10.2 | | |
| | | | | |
10.17* | Performance Stock Unit Agreement, dated March 11, 2021 between the Company and David Moradi | 8-K | March 15, 2021 | 10.1 | |
| | | | | |
10.18* | 8-K | April 2, 2025 | 10.1 | | |
| | | | | |
10.19* | 10-Q | May 1, 2025 | 10.3 | | |
| | | | | |
10.20* | Executive Employment Agreement, dated June 10, 2021, between the Company and Kelly Georgevich | 8-K | June 23, 2021 | 10.1 | |
| | | | | |
10.21 | 8-K | April 1, 2025 | 10.1 | | |
| | | | | |
10.22 | 10-Q | August 8, 2025 | 10.1 | | |
| | | | | |
10.23 | 10-Q | November 4, 2025 | 10.1 | | |
| | | | | |
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10.24 | | | | X | |
| | | | | |
10.25 | 8-K | August 7, 2018 | 10.1 | | |
| | | | | |
10.26 | 10-K | March 27, 2019 | 10.35 | | |
| | | | ||
10.27 | 8-K | September 30, 2024 | 10.1 | | |
| | | | | |
10.28* | Form of AudioEye, Inc. Indemnification Agreement (Directors and Executive Officers) | 8-K | December 16, 2019 | 10.1 | |
| | | | | |
14.1 | 10-K | March 27, 2019 | 14.1 | | |
| | | | | |
19.1 | 10-K | March 12, 2025 | 19.1 | | |
| | | | | |
21 | | | | X | |
| | | | | |
23.1 | Consent of MaloneBailey LLP, Independent Registered Public Accounting Firm | | | | X |
| | | | | |
24.1 | | | | X | |
| | | | | |
31.1 | | | | X | |
| | | | | |
31.2 | | | | X | |
| | | | | |
32.1 | | | | X | |
| | | | | |
32.2 | | | | X | |
| | | | | |
97 | 10-K | March 7, 2024 | 97 | | |
| | | | | |
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 |
| | | | | |
31
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 | | | | |
| | | | | |
* | Constitutes a management contract or compensatory plan or arrangement. | | | | |
| |||||
Item 16. Form 10-K Summary
None.
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the 12th day of March, 2026.
| AUDIOEYE, INC. | |
|
|
|
| By: | /s/ David Moradi |
|
| David Moradi |
|
| Principal Executive Officer |
|
|
|
| By: | /s/ Kelly Georgevich |
|
| Kelly Georgevich |
|
| Principal Financial and Accounting Officer |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David Moradi and Kelly Georgevich, or either of them, his attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | | Title | | Date |
|
|
|
|
|
/s/ David Moradi |
| Chief Executive Officer, Director |
| March 12, 2026 |
David Moradi |
| (Principal Executive Officer) |
|
|
|
|
|
|
|
/s/ Kelly Georgevich |
| Chief Financial Officer |
| March 12, 2026 |
Kelly Georgevich |
| (Principal Financial and Accounting Officer) |
|
|
|
|
|
|
|
/s/ Jamil Tahir |
| Director |
| March 12, 2026 |
Jamil Tahir |
|
|
|
|
|
|
|
|
|
/s/ James Hawkins |
| Director |
| March 12, 2026 |
James Hawkins |
|
|
|
|
|
|
|
|
|
/s/ Dr. Katherine Fleming |
| Director |
| March 12, 2026 |
Dr. Katherine Fleming |
|
|
|
|
33
ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AUDIOEYE, INC.
consolidated FINANCIAL STATEMENTS
TABLE OF CONTENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
AudioEye, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of AudioEye, Inc, and its subsidiaries (collectively, the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/
www.malonebailey.com
We have served as the Company's auditor since 2011.
March 12, 2026
F-2
AUDIOEYE, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2025 AND 2024
| | December 31, | | December 31, | ||
(in thousands, except per share data) | | 2025 | | 2024 | ||
ASSETS | | | | | | |
Current assets: |
| | |
| | |
Cash and cash equivalents | | $ | | | $ | |
Accounts receivable, net of allowance for doubtful accounts of $ | |
| | |
| |
Prepaid expenses and other current assets | |
| | |
| |
Total current assets | |
| | |
| |
| |
| | |
| |
Property and equipment, net of accumulated depreciation of $ | |
| | |
| |
Right of use assets | | | | | | |
Intangible assets, net of accumulated amortization of $ | |
| | |
| |
Goodwill | | | | | | |
Other | |
| | |
| |
Total assets | | $ | | | $ | |
| |
| | |
| |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | |
| |
Current liabilities: | |
| | |
| |
Accounts payable and accrued expenses | | $ | | | $ | |
Operating lease liabilities | | | | | | |
Deferred revenue | |
| | |
| |
Contingent consideration | | | | | | — |
Term loan, current | | | | | | — |
Total current liabilities | |
| | |
| |
| |
| | |
| |
Long term liabilities: | |
| | |
| |
Term loan, net | | | | | | |
Operating lease liabilities | | | — | | | |
Deferred revenue | |
| | |
| |
Contingent consideration, long term | |
| | |
| |
Other | | | | | | |
Total liabilities | |
| | |
| |
| |
| | |
| |
Stockholders’ equity: | |
| | |
| |
Preferred stock, $ | |
| | |
| |
Common stock, $ | |
| | |
| |
Additional paid-in capital | |
| | |
| |
Accumulated deficit | |
| ( | |
| ( |
Total stockholders’ equity | |
| | |
| |
| |
| | |
| |
Total liabilities and stockholders’ equity | | $ | | | $ | |
See Notes to Consolidated Financial Statements
F-3
AUDIOEYE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| | Year ended December 31, | ||||
(in thousands, except per share data) | | 2025 | | 2024 | ||
Revenue | | $ | | $ | | |
| |
| | |
| |
Cost of revenue | |
| | |
| |
| |
| | |
| |
Gross profit | |
| | |
| |
| |
| | |
| |
Operating expenses: | |
| | |
| |
Selling and marketing | |
| | |
| |
Research and development | |
| | |
| |
General and administrative | |
| | |
| |
Change in fair value of contingent consideration | |
| ( | |
| |
Total operating expenses | |
| | |
| |
| |
| | |
| |
Operating loss | |
| ( | |
| ( |
| | | | | | |
Other expense: | |
| | |
| |
Interest expense, net | |
| ( | |
| ( |
Loss on extinguishment of debt | |
| ( | |
| — |
Total other expense | | | ( | | | ( |
| |
| | |
| |
Net loss | | $ | ( | | $ | ( |
| |
| | |
| |
Net loss per common share-basic and diluted | | $ | ( | | $ | ( |
| |
| | |
|
|
Weighted average common shares outstanding-basic and diluted | |
| | |
| |
See Notes to Consolidated Financial Statements
F-4
AUDIOEYE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2025 AND 2024
| | | | | | | Additional | | | | | | | |
| | Common stock | | Paid-in | | Accumulated | | | | |||||
(in thousands) | | Shares | | Amount | | Capital | | Deficit | | Total | ||||
Balance, December 31, 2023 |
| | | $ | | | $ | | | $ | ( | | $ | |
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, December 31, 2024 | | | | $ | | | $ | | | $ | ( | | $ | |
Common stock issued upon exercise of options on a cashless basis | | | | | — | | | — | | | — | | | — |
Common stock issued upon exercise of options on a cash 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, December 31, 2025 |
| | | $ | |
| $ | | | $ | ( | | $ | |
See Notes to Consolidated Financial Statements
F-5
AUDIOEYE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | Year ended December 31, | ||||
(in thousands) | | 2025 | | 2024 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | |
Net loss | | $ | ( | | $ | ( |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | |
Depreciation and amortization | |
| | |
| |
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 | |
| | |
| |
Amortization of right-of-use assets | | | | | | |
Change in fair value of contingent consideration | |
| ( | |
| |
Provision for accounts receivable | | | | | | |
Changes in operating assets and liabilities: | | | | | | |
Accounts receivable | | | ( | | | ( |
Prepaid expenses and other assets | | | ( | | | |
Accounts payable and accruals | |
| | |
| |
Operating lease liability | |
| ( | |
| ( |
Deferred revenue | |
| | |
| ( |
Net cash provided by operating activities | |
| | |
| |
| |
| | |
| |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | | |
Purchase of equipment | |
| ( | |
| ( |
Proceeds from sale of equipment | | | | | | — |
Software development costs | |
| ( | |
| ( |
Patent costs | | | ( | | | ( |
Payment for acquisitions, net | | | ( | | | ( |
Net cash used in investing activities | |
| ( | |
| ( |
| |
| | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | | |
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 | |
| — | |
| ( |
Net cash provided by (used in) financing activities | |
| ( | |
| |
| |
| | | | |
Net decrease in cash and cash equivalents | |
| ( | |
| ( |
Cash and cash equivalents - beginning of period | |
| | |
| |
Cash and cash equivalents - end of period | | $ | | | $ | |
| |
| | |
| |
SUPPLEMENTAL CASH FLOW DISCLOSURES | |
| | |
| |
Interest paid | | $ | | | $ | |
Income taxes paid | |
| — | |
| — |
| |
| | |
| |
Non-cash investing and financing activities: | | | | | | |
Deferred tax liability recorded in connection with an asset acquisition | | | | | | — |
Contingent consideration recorded in connection with an asset acquisition or business combination | | | | | | |
See Notes to Consolidated Financial Statements
F-6
NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS
AudioEye, Inc. and its wholly-owned subsidiaries, ADA Site Compliance, LLC, Criterion 508 Solutions, Inc., Ability, Inc., and Equally AI Ltd. (“we”, “us”, “our”, “AudioEye” or the “Company”) operate in
Our common stock is listed on The Nasdaq Capital Market under the symbol “AEYE” since September 4, 2018. Prior to September 4, 2018, our common stock was listed on the OTCQB and the OTC Bulletin Board since April 15, 2013 under the same symbol.
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
This summary of significant accounting policies is presented to assist in understanding the Company’s consolidated financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been consistently applied in the preparation of the consolidated financial statements. The Company has a fiscal year ending on December 31.
All amounts in the consolidated financial statements, notes and tables have been rounded to the nearest thousand dollars, except share and per share amounts, unless otherwise indicated.
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, and intangible assets. 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. |
F-7
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 table presents our revenues disaggregated by sales channel:
| | Year ended December 31, | ||||
(in thousands) | | 2025 | | 2024 | ||
Partner and Marketplace | | $ | |
| $ | |
Enterprise | |
| | | | |
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 December 31, 2025 and 2024:
| | December 31, | | December 31, | | ||
(in thousands) | | 2025 | | 2024 | | ||
Deferred revenue – current | | $ | | | $ | | |
Deferred revenue – noncurrent | | | | | | | |
Total deferred revenue | | $ | |
| $ | | |
In the year ended December 31, 2025, we recognized approximately $
We had
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 December 31, 2025 and 2024, which are included in Prepaid expenses and other current assets (current portion) and Other assets (noncurrent portion) on our consolidated balance sheets:
F-8
|
| December 31, | | December 31, |
| ||
(in thousands) | | 2025 | | 2024 | | ||
Deferred costs – current | | $ | | | $ | | |
Deferred costs – noncurrent | |
| | |
| | |
Total deferred costs | | $ | | | $ | | |
Amortization expense associated with sales commissions was included in selling and marketing expenses on the consolidated statements of operations and totaled $
Cost of Revenue
Cost of revenue consists primarily of employee-related costs, including payroll, benefits and stock-based compensation expense for our technology operations and customer experience teams, fees paid to our managed hosting providers and other third-party service providers, amortization of capitalized software development costs and acquired technology, and allocated overhead costs.
Cash and Cash Equivalents
The Company considers cash and any short-term, highly liquid investments with maturities of three months or less from the date of purchase as cash and cash equivalents.
Allowance for Doubtful Accounts
The Company adjusts accounts receivable down to net realizable value with its allowance methodology. In determining the allowance for doubtful accounts for estimated losses, aged receivables are analyzed periodically by management. Each identified receivable is reviewed based upon historical collection experience, financial condition of the client and the status of any open or unresolved issues with the client preventing the payment thereof. Corrective action, if necessary, is taken by the Company to resolve open issues related to unpaid receivables. The allowance for doubtful accounts was $
Property and Equipment
Property and equipment includes office and computer equipment. Property and equipment are carried at the cost of acquisition and depreciated using the straight-line method over their estimated useful lives, which typically is
Property and equipment acquired in the years ended December 31, 2025 and 2024 totaled $
Capitalized Software Development Costs
In accordance with ASC 350-40, the Company capitalizes certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use when both the preliminary project stage is completed, and it is probable that the software will be used as intended, until the software is available for general release. Capitalized software costs include (i) external direct costs of developing or obtaining computer software, and (ii) compensation and related benefits for employees who are directly associated with the software project.
Capitalized software costs are included in intangible assets on our consolidated balance sheet and amortized on a straight-line basis when placed into service over the estimated useful lives of the software, which is typically
F-9
exist that would suggest that assets might be impaired or that the useful lives should be modified. Refer to Note 4 – Intangible Assets for additional information regarding our Capitalized Software Development Costs.
Patents
We capitalize patent application costs, including registration, documentation, and other legal fees associated with the application, which are incurred through the month the patent is issued. Costs associated with provisional application filings are expensed as incurred. Costs incurred to renew or extend the term of recognized intangible assets, including patent annuities and fees, and costs incurred in prosecuting alleged infringements of our patents are expensed as incurred. Patents are included in intangible assets on our consolidated balance sheet.
We amortize capitalized patent costs on a straight-line basis over their estimated useful lives, which is generally
Goodwill, Intangible Assets and Long-Lived Assets
Goodwill is tested for impairment at least annually, and more frequently upon the occurrence of certain events that may indicate that the carrying value of goodwill may not be recoverable. Events or circumstances that could trigger an impairment test include, but are not limited to, a significant adverse change in the business climate or in legal factors, an adverse action or assessment by a regulator, a loss of key personnel, significant changes in the strategy for our overall business, significant negative industry or economic trends, significant underperformance relative to operating performance indicators, a significant decline in market capitalization and significant changes in competition. We complete our annual impairment test during the fourth quarter of each year, at the reporting unit level, which is at the company level since we operate in
The following table summarizes the goodwill activity for the years ended December 31, 2025 and 2024:
| | Year ended December 31, | ||||
(in thousands) | | 2025 | | 2024 | ||
Goodwill, beginning of period | | $ | | | $ | |
Acquisitions (1) | | | — | | | |
Impairments | | | — | | | — |
Measurement period adjustments | | | | | | — |
Goodwill, end of period (2) | | $ | | | $ | |
| (1) | Represents goodwill recorded in connection with the acquisition of ADA Site Compliance, LLC (“ADA Site Compliance”) in 2024. Refer to Note 3 – Acquisitions for additional information on the ADA Site Compliance acquisition. |
| (2) | As of each of December 31, 2025 and 2024, accumulated impairment losses totaled |
Intangible assets with a finite life are amortized over their estimated useful lives.
We evaluate the need for an impairment charge relating to long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We consider the following to be some examples of indicators that may trigger an impairment review: (i) actual undiscounted cash flows significantly below historical or projected future undiscounted cash flows for the associated assets; (ii) significant changes in the manner or use of the assets or in our overall strategy with respect to the manner or use of the assets or changes in our overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; and (v) a significant decline in our stock price for a sustained period of time.
Once we determine that a potential impairment indicator exists, we perform the test for recoverability by comparing the estimated future undiscounted cash flows associated with the intangible assets with the intangible asset’s carrying amount. Where the carrying value of the intangible asset exceeds the future undiscounted cash flows associated with the intangible assets, it is determined that the value of those intangible assets cannot be recovered. For an intangible asset failing the recoverability test, an impairment charge is recorded for
F-10
the difference between the carrying value and the estimated fair value.
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:
| | Year Ended | |
(in thousands) | | December 31, 2025 | |
Contingent consideration | | | Level 3 |
Balance at December 31, 2024 | | $ | |
Additions (1) | | | |
Change in fair value of contingent consideration (2) | | | ( |
Balance at December 31, 2025 | | $ | |
| (1) | Represents the value of the contingent consideration liability recorded in connection with asset acquisitions in 2025. The fair value of the contingent consideration was determined by management based on estimated recurring revenue from acquired customer relationships. |
| (2) | Represents the change in fair value of contingent consideration recorded in 2025 in connection with the acquisition of ADA Site Compliance in 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. We do not expect further changes in the fair value of contingent consideration associated with ADA Site Compliance in future periods because the actual contingent consideration was based on earn-out conditions measured as of December 31, 2025. |
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.
F-11
Business Combinations
The assets acquired, liabilities assumed and contingent consideration 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 a 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 associated 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. Contingent consideration is not recorded in an asset acquisition until it is deemed probable and reasonably estimable. Direct transaction costs are capitalized as a component of the cost of the acquisition.
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
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
F-12
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 December 31, 2025 and 2024, which were excluded from the computation of basic and diluted net loss per share for the years then ended, are as follows:
| | December 31, | ||
(in thousands) | | 2025 | | 2024 |
Options | | |
| |
Restricted stock units |
| |
| |
Total |
| |
| |
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 the repurchase price over par value entirely to retained earnings.
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 $
Loss Contingencies
We are subject to the possibility of various loss contingencies arising in the normal course of business. In determining loss contingencies, we consider the likelihood of the loss or impairment of an asset and the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether to accrue for a loss contingency and adjust any previous accrual.
Income Taxes
We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.
F-13
The Company has net operating loss carryforwards available to reduce future taxable income. Future tax benefits for these net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. To the extent that the Company will not realize a future tax benefit, a valuation allowance is established.
Recent Accounting Pronouncements
Recently Adopted
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. The adoption of ASU 2023-09 did not have a significant impact on the Company's consolidated financial statements. See Note 9, Income Taxes, for the required disclosures.
Not Yet Adopted
In September 2025, the FASB issued 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 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 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.
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, 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
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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 $ |
| (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 |
In the twelve months ended December 31, 2025 and 2024, we recorded $
Pro Forma Financials
The following unaudited pro forma results of operations for the year ended December 31, 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.
F-15
| | | | |
| | Pro Forma Combined Financials (unaudited) | | |
(in thousands) | | Year ended December 31, 2024 | | |
Revenue | | $ | | |
Net loss attributed to common shareholders | | | ( | |
For purposes of the pro forma disclosures above, results for the year ended December 31, 2024 exclude $
Asset Acquisitions
In 2025, we completed acquisitions that do 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, the customer relationships. In connection with these asset acquisitions, we recognized $
NOTE 4 — INTANGIBLE ASSETS
Intangible assets as of December 31, 2025 and 2024 consisted of the following:
| | December 31, 2025 | |||||||
(in thousands) | | Cost | | Accumulated Amortization | | Net Book Value | |||
Finite-lived assets: | | | | | | | | | |
Patents | | $ | | | $ | ( | | $ | |
Capitalized software development costs | |
| | | | ( | |
| |
Customer relationships | | | | | | ( | | | |
Intangible assets, net | | $ | | | $ | ( | | $ | |
| | December 31, 2024 | |||||||
(in thousands) | | Cost | | Accumulated Amortization | | Net Book Value | |||
Finite-lived assets: | | | | | | | | | |
Patents | | $ | | | $ | ( | | $ | |
Capitalized software development costs | | | | | | ( | | | |
Customer relationships | | | | | | ( | | | |
Intangible assets, net | | $ | | | $ | ( | | $ | |
As of December 31, 2025 and 2024, capitalized cost associated with pending patents totaled $
For the years ended December 31, 2025 and 2024, software development costs capitalized totaled $
We amortize our customer relationships on a straight-line basis over the estimated useful lives. Refer to Note 3 – Acquisitions for additional information on business combinations and asset acquisitions. Refer to Note 2 – Significant Accounting Policies for additional information regarding our intangible assets, including specific information on our patents and capitalized software development costs.
F-16
The following table summarizes amortization expense associated with intangible assets for the fiscal years ended December 31, 2025 and 2024:
| | Year ended December 31, | ||||
(in thousands) | | 2025 | | 2024 | ||
Patents | | $ | | | $ | |
Capitalized software development costs | | | | | | |
Customer relationships | |
| | |
| |
Trade name | | | — | | | |
Total amortization expense | | $ | | | $ | |
The following table summarizes future amortization expense associated with intangible assets as of December 31, 2025 (in thousands):
Year ending December 31, | Amortization Expense | |
2026 | $ | |
2027 | | |
2028 | | |
2029 | | |
2030 | | |
Thereafter | | |
Total future amortization expense | $ | |
The weighted average remaining useful life of our finite-lived intangible assets (in years) as of December 31, 2025 are as follows:
Weighted average remaining amortization period (in years) | | | |
Patents |
| | |
Capitalized software development costs | | | |
Customer relationships |
| |
For the years ended December 31, 2025 and 2024, loss on impairment of intangible assets totaled
NOTE 5 — LEASE LIABILITIES AND RIGHT OF USE ASSETS
We determine whether an arrangement is a lease at inception. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease.
Operating Leases
Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Since our lease arrangements do not provide an implicit rate, we use our estimated incremental borrowing rate for the expected remaining lease term at commencement date in determining the present value of future lease payments. Operating lease expense is recognized on a straight-line basis over the lease term.
The Company has operating leases for office space in Tucson, Arizona, and New York, New York. The lease for the principal office located in Tucson consists of approximately
In March 2025, the Company entered into an agreement to sublease its office space in New York through the end of the original lease term in December 2026. The sublease did not relieve the Company of its original obligation under the lease, therefore the Company did not adjust the related lease liability. In the twelve months ended December 31, 2025, Company recognized a $
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In the second quarter of 2024, the Company entered into an agreement to sublease office space in Miami Beach, Florida, on a month-to-month basis. In addition, the Company entered into membership agreements to occupy shared office space in other locations. Because these agreements do not qualify as a lease under ASC 842, we expense the related rent and membership fees as they are incurred.
The Company made operating lease payments in the amount of $
The following summarizes the total lease liabilities and remaining future minimum lease payments at December 31, 2025 (in thousands):
Year ending December 31, | | Operating Leases | |
2026 | | $ | |
Total minimum lease payments | |
| |
Less: present value discount | |
| ( |
Total lease liabilities | | $ | |
Current portion of lease liabilities | | $ | |
Long term portion of lease liabilities | | $ | — |
The following summarizes expenses associated with our finance and operating leases for the years ended December 31, 2025 and 2024:
| | Year ended December 31, | ||||
(in thousands) | | 2025 | | 2024 | ||
Finance lease expenses: | | | | | | |
Depreciation expense | | $ | — | | $ | |
Total Finance lease expense | |
| — | |
| |
Operating lease expense | |
| | |
| |
Sublease income | | | ( | | | — |
Short-term lease and related expenses | |
| | |
| |
Total lease expenses | | $ | | | $ | |
The following table provides information about the remaining lease terms and discount rates applied as of December 31, 2025 and 2024:
| | As of December 31, | ||
| | 2025 | | 2024 |
Weighted average remaining lease term (years) | | | | |
Operating Leases | | | ||
Weighted average discount rate (%) | | | | |
Operating Leases | | | | |
NOTE 6 — 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
F-18
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 twelve months ended December 31, 2025, amortization of debt discount and debt issuance costs (associated with the Western Alliance Bank credit facility and the SG Credit Partners term loan, discussed below) 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 December 31, 2025, the outstanding principal balance of our term loan totaled $
As of December 31, 2025, future principal payments of debt based on the principal balance then outstanding are as follows (in thousands):
Year ending December 31, | | Term Loan | |
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 $
The Company paid a commitment fee equal to $
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presented as a direct deduction from the carrying amount of our term loan and were being amortized to interest expense over the term of the loan.
On March 31, 2025, the Company used the proceeds from the Credit Facility Agreement to pay $
NOTE 7 — 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.
NOTE 8 — STOCK-BASED COMPENSATION
On December 9, 2020, the 2020 Equity Incentive Plan (the “2020 Plan”) was approved, replacing the 2019 Equity Incentive Plan. The 2020 Plan, as amended on May 24, 2024, provides for the issuance of up to
The following table summarizes the stock-based compensation expense recorded for the years ended December 31, 2025 and 2024:
| | Year ended December 31, | ||||
(in thousands) | | 2025 | | 2024 | ||
RSUs | | $ | | | $ | |
Unrestricted Shares of Common Stock | |
| | |
| |
Employee stock purchase plan | |
| | |
| |
Stock Options | | | — | | | |
Total | | $ | | | $ | |
As of December 31, 2025, the outstanding unrecognized stock-based compensation expense related to restricted stock units (“RSUs”) was $
Stock Options
Options granted under our equity incentive plans generally have terms of
F-20
The following table summarizes the stock option activity for the years ended December 31, 2025 and 2024:
| | | | | | | Weighted | | | | Intrinsic | |
| | | | Weighted | | Average | | | | Value | ||
| | Number of | | Average | | Remaining | | | | of | ||
| | Options | | Exercise Price | | Term | | Exercisable | | Options | ||
Outstanding at December 31, 2023 |
| | | $ | |
|
| | | $ | | |
Exercised | | ( | | | | | | | | | | |
Forfeited/Expired |
| ( | |
| |
| |
| | |
| |
Outstanding at December 31, 2024 |
| | | $ | |
|
| | | $ | | |
Exercised | | ( | | | | | | | | | | |
Forfeited/Expired |
| ( | |
| |
| |
| | |
| |
Outstanding at December 31, 2025 |
| | | $ | |
|
| | | $ | | |
There were no options granted in 2025 and 2024.
Restricted Stock Units
We issue RSUs to employees, officers, directors, and consultants of the Company. The restrictions on time-based RSUs generally lapse over a - to
The following table summarizes the RSU activity for year ended December 31, 2025:
| | | | Weighted | | | | | |
| | | | Average | | | | | |
| | Number of | | Grant Date | | | | | |
| | RSUs | | Fair Value | | Vested | | Unvested | |
Restricted stock units outstanding as of December 31, 2024 |
| | | $ | | | | | |
Granted |
| | | | | | | | |
Settled |
| ( | | | | | | | |
Forfeited/Canceled |
| ( | | | | | | | |
Restricted stock units outstanding at December 31, 2025 |
| | | $ | | | | | |
NOTE 9 — INCOME TAXES
For the years ended December 31, 2025 and 2024, federal and state income tax expense totaled
The Company has net operating loss carryforwards available to reduce future taxable income. At December 31, 2025, the Company had U.S. federal net operating loss carry forwards of $
At this time, the Company is unable to determine if it will be able to benefit from its deferred tax asset. There are limitations on the utilization of net operating loss carryforwards, including a requirement that losses be offset against future taxable income, if any. In addition, utilization of the U.S. federal and state NOL carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income or tax liabilities. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. Accordingly, our U.S. federal and state net deferred tax asset
F-21
Significant components of our deferred tax assets and liabilities as of December 31, 2025 and 2024 consist of the following:
| | December 31, | ||||
(in thousands) | | 2025 | | 2024 | ||
Deferred tax assets: | | | | | | |
Bad debt expense | | $ | | | $ | |
Accrued compensation expense | |
| | |
| |
Deferred revenue and costs | |
| — | |
| |
Capitalized research and development costs | | | | | | |
Stock-based compensation | |
| | |
| |
Interest expense | | | | | | — |
Transaction costs | | | | | | |
Operating lease liability | |
| | |
| |
Charitable contributions | | | | | | — |
State NOL carryforwards | |
| | |
| |
Federal NOL carryforwards | |
| | |
| |
Foreign NOL carryforwards | | | | | | — |
State tax credit carryforwards | | | | | | |
Federal tax credit carryforwards | | | | | | |
Total Deferred Tax Assets | |
| | |
| |
Valuation allowance | |
| ( | |
| ( |
Net deferred tax assets | |
| | |
| |
Deferred tax liabilities: | |
| | |
| |
Property and equipment | |
| ( | |
| ( |
Intangible assets | | | ( | | | ( |
Deferred revenue and costs | | | ( | | | |
Right of use assets | |
| ( | |
| ( |
Total deferred tax liabilities | |
| ( | |
| ( |
Net deferred tax asset (liability) | | $ | ( | | $ | — |
The following table reconciles the statutory U.S. corporate federal income tax rate to the Company’s effective tax rate:
| | Year ended December 31, | | |||||||||
| | 2025 | | | 2024 | | ||||||
(in thousands) | | $ | | % | | | $ | | % | | ||
U.S. federal statutory tax (benefit) rate | | $ | ( | | | % | | $ | ( | | | % |
State and local income taxes, net of federal income tax effect | | | | | ( | % | | | ( | | | % |
Changes in valuation allowance | | | | | ( | % | | | ( | | | % |
Nontaxable or nondeductible items | | | ( | | | % | | | ( | | | % |
Other adjustments | | | | | | % | | | | | ( | % |
Shortfalls/expirations | | | | | ( | % | | | | | ( | % |
Provision to return and deferred true-ups | | | | | | % | | | | | ( | % |
Total tax expense | | $ | | | | % | | $ | | | | % |
The Company has concluded all U.S. federal tax matters for years through December 31, 2021. All material state and local income tax matters have been concluded for years through December 31, 2020. The Company is no longer subject to IRS examination for the tax years ended on or before December 31, 2021; however, carryforward losses that were generated through the tax year ended December 31, 2021 may still be adjusted by the IRS if they are used in a future period. The Company had
F-22
NOTE 10 — SEGMENT INFORMATION
The Company has a reportable segment focused around 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.
NOTE 11 — SUBSEQUENT EVENTS
We have evaluated subsequent events occurring after December 31, 2025 and based on our evaluation we did not identify any events that would have required recognition or disclosure in these consolidated financial statements.
F-23
Exhibit 10.24
CONSENT AND THIRD LOAN MODIFICATION AGREEMENT
This Consent and Third Loan Modification Agreement (this “Amendment”) is entered into this 12th day of January, 2026, by and among (a) WESTERN ALLIANCE BANK, an Arizona corporation (“Bank”) and (b) (i) AUDIOEYE, INC., a Delaware corporation (“AudioEye”), (ii) ADA SITE COMPLIANCE, LLC, a Delaware limited liability company (“ADA”), and (iii) CRITERION 508 SOLUTIONS, INC., an Iowa corporation (“Criterion”, together with AudioEye and ADA, individually and collectively, jointly and severally, “Borrower”).
RECITALS
A.Among other indebtedness which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other documents, that certain Loan and Security Agreement, dated as of March 31, 2025, by and between Borrower and Bank, as amended by that certain Consent and First Loan Modification Agreement dated as of May 22, 2025 by and between Bank and Borrower, and as further amended by that certain Second Loan Modification Agreement dated as of August 13, 2025 by and between Bank and Borrower (as may be further amended, modified, supplemented, or restated from time to time, the “Loan and Security Agreement”). Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as the “Indebtedness” and the Loan and Security Agreement and any and all other documents executed by Borrower in favor of Bank shall be referred to as the “Existing Documents.”
B.Borrower has notified Bank that Borrower acquired Equally AI LTD., a company formed under the laws of Israel (“Equally”) on December 30, 2025 (the “Acquisition Consummation Date”) on substantially the terms set forth in that certain Share Purchase Agreement attached hereto as Exhibit A (the “Share Purchase Agreement”) pursuant to which, among other things, (i) Borrower acquired one hundred percent (100.0%) of the outstanding equity interests of Equally, and the aggregate value of the total consideration paid by Borrower pursuant to the Share Purchase Agreement in connection with the Acquisition did not exceed the sum of (a) $650,000.00 plus (b) the amount of any Earnout Payment (as defined in the Share Purchase Agreement) (collectively, the “Purchase Price”) and (ii) Equally became a wholly-owned Subsidiary of Borrower (collectively, and together with the execution of the Transition Services Agreement (as defined below) and the consummation of the transactions contemplated thereby, the “Acquisition”).
C.Borrower has requested that Bank (i) amend the Loan and Security Agreement to make certain revisions to the Loan and Security Agreement as more fully set forth herein and (ii) to memorialize its consent to the Acquisition as of the Acquisition Consummation Date.
D.Bank has agreed to (i) so amend the Loan and Security Agreement and (ii) memorialize its consent to the Acquisition as of the Acquisition Consummation Date, subject to the conditions and in reliance upon the representations and warranties set forth below.
Agreement
Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:
1.DEFINITIONS. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan and Security Agreement.
2.CONSENT. Bank hereby memorializes its consent to the Acquisition as of the Acquisition
Consummation Date and agrees that the Acquisition shall not constitute an Event of Default under Section 7.1 (relative to dispositions), Section 7.3 (relative to mergers or acquisitions) and Section 7.7 (relative to distributions and investments) of the Loan and Security Agreement and shall be a “Permitted Acquisition” for purposes of the Loan and Security Agreement; provided that such consent is subject to the following conditions being fulfilled, each to the satisfaction of Bank: (a) the aggregate value of the total consideration paid by Borrower in connection with the Acquisition shall not exceed the Purchase Price; (b) Borrower shall not assume or incur any Indebtedness or Liens in connection with the Acquisition; (c) Borrower shall provide Bank with certified copies of financing statement searches and searches of security interests filed in the Israeli Registrar of Companies with respect to Equally (in each case, dated as of a recent date); (d) Borrower shall provide Bank with a duly executed letter from Borrower’s Israeli counsel certifying that all Liens securing the Indebtedness from Equally to Bank Hapoalim were terminated, (e) Borrower and Equally shall be the surviving legal entities after the consummation of the Acquisition, with Equally as a wholly-owned subsidiary of Borrower; (f) Borrower shall provide Bank with a fully-executed copy of the Share Purchase Agreement on or before the date hereof; (g) Borrower shall deliver to Bank a duly executed copy of the Transition Services Agreement by and between Borrower and Equally AI, LLC, a Delaware limited liability company and an Affiliate of Equally (“Equally U.S.”) dated as of December 30, 2025 (the “Transition Services Agreement”), and (h) no Event of Default shall occur or continue, both before and after giving effect to the Acquisition. The consent provided for herein is a one-time consent relating only to the matters described above and shall not be deemed to constitute an agreement by the Bank to any future consent or waiver of the terms and conditions of the Loan and Security Agreement. This consent shall be deemed subject to no Event of Default occurring or continuing both before and after the consummation of the Acquisition (after giving effect to this Agreement). Bank hereby agrees that the conditions set forth above were fulfilled to Bank’s satisfaction as of the date hereof.
3.ADDITIONAL COVENANTS.
3.1Within thirty (30) days after the Acquisition Consummation Date (as defined above), Borrower shall provide Bank with (a) evidence that the Indebtedness owed by Equally to Bank Hapoalim evidenced by the payoff letter therefrom has been paid off in full, and (b) filed copies of any UCC termination statements or other similar documents (including termination of control agreements) evidencing that the Liens securing Indebtedness owed by Equally to Bank Hapoalim have been terminated.
3.2Within one hundred eighty (180) days after the Acquisition Consummation Date (the “Dissolution Date”), Borrower shall provide Bank with evidence, in form and substance satisfactory to Bank in all respects, that (a) Equally has been dissolved and (b) all assets of Equally have been transferred to Borrower free and clear of any Liens (collectively the “Dissolution Event”).
3.3If the Dissolution Event does not occur, Borrower shall, within thirty (30) days after the Dissolution Date, at the sole cost and expense of Borrower, (i) cause Equally to provide to Bank a joinder to the Loan Agreement to become a co-borrower hereunder, together with such appropriate financing statements, Control Agreements and/or debentures, all in form and substance satisfactory to Bank (including being sufficient to grant Bank a first priority Lien (subject to Permitted Liens) in and to the assets of Equally), (ii) provide to Bank appropriate certificates and powers and financing statements, pledging all of the direct or beneficial ownership interest in Equally, in form and substance satisfactory to Bank, and (iii) provide to Bank all other documentation in form and substance satisfactory to Bank, including (at Bank’s election) one (1) or more opinions of counsel satisfactory to Bank, which in its opinion is appropriate with respect to the execution and delivery of the applicable documentation referred to above. Any document, agreement, or instrument executed or issued pursuant to this Section 3.2 shall be a Loan Document.
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3.4Commencing as of the Acquisition Consummation Date, and at all times until the Dissolution Date (as defined above), Equally shall be permitted to maintain one (1) account at Bank of Hapoalim so long as the aggregate amount of funds maintained in such account does not exceed Sixty Thousand Dollars ($60,000.00) at any time.
3.5Commencing as of the Acquisition Consummation Date, the Transition Services Agreement shall remain in full force and effect, and the Borrower shall cause Equally U.S. to perform the services described on Schedule A to the Transition Services Agreement. In the event that Equally U.S. receives any consideration, payment, benefit or asset in connection with the business or on behalf of Equally, the Borrower shall cause Equally U.S. to comply with Section 5(d) of the Transition Services Agreement. The modification or amendment of the Transition Services Agreement, or the termination, suspension, rescission of the Transition Services Agreement without Bank’s prior written consent shall be an immediate Event of Default hereunder.
3.6Borrower’s failure to comply with this Section 3 shall be an Event of Default hereunder. Any document, agreement, or instrument executed or issued pursuant to this Section 3 shall be a Loan Document.
4.MODIFICATIONS TO LOAN AND SECURITY AGREEMENT.
4.1Section 1.1 (Definitions). The following new defined terms and their respective definitions are hereby inserted alphabetically in Section 1.1 (Definitions) of the Loan and Security Agreement:
““Ability” means Ability, Inc., an Oregon corporation.”
““Ability Dissolution Event” is defined in Section 6.15.”
““Equally” means Equally AI LTD., a company formed under the laws of Israel.”
““Third Loan Modification Agreement” means that certain Consent and Third Loan Modification Agreement, dated as of January 12, 2026 by and between Borrower and Bank.”
4.2Section 1.1 (Definitions). The following defined term and its definition set forth in Section 1.1 of the Loan and Security Agreement is amended in its entirety and replaced with the following:
““Permitted Stock Buyback Amount” means an aggregate amount not to exceed (i) Four Million Five Hundred Seventy-Five Thousand Dollars ($4,575,000.00) for Borrower’s 2025 fiscal year, (ii) Four Hundred Twenty-Five Thousand Dollars ($425,000.00) for Borrower’s 2026 fiscal year, and (iii) Two Million Dollars ($2,000,000.00) for Borrower’s 2027 fiscal year and each fiscal year thereafter.”
4.3Section 3.2 (Conditions Precedent to all Credit Extensions). Section 3.2 is amended in its entirety and replaced with the following:
“(d)with respect to each Term B Advance that is used in connection with a Permitted Term B Acquisition, confirmation in writing by Bank, that Borrower has delivered evidence to Bank, satisfactory to Bank in its sole and absolute discretion, that Borrower is in compliance with the financial covenants set forth in Section 6.8 at all times
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prior to the date such Term B Advance is made and after giving effect to such Term B Advance on a pro-forma basis.”
4.4Section 6.7 (Accounts). The second sentence of Section 6.7(a) is amended in its entirety and replaced with the following:
“Notwithstanding the foregoing, (a) Borrower shall be permitted to maintain accounts with financial institutions other than Bank (the “Permitted Bank Accounts”) provided that (i) the maximum aggregate balance in the Permitted Bank Accounts (for all such accounts) shall not exceed ten percent (10.0%) of the Dollar value of all of Borrower’s and its Subsidiaries’ accounts, in each case, at all financial institutions, wherever located and (ii) the Permitted Bank Accounts shall be subject to a Control Agreement in favor of Bank pursuant to the terms of Section 6.7(b) and Section 6.14 hereof, (b) Borrower shall be permitted to maintain one (1) account with Stripe (the “Permitted Stripe Account”), provided that Borrower shall transfer any and all funds deposited into the Permitted Stripe Account into an account of Borrower maintained with Bank within three (3) Business Days after such deposit into the Permitted Stripe Account, (c) Ability shall be permitted to maintain one (1) account at JPMorgan Chase Bank provided that the aggregate amount of funds maintained in such account does not exceed $50,000.00 at any time, and (d) prior to the Dissolution Event (as defined in the Third Loan Modification Agreement), Equally shall be permitted to maintain one (1) account at Bank of Hapoalim so long as the aggregate amount of funds maintained in such account does not exceed Sixty Thousand Dollars ($60,000.00) at any time.”
4.5Section 6.10 (Use of Proceeds). Section 6.10 is amended in its entirety and replaced with the following:
“6.10Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely (i) to repay in-full Borrower’s outstanding liabilities and obligations with SG Credit Partners, (ii) with respect to Term B Advances (a) for Permitted Term B Acquisitions; provided that, Advances shall not be used for earn-out payments or other deferred considerations related to any Permitted Term B Acquisitions, Permitted Stock Buybacks or ADA Indebtedness and (b) for such purposes consistent with the terms of subsection (iii) hereof, and (iii) as growth capital, working capital or general corporate purposes in order to fund its general business requirements in accordance with the provisions of this Agreement, and not for personal, family, household, or agricultural purposes.”
4.66.15 (2025 Post-Closing Deliverables). The Loan and Security Agreement is amended by inserting the following new Section 6.15 (2026 Post-Closing Deliverables) immediately following Section 6.14 thereof:
“6.15.2026 Post-Closing Deliverables. On or prior to April 30, 2026, Borrower shall deliver to Bank evidence, in form and substance satisfactory to Bank in all respects, that (a) Ability has been dissolved and (b) all assets of Ability have been transferred to Borrower free and clear of any Liens (collectively the “Ability Dissolution Event”). If the Ability Dissolution Event does not occur, Borrower shall, on or before May 30, 2026, at the sole cost and expense of Borrower, (i) cause Ability to provide to Bank a joinder to the Loan Agreement to become a co-borrower hereunder, together with such appropriate financing statements and/or Control Agreements, all in form and substance satisfactory to Bank (including being sufficient to grant Bank a first priority Lien (subject to Permitted
4
Liens) in and to the assets of Ability), (ii) provide to Bank appropriate certificates and powers and financing statements, pledging all of the direct or beneficial ownership interest in Ability, in form and substance satisfactory to Bank, and (iii) provide to Bank all other documentation in form and substance satisfactory to Bank, including (at Bank’s election) one (1) or more opinions of counsel satisfactory to Bank, which in its opinion is appropriate with respect to the execution and delivery of the applicable documentation referred to above. Any document, agreement, or instrument executed or issued pursuant to this Section 6.15 shall be a Loan Document.”
5.LIMITATION OF AMENDMENTS.
5.1The amendments set forth in Section 4 above are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.
5.2This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.
6.CONSISTENT CHANGES. The Existing Documents are each hereby amended wherever necessary to reflect the changes described above.
7.CONTINUING VALIDITY. Borrower understands and agrees that in modifying the existing Indebtedness, Bank is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Documents. Except as expressly modified pursuant to this Amendment, the terms of the Existing Documents remain unchanged and in full force and effect. Bank’s agreement to modifications to the existing Indebtedness pursuant to this Amendment in no way shall obligate Bank to make any future modifications to the Indebtedness. Nothing in this Amendment shall constitute a satisfaction of the Indebtedness. It is the intention of Bank and Borrower to retain as liable parties all makers and endorsers of Existing Documents, unless the party is expressly released by Bank in writing. No maker, endorser, or guarantor will be released by virtue of this Amendment. The terms of this paragraph apply not only to this Amendment, but also to any subsequent loan and security modification agreements.
8.RATIFICATION OF INTELLECTUAL PROPERTY SECURITY AGREEMENT. Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and conditions of a certain Intellectual Property Security Agreement dated as of March 31, 2025 between Borrower and Bank, and acknowledges, confirms and agrees that said Intellectual Property Security Agreement (a) contains an accurate and complete listing of all Intellectual Property Collateral, as defined in said Intellectual Property Security Agreement, and (b) shall remain in full force and effect.
9.RELEASE BY BORROWER.
9.1FOR GOOD AND VALUABLE CONSIDERATION, Borrower hereby forever relieves, releases, and discharges Bank and its present or former employees, officers, directors, agents, representatives, attorneys, and each of them, from any and all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs and expenses, actions and causes of action, of every type, kind, nature, description or character whatsoever, whether known or unknown, suspected or unsuspected, absolute or contingent, arising out of or in any manner whatsoever connected with or related to facts,
5
circumstances, issues, controversies or claims existing or arising from the beginning of time through and including the date of execution of this Amendment (collectively “Released Claims”). Without limiting the foregoing, the Released Claims shall include any and all liabilities or claims arising out of or in any manner whatsoever connected with or related to the Loan Documents, the recitals hereto, any instruments, agreements or documents executed in connection with any of the foregoing or the origination, negotiation, administration, servicing and/or enforcement of any of the foregoing.
9.2In furtherance of this release, Borrower expressly acknowledges and waives any and all rights under Section 1542 of the California Civil Code, which provides as follows:
“A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.” (Emphasis added.)
9.3By entering into this release, Borrower recognizes that no facts or representations are ever absolutely certain and it may hereafter discover facts in addition to or different from those which it presently knows or believes to be true, but that it is the intention of Borrower hereby to fully, finally and forever settle and release all matters, disputes and differences, known or unknown, suspected or unsuspected; accordingly, if Borrower should subsequently discover that any fact that it relied upon in entering into this release was untrue, or that any understanding of the facts was incorrect, Borrower shall not be entitled to set aside this release by reason thereof, regardless of any claim of mistake of fact or law or any other circumstances whatsoever. Borrower acknowledges that it is not relying upon and has not relied upon any representation or statement made by Bank with respect to the facts underlying this release or with regard to any of such party’s rights or asserted rights.
9.4This release may be pleaded as a full and complete defense and/or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release. Borrower acknowledges that the release contained herein constitutes a material inducement to Bank to enter into this Amendment, and that Bank would not have done so but for Bank’s expectation that such release is valid and enforceable in all events.
9.5Borrower hereby represents and warrants to Bank, and Bank is relying thereon, as follows:
(a)Except as expressly stated in this Amendment, neither Bank nor any agent, employee or representative of Bank has made any statement or representation to Borrower regarding any fact relied upon by Borrower in entering into this Amendment.
(b)Borrower has made such investigation of the facts pertaining to this Amendment and all of the matters appertaining thereto, as it deems necessary.
(c)The terms of this Amendment are contractual and not a mere recital.
(d)This Amendment has been carefully read by Borrower, the contents hereof are known and understood by Borrower, and this Amendment is signed freely, and without duress, by Borrower.
(e)Borrower represents and warrants that it is the sole and lawful owner of all right, title and interest in and to every claim and every other matter which it releases herein, and that it has not heretofore assigned or transferred, or purported to assign or transfer, to any person, firm or entity
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any claims or other matters herein released. Borrower shall indemnify Bank, defend and hold it harmless from and against all claims based upon or arising in connection with prior assignments or purported assignments or transfers of any claims or matters released herein.
10.CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; REFERENCE PROVISION. This Amendment constitutes a “Loan Document” as defined and set forth in the Loan and Security Agreement, and is subject to Sections 11 and 12 of the Loan and Security Agreement, which are incorporated by reference herein.
11.PAYMENT OF BANK EXPENSES. Borrower agrees to promptly pay all Bank Expenses incurred by Bank in connection with this Amendment.
12.NOTICE OF FINAL AGREEMENT. BY SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND AGREES THAT: (A) THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES, (B) THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES, AND (C) THIS WRITTEN AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS OF THE PARTIES.
13.EFFECTIVENESS. This Agreement shall be deemed effective upon (a) the due execution and delivery to Bank of this Agreement by each party hereto and (b) Borrower’s payment to Bank of Bank’s legal fees and expenses incurred in connection with this Amendment. This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.
[Signature page follows.]
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In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.
| AUDIOEYE, INC. | |
| | |
| By: | /s/ Kelly Georgevich |
| Name: | Kelly Georgevich |
| Title: | Chief Financial Officer |
| | |
| ADA SITE COMPLIANCE, LLC | |
| | |
| By: | /s/ Kelly Georgevich |
| Name: | Kelly Georgevich |
| Title: | Chief Financial Officer |
| | |
| CRITERION 508 SOLUTIONS, INC. | |
| | |
| By: | /s/ Kelly Georgevich |
| Name: | Kelly Georgevich |
| Title: | Chief Financial Officer |
| | |
| WESTERN ALLIANCE BANK, AN ARIZONA CORPORATION | |
| | |
| By: | /s/ Francesco Corradino |
| Name: | Francesco Corradino |
| Title: | Director |
Exhibit 21
LIST OF SUBSIDIARIES
NAME OF SUBSIDIARY | | JURISDICTION OF INCORPORATION OR ORGANIZATION |
| | |
Ability, Inc. | | Oregon |
| | |
ADA Site Compliance, LLC | | Delaware |
| | |
Criterion 508 Solutions, Inc. | | Iowa |
| | |
Equally AI Ltd. | | Israel |
| | |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-190871, 333-195471, 333-200170, 333-231760, 333-232568, 333-248088, 333-251225, 333-265355, 333-265356 and 333-280042) and on Form S-3 (No. 333-276937) of our report dated March 12, 2026 relating to the audited consolidated financial statements of AudioEye, Inc., appearing in this Annual Report on Form 10-K.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
March 12, 2026
Exhibit 31.1
CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David Moradi, Principal Executive Officer of AudioEye, Inc. (the “Registrant”), certify that:
1.I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2025 of AudioEye, Inc. (the “Annual Report”);
2.Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report;
3.Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Annual Report;
4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Annual Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; and
(d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
Date: March 12, 2026 | By: | /s/ David Moradi |
| | Name: David Moradi |
| | Title: Chief Executive Officer |
| | (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kelly Georgevich, Principal Financial Officer of AudioEye, Inc. (the “Registrant”), certify that:
1.I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2025 of AudioEye, Inc. (the “Annual Report”);
2.Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report;
3.Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Annual Report;
4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Annual Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; and
(d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
Date: March 12, 2026 | By: | /s/ Kelly Georgevich |
| | Name: Kelly Georgevich |
| | Title: Chief Financial Officer |
| | (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing by AudioEye, Inc. (the “Registrant”) of its Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “Annual Report”) with the Securities and Exchange Commission, I, David Moradi, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(i)The Annual Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: March 12, 2026 | By: | /s/ David Moradi |
| | Name: David Moradi |
| | Title: Chief Executive Officer |
| | (Principal Executive Officer) |
A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing by AudioEye, Inc. (the “Registrant”) of its Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “Annual Report”) with the Securities and Exchange Commission, I, Kelly Georgevich, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(i)The Annual Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
Date: March 12, 2026 | By: | /s/ Kelly Georgevich |
| | Name: Kelly Georgevich |
| | Title: Chief Financial Officer |
| | (Principal Financial Officer) |
A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.