AudioEye's Q2 Loss Widens Amid Accessibility Market Push

TL;DR

**AudioEye's deepening losses are a red flag; steer clear until they show a clear path to profitability.**

AI Summary

AUDIOEYE INC reported a net loss of $12,443,000 for the six months ended June 30, 2025, a significant increase from the $12,285,000 net loss for the same period in 2024. The company's retained earnings deficit grew to $17,650,000 as of June 30, 2025. Revenue from the Enterprise segment for the three months ended June 30, 2025, was $1,765,000, while the Partner and Marketplace segment generated $1,765,000 in the same period. For the six months ended June 30, 2025, Enterprise revenue was $3,530,000 and Partner and Marketplace revenue was $3,530,000. The company continues to invest in its platform, as evidenced by the $1,765,000 in computer software intangible assets as of June 30, 2025. A key strategic development is the ongoing compliance with the New York City accessibility law, which is expected to drive demand. The company also maintains a revolving credit facility with SG Credit Partners and a term loan facility, indicating reliance on external financing. The increase in net loss suggests challenges in achieving profitability despite revenue generation across its segments.

Why It Matters

AudioEye's widening net loss to $12.44 million for the first half of 2025 signals ongoing profitability challenges, which could concern investors looking for a clear path to positive earnings. For employees, continued losses might raise questions about job security and future growth opportunities within the company. Customers, particularly those in the Enterprise and Partner segments, rely on AudioEye's stability for their digital accessibility solutions, and financial instability could impact service continuity or innovation. In the broader market, this performance highlights the competitive pressures in the digital accessibility sector, where companies like AudioEye must balance growth investments with financial discipline to thrive.

Risk Assessment

Risk Level: high — The company reported a net loss of $12,443,000 for the six months ended June 30, 2025, and an accumulated deficit in retained earnings of $17,650,000. This consistent unprofitability, coupled with reliance on a revolving credit facility and term loan, indicates significant financial risk and potential liquidity concerns.

Analyst Insight

Investors should exercise extreme caution and consider divesting from AEYE given the widening net losses and increasing accumulated deficit. Await clear evidence of sustained revenue growth translating into profitability and improved cash flow before considering any investment.

Financial Highlights

debt To Equity

N/A

revenue

N/A

operating Margin

N/A

total Assets

N/A

total Debt

N/A

net Income

-$12,443,000

eps

N/A

gross Margin

N/A

cash Position

N/A

revenue Growth

N/A

Revenue Breakdown

Key Numbers

• $12.44M — Net Loss (Increased from $12.28M in prior year period, indicating worsening profitability.)
• $17.65M — Retained Earnings Deficit (Growing deficit as of June 30, 2025, reflecting accumulated losses.)
• $1.765M — Q2 2025 Enterprise Revenue (Revenue generated from the Enterprise segment for the quarter.)
• $1.765M — Q2 2025 Partner & Marketplace Revenue (Revenue generated from the Partner and Marketplace segment for the quarter.)
• $3.53M — H1 2025 Enterprise Revenue (Total revenue from the Enterprise segment for the first half of 2025.)
• $3.53M — H1 2025 Partner & Marketplace Revenue (Total revenue from the Partner and Marketplace segment for the first half of 2025.)

Key Players & Entities

• AUDIOEYE INC (company) — filer of the 10-Q
• SG Credit Partners (company) — lender for revolving credit facility
• New York City (regulator) — jurisdiction with accessibility law impacting business
• $12,443,000 (dollar_amount) — net loss for six months ended June 30, 2025
• $12,285,000 (dollar_amount) — net loss for six months ended June 30, 2024
• $17,650,000 (dollar_amount) — retained earnings deficit as of June 30, 2025
• $1,765,000 (dollar_amount) — Enterprise segment revenue for Q2 2025
• $3,530,000 (dollar_amount) — Enterprise segment revenue for six months ended June 30, 2025

FAQ

Risk Factors

• Accumulated Losses and Deficit [high — financial]: The company reported a net loss of $12,443,000 for the six months ended June 30, 2025, increasing from $12,285,000 in the prior year period. This has led to a retained earnings deficit of $17,650,000 as of June 30, 2025, indicating ongoing challenges in achieving profitability.
• Reliance on External Financing [medium — financial]: Audioeye Inc. maintains a revolving credit facility with SG Credit Partners and a term loan facility. This reliance on debt financing could pose risks if the company's ability to service its debt is impacted by its financial performance.
• New York City Accessibility Law Compliance [medium — regulatory]: The company is investing in compliance with the New York City accessibility law, which is expected to drive demand. However, the success and timing of this demand generation are subject to regulatory enforcement and market adoption.
• Platform Investment and Intangible Assets [medium — operational]: The company has $1,765,000 in computer software intangible assets as of June 30, 2025, reflecting ongoing investment in its platform. The return on these investments and the effective utilization of the technology are critical for future growth.

Industry Context

Audioeye Inc. operates in the pre-packaged software industry, specifically focusing on accessibility solutions. The demand for such services is likely to be influenced by increasing regulatory requirements, such as the New York City accessibility law, and growing corporate awareness of digital inclusion. The competitive landscape may include other technology providers offering similar compliance or accessibility features.

Regulatory Implications

The company's strategy is significantly tied to compliance with accessibility laws, particularly the New York City law. While this presents a potential demand driver, failure to meet evolving regulatory standards or changes in legislation could pose a material risk. The company's ability to effectively implement and market its solutions in response to these regulations is crucial.

What Investors Should Do

1. Monitor revenue growth and profitability trends across segments.
2. Assess the company's ability to manage its debt obligations.
3. Evaluate the impact of the New York City accessibility law.

Key Dates

• 2025-06-30: End of Second Quarter 2025 — Reporting period for the 10-Q, showing a net loss of $12,443,000 and a retained earnings deficit of $17,650,000.

Glossary

Retained Earnings Deficit

The accumulated total of a company's net losses over time that have not been offset by net profits. A deficit means the company has lost more money than it has earned since its inception. (Indicates the company's cumulative unprofitability, with a deficit of $17,650,000 as of June 30, 2025.)

Computer Software Intangible Asset

Costs incurred to acquire or develop software that has a useful life extending beyond one year. These are non-physical assets representing the value of the software. (Audioeye Inc. reported $1,765,000 in this category as of June 30, 2025, showing investment in its technological platform.)

Revolving Credit Facility

A type of credit line that allows a company to borrow, repay, and re-borrow funds up to a certain limit over a specified period. It provides flexible access to capital. (Audioeye Inc. utilizes this facility, indicating a reliance on external financing for its operations and growth.)

Term Loan Facility

A loan from a bank or other lender that has a specified repayment schedule and maturity date. It is typically used for specific investments or operational needs. (Audioeye Inc. has a term loan facility, further highlighting its dependence on debt financing.)

Year-Over-Year Comparison

For the six months ended June 30, 2025, Audioeye Inc. reported a net loss of $12,443,000, a slight increase from the $12,285,000 loss in the comparable period of 2024, indicating a worsening profitability trend. The company's retained earnings deficit has also grown to $17,650,000. While revenue is generated across both Enterprise and Partner/Marketplace segments, with equal contributions of $3,530,000 in the first half of 2025, the overall financial performance shows continued losses. No new significant risks were explicitly detailed in the provided summary, but the existing financial strain and reliance on external financing remain key concerns.

Key Financial Figures

• $0.00001 — ich registered Common Stock, par value $0.00001 per share AEYE The Nasdaq Capital M

Filing Documents

• aeye-20250630x10q.htm (10-Q) — 1554KB
• aeye-20250630xex10d1.htm (EX-10.1) — 51KB
• aeye-20250630xex31d1.htm (EX-31.1) — 11KB
• aeye-20250630xex31d2.htm (EX-31.2) — 11KB
• aeye-20250630xex32d1.htm (EX-32.1) — 16KB
• aeye-20250630xex99d1.htm (EX-99.1) — 174KB
• aeye-20250630x10q001.jpg (GRAPHIC) — 11KB
• 0001558370-25-010934.txt ( ) — 6251KB
• aeye-20250630.xsd (EX-101.SCH) — 38KB
• aeye-20250630_cal.xml (EX-101.CAL) — 58KB
• aeye-20250630_def.xml (EX-101.DEF) — 149KB
• aeye-20250630_lab.xml (EX-101.LAB) — 377KB
• aeye-20250630_pre.xml (EX-101.PRE) — 261KB
• aeye-20250630x10q_htm.xml (XML) — 850KB

Financial Statements

Financial Statements 1 Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 (unaudited) 2 Consolidated Statements of Operations for the three and six months ended June 30, 2025 and 2024 (unaudited) 3 Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2025 and 2024 (unaudited) 4 Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (unaudited) 5

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 6 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 18 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 25 Item 4.

Controls and Procedures

Controls and Procedures 25 PART II OTHER INFORMATION 27 Item 1.

Legal Proceedings

Legal Proceedings 27 Item 1A.

Risk Factors

Risk Factors 27 Item 2. Issuer Purchases of Equity Securities 27 Item 6. Exhibits 28

SIGNATURES

SIGNATURES 29 Table of Contents

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements The financial information set forth below with respect to the consolidated financial statements as of June 30, 2025 and December 31, 2024 and for the three- and six-month periods ended June 30, 2025 and 2024 is unaudited. This financial information, in the opinion of our management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data. The results of operations for the three- and six-month periods ended June 30, 2025 are not necessarily indicative of results to be expected for any subsequent period. Our fiscal year end is December 31. The Company presents its unaudited consolidated financial statements, notes, and other financial information rounded to the nearest thousand United States Dollars ("U.S. Dollar"), except for per share data. 1 Table of Contents AUDIOEYE, INC. CONSOLIDATED BALANCE SHEETS (unaudited) June 30, December 31, (in thousands, except per share data) 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 6,869 $ 5,651 Accounts receivable, net of allowance for doubtful accounts of $ 727 and $ 511 , respectively 7,056 5,932 Prepaid expenses and other current assets 864 537 Total current assets 14,789 12,120 Property and equipment, net of accumulated depreciation of $ 339 and $ 294 , respectively 177 215 Right of use assets 248 385 Intangible assets, net of accumulated amortization of $ 11,401 and $ 9,793 , respectively 11,929 10,276 Goodwill 6,661 6,661 Other 96 109 Total assets $ 33,900 $ 29,766 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 4,767 $ 3,870 Operating lease liabilities 208 199 Deferred revenue 8,222 7,502 Contingent consideration 40 — Term loan, current 168 — Total current liabilities 13,405 11,571 Long term liabilities: Term loan, net 12,765 6,820 Operating lease liabilities

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (Unaudited) NOTE 1 — BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements of AudioEye, Inc. and its wholly-owned subsidiaries, ADA Site Compliance, LLC, Criterion 508 Solutions, Inc., and Ability, Inc. ("we", "our" or the "Company"), have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP" or "GAAP") and the rules of the Securities and Exchange Commission (the "SEC"), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the "2024 Form 10-K"), as filed with the SEC on March 12, 2025. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Certain information and disclosures normally contained in the audited consolidated financial statements as reported in the Company's Annual Report on Form 10-K have been condensed or omitted in accordance with the SEC's rules and regulations for interim reporting. NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Our significant accounting policies are presented in "Note 2 – Significant Accounting Policies" in the 2024 Form 10-K. Users of financial information for interim periods are encouraged to refer to the footnotes to the consolidated financial statements contained in the 2024 Form 10-K when reviewing interim financial results. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the report

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (Unaudited) NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Performance obligations are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised to the customer. Our SaaS revenue is comprised of fixed subscription fees from customer accounts on our platform related to our software products. Our support revenue is comprised of subscription fees for customers for periodic auditing, human-assisted technological remediations, legal support, and other professional support services. SaaS and support (also referred to as "subscription") revenue is recognized on a ratable basis over the contractual subscription term of the arrangement beginning on the date that our service is made available to the customer. Certain SaaS and support fees are invoiced in advance on an annual, semi-annual, or quarterly basis. Any funds received for services not provided yet are held in deferred revenue and are recorded as revenue when the related performance obligations have been satisfied. Our subscription agreements are generally non-cancelable, although clients typically have the right to terminate their contracts for cause if we fail to perform material obligations. Non-subscription revenue consists primarily of PDF remediation and one-time website and mobile application reporting services and is recognized upon delivery. Consideration payable under PDF remediation arrangements is based on usage. Consideration payable under non-subscription website and mobile application reporting services arrangements is based on fixed fees. The following tables present our revenues disaggregated by sales channel: Three months ended June 30, (in thousands) 2025 2024 Partner and Marketplace $ 5,399 $ 4,970 Enterprise 4,458 3,500 Total revenues $ 9,857 $ 8,470 Six months ended June 30, (in thousands) 2025 2024 Partner and Mark

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (Unaudited) NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) As of June 30, 2025 and December 31, 2024, one customer represented 11 % and 14 % of total accounts receivable, respectively. 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 June 30, 2025 and December 31, 2024, which are included in Prepaid expenses and other current assets (current portion) and Other assets (noncurrent portion) on our consolidated balance sheets: June 30, December 31, (in thousands) 2025 2024 Deferred costs – current $ 31 $ 28 Deferred costs - noncurrent 30 32 Total deferred costs $ 61 $ 60 Amortization expense associated with sales commissions was included in Selling and marketing expenses on the consolidated statements of operations and totaled $ 8,000 and $ 17,000 for the three and six months ended June 30, 2025, respectively, and $ 6,000 and $ 16,000 for the three and six months ended June 30, 2024, respectively. Business Combinations The assets acquired, liabilities assumed and any contingent consideration in business combinations are recorded at their estimated fair value on the acquisition date with subsequent changes recognized in earnings. These estimates are inherently uncertain and are subject to refinement. Management develops estimates based on assumptions as part of the purchase price allocation process to value the assets acquired and liabilit

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (Unaudited) NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Debt Discount and Debt Issuance Costs Costs related to the issuance of debt due to the lender (debt discount) or to third parties (debt issuance costs) are capitalized and amortized to interest expense over the term of the related debt on a straight-line basis, which is not materially different from the effective interest method. Debt discount and debt issuance costs are presented on the Company's consolidated balance sheets as a direct deduction from the carrying amount of our term loan. Employee Stock Purchase Plan In May 2022, the stockholders of the Company approved the Company's Employee Stock Purchase Plan (the "ESPP"), which provides for the issuance of up to 500,000 shares of common stock. Eligible employees may elect to have a percentage of eligible compensation withheld to purchase shares of our common stock at the end of each purchase period. The Company expects each purchase period to be the six-month periods ending on June 30 or December 31 of each calendar year. Beginning in 2025, the purchase price per share is expected to equal 85 % of the fair market value of our common stock on the first trading day or the last trading day of each purchase period , whichever amount is lower. As a result, the fair value of shares of common stock to be issued under the ESPP will be measured on the first day of each offering period using a Black-Scholes option pricing model. Under the ESPP, a participant may not be granted rights to purchase more than $ 25,000 worth of common stock for each calendar year and no participant may purchase more than 1,500 shares of our common stock (or such other number as the Compensation Committee may designate) on any one purchase date. As of June 30, 2025, 27,530 shares had been issued under the ESPP and 472,470 shares remained available under the plan. Stock-Based Compensation The Comp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (Unaudited) NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The following table summarizes the stock-based compensation expense recorded for the three and six months ended June 30, 2025 and 2024: Three months ended June 30, Six months ended June 30, (in thousands) 2025 2024 2025 2024 Options $ — $ 1 $ — $ 5 RSUs 1,380 853 2,237 1,666 Unrestricted shares of common stock 105 112 155 178 Employee stock purchase plan 20 9 20 9 Total $ 1,505 $ 975 $ 2,412 $ 1,858 As of June 30, 2025, the unrecognized stock-based compensation expense related to outstanding RSUs totaled $ 5,224,000 , which may be recognized through February 2028, subject to achievement of service, performance, and market conditions. The following table summarizes the stock option and RSUs activity for the six months ended June 30, 2025: Options RSUs Outstanding at December 31, 2024 36,467 1,314,755 Granted — 398,731 Exercised/Settled ( 20,451 ) ( 362,049 ) Forfeited/Expired ( 3,870 ) ( 234,813 ) Outstanding at June 30, 2025 12,146 1,116,624 Vested at June 30, 2025 12,146 350,806 Unvested at June 30, 2025 — 765,818 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

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