10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026

or

☐     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from [                     ] to [                     ]

Commission File Number: 001-38640

AudioEye, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-2939845
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5210 East Williams Circle, Suite 750, Tucson, Arizona	85711
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:  866-331-5324

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.00001 per share	AEYE	The Nasdaq Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days. Yes ☒   No ☐

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). Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 30, 2026, 12,438,294 shares of the registrant’s common stock were issued and outstanding.

		Page
PART I	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025 (unaudited)	2
	Consolidated Statements of Operations for the three months ended March 31, 2026 and 2025 (unaudited)	3
	Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2026 and 2025 (unaudited)	4
	Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025 (unaudited)	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
PART II	OTHER INFORMATION	22
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 5.	Other Information	23
Item 6.	Exhibits	24
SIGNATURES		25

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

The financial information set forth below with respect to the consolidated financial statements as of March 31, 2026 and December 31, 2025 and for the three-month periods ended March 31, 2026 and 2025 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-month period ended March 31, 2026 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

AUDIOEYE, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

	March 31,		December 31,
(in thousands, except per share data)	2026		2025
ASSETS
Current assets:
Cash and cash equivalents	$	8,563	$	5,288
Accounts receivable, net of allowance for doubtful accounts of $559 and $643, respectively		6,294		6,557
Prepaid expenses and other current assets		1,019		777
Total current assets		15,876		12,622
Property and equipment, net of accumulated depreciation of $250 and $227, respectively		137		146
Right of use assets		324		168
Intangible assets, net of accumulated amortization of $14,237 and $13,251, respectively		12,036		12,515
Goodwill		6,682		6,682
Other		45		97
Total assets	$	35,100	$	32,230
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	5,816	$	4,851
Operating lease liabilities		54		218
Deferred revenue		8,491		8,619
Contingent consideration		225		225
Term loan, current		850		503
Total current liabilities		15,436		14,416
Long term liabilities:
Term loan, net		15,756		12,479
Operating lease liabilities		283		—
Deferred revenue		7		5
Contingent consideration, long term		300		300
Other		139		226
Total liabilities		31,921		27,426
Stockholders’ equity:
Preferred stock, $0.00001 par value, 10,000 shares authorized
Common stock, $0.00001 par value, 50,000 shares authorized, 12,430 and 12,383 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively		1		1
Additional paid-in capital		109,165		108,201
Accumulated deficit		(105,987)		(103,398)
Total stockholders’ equity		3,179		4,804
Total liabilities and stockholders’ equity	$	35,100	$	32,230

See Notes to Unaudited Consolidated Financial Statements

2

AUDIOEYE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three months ended March 31,
(in thousands, except per share data)	2026		2025
Revenue	$	10,553	$	9,733
Cost of revenue		2,301		1,995
Gross profit		8,252		7,738
Operating expenses:
Selling and marketing		3,852		3,714
Research and development		1,110		1,153
General and administrative		5,173		3,761
Change in fair value of contingent consideration		—		50
Total operating expenses		10,135		8,678
Operating loss		(1,883)		(940)
Other expense:
Interest expense, net		(231)		(229)
Loss on extinguishment of debt		—		(300)
Total other expense		(231)		(529)
Net loss	$	(2,114)	$	(1,469)
Net loss per common share-basic and diluted	$	(0.17)	$	(0.12)
Weighted average common shares outstanding-basic and diluted		12,460		12,390

See Notes to Unaudited Consolidated Financial Statements

3

AUDIOEYE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 2026 AND 2025

(unaudited)

				Additional
	Common stock			Paid-in		Accumulated
(in thousands)	Shares	Amount		Capital		Deficit		Total
Balance, December 31, 2025	12,383	$	1	$	108,201	$	(103,398)	$	4,804
Common stock issued upon settlement of restricted stock units	169		—		—		—		—
Issuance of common stock for services	4		—		—		—		—
Surrender of stock to cover tax liability on settlement of employee stock-based awards	(44)		—		(382)		—		(382)
Common stock repurchased for retirement	(82)		—		—		(475)		(475)
Stock-based compensation	—		—		1,346		—		1,346
Net loss	—		—		—		(2,114)		(2,114)
Balance, March 31, 2026	12,430	$	1	$	109,165	$	(105,987)	$	3,179

				Additional
	Common stock			Paid-in		Accumulated
(in thousands)	Shares	Amount		Capital		Deficit		Total
Balance, December 31, 2024	12,285	$	1	$	105,181	$	(95,746)	$	9,436
Common stock issued upon settlement of restricted stock units	207		—		—		—		—
Common stock issued upon exercise of options on a cash basis	6		—		38		—		38
Issuance of common stock for services	7		—		—		—		—
Surrender of stock to cover tax liability on settlement of employee stock-based awards	(60)		—		(966)		—		(966)
Stock-based compensation	—		—		907		—		907
Net loss	—		—		—		(1,469)		(1,469)
Balance, March 31, 2025	12,445	$	1	$	105,160	$	(97,215)	$	7,946

See Notes to Unaudited Consolidated Financial Statements

4

AUDIOEYE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three months ended March 31,
(in thousands)	2026		2025
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,114)	$	(1,469)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		1,011		775
Loss on disposal or impairment of long-lived assets		—		40
Loss on extinguishment of debt		—		300
Stock-based compensation expense		1,346		907
Amortization of deferred commissions		11		9
Amortization of debt discount and issuance costs		24		23
Amortization of right-of-use assets		56		45
Change in fair value of contingent consideration		—		50
Provision for accounts receivable		52		140
Changes in operating assets and liabilities:
Accounts receivable		232		(558)
Prepaid expenses and other assets		(187)		(240)
Accounts payable and accruals		1,010		(22)
Operating lease liability		(55)		(48)
Deferred revenue		(126)		4
Net cash provided by (used in) operating activities		1,260		(44)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment		(17)		(3)
Software development costs		(465)		(472)
Patent costs		—		(4)
Payment for acquisitions, net		(245)		(311)
Net cash used in investing activities		(727)		(790)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from term loan, net of lender fees		3,599		11,950
Payments for costs directly attributable to the issuance of term loan		—		(325)
Repayment of term loan		—		(7,000)
Payments for debt extinguishment costs		—		(249)
Proceeds from exercise of options		—		38
Payments related to settlement of employee shared-based awards		(382)		(966)
Repurchase of common stock		(475)		—
Net cash provided by financing activities		2,742		3,448
Net increase in cash and cash equivalents		3,275		2,614
Cash and cash equivalents - beginning of period		5,288		5,651
Cash and cash equivalents - end of period	$	8,563	$	8,265

See Notes to Unaudited Consolidated Financial Statements

5

AUDIOEYE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026

(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., Ability, Inc., and Equally AI Ltd. (“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, 2025 (the “2025 Form 10-K”), as filed with the SEC on March 12, 2026. Subsequent to March 31, 2026, each of ADA Site Compliance, LLC, Criterion 508 Solutions, Inc., and Ability, Inc. was merged into AudioEye, Inc.  

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 2025 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 2025 Form 10-K when reviewing interim financial results.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the consolidated financial statements and during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to stock-based compensation, allowance for doubtful accounts, intangible assets, and contingent consideration. Actual results may differ from these estimates.

Revenue Recognition

We derive our revenue primarily from the sale of internally developed software by a software-as-a-service (“SaaS”) delivery model, as well as from professional services, through our direct sales force or through third-party resellers. Our SaaS fees include support and maintenance.

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

We determine revenue recognition through the following five steps:

● Identify the contract with the customer;

● Identify the performance obligations in the contract;

● Determine the transaction price;

● Allocate the transaction price to the performance obligations in the contract; and

6

AUDIOEYE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026

(Unaudited)

● Recognize revenue when, or as, the performance obligations are satisfied.

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 March 31,
(in thousands)	2026		2025
Partner and Marketplace	$	5,971	$	5,520
Enterprise		4,582		4,213
Total revenues	$	10,553	$	9,733

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 March 31, 2026 and December 31, 2025:

	March 31,		December 31,
(in thousands)	2026		2025
Deferred revenue – current	$	8,491	$	8,619
Deferred revenue – noncurrent		7		5
Total deferred revenue	$	8,498	$	8,624

In the three-month period ended March 31, 2026, we recognized $4,074,000, or 47%, in revenue from deferred revenue outstanding as of December 31, 2025.

We had one customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 13% and 14% of our total revenue in the three months ended March 31, 2026 and 2025, respectively.

As of March 31, 2026 and December 31, 2025, one customer represented 13% and 12% 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

7

AUDIOEYE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026

(Unaudited)

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 March 31, 2026 and December 31, 2025, which are included in Prepaid expenses and other current assets (current portion) and Other assets (noncurrent portion) on our consolidated balance sheets:

	March 31,		December 31,
(in thousands)	2026		2025
Deferred costs – current	$	36	$	39
Deferred costs – noncurrent		27		29
Total deferred costs	$	63	$	68

Amortization expense associated with sales commissions was included in Selling and marketing expenses on the consolidated statements of operations and totaled $11,000 and $9,000 for the three months ended March 31, 2026 and 2025, respectively.

Business Combinations

The assets acquired, liabilities assumed and contingent consideration in business combinations are recorded at their estimated fair value on the acquisition date with subsequent changes recognized in earnings. These estimates are inherently uncertain and are subject to refinement. Management develops estimates based on assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed as of the business combination date. As a result, the Company may recognize adjustments to provisional amounts of assets acquired or liabilities assumed in earnings in the reporting period in which the adjustments are determined.

Acquisition-related expenses primarily consist of legal, accounting, and other advisory fees and are recorded in the period in which they are incurred.

Asset Acquisitions

Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions. The Company allocates the cost of the acquisition to the individual assets acquired and liabilities assumed on a relative fair value basis and goodwill is not recognized in an asset acquisition. 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.

Intangible Assets

Intangible assets include patents, capitalized software development costs, and customer relationships. Intangible assets with finite lives are amortized on a straight-line basis over their respective estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Intangible assets determined to have indefinite useful lives are not amortized but are tested for impairment annually and more frequently if events occur or circumstances change that indicate an asset may be impaired.

As of March 31, 2026 and December 31, 2025, intangible assets primarily included $8,897,000 and $9,334,000 in customer relationships, respectively, and $2,994,000 and $3,028,000 in capitalized software development costs, respectively, net of accumulated amortization.

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.

8

AUDIOEYE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026

(Unaudited)

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. The purchase price per share equals 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. Accordingly, the fair value of shares of common stock to be issued under the ESPP is 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 March 31, 2026, 31,543 shares had been issued under the ESPP and 468,457 shares remained available under the plan.

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 one- to three-year service period with the Company. Compensation expense related to performance-based RSUs is recognized on a straight-line basis over the requisite service period, provided that it is probable that performance conditions will be achieved, with probability assessed on a quarterly basis and any changes in expectations recognized as an adjustment to earnings in the period of the change. Compensation cost is not recognized for service- and performance-based awards that do not vest because service or performance conditions are not satisfied, and any previously recognized compensation cost is reversed. Compensation costs related to awards with market conditions are recognized on a straight-line basis over the requisite service period regardless of whether the market condition is satisfied and is not reversed provided that the requisite service period derived from the Monte-Carlo simulation has been completed. If vesting occurs prior to the end of the requisite service period, expense is accelerated and fully recognized through the vesting date.

The following table summarizes the stock-based compensation expense recorded for the three months ended March 31, 2026 and 2025:

	Three months ended March 31,
(in thousands)	2026		2025
RSUs	$	1,316	$	857
Unrestricted shares of common stock		30		50
Total	$	1,346	$	907

As of March 31, 2026, the unrecognized stock-based compensation expense related to outstanding RSUs totaled $3,535,000, which may be recognized through February 2028, subject to achievement of service, performance, and market conditions.

9

AUDIOEYE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026

(Unaudited)

The following table summarizes the stock option and RSUs activity for the three months ended March 31, 2026:

	Options	RSUs
Outstanding at December 31, 2025	7,436	988,767
Granted	—	22,258
Exercised/Settled	—	(168,868)
Forfeited/Expired	(1,715)	(13,642)
Outstanding at March 31, 2026	5,721	828,515
Vested at March 31, 2026	5,721	304,637
Unvested at March 31, 2026	—	523,878

Earnings (Loss) Per Share (“EPS”)

Basic EPS is calculated by dividing net income (loss) available to common stockholders by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted EPS is calculated based on the net income (loss) available to common stockholders and the weighted average number of shares of common stock outstanding during the period, adjusted for the effects of all potential dilutive common stock issuances related to options and restricted stock units. The dilutive effect of our stock-based awards is computed using the treasury stock method, which assumes all stock-based awards are exercised and the hypothetical proceeds from exercise are used to purchase common stock at the average market price during the period. The incremental shares (i.e., the difference between shares assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted EPS calculation. However, when a net loss exists, no potential common stock equivalents are included in the computation of the diluted per-share amount because the computation would result in an anti-dilutive per-share amount.

Potentially dilutive securities outstanding as of March 31, 2026 and 2025, which were excluded from the computation of basic and diluted net loss per share for the periods then ended, are as follows:

	March 31,
(in thousands)	2026	2025
Options	6	28
Restricted stock units	829	1,226
Total	835	1,254

Stock Repurchases

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. In the three months ended March 31, 2026 and 2025, we used $475,000 and zero of the program to repurchase shares, respectively. As of March 31, 2026, we had $7.45 million remaining for the repurchase of shares.

Shares repurchased by the Company are immediately retired. The Company made an accounting policy election to charge the excess of repurchase price over par value entirely to retained earnings.

Fair Value of Financial Instruments

Fair value is an estimate of the exit price, representing the amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date). Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market participant assumptions in the absence of observable market information. Assets and liabilities required to be measured at fair value are categorized based upon the level of judgment associated with the inputs used to measure their value in one of the following three categories:

10

AUDIOEYE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026

(Unaudited)

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:

	Three Months Ended
(in thousands)	March 31, 2026
Contingent consideration (1)		Level 3
Balance at December 31, 2025	$	525
Additions		—
Change in fair value of contingent consideration		—
Balance at March 31, 2026	$	525

(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.

Recent Accounting Pronouncements

Recently Adopted

In July 2025, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. Under the practical expedient, entities may assume that current conditions as of the balance sheet date remain unchanged for the remaining life of the asset when developing reasonable and supportable forecasts. This ASU is effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods. The Company adopted this ASU beginning with the three months ended March 31, 2026, on a prospective basis. The adoption of ASU 2025-05 did not have a significant impact on the Company's consolidated financial statements.

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 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,

11

AUDIOEYE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026

(Unaudited)

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 — 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 $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 at the Company’s request through March 31, 2026, with an aggregate principal amount not to exceed $5.0 million (the “Term Advances”); and (ii) a revolving line of credit in an aggregate outstanding amount not to exceed $3.0 million (the “Revolving Facility”). The Term Advances and the Revolving Facility have a maturity date of March 31, 2030. In the three months ended March 31, 2026, we drew the remaining $3.6 million from the $5.0 million available as subsequent Term Advances, resulting in a total $17.0 million drawn under the term loan as of March 31, 2026.

The outstanding Term Advances and the Revolving Facility bear interest on the outstanding daily balance at a floating rate equal to 3.25% above the term SOFR rate, which is defined as the greater of (i) 2.30% and (ii) the 1-month Term SOFR Reference Rate.

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 1.25% of the aggregate principal amount of Term Advances outstanding as of April 10, 2026, payable on the tenth (10th) day of each calendar quarter, plus (ii) monthly payments of accrued interest, payable on the tenth (10th) day of each month. The final payment for each Term Advance, due on March 31, 2030, shall include all outstanding principal and accrued and unpaid interest under such Term Advance. Once repaid, the Term Advances may not be reborrowed. The interest on the Revolving Facility is payable monthly with the principal outstanding amount due at maturity. 

The Company incurred $50,000 in facility fees on the closing date, which were recorded as debt discount. The Company also incurred  $443,000 in third-party expenses in connection with the term loan, which were recorded as debt issuance costs. Debt discount and debt issuance costs are presented as a direct deduction from the carrying amount of our term loan and are amortized to interest expense over the term of the loan on a straight-line basis, which is not materially different from the effective interest method. 

In the three months ended March 31, 2026, amortization of debt discount and debt issuance costs (associated with the Western Alliance Bank credit facility) totaled $3,000 and $22,000, respectively.

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 $3.0 million measured as of the last day of each calendar month, and (b) a ratio of certain total committed debt to its Annual Recurring Revenue between 0.70 to 0.55, depending on the testing date, measured as of the last day of each calendar quarter. During the period of time commencing on September 30, 2026, and continuing through and including March 31, 2030, the Company shall maintain (a) a ratio of its aggregate funded indebtedness to its adjusted EBITDA for the prior twelve months of no greater than (i) 2.50 to 1.00 for the calendar quarters commencing September 30, 2026 through and including June 30, 2027, and (ii) 2.00 to 1.00 at all times thereafter, in each case measured as of the last day of each calendar quarter, and (b) a Fixed Charge Coverage Ratio of at least 1.50 to 1.00.

As of March 31, 2026, the outstanding principal balance of our term loan totaled $17.0 million and there were no outstanding borrowings under the revolving line of credit. As of March 31, 2026, revolving line of credit available for future draws totaled $3.0 million.

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AUDIOEYE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026

(Unaudited)

As of March 31, 2026, future principal payments of debt based on the principal balance then outstanding are as follows (in thousands):

Year ending December 31,	Term Loan
2026 (9 months remaining)	$	638
2027		850
2028		850
2029		850
2030		13,812
Total repayments	$	17,000

As of March 31, 2026, the $17,000,000 in future principal payments reconciles to the carrying value on the consolidated balance sheet as follows:

(in thousands)	March 31, 2026
Term loan principal	$	17,000
Less: unamortized debt discount and debt issuance costs		(394)
Term loan, net	$	16,606
Term loan, current	$	850
Term loan, noncurrent	$	15,756

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 $7.0 million term loan, which was due and payable on the maturity date of November 30, 2026. The interest rate was 6.25% in excess of the base rate, which is defined as the greater of the prime rate and 7.00% per annum. Interest was payable in cash on a monthly basis.

On March 31, 2025, the Company paid $7.0 million in outstanding principal, $105,000 in exit fees and $144,000 in prepayment and other fees with the proceeds from the Credit Facility Agreement to repay in full all indebtedness, liabilities and other obligations outstanding under, and terminated, the Loan Agreement. In the three months ended March 31, 2025, we recognized a $300,000 loss on extinguishment of debt in connection with the termination of the term loan under the Loan Agreement, which included the unamortized portion of related debt discount and debt issuance costs.

NOTE 4 — 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.

Contingent Consideration

The Company recorded contingent consideration liabilities in connection with certain transactions accounted for as asset acquisitions as they do not meet the definition of a business. The fair value of the contingent consideration liabilities was determined by management based on estimated recurring revenue from acquired customer relationships. As of March 31, 2026, total contingent consideration was $525,000.

13

AUDIOEYE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026

(Unaudited)

Operating Leases

The Company has operating leases for office space in Tucson, Arizona, and Miami Beach, Florida. The following summarizes the total lease liabilities and remaining future minimum lease payments as of March 31, 2026 (in thousands):

Year ending December 31,	Operating Leases
2026 (9 months remaining)	$	58
2027		80
2028		83
2029		85
2030		88
Thereafter		15
Total minimum lease payments		409
Less: present value discount		(72)
Total lease liabilities	$	337
Current portion of lease liabilities	$	54
Long term portion of lease liabilities	$	283

NOTE 5 — SEGMENT INFORMATION

The Company has a single reportable segment focused around the sale of similar products and related services. This reportable segment derives revenues from customers by selling subscriptions for our digital accessibility platform delivering website accessibility compliance and providing services related to digital accessibility.

The Company’s chief operating decision-maker (the "CODM”), who is the chief executive officer, assesses performance for the reportable segment and decides how to allocate resources using net income as the primary measure of profitability. The CODM is not regularly provided with specific segment expenses, but focuses on revenue, gross margin, and net income. Expense information, including cost of revenue, can be easily computed from the provided information. These segment measures of profitability are shown in the consolidated statements of operations. The measure of segment assets is reported on the consolidated balance sheets as total assets.

NOTE 6 — SUBSEQUENT EVENTS

We have evaluated subsequent events occurring after March 31, 2026, and based on our evaluation we did not identify any events that would have required recognition or disclosure in these consolidated financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, should be read in conjunction with our consolidated financial statements and related notes in Part I, Item 1 of this report.

As used in this quarterly report, the terms “we,” “us,” “our” and similar references refer to AudioEye, Inc., unless otherwise indicated.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you may be able to identify forward-looking statements by terms such as “may,” “should,” “will,” “forecasts,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential” or “continue,” the negative of these terms and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements, and are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions and speak only as of the date on which they are made.

Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations and intentions and other factors discussed in “Part I, Item 1A. Risk Factors” contained in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Risk factors that could cause actual results to differ from those contained in the forward-looking statements include but are not limited to risks related to:

● the uncertain market acceptance of our existing and future products;

● our need for, and the availability of, additional capital in the future to fund our operations and the development of new products;

● the success, timing and financial consequences of new strategic relationships, acquisitions or licensing agreements we may enter into;

● rapid changes in Internet-based applications that may affect the utility and commercial viability of our products;

● the timing and magnitude of expenditures we may incur in connection with our ongoing product development activities;

● judicial applications of accessibility laws to the internet;

● the level of competition from our existing competitors and from new competitors in our marketplace; and

● the regulatory environment for our products and services.

Readers of this report are cautioned not to rely on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. This cautionary note is applicable to all forward-looking statements contained in this report.

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AudioEye Solutions

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

Intellectual Property

Our intellectual property is primarily comprised of copyrights, trademarks, trade secrets, issued patents and pending patent applications. We have a patent portfolio comprised of twenty-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.

Our Annual Report filed on Form 10-K for the year ended December 31, 2025 as filed with the SEC on March 12, 2026 provides additional information about our business and operations.

Executive Overview

AudioEye is an industry-leading digital accessibility platform delivering Americans with Disabilities Act (“ADA”) and WCAG compliance at scale. Our solutions advance accessibility with patented technology that reduces barriers, expands access for individuals with disabilities, and enhances the user experience for a broader audience. In the three months ended March 31, 2026, we continued to focus on product innovation and expanding revenue.

We have two sales channels to deliver our product, the Partner and Marketplace channel and the Enterprise channel. AudioEye continues to focus on recurring revenue growth in both channels, while still offering our website and mobile application reporting services and PDF remediation services that provide non-recurring revenue.

In the three months ended March 31, 2026, total revenue increased by 8% over the prior year comparable period. As of March 31, 2026, Annual Recurring Revenue (“ARR”) was approximately $41.2 million, which represented an increase of 11% year-over-year. Refer to “Other Key Operating Metrics” below for details on how we calculate ARR.

As of March 31, 2026, AudioEye had approximately 127,000 customers, a 7% increase from 119,000 customers at March 31, 2025. The increase in customer count was attributable to an increase in our Partner and Marketplace channel customers.

In the three months ended March 31, 2026, revenue from our Partner and Marketplace channel grew 8% over the prior year comparable period. The Partner and Marketplace channel represented about 59% of ARR as of March 31, 2026. In three months ended March 31, 2026, total Enterprise channel revenue grew 9% over the prior year comparable period. The Enterprise channel represented about 41% of ARR as of March 31, 2026.

We had one customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 13% and 14% of our total revenue in the three months ended March 31, 2026 and 2025, respectively.

The Company continued to invest in research and development in the first quarter of 2026. Total research and development cost, as defined under the “Research and Development Expenses” section in the “Results of Operations” below, was 15% of total revenue in the three months ended March 31, 2026. Total research and development cost in the three months ended March 31, 2026 decreased from the prior year comparable period due to lower personnel cost.

In the three months ended March 31, 2026, both selling and marketing expense and general and administrative expense increased from the prior year comparable period. The increase in selling and marketing expense was mainly driven by higher third-party marketing

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expenses and personnel costs. The increase in general and administrative expenses in the three months ended March 31, 2026 was due primarily to higher litigation, stock compensation and amortization expense.

We provide further commentary on our Results of Operations below.

Results of Operations

Our unaudited consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP” or “GAAP”). The discussion of the results of our operations compares the three months ended March 31, 2026 with the three months ended March 31, 2025.

Our results of operations in these interim periods are not necessarily indicative of the results which may be expected for any subsequent period. Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

	Three months ended March 31,				Change
(in thousands)	2026		2025		$		%
Revenue	$	10,553	$	9,733	$	820	8	%
Cost of revenue		2,301		1,995		306	15	%
Gross profit		8,252		7,738		514	7	%
Operating expenses:
Selling and marketing		3,852		3,714		138	4	%
Research and development		1,110		1,153		(43)	(4)	%
General and administrative		5,173		3,761		1,412	38	%
Change in fair value of contingent consideration		—		50		(50)	(100)	%
Total operating expenses		10,135		8,678		1,457	17	%
Operating loss		(1,883)		(940)		(943)	100	%
Other expense:
Interest expense, net		(231)		(229)		(2)	1	%
Loss on extinguishment of debt		—		(300)		300	(100)	%
Total other expense		(231)		(529)		298	(56)	%
Net loss	$	(2,114)	$	(1,469)	$	(645)	44	%

Revenue

The following table presents our revenues disaggregated by sales channel:

	Three months ended March 31,				Change
(in thousands)	2026		2025		$		%
Partner and Marketplace	$	5,971	$	5,520	$	451	8	%
Enterprise		4,582		4,213		369	9	%
Total revenues	$	10,553	$	9,733	$	820	8	%

The Partner and Marketplace channel consists of our Content Management System (“CMS”) partners, platform & agency partners, authorized resellers and the Marketplace. This channel serves small and medium sized businesses that are on a partner or reseller’s web-hosting platform or that purchase our solutions from our Marketplace.

The Enterprise channel consists of our larger customers and organizations, including those with non-platform custom websites, who generally engage directly with AudioEye sales personnel for custom pricing and solutions. This channel also includes federal, state and local government agencies.

For the three months ended March 31, 2026, total revenue increased by 8% over the prior year comparable period. The 8% increase in Partner and Marketplace channel revenue for the three months ended March 31, 2026 was primarily due to continued expansion with

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existing partners. The 9% increase in Enterprise channel revenue for the three months ended March 31, 2026 was driven primarily by new customer relationships, including additions from acquisitions.

Cost of Revenue and Gross Profit

	Three months ended March 31,				Change
(in thousands)	2026		2025		$		%
Revenue	$	10,553	$	9,733	$	820	8	%
Cost of Revenue		2,301		1,995		306	15	%
Gross profit	$	8,252	$	7,738	$	514	7	%

Cost of revenue consists primarily of compensation and related benefits costs for our customer experience team, as well as a portion of our technology operations team that supports the delivery of our services, fees paid to our managed hosting and other third-party service providers, amortization of capitalized software development costs and patent costs, and allocated overhead costs.

For the three months ended March 31, 2026, cost of revenue increased by 15% over the prior year comparable period. The increase in cost of revenue was primarily due to higher costs incurred for service delivery supporting our increased revenue, additional costs attributable to asset acquisitions, and higher amortization expense related to our capitalized software development costs.

For the three months ended March 31, 2026, gross profit increased by 7% over the prior year comparable periods. The increase in gross profit was a result of increased revenue from new customers exceeding the incremental fulfilment cost.

Selling and Marketing Expenses

	Three months ended March 31,				Change
(in thousands)	2026		2025		$		%
Selling and marketing	$	3,852	$	3,714	$	138	4	%

Selling and marketing expenses consist primarily of compensation and benefits related to our sales and marketing staff, as well as third-party advertising and marketing expenses.

For the three months ended March 31, 2026, selling and marketing expenses increased by 4% over the prior year comparable period. The increase in selling and marketing expenses resulted primarily from higher third-party marketing expenses and personnel costs.

Research and Development Expenses

	Three months ended March 31,				Change
(in thousands)	2026		2025		$		%
Research and development expense	$	1,110	$	1,153	$	(43)	(4)	%
Plus: Capitalized research and development cost		465		472		(7)	(1)	%
Total research and development cost	$	1,575	$	1,625	$	(50)	(3)	%

Research and development (“R&D”) expenses consist primarily of compensation and related benefits, independent contractor costs, and an allocated portion of general overhead costs related to our employees involved in research and development activities. Total research and development cost includes the amount of research and development expense reported within operating expenses as well as research and development cost that was capitalized during the fiscal period.

For the three months ended March 31, 2026, R&D expenses decreased by 4% from the prior year comparable period. The decrease was driven by lower personnel cost. For the three months ended March 31, 2026, capitalized R&D cost remained consistent with the prior year comparable period due to engineering personnel spending a similar level of effort on product development. For the three months ended March 31, 2026, total R&D cost, which includes both R&D expenses and capitalized R&D costs, decreased by 3% from the prior year comparable period.

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General and Administrative Expenses

	Three months ended March 31,				Change
(in thousands)	2026		2025		$		%
General and administrative	$	5,173	$	3,761	$	1,412	38	%

General and administrative expenses consist primarily of compensation and benefits related to our executives, directors and corporate support functions, and general corporate expenses including legal fees, occupancy and transaction costs.

For the three months ended March 31, 2026, general and administrative expenses increased by 38% from the prior year comparable period. The increase in general and administrative expense was due primarily to an increase in litigation expense by $1,110,000, as well as to higher stock compensation expense and amortization expense associated with our intangible assets.

Change in Fair Value of Contingent Consideration

	Three months ended March 31,				Change
(in thousands)	2026		2025		$		%
Change in fair value of contingent consideration	$	—	$	50	$	(50)	(100)	%

Change in fair value of contingent consideration consists of non-cash valuation adjustments to contingent consideration liabilities recognized in connection with the acquisition of ADA Site Compliance, which was accounted for as a business combination.

For the three months ended March 31, 2026, no change in fair value of contingent consideration was recorded. The earnout targets for ADA Site Compliance were measured as of December 31, 2025, and no further changes in the fair value of this contingent consideration are expected following that measurement date.  

Interest Expense

	Three months ended March 31,				Change
(in thousands)	2026		2025		$		%
Interest expense, net	$	(231)	$	(229)	$	(2)	1	%

Interest expense, net consists primarily of interest on our term loan, offset by interest income from investment in money market funds.

For the three months ended March 31, 2026, interest expense, net remained consistent with the prior year comparable period, as the impact of the higher outstanding principal balance was mostly offset by the lower interest rate from the new credit facility and the increase in interest income from investment in money market funds.

Loss on Extinguishment of Debt

	Three months ended March 31,				Change
(in thousands)	2026		2025		$		%
Loss on extinguishment of debt	$	—	$	(300)	$	300	(100)	%

On March 31, 2025, upon entering into a new credit facility with Western Alliance Bank, the Company paid the full $7.0 million in outstanding principal on its previous term loan with SG Credit Partners. In the three months ended March 31, 2025, in connection with the termination of the SG Credit Partners term loan, we recognized a $300,000 loss on extinguishment of debt, which included prepayment and other fees and the unamortized portion of related debt discount and debt issuance costs.

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

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the date of determination, in each case, assuming no changes to the subscription, multiplied by 12 if applicable. Recurring fees are defined as revenues expected to be generated from services typically offered as a subscription service or annual service offering such as our automation and platform, periodic auditing, human-assisted technological fixes, legal support and professional service offerings and other services that reoccur on a multi-year contract. This determination includes both annual and monthly contracts for recurring products. Some of our contracts are terminable prior to the expected term, which may impact future ARR. ARR excludes non-recurring fees, which are defined as revenue expected to be generated from services typically not offered as a subscription service or annual service offering such as our PDF remediation services business, one-time mobile application reports, and other miscellaneous services that are offered as non-subscription services or are expected to be one-time in nature. As of March 31, 2026, ARR was $41.2 million, which represents an increase of 11% year-over-year, driven by growth in both our Partner and Marketplace channel and Enterprise channel.

Liquidity and Capital Resources

Working Capital

(in thousands)	March 31, 2026		December 31, 2025
Current assets	$	15,876	$	12,622
Current liabilities		(15,436)		(14,416)
Working capital	$	440	$	(1,794)

As of March 31, 2026, we had $8,563,000 in cash and cash equivalents and working capital of $440,000. The $2.2 million increase in working capital in the three months ended March 31, 2026 was primarily due to $3.6 million in proceeds drawn from the remaining subsequent term loan advances available to the Company, partially offset by the increase in accrued expenses and in 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 three months ended March 31, 2026, we used $475,000 of the program to repurchase shares. As of March 31, 2026, we had $7.45 million remaining for the repurchase of shares.

As of March 31, 2026, we had $17.0 million outstanding under the term loan, $16.2 million of which is classified as a noncurrent liability. The term loan matures on March 31, 2030, and requires quarterly principal payments beginning on April 10, 2026. Refer to Note 3 – Debt to our consolidated financial statements for additional information regarding our credit facility.

As of May 12, 2026, we had no off-balance sheet arrangements, and we believe that the Company has sufficient liquidity to continue as a going concern through the next twelve months.

While the Company has been successful in raising capital, there is no assurance that it will be successful at raising additional capital in the future. Additionally, if the Company’s plans are not achieved and/or if significant unanticipated events occur, the Company may have to further modify its business plan, which may require us to raise additional capital or reduce expenses.

Cash Flows

	Three months ended March 31,
(in thousands)	2026		2025
Net cash provided by (used in) operating activities	$	1,260	$	(44)
Net cash used in investing activities		(727)		(790)
Net cash provided by financing activities		2,742		3,448
Net increase in cash and cash equivalents	$	3,275	$	2,614

For the three months ended March 31, 2026, in relation to the prior year comparable period, cash provided by operating activities increased primarily due to timing of payments and the increase in revenue.

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For the three months ended March 31, 2026, in relation to the prior year comparable period, cash used in investing activities decreased primarily due to a reduction in payments associated acquisitions in the current year period.

For the three months ended March 31, 2026, in relation to the prior year comparable period, cash provided by financing activities decreased primarily due to $475,000 in stock repurchases in the first quarter of 2026, as well as to lower net proceeds from credit facility activity. In the three months ended March 31, 2026 and 2025, we obtained $3.6 million and $12.0 million, respectively, in proceeds from term loan borrowings under the credit facility with Western Alliance Bank. In the three months ended March 31, 2025, we used a portion of the term loan borrowings to repay our previous $7.0 million term loan, as well as costs associated with the issuance and termination of our previous credit facilities.

Critical Accounting Policies and Estimates

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

Our critical accounting estimates, as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, relate to contingent consideration recognized in connection with business combinations and asset acquisitions. There have been no material changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that there is reasonable assurance that the information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of “disclosure controls and procedures” in Exchange Act Rules 13a-15(e) and 15d-15(e). In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, projections of any evaluation of effectiveness of our disclosure controls and procedures to future periods are subject to the risk that controls or procedures may become inadequate because of changes in conditions, or that the degree of compliance with the controls or procedures may deteriorate.

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company’s senior management, including the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures to provide reasonable assurance of achieving the desired objectives of the disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer has concluded that our disclosure controls and procedures were effective as of March 31, 2026.

Changes in Internal Controls over Financial Reporting

During the quarter ended March 31, 2026, there were no changes in our internal control over financial reporting that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

21

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We may become involved in various routine disputes and allegations incidental to our business operations. While it is not possible to determine the ultimate disposition of these matters, our management believes that the resolution of any such matters, should they arise, is not likely to have a material adverse effect on our financial position or results of operations.

Item 1A. Risk Factors

You should carefully consider the factors discussed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 (“2025 Form 10-K”), which could materially affect our business, financial condition and results of operations. There have been no material changes to the risk factors set forth in the 2025 Form 10-K. The risks described in our 2025 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information with respect to our repurchases of common stock during the three months ended March 31, 2026:

					Maximum Number (or
				Total Number of	Approximate Dollar
				Shares Purchased	Value) of Shares that
				as Part of Publicly	May Yet Be Purchased
	Total Number of	Average Price		Announced Plans or	under the Plans or
Period	Shares Purchased	Paid per Share		Programs	Programs (2)
January 1 - January 31, 2026:
Employee transactions (1)	33,188	$	9.49	—	$	—
February 1 - February 28, 2026:
Employee transactions (1)	3,556		6.83	—		—
March 1 - March 31, 2026:
Employee transactions (1)	7,246		5.93	—		—
Share repurchase program (2)	82,200		5.78	82,200		7,450,000
Total:
Employee transactions (1)	43,990	$	8.69	—	$	—
Share repurchase program (2)	82,200	$	5.78	82,200	$	7,450,000

(1) Consists of shares surrendered by employees to satisfy tax withholding obligations in connection with the settlement of restricted stock units.

(2) In January 2025, the Board of Directors adopted a share repurchase program authorizing the repurchase of up to $12.5 million of our common stock through January 24, 2027. Shares repurchased under the program will be subsequently retired. The average price paid per share includes any broker fees.

22

Item 5. Other Information

​
Rule 10b5-1 Trading Plans

On March 12, 2026, Sero Capital LLC, an entity whose Chief Executive Officer and beneficial owner is David Moradi, the Company’s Executive Chairman and Chief Product Officer, terminated a pre-arranged trading plan that was intended to satisfy the affirmative defense of Rule 10b5-1(c) of the Exchange Act. The arrangement, originally adopted on May 30, 2025, covered the sale of up to 500,000 shares of common stock and was scheduled to expire on May 29, 2026.

On March 23, 2026, Kelly Georgevich, the Company’s Chief Executive Officer and Chief Financial Officer, terminated a pre-arranged trading plan that was intended to satisfy the affirmative defense of Rule 10b5-1(c) of the Exchange Act. The arrangement, originally adopted on June 9, 2025, covered the sale of up to 20,000 shares of common stock and was scheduled to expire on September 9, 2026.

23

Item 6. Exhibits

		Incorporation by Reference
Exhibit No.	Description		Form	Date of Filing	Exhibit No.	Filed Herewith
3.1	Restated Certificate of Incorporation of AudioEye, Inc., dated as of May 24, 2024		8-K	May 24, 2024	3.3
3.2	By-Laws of AudioEye, Inc. (as amended as of May 22, 2024)		10-Q	July 29, 2024	3.3
10.1	Consent and Third Loan Modification Agreement, dated as of January 12, 2026, by and among Western Alliance Bank, AudioEye, Inc., ADA Site Compliance, LLC and Criterion 508 Solutions, Inc.		10-K	March 12, 2026	10.24
10.2	Amended and Restated Employment Agreement, dated as of May 4, 2026, by and between AudioEye, Inc. and Kelly Georgevich		8-K	May 7, 2026	10.1
10.3	Second Amended and Restated Employment Agreement, dated as of May 4, 2026, by and between AudioEye, Inc. and David Moradi		8-K	May 7, 2026	10.2
31.1	Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1	Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document					X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document					X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document					X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document					X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document					X
104	Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

24

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		AUDIOEYE, INC.
Date:	May 12, 2026	By:	/s/ Kelly Georgevich
			Kelly Georgevich
			Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer

25

EX-31.1

Exhibit 31.1

CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kelly Georgevich, Principal Executive Officer and Principal Financial Officer of AudioEye, Inc. (the “Registrant”), certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended March 31, 2026 of AudioEye, Inc. (the “Quarterly Report”);

2. Based on my knowledge, this Quarterly 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 Quarterly Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Quarterly 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 Quarterly 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 Quarterly 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 Quarterly Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Quarterly 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: May 12, 2026	By:	/s/ Kelly Georgevich
		Name:	Kelly Georgevich
		Title:	Chief Executive Officer and Chief Financial Officer
			(Principal Executive Officer and Principal Financial Officer)

EX-32.1

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 Quarterly Report on Form 10-Q for the period ended March 31, 2026 (the “Quarterly 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 Quarterly 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 Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

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.

Date: May 12, 2026	By:	/s/ Kelly Georgevich
		Name:	Kelly Georgevich
		Title:	Chief Executive Officer and Chief Financial Officer
			(Principal Executive Officer and Principal Financial Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2026	Apr. 30, 2026
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2026
Document Transition Report	false
Entity File Number	001-38640
Entity Registrant Name	AUDIOEYE INC
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-2939845
Entity Address, Postal Zip Code	85711
Entity Address, Address Line One	5210 East Williams Circle
Entity Address, Address Line Two	Suite 750
Entity Address, City or Town	Tucson
Entity Address, State or Province	AZ
City Area Code	866
Local Phone Number	331-5324
Title of 12(b) Security	Common Stock, par value $0.00001 per share
Trading Symbol	AEYE
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		12,438,294
Entity Central Index Key	0001362190
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2026
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2026	Dec. 31, 2025
Current assets:
Cash and cash equivalents	$ 8,563	$ 5,288
Accounts receivable, net of allowance for doubtful accounts of $559 and $643, respectively	6,294	6,557
Prepaid expenses and other current assets	1,019	777
Total current assets	15,876	12,622
Property and equipment, net of accumulated depreciation of $250 and $227, respectively	137	146
Right of use assets	324	168
Intangible assets, net of accumulated amortization of $14,237 and $13,251, respectively	12,036	12,515
Goodwill	6,682	6,682
Other	45	97
Total assets	35,100	32,230
Current liabilities:
Accounts payable and accrued expenses	5,816	4,851
Operating lease liabilities	54	218
Deferred revenue	8,491	8,619
Contingent consideration	225	225
Term loan, current	850	503
Total current liabilities	15,436	14,416
Long term liabilities:
Term loan, net	15,756	12,479
Operating lease liabilities	283
Deferred revenue	7	5
Contingent consideration, long term	300	300
Other	139	226
Total liabilities	31,921	27,426
Stockholders' equity:
Common stock, $0.00001 par value, 50,000 shares authorized, 12,430 and 12,383 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively	1	1
Additional paid-in capital	109,165	108,201
Accumulated deficit	(105,987)	(103,398)
Total stockholders' equity	3,179	4,804
Total liabilities and stockholders' equity	$ 35,100	$ 32,230

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Mar. 31, 2026	Dec. 31, 2025
CONSOLIDATED BALANCE SHEETS
Allowance for doubtful accounts	$ 559	$ 643
Property and equipment, accumulated depreciation	250	227
Intangible assets, accumulated amortization	$ 14,237	$ 13,251
Preferred stock, par value (in dollars per share)	$ 0.00001
Preferred stock, shares authorized	10,000
Common stock, par value (in dollars per share)	$ 0.00001	$ 0.00001
Common stock, shares authorized	50,000	50,000
Common stock, shares issued	12,430	12,383
Common stock, shares outstanding	12,414	12,285

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenue	$ 10,553,000	$ 9,733,000
Cost of revenue	2,301,000	1,995,000
Gross profit	8,252,000	7,738,000
Operating expenses:
Selling and marketing	3,852,000	3,714,000
Research and development	1,110,000	1,153,000
General and administrative	5,173,000	3,761,000
Change in fair value of contingent consideration		50,000
Total operating expenses	10,135,000	8,678,000
Operating loss	(1,883,000)	(940,000)
Other income (expense):
Interest expense, net	(231,000)	(229,000)
Loss on extinguishment of debt		(300,000)
Total other expense	(231,000)	(529,000)
Net loss	$ (2,114,000)	$ (1,469,000)
Net loss per common share-basic (in dollars per share)	$ (0.17)	$ (0.12)
Weighted average common shares outstanding-basic (in shares)	12,460	12,390

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Common stock	Additional Paid in Capital	Accumulated Deficit	Total
Balance at Dec. 31, 2024	$ 1	$ 105,181	$ (95,746)	$ 9,436
Balance (in shares) at Dec. 31, 2024	12,285
Common stock issued upon settlement of restricted stock units (in shares)	207
Issuance of common stock for services (in shares)	7
Surrender of stock to cover tax liability on settlement of employee stock-based awards		966		966
Surrender of stock to cover tax liability on settlement of employee stock-based awards (in shares)	60
Common stock issued upon exercise of warrants and options on a cash basis		38		38
Common stock issued upon exercise of warrants and options on a cash basis (in shares)	6
Stock-based compensation		907		907
Net loss			(1,469)	(1,469)
Balance at Mar. 31, 2025	$ 1	105,160	(97,215)	7,946
Balance (in shares) at Mar. 31, 2025	12,445
Balance at Dec. 31, 2025	$ 1	108,201	(103,398)	4,804
Balance (in shares) at Dec. 31, 2025	12,383
Common stock issued upon settlement of restricted stock units (in shares)	169
Issuance of common stock for services (in shares)	4
Surrender of stock to cover tax liability on settlement of employee stock-based awards		(382)		(382)
Surrender of stock to cover tax liability on settlement of employee stock-based awards (in shares)	(44)
Common stock repurchased for retirement			(475)	(475)
Common stock repurchased for retirement (in shares)	(82)
Stock-based compensation		1,346		1,346
Net loss			(2,114)	(2,114)
Balance at Mar. 31, 2026	$ 1	$ 109,165	$ (105,987)	$ 3,179
Balance (in shares) at Mar. 31, 2026	12,430

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (2,114,000)	$ (1,469,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	1,011,000	775,000
Loss on disposal or impairment of long-lived assets		40,000
Loss on extinguishment of debt		300,000
Stock-based compensation expense	1,346,000	907,000
Amortization of deferred commissions	11,000	9,000
Amortization of debt discount and issuance costs	24,000	23,000
Amortization of right-of-use assets	56,000	45,000
Change in fair value of contingent consideration		50,000
Provision for accounts receivable	52,000	140,000
Changes in operating assets and liabilities:
Accounts receivable	232,000	(558,000)
Prepaid expenses and other assets	(187,000)	(240,000)
Accounts payable and accruals	1,010,000	(22,000)
Operating lease liability	(55,000)	(48,000)
Deferred revenue	(126,000)	4,000
Net cash provided by (used in) operating activities	1,260,000	(44,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment	(17,000)	(3,000)
Software development costs	(465,000)	(472,000)
Patent costs		(4,000)
Payment for acquisition	(245,000)	(311,000)
Net cash used in investing activities	(727,000)	(790,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from term loan, net of lender fees	3,599,000	11,950,000
Payments for costs directly attributable to the issuance of term loan		(325,000)
Repayment of term loan		(7,000,000)
Payments for debt extinguishment costs		(249,000)
Proceeds from exercise of options		38,000
Payments related to settlement of employee shared-based awards	(382,000)	(966,000)
Repurchase of common stock	(475,000)	0
Net cash provided by financing activities	2,742,000	3,448,000
Net decrease in cash and cash equivalents	3,275,000	2,614,000
Cash and cash equivalents -beginning of period	5,288,000	5,651,000
Cash and cash equivalents - end of period	$ 8,563,000	$ 8,265,000

XML

ORGANIZATION AND DESCRIPTION OF BUSINESS

3 Months Ended

Mar. 31, 2026

ORGANIZATION AND DESCRIPTION OF BUSINESS

ORGANIZATION AND DESCRIPTION OF BUSINESS

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., Ability, Inc., and Equally AI Ltd. (“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, 2025 (the “2025 Form 10-K”), as filed with the SEC on March 12, 2026. Subsequent to March 31, 2026, each of ADA Site Compliance, LLC, Criterion 508 Solutions, Inc., and Ability, Inc. was merged into AudioEye, Inc.  

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.

XML

SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2026

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are presented in “Note 2 – Significant Accounting Policies” in the 2025 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 2025 Form 10-K when reviewing interim financial results.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the consolidated financial statements and during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to stock-based compensation, allowance for doubtful accounts, intangible assets, and contingent consideration. Actual results may differ from these estimates.

Revenue Recognition

We derive our revenue primarily from the sale of internally developed software by a software-as-a-service (“SaaS”) delivery model, as well as from professional services, through our direct sales force or through third-party resellers. Our SaaS fees include support and maintenance.

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

We determine revenue recognition through the following five steps:

● Identify the contract with the customer;

● Identify the performance obligations in the contract;

● Determine the transaction price;

● Allocate the transaction price to the performance obligations in the contract; and

● Recognize revenue when, or as, the performance obligations are satisfied.

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 March 31,
(in thousands)	2026		2025
Partner and Marketplace	$	5,971	$	5,520
Enterprise		4,582		4,213
Total revenues	$	10,553	$	9,733

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 March 31, 2026 and December 31, 2025:

	March 31,		December 31,
(in thousands)	2026		2025
Deferred revenue – current	$	8,491	$	8,619
Deferred revenue – noncurrent		7		5
Total deferred revenue	$	8,498	$	8,624

In the three-month period ended March 31, 2026, we recognized $4,074,000, or 47%, in revenue from deferred revenue outstanding as of December 31, 2025.

We had one customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 13% and 14% of our total revenue in the three months ended March 31, 2026 and 2025, respectively.

As of March 31, 2026 and December 31, 2025, one customer represented 13% and 12% 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 March 31, 2026 and December 31, 2025, which are included in Prepaid expenses and other current assets (current portion) and Other assets (noncurrent portion) on our consolidated balance sheets:

	March 31,		December 31,
(in thousands)	2026		2025
Deferred costs – current	$	36	$	39
Deferred costs – noncurrent		27		29
Total deferred costs	$	63	$	68

Amortization expense associated with sales commissions was included in Selling and marketing expenses on the consolidated statements of operations and totaled $11,000 and $9,000 for the three months ended March 31, 2026 and 2025, respectively.

Business Combinations

The assets acquired, liabilities assumed and contingent consideration in business combinations are recorded at their estimated fair value on the acquisition date with subsequent changes recognized in earnings. These estimates are inherently uncertain and are subject to refinement. Management develops estimates based on assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed as of the business combination date. As a result, the Company may recognize adjustments to provisional amounts of assets acquired or liabilities assumed in earnings in the reporting period in which the adjustments are determined.

Acquisition-related expenses primarily consist of legal, accounting, and other advisory fees and are recorded in the period in which they are incurred.

Asset Acquisitions

Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions. The Company allocates the cost of the acquisition to the individual assets acquired and liabilities assumed on a relative fair value basis and goodwill is not recognized in an asset acquisition. 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.

Intangible Assets

Intangible assets include patents, capitalized software development costs, and customer relationships. Intangible assets with finite lives are amortized on a straight-line basis over their respective estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Intangible assets determined to have indefinite useful lives are not amortized but are tested for impairment annually and more frequently if events occur or circumstances change that indicate an asset may be impaired.

As of March 31, 2026 and December 31, 2025, intangible assets primarily included $8,897,000 and $9,334,000 in customer relationships, respectively, and $2,994,000 and $3,028,000 in capitalized software development costs, respectively, net of accumulated amortization.

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. The purchase price per share equals 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. Accordingly, the fair value of shares of common stock to be issued under the ESPP is 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 March 31, 2026, 31,543 shares had been issued under the ESPP and 468,457 shares remained available under the plan.

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 one- to three-year service period with the Company. Compensation expense related to performance-based RSUs is recognized on a straight-line basis over the requisite service period, provided that it is probable that performance conditions will be achieved, with probability assessed on a quarterly basis and any changes in expectations recognized as an adjustment to earnings in the period of the change. Compensation cost is not recognized for service- and performance-based awards that do not vest because service or performance conditions are not satisfied, and any previously recognized compensation cost is reversed. Compensation costs related to awards with market conditions are recognized on a straight-line basis over the requisite service period regardless of whether the market condition is satisfied and is not reversed provided that the requisite service period derived from the Monte-Carlo simulation has been completed. If vesting occurs prior to the end of the requisite service period, expense is accelerated and fully recognized through the vesting date.

The following table summarizes the stock-based compensation expense recorded for the three months ended March 31, 2026 and 2025:

	Three months ended March 31,
(in thousands)	2026		2025
RSUs	$	1,316	$	857
Unrestricted shares of common stock		30		50
Total	$	1,346	$	907

As of March 31, 2026, the unrecognized stock-based compensation expense related to outstanding RSUs totaled $3,535,000, 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 three months ended March 31, 2026:

	Options	RSUs
Outstanding at December 31, 2025	7,436	988,767
Granted	—	22,258
Exercised/Settled	—	(168,868)
Forfeited/Expired	(1,715)	(13,642)
Outstanding at March 31, 2026	5,721	828,515
Vested at March 31, 2026	5,721	304,637
Unvested at March 31, 2026	—	523,878

Earnings (Loss) Per Share (“EPS”)

Basic EPS is calculated by dividing net income (loss) available to common stockholders by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted EPS is calculated based on the net income (loss) available to common stockholders and the weighted average number of shares of common stock outstanding during the period, adjusted for the effects of all potential dilutive common stock issuances related to options and restricted stock units. The dilutive effect of our stock-based awards is computed using the treasury stock method, which assumes all stock-based awards are exercised and the hypothetical proceeds from exercise are used to purchase common stock at the average market price during the period. The incremental shares (i.e., the difference between shares assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted EPS calculation. However, when a net loss exists, no potential common stock equivalents are included in the computation of the diluted per-share amount because the computation would result in an anti-dilutive per-share amount.

Potentially dilutive securities outstanding as of March 31, 2026 and 2025, which were excluded from the computation of basic and diluted net loss per share for the periods then ended, are as follows:

	March 31,
(in thousands)	2026	2025
Options	6	28
Restricted stock units	829	1,226
Total	835	1,254

Stock Repurchases

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. In the three months ended March 31, 2026 and 2025, we used $475,000 and zero of the program to repurchase shares, respectively. As of March 31, 2026, we had $7.45 million remaining for the repurchase of shares.

Shares repurchased by the Company are immediately retired. The Company made an accounting policy election to charge the excess of repurchase price over par value entirely to retained earnings.

Fair Value of Financial Instruments

Fair value is an estimate of the exit price, representing the amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date). Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market participant assumptions in the absence of observable market information. Assets and liabilities required to be measured at fair value are categorized based upon the level of judgment associated with the inputs used to measure their value in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company.

Level 3: Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments.

The table below provides information on our Level 3 liabilities:

	Three Months Ended
(in thousands)	March 31, 2026
Contingent consideration (1)		Level 3
Balance at December 31, 2025	$	525
Additions		—
Change in fair value of contingent consideration		—
Balance at March 31, 2026	$	525

(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.

Recent Accounting Pronouncements

Recently Adopted

In July 2025, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. Under the practical expedient, entities may assume that current conditions as of the balance sheet date remain unchanged for the remaining life of the asset when developing reasonable and supportable forecasts. This ASU is effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods. The Company adopted this ASU beginning with the three months ended March 31, 2026, on a prospective basis. The adoption of ASU 2025-05 did not have a significant impact on the Company's consolidated financial statements.

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 November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40) to improve the disclosures about a public entity’s expenses and provide more detailed information about the types of expenses included in certain expense captions in the consolidated financial statements. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15,

2027. Early adoption is permitted and the amendments in this update should be applied either prospectively to financial statements issued for reporting periods after the effective date of this update or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the impact of the new standard on the disclosures in its consolidated financial statements.

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DEBT

3 Months Ended

Mar. 31, 2026

DEBT

DEBT

NOTE 3 — 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 $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 at the Company’s request through March 31, 2026, with an aggregate principal amount not to exceed $5.0 million (the “Term Advances”); and (ii) a revolving line of credit in an aggregate outstanding amount not to exceed $3.0 million (the “Revolving Facility”). The Term Advances and the Revolving Facility have a maturity date of March 31, 2030. In the three months ended March 31, 2026, we drew the remaining $3.6 million from the $5.0 million available as subsequent Term Advances, resulting in a total $17.0 million drawn under the term loan as of March 31, 2026.

The outstanding Term Advances and the Revolving Facility bear interest on the outstanding daily balance at a floating rate equal to 3.25% above the term SOFR rate, which is defined as the greater of (i) 2.30% and (ii) the 1-month Term SOFR Reference Rate.

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 1.25% of the aggregate principal amount of Term Advances outstanding as of April 10, 2026, payable on the tenth (10th) day of each calendar quarter, plus (ii) monthly payments of accrued interest, payable on the tenth (10th) day of each month. The final payment for each Term Advance, due on March 31, 2030, shall include all outstanding principal and accrued and unpaid interest under such Term Advance. Once repaid, the Term Advances may not be reborrowed. The interest on the Revolving Facility is payable monthly with the principal outstanding amount due at maturity. 

The Company incurred $50,000 in facility fees on the closing date, which were recorded as debt discount. The Company also incurred  $443,000 in third-party expenses in connection with the term loan, which were recorded as debt issuance costs. Debt discount and debt issuance costs are presented as a direct deduction from the carrying amount of our term loan and are amortized to interest expense over the term of the loan on a straight-line basis, which is not materially different from the effective interest method. 

In the three months ended March 31, 2026, amortization of debt discount and debt issuance costs (associated with the Western Alliance Bank credit facility) totaled $3,000 and $22,000, respectively.

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 $3.0 million measured as of the last day of each calendar month, and (b) a ratio of certain total committed debt to its Annual Recurring Revenue between 0.70 to 0.55, depending on the testing date, measured as of the last day of each calendar quarter. During the period of time commencing on September 30, 2026, and continuing through and including March 31, 2030, the Company shall maintain (a) a ratio of its aggregate funded indebtedness to its adjusted EBITDA for the prior twelve months of no greater than (i) 2.50 to 1.00 for the calendar quarters commencing September 30, 2026 through and including June 30, 2027, and (ii) 2.00 to 1.00 at all times thereafter, in each case measured as of the last day of each calendar quarter, and (b) a Fixed Charge Coverage Ratio of at least 1.50 to 1.00.

As of March 31, 2026, the outstanding principal balance of our term loan totaled $17.0 million and there were no outstanding borrowings under the revolving line of credit. As of March 31, 2026, revolving line of credit available for future draws totaled $3.0 million.

As of March 31, 2026, future principal payments of debt based on the principal balance then outstanding are as follows (in thousands):

Year ending December 31,	Term Loan
2026 (9 months remaining)	$	638
2027		850
2028		850
2029		850
2030		13,812
Total repayments	$	17,000

As of March 31, 2026, the $17,000,000 in future principal payments reconciles to the carrying value on the consolidated balance sheet as follows:

(in thousands)	March 31, 2026
Term loan principal	$	17,000
Less: unamortized debt discount and debt issuance costs		(394)
Term loan, net	$	16,606
Term loan, current	$	850
Term loan, noncurrent	$	15,756

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 $7.0 million term loan, which was due and payable on the maturity date of November 30, 2026. The interest rate was 6.25% in excess of the base rate, which is defined as the greater of the prime rate and 7.00% per annum. Interest was payable in cash on a monthly basis.

On March 31, 2025, the Company paid $7.0 million in outstanding principal, $105,000 in exit fees and $144,000 in prepayment and other fees with the proceeds from the Credit Facility Agreement to repay in full all indebtedness, liabilities and other obligations outstanding under, and terminated, the Loan Agreement. In the three months ended March 31, 2025, we recognized a $300,000 loss on extinguishment of debt in connection with the termination of the term loan under the Loan Agreement, which included the unamortized portion of related debt discount and debt issuance costs.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2026

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 4 — 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.

Contingent Consideration

The Company recorded contingent consideration liabilities in connection with certain transactions accounted for as asset acquisitions as they do not meet the definition of a business. The fair value of the contingent consideration liabilities was determined by management based on estimated recurring revenue from acquired customer relationships. As of March 31, 2026, total contingent consideration was $525,000.

Operating Leases

The Company has operating leases for office space in Tucson, Arizona, and Miami Beach, Florida. The following summarizes the total lease liabilities and remaining future minimum lease payments as of March 31, 2026 (in thousands):

Year ending December 31,	Operating Leases
2026 (9 months remaining)	$	58
2027		80
2028		83
2029		85
2030		88
Thereafter		15
Total minimum lease payments		409
Less: present value discount		(72)
Total lease liabilities	$	337
Current portion of lease liabilities	$	54
Long term portion of lease liabilities	$	283

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SEGMENT INFORMATION

3 Months Ended

Mar. 31, 2026

SEGMENT REPORTING

SEGMENT INFORMATION

NOTE 5 — SEGMENT INFORMATION

The Company has a single reportable segment focused around the sale of similar products and related services. This reportable segment derives revenues from customers by selling subscriptions for our digital accessibility platform delivering website accessibility compliance and providing services related to digital accessibility.

The Company’s chief operating decision-maker (the "CODM”), who is the chief executive officer, assesses performance for the reportable segment and decides how to allocate resources using net income as the primary measure of profitability. The CODM is not regularly provided with specific segment expenses, but focuses on revenue, gross margin, and net income. Expense information, including cost of revenue, can be easily computed from the provided information. These segment measures of profitability are shown in the consolidated statements of operations. The measure of segment assets is reported on the consolidated balance sheets as total assets.

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2026

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 6 — SUBSEQUENT EVENTS

We have evaluated subsequent events occurring after March 31, 2026, and based on our evaluation we did not identify any events that would have required recognition or disclosure in these consolidated financial statements.

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Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025
Pay vs Performance Disclosure
Net Income (Loss)	$ (2,114)	$ (1,469)

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Insider Trading Arrangements - shares	Sep. 09, 2026	May 29, 2026	Mar. 23, 2026	Mar. 12, 2026	Jun. 09, 2025	May 30, 2025
David Moradi [Member]
Trading Arrangements, by Individual
Name				David Moradi
Title				Chief Executive Officer
Rule 10b5-1 Arrangement Adopted						true
Adoption Date						May 30, 2025
Rule 10b5-1 Arrangement Terminated				true
Termination Date				March 12, 2026
Expiration Date		May 29, 2026
Aggregate Available						500,000
Kelly Georgevich [Member]
Trading Arrangements, by Individual
Name			Kelly Georgevich
Title			Chief Executive Officer and Chief Financial Officer
Rule 10b5-1 Arrangement Adopted					true
Adoption Date					June 9, 2025
Rule 10b5-1 Arrangement Terminated			true
Termination Date			March 23, 2026
Expiration Date	September 9, 2026
Aggregate Available					20,000

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2026

SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the consolidated financial statements and during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to stock-based compensation, allowance for doubtful accounts, intangible assets, and contingent consideration. Actual results may differ from these estimates.

Revenue Recognition

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.

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 March 31,
(in thousands)	2026		2025
Partner and Marketplace	$	5,971	$	5,520
Enterprise		4,582		4,213
Total revenues	$	10,553	$	9,733

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 March 31, 2026 and December 31, 2025:

	March 31,		December 31,
(in thousands)	2026		2025
Deferred revenue – current	$	8,491	$	8,619
Deferred revenue – noncurrent		7		5
Total deferred revenue	$	8,498	$	8,624

In the three-month period ended March 31, 2026, we recognized $4,074,000, or 47%, in revenue from deferred revenue outstanding as of December 31, 2025.

We had one customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 13% and 14% of our total revenue in the three months ended March 31, 2026 and 2025, respectively.

As of March 31, 2026 and December 31, 2025, one customer represented 13% and 12% of total accounts receivable, respectively.

Deferred Costs (Contract acquisition costs)

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 March 31, 2026 and December 31, 2025, which are included in Prepaid expenses and other current assets (current portion) and Other assets (noncurrent portion) on our consolidated balance sheets:

	March 31,		December 31,
(in thousands)	2026		2025
Deferred costs – current	$	36	$	39
Deferred costs – noncurrent		27		29
Total deferred costs	$	63	$	68

Amortization expense associated with sales commissions was included in Selling and marketing expenses on the consolidated statements of operations and totaled $11,000 and $9,000 for the three months ended March 31, 2026 and 2025, respectively.

Intangible Assets

Intangible Assets

Intangible assets include patents, capitalized software development costs, and customer relationships. Intangible assets with finite lives are amortized on a straight-line basis over their respective estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Intangible assets determined to have indefinite useful lives are not amortized but are tested for impairment annually and more frequently if events occur or circumstances change that indicate an asset may be impaired.

As of March 31, 2026 and December 31, 2025, intangible assets primarily included $8,897,000 and $9,334,000 in customer relationships, respectively, and $2,994,000 and $3,028,000 in capitalized software development costs, respectively, net of accumulated amortization.

Debt Discount and Debt Issuance Costs

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

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. The purchase price per share equals 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. Accordingly, the fair value of shares of common stock to be issued under the ESPP is 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 March 31, 2026, 31,543 shares had been issued under the ESPP and 468,457 shares remained available under the plan.

Stock-Based Compensation

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 one- to three-year service period with the Company. Compensation expense related to performance-based RSUs is recognized on a straight-line basis over the requisite service period, provided that it is probable that performance conditions will be achieved, with probability assessed on a quarterly basis and any changes in expectations recognized as an adjustment to earnings in the period of the change. Compensation cost is not recognized for service- and performance-based awards that do not vest because service or performance conditions are not satisfied, and any previously recognized compensation cost is reversed. Compensation costs related to awards with market conditions are recognized on a straight-line basis over the requisite service period regardless of whether the market condition is satisfied and is not reversed provided that the requisite service period derived from the Monte-Carlo simulation has been completed. If vesting occurs prior to the end of the requisite service period, expense is accelerated and fully recognized through the vesting date.

The following table summarizes the stock-based compensation expense recorded for the three months ended March 31, 2026 and 2025:

	Three months ended March 31,
(in thousands)	2026		2025
RSUs	$	1,316	$	857
Unrestricted shares of common stock		30		50
Total	$	1,346	$	907

As of March 31, 2026, the unrecognized stock-based compensation expense related to outstanding RSUs totaled $3,535,000, 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 three months ended March 31, 2026:

	Options	RSUs
Outstanding at December 31, 2025	7,436	988,767
Granted	—	22,258
Exercised/Settled	—	(168,868)
Forfeited/Expired	(1,715)	(13,642)
Outstanding at March 31, 2026	5,721	828,515
Vested at March 31, 2026	5,721	304,637
Unvested at March 31, 2026	—	523,878

Earnings (Loss) Per Share ("EPS")

Earnings (Loss) Per Share (“EPS”)

Basic EPS is calculated by dividing net income (loss) available to common stockholders by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted EPS is calculated based on the net income (loss) available to common stockholders and the weighted average number of shares of common stock outstanding during the period, adjusted for the effects of all potential dilutive common stock issuances related to options and restricted stock units. The dilutive effect of our stock-based awards is computed using the treasury stock method, which assumes all stock-based awards are exercised and the hypothetical proceeds from exercise are used to purchase common stock at the average market price during the period. The incremental shares (i.e., the difference between shares assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted EPS calculation. However, when a net loss exists, no potential common stock equivalents are included in the computation of the diluted per-share amount because the computation would result in an anti-dilutive per-share amount.

Potentially dilutive securities outstanding as of March 31, 2026 and 2025, which were excluded from the computation of basic and diluted net loss per share for the periods then ended, are as follows:

	March 31,
(in thousands)	2026	2025
Options	6	28
Restricted stock units	829	1,226
Total	835	1,254

Stock Repurchases

Stock Repurchases

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. In the three months ended March 31, 2026 and 2025, we used $475,000 and zero of the program to repurchase shares, respectively. As of March 31, 2026, we had $7.45 million remaining for the repurchase of shares.

Shares repurchased by the Company are immediately retired. The Company made an accounting policy election to charge the excess of repurchase price over par value entirely to retained earnings.

Fair Value of Financial Instruments

Fair Value 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:

	Three Months Ended
(in thousands)	March 31, 2026
Contingent consideration (1)		Level 3
Balance at December 31, 2025	$	525
Additions		—
Change in fair value of contingent consideration		—
Balance at March 31, 2026	$	525

(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.

Business Combination

Business Combinations

The assets acquired, liabilities assumed and contingent consideration in business combinations are recorded at their estimated fair value on the acquisition date with subsequent changes recognized in earnings. These estimates are inherently uncertain and are subject to refinement. Management develops estimates based on assumptions as part of the purchase price allocation process to value the assets acquired and liabilities assumed as of the business combination date. As a result, the Company may recognize adjustments to provisional amounts of assets acquired or liabilities assumed in earnings in the reporting period in which the adjustments are determined.

Acquisition-related expenses primarily consist of legal, accounting, and other advisory fees and are recorded in the period in which they are incurred.

Asset Acquisitions

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.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Recently Adopted

In July 2025, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. Under the practical expedient, entities may assume that current conditions as of the balance sheet date remain unchanged for the remaining life of the asset when developing reasonable and supportable forecasts. This ASU is effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods. The Company adopted this ASU beginning with the three months ended March 31, 2026, on a prospective basis. The adoption of ASU 2025-05 did not have a significant impact on the Company's consolidated financial statements.

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 November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40) to improve the disclosures about a public entity’s expenses and provide more detailed information about the types of expenses included in certain expense captions in the consolidated financial statements. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15,

2027. Early adoption is permitted and the amendments in this update should be applied either prospectively to financial statements issued for reporting periods after the effective date of this update or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the impact of the new standard on the disclosures in its consolidated financial statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2026

SIGNIFICANT ACCOUNTING POLICIES

Summary of revenues disaggregation by sales channel

	Three months ended March 31,
(in thousands)	2026		2025
Partner and Marketplace	$	5,971	$	5,520
Enterprise		4,582		4,213
Total revenues	$	10,553	$	9,733

Summary of deferred revenue

	March 31,		December 31,
(in thousands)	2026		2025
Deferred revenue – current	$	8,491	$	8,619
Deferred revenue – noncurrent		7		5
Total deferred revenue	$	8,498	$	8,624

Summary of deferred commission costs

	March 31,		December 31,
(in thousands)	2026		2025
Deferred costs – current	$	36	$	39
Deferred costs – noncurrent		27		29
Total deferred costs	$	63	$	68

Summary of stock-based compensation expense

	Three months ended March 31,
(in thousands)	2026		2025
RSUs	$	1,316	$	857
Unrestricted shares of common stock		30		50
Total	$	1,346	$	907

Summary of dilutive securities outstanding excluded from computation of basic and diluted net loss per share

	March 31,
(in thousands)	2026	2025
Options	6	28
Restricted stock units	829	1,226
Total	835	1,254

Summary the stock option and RSUs activity

	Options	RSUs
Outstanding at December 31, 2025	7,436	988,767
Granted	—	22,258
Exercised/Settled	—	(168,868)
Forfeited/Expired	(1,715)	(13,642)
Outstanding at March 31, 2026	5,721	828,515
Vested at March 31, 2026	5,721	304,637
Unvested at March 31, 2026	—	523,878

Summary of contingent consideration

	Three Months Ended
(in thousands)	March 31, 2026
Contingent consideration (1)		Level 3
Balance at December 31, 2025	$	525
Additions		—
Change in fair value of contingent consideration		—
Balance at March 31, 2026	$	525

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DEBT (Tables)

3 Months Ended

Mar. 31, 2026

DEBT

Summary of future principle payments of debt

Year ending December 31,	Term Loan
2026 (9 months remaining)	$	638
2027		850
2028		850
2029		850
2030		13,812
Total repayments	$	17,000

Summary of future principle payments on debt reconciled to the carrying value

(in thousands)	March 31, 2026
Term loan principal	$	17,000
Less: unamortized debt discount and debt issuance costs		(394)
Term loan, net	$	16,606
Term loan, current	$	850
Term loan, noncurrent	$	15,756

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COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Mar. 31, 2026

COMMITMENTS AND CONTINGENCIES

Schedule of total remaining future minimum lease payments for finance leases

Year ending December 31,	Operating Leases
2026 (9 months remaining)	$	58
2027		80
2028		83
2029		85
2030		88
Thereafter		15
Total minimum lease payments		409
Less: present value discount		(72)
Total lease liabilities	$	337
Current portion of lease liabilities	$	54
Long term portion of lease liabilities	$	283

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SIGNIFICANT ACCOUNTING POLICIES - Disaggregated by sales (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025
Disaggregated by sales channel
Total revenues	$ 10,553	$ 9,733
Partner and Marketplace
Disaggregated by sales channel
Total revenues	5,971	5,520
Enterprise
Disaggregated by sales channel
Total revenues	$ 4,582	$ 4,213

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SIGNIFICANT ACCOUNTING POLICIES - Deferred revenue (Details) - USD ($) $ in Thousands	Mar. 31, 2026	Dec. 31, 2025
SIGNIFICANT ACCOUNTING POLICIES
Deferred revenue - current	$ 8,491	$ 8,619
Deferred revenue - noncurrent	7	5
Total deferred revenue	$ 8,498	$ 8,624

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SIGNIFICANT ACCOUNTING POLICIES - Deferred commission costs (Details) - USD ($) $ in Thousands	Mar. 31, 2026	Dec. 31, 2025
SIGNIFICANT ACCOUNTING POLICIES
Deferred costs - current	$ 36	$ 39
Deferred costs - noncurrent	27	29
Total deferred costs	$ 63	$ 68

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SIGNIFICANT ACCOUNTING POLICIES - Fair value on a recurring basis (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2025 USD ($)
SIGNIFICANT ACCOUNTING POLICIES
Change in fair value of contingent consideration	$ 50

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SIGNIFICANT ACCOUNTING POLICIES - Goodwill, Intangible Assets and Long-Lived Assets (Details) $ in Thousands	Mar. 31, 2026 USD ($)
SIGNIFICANT ACCOUNTING POLICIES
Goodwill, Beginning Balance	$ 6,682
Goodwill, Ending Balance	$ 6,682

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SIGNIFICANT ACCOUNTING POLICIES - Stock-based compensation expense (Details) - USD ($)	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025
SIGNIFICANT ACCOUNTING POLICIES
Stock-based compensation expense	$ 1,346,000	$ 907,000
Options
SIGNIFICANT ACCOUNTING POLICIES
Stock-based compensation expense	1,316,000	857,000
RSUs
SIGNIFICANT ACCOUNTING POLICIES
Outstanding unamortized share-based compensation expense	3,535,000
Unrestricted Shares of Common Stock
SIGNIFICANT ACCOUNTING POLICIES
Stock-based compensation expense	$ 30,000	$ 50,000

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SIGNIFICANT ACCOUNTING POLICIES - Summary of stock options and RSUs activity (Details)	3 Months Ended
	Mar. 31, 2026 shares
Options
Number of Options
Balance at beginning of the period (in shares)	7,436
Forfeited/Expired	(1,715)
Balance at end of the period (in shares)	5,721
Vested (in shares)	5,721
RSUs
Number of Options
Balance at beginning of the period (In shares)	988,767
Granted	22,258
Exercised/Settled	(168,868)
Forfeited/Expired	(13,642)
Balance at end of the period (In shares)	828,515
Vested (in shares)	304,637
Unvested (in shares)	523,878

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SIGNIFICANT ACCOUNTING POLICIES - Potentially dilutive securities excluded from computation of earnings per share (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2026	Mar. 31, 2025
SIGNIFICANT ACCOUNTING POLICIES
Dilutive securities outstanding	835	1,254
Options
SIGNIFICANT ACCOUNTING POLICIES
Dilutive securities outstanding	6	28
Restricted stock units
SIGNIFICANT ACCOUNTING POLICIES
Dilutive securities outstanding	829	1,226

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SIGNIFICANT ACCOUNTING POLICIES - Summary of contingent consideration (Details) - USD ($)	3 Months Ended
	Mar. 31, 2025	Mar. 31, 2026	Dec. 31, 2025
Business Acquisition, Contingent Consideration [Line Items]
Contingent consideration, long term		$ 300,000	$ 300,000
Contingent consideration		525,000
Change in fair value of contingent consideration	$ 50,000
Level 3
Business Acquisition, Contingent Consideration [Line Items]
Contingent consideration		$ 525,000	$ 525,000

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SIGNIFICANT ACCOUNTING POLICIES - Additional information (Details)	1 Months Ended	3 Months Ended		12 Months Ended	15 Months Ended
	May 31, 2022 USD ($) shares	Mar. 31, 2026 USD ($) segment customer shares	Mar. 31, 2025 USD ($) customer	Dec. 31, 2025 USD ($)	Mar. 31, 2026 USD ($) customer shares	Jan. 31, 2025 USD ($)
SIGNIFICANT ACCOUNTING POLICIES
Deferred revenue recognized to revenue		$ 4,074,000
Deferred revenue outstanding (as a percent)		47.00%
Amortization of deferred sales commissions		$ 11,000	$ 9,000
Allowance for doubtful accounts		559,000		$ 643,000	$ 559,000
Bad debt expense		52,000	140,000
Intangible assets, net		$ 12,036,000		12,515,000	12,036,000
Number of reportable segments | segment		1
Repurchase of outstanding shares of common stock		$ 7,450,000			$ 7,450,000	$ 12,500,000
Repurchase of common stock		$ 475,000	$ 0
Maximum number of shares issuance of common stock under ESPP | shares	500,000
Maximum percentage of base compensation on payroll deductions	85.00%
Maximum value of shares for each employee under ESPP	$ 25,000
Maximum number of shares for each employee under ESPP | shares	1,500
Shares issued under the ESPP | shares		31,543
Shares remained available under the ESPP | shares		468,457			468,457
Customer relationships
SIGNIFICANT ACCOUNTING POLICIES
Intangible assets, net		$ 8,897,000		9,334,000	$ 8,897,000
Capitalized software development costs
SIGNIFICANT ACCOUNTING POLICIES
Intangible assets, net		$ 2,994,000		$ 3,028,000	$ 2,994,000
Maximum
SIGNIFICANT ACCOUNTING POLICIES
Service period		3 years
Minimum
SIGNIFICANT ACCOUNTING POLICIES
Service period		1 year
Customer concentration risk | Sales revenue, net
SIGNIFICANT ACCOUNTING POLICIES
Number of customer | customer		1	1
One customer | Customer concentration risk | Sales revenue, net
SIGNIFICANT ACCOUNTING POLICIES
Concentration risk percentage		13.00%	14.00%
One customer | Customer concentration risk | Accounts receivable
SIGNIFICANT ACCOUNTING POLICIES
Number of customer | customer					1
Concentration risk percentage		13.00%		12.00%

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DEBT - Future principle payments of debt (Details)	Mar. 31, 2026 USD ($)
Long-Term Debt, Fiscal Year Maturity [Abstract]
2026 (9 months remaining)	$ 638,000
2027	850,000
2028	850,000
2029	850,000
2030	13,812,000
Total repayments	17,000,000
Term loan advance
Long-Term Debt, Fiscal Year Maturity [Abstract]
Total repayments	17,000,000
Unsecured credit facility
Long-Term Debt, Fiscal Year Maturity [Abstract]
Total repayments	$ 0

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DEBT - Future principle payments reconciled to carry value (Details) - USD ($)	Mar. 31, 2026	Dec. 31, 2025
DEBT
Term loan principle	$ 17,000,000
Less: unamortized debt discount and debt issuance costs	(394,000)
Term loan, net	16,606,000
Term loan, current	850,000	$ 503,000
Term loan, noncurrent	$ 15,756,000	$ 12,479,000

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DEBT - Additional information (Details) - USD ($)				3 Months Ended
	Apr. 10, 2026	Mar. 31, 2025	Nov. 30, 2023	Mar. 31, 2026	Mar. 31, 2025
DEBT
Debt issuance cost					$ 325,000
Outstanding principal balance				$ 17,000,000
Amortization of debt discounts				3,000
Amortization of debt issuance costs				22,000
Repayment of term loan					7,000,000
Loss on extinguishment of debt					(300,000)
Term loan facility
DEBT
Facility fee paid		$ 50,000
Debt issuance cost		443,000
Annual recurring revenue				$ 3,000,000
Fixed charge coverage ratio				1.50%
Term loan facility | Maximum
DEBT
Term loan		$ 20,000,000			20,000,000
Annual recurring revenue, ratio				0.55%
Term loan facility | Minimum
DEBT
Annual recurring revenue, ratio				0.70%
Term loan facility | Quarters commencing september 30, 2026
DEBT
Adjusted EBITDA, ratio				2.50%
Term loan facility | Quarters commencing June 30, 2027
DEBT
Adjusted EBITDA, ratio				2.00%
Term loan facility | SOFR
DEBT
Interest rate		3.25%
Interest rate, floor rate		2.30%
Term loan advance
DEBT
Term loan		$ 12,000,000			12,000,000
Amount drawn				$ 3,600,000
Interest rate	1.25%
Outstanding principal balance				17,000,000
Term loan advance | Maximum
DEBT
Aggregate principal amount		5,000,000		5,000,000	5,000,000
Unsecured credit facility
DEBT
Amount of available credit		3,000,000			$ 3,000,000
Outstanding principal balance				0
Line of credit available				$ 3,000,000
Loan and security agreement with sg credit partner
DEBT
Term loan			$ 7,000,000
Exit fee		105,000
Repayment of term loan		7,000,000
Prepayment fees		$ 144,000
Loan and security agreement with sg credit partner | Base Rate
DEBT
Interest rate			6.25%
Reference rate			7.00%

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COMMITMENTS AND CONTINGENCIES - Future minimum operating leases payments (Details) - USD ($) $ in Thousands	Mar. 31, 2026	Dec. 31, 2025
LEASE LIABILITIES AND RIGHT OF USE ASSETS
2026 (9 months remaining)	$ 58
2027	80
2028	83
2029	85
2030	88
Thereafter	15
Total minimum lease payments	409
Less: present value discount	(72)
Total lease liabilities	337
Current portion of lease liabilities	54	$ 218
Long term portion of lease liabilities	$ 283

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COMMITMENTS AND CONTINGENCIES - Additional Information (Details)	Mar. 31, 2026 USD ($)
COMMITMENTS AND CONTINGENCIES
Contingent consideration	$ 525,000

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SEGMENT INFORMATION (Details)	3 Months Ended
	Mar. 31, 2026 segment
SEGMENT REPORTING
Number of reportable segments	1