Item 3.02. Unregistered Sales of Equity
Securities.
On August 6, 2018, AudioEye Inc. (the “Company”)
closed the previously announced sale of a total of 26,000,000 shares of the Company’s common stock (the “Shares”)
in a private placement to certain eligible investors for an aggregate purchase price of approximately $6,500,000, or $0.25 per
Share, with the first tranche of 24,800,000 shares being issued on the date hereof for an aggregate purchase price of $6,200,000
funded immediately and the second tranche of 1,200,000 shares being issued on or about August 20, 2018 for an aggregate purchase
price of $300,000 (the “Private Placement”). The share and per share numbers above do not reflect the Reverse Split
(defined below).
In connection with the Private Placement,
the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with investors in the Private Placement
pursuant to which the Company offered and sold the Shares to the investors. A copy of the form of Purchase Agreement is
filed
herewith as Exhibit 10.1 and is incorporated herein by reference.
Pursuant to the Purchase Agreement, the
Company agreed to indemnify the investors for, among other things, liabilities arising out of or relating to any breach of any
of the representations, warranties, covenants or agreements made by the Company in the Purchase Agreement or related documents,
subject to certain exceptions. The Purchase Agreement contains representations that the Company is taking the necessary steps to
effectuate the Reverse Split (defined below) and to pursue a listing on the Nasdaq Capital Market. The Purchase Agreement also
contains customary representations and warranties and covenants of the Company and is subject to customary closing conditions.
The representations, warranties and covenants made by the Company in the Purchase Agreement were made solely for the benefit of
the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreement,
and such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations,
warranties and covenants should not be relied on as accurately representing the current state of the Company’s affairs.
At
the closing of the Private Placement, the Company also entered into a registration rights agreement (the “Registration Rights
Agreement”) with the investors pursuant to which the Company agreed to register the Shares for resale. Under the terms of
the Registration Rights Agreement, the Company will be obligated to file a registration statement covering the resale or other
disposition of the Registrable Securities by the Investors no later than 30 days after the initial closing and to use its reasonable
best efforts to cause the registration statement to become effective no later than 90 days after the initial closing. In the event
that the Company fails to file and obtain and maintain effectiveness of the registration statement, the Company is subject to certain
penalties, including making certain registration delay payments to the investors.
A
copy of the form of Registration Rights Agreement is filed herewith as Exhibit 4.1 and is incorporated herein by reference.
The Shares were offered and sold in the
Private Placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The
Shares have not been registered under the Securities Act, or the securities laws of any other jurisdiction, and may not be offered
or sold in the United States absent registration or an applicable exemption from such registration requirements. This Current Report
on Form 8-K does not constitute an offer to sell, or a solicitation of an offer to purchase, the Shares in any jurisdiction in
which such offer or solicitation would be unlawful.
The foregoing descriptions of the Purchase
Agreement and the Registration Rights Agreement are qualified in their entirety by reference to the full text of the agreements,
which are attached hereto as Exhibits 10.1 and 4.1, respectively, and are incorporated herein by reference.