Filed Pursuant to Rule 424(b)(5)
Registration No. 333-252864
PROSPECTUS SUPPLEMENT
(To Prospectus dated February 11, 2021)
Up to $30,000,000
Common Stock
We have entered
into an At Market Issuance Sales Agreement, or the Sales Agreement, with B. Riley Securities, Inc., or B. Riley Securities,
relating to the sale of shares of our common stock, par value $0.00001 per share, offered by this prospectus supplement. In
accordance with the terms of the Sales Agreement, under this prospectus supplement we may offer and sell our common stock
having an aggregate offering price of up to $30,000,000 from time to time through or to B. Riley Securities, acting as our
sales agent. Sales of our common stock, if any, under this prospectus supplement will be made by any method permitted that is
deemed an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended, or the
Securities Act. B. Riley Securities is not required to sell any specific amount but will act as our sales agent using
commercially reasonable efforts consistent with its normal trading and sales practices. There is no arrangement for funds to
be received in escrow, trust or similar arrangement.
B. Riley
Securities will be entitled to compensation at a commission rate of up to 3% of the gross sales price per share sold under
the Sales Agreement. The net proceeds, if any, that we receive from the sales of our common stock will depend on the number
of shares actually sold and the offering price for such shares. See “Plan of Distribution” beginning on page
S-11 for additional information regarding the compensation to be paid to B. Riley Securities. In connection with the
sale of our common stock on our behalf, B. Riley Securities will be deemed to be an underwriter within the meaning of the
Securities Act and the compensation of B. Riley Securities will be deemed to be underwriting commissions or discounts. We
have also agreed to provide indemnification and contribution to B. Riley Securities with respect to certain liabilities,
including liabilities under the Securities Act.
Our common stock is
listed on The Nasdaq Capital Market under the symbol “AEYE.” On February 10, 2021, the last reported sales price of
our common stock on the Nasdaq Capital Market was $41.43 per share.
Investing
in our securities involves risks. See the section entitled “Risk Factors” commencing
on page S-5 of this prospectus supplement and the accompanying base prospectus for a discussion of information that should
be considered in connection with an investment in our securities.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus supplement. Any representation to the contrary is a criminal offense.
B. Riley Securities
The date of this prospectus supplement is
February 12, 2021
TABLE OF CONTENTS
Prospectus Supplement
Prospectus
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement
and the accompanying base prospectus are part of a registration statement that we filed with the Securities and Exchange Commission
(the “SEC”) utilizing a “shelf” registration process. Each time we conduct an offering to sell securities
under the accompanying base prospectus we will provide a prospectus supplement that will contain specific information about the
terms of that offering, including the price, the amount of securities being offered and the plan of distribution. This prospectus
supplement describes the specific details regarding this offering and may add, update or change information contained in the accompanying
base prospectus. The base prospectus, including the documents incorporated by reference therein, provides general information about
us and our securities, some of which, such as the section entitled “Plan of Distribution,” may not apply to this offering.
This prospectus supplement and the accompanying base prospectus are an offer to sell only the securities offered hereby, but only
under circumstances and in jurisdictions where it is lawful to do so. We are not, and B. Riley Securities is not, making offers
to sell or solicitations to buy our common stock in any jurisdiction in which an offer or solicitation is not authorized or in
which the person making that offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make an offer
or solicitation.
If information in this prospectus supplement is
inconsistent with the accompanying base prospectus or the information incorporated by reference with an earlier date, you
should rely on this prospectus supplement. This prospectus supplement, together with the base prospectus, the documents
incorporated by reference into this prospectus supplement and the accompanying base prospectus and any free writing
prospectus we have provided for use in connection with this offering, include all material information relating to this
offering. We have not, and B. Riley Securities has not, authorized anyone to provide you with different or additional
information and you must not rely on any unauthorized information or representations. You should assume that the information
appearing in this prospectus supplement, the accompanying base prospectus, the documents incorporated by reference in this
prospectus supplement and the accompanying base prospectus and any free writing prospectus we have provided for use in
connection with this offering is accurate only as of the respective dates of those documents. Our business, financial
condition, results of operations and prospects may have changed since those dates. You should carefully read this
prospectus supplement, the accompanying base prospectus and the information and documents incorporated herein by reference
herein and therein, as well as any free writing prospectus we have provided for use in connection with this offering, before
making an investment decision. See “Incorporation of Certain Documents by Reference” and
“Where You Can Find More Information” in this prospectus supplement and in the accompanying
base prospectus.
This
prospectus supplement and the accompanying base prospectus contain summaries of certain provisions contained in some of the documents
described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in
their entirety by the full text of the actual documents, some of which have been filed or will be filed and incorporated by reference
herein. See “Where You Can Find More Information” in this prospectus supplement. We further note that the representations,
warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated by reference
into this prospectus supplement or the accompanying base prospectus 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 agreements, and should not be deemed to
be a representation, warranty or covenant to you. Moreover, 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 our affairs.
This prospectus supplement
and the accompanying base prospectus contain and incorporate by reference certain market data and industry statistics and forecasts
that are based on Company-sponsored studies, independent industry publications and other publicly available information. Although
we believe these sources are reliable, estimates as they relate to projections involve numerous assumptions, are subject to risks
and uncertainties, and are subject to change based on various factors, including those discussed under “Risk Factors”
in this prospectus supplement and the accompanying base prospectus and under similar headings in the documents incorporated by
reference herein and therein. Accordingly, investors should not place undue reliance on this information.
Unless otherwise stated
or the context requires otherwise, all references in this prospectus supplement to the “Company,” “we,”
“us,” “our” and “AudioEye” refer to AudioEye, Inc., a Delaware corporation.
PROSPECTUS SUPPLEMENT SUMMARY
This
prospectus summary highlights information contained elsewhere in this prospectus supplement, the accompanying base prospectus
and the documents incorporated by reference herein and therein. This summary does not contain all of the information that you
should consider before deciding to invest in our securities. You should read this entire prospectus supplement and the accompanying
base prospectus carefully, including the section entitled “Risk Factors” in this prospectus supplement and
our financial statements and the related notes and the other information incorporated by reference into this prospectus supplement
and the accompanying base prospectus, before making an investment decision.
THE COMPANY
Overview
AudioEye is an industry-leading software
solution provider delivering website accessibility compliance at all price points to businesses of all sizes. Our solutions advance
accessibility with patented technology that reduces barriers, expands access for individuals with disabilities, and enhances the
user experience for a broader audience. We believe that, when implemented, our solution offers businesses and organizations the
opportunity to reach more customers, improve brand image, build additional brand loyalty, and, most importantly, provide an accessible
and usable web experience to the expansive and ever-growing global population of individuals with disabilities. AudioEye provides
an always-on testing, remediation, and monitoring solution that continually improves conformance with the Web Content Accessibility
Guidelines (“WCAG”), helping businesses and organizations comply with WCAG standards, as well as applicable U.S., Canadian,
Australian, and United Kingdom accessibility laws.
AudioEye stands out among its competitors
because it delivers machine-learning/artificial intelligence (“AI”)-driven accessibility without fundamental changes
to the website architecture. Our technology publishes more than one billion remediations daily, and our solution is trusted by
some of the largest and most influential companies in the world, including ADP, Tommy Hilfiger, 360 Media, Samsung, Darden, Landry’s
and more. Government agencies, both at the federal level and state and local levels, have also integrated our software in their
digital platforms, including the Federal Communications Commission and the Social Security Administration.
AudioEye primarily generates revenue through
the sale of subscriptions for our software-as-a-service (“SaaS”) accessibility solution plans. All plans are backed
by the power of AudioEye’s machine-learning/AI-driven technology that finds and fixes the most common accessibility errors.
Managed and Enterprise also come with the AudioEye Trusted Certification, our attestation of a site owner’s commitment to
digital inclusion as defined by WCAG success criteria, which mitigates a customer’s risk of a costly digital accessibility-related
legal action. AudioEye also provides Mobile App audits.
AudioEye customers may purchase tiered
plans directly through the AudioEye marketplace, in a platform partner marketplace, through a vertical Content Management System
(“CMS”) authorized reseller, or by working directly with the AudioEye sales team:
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The AudioEye marketplace offers plans ideal for customers in any industry and platform;
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Certain platforms, such as Duda, natively integrate our plans into their marketplace, enabling web creators to build websites with our solution immediately improving compliance and accessibility;
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Vertical CMS authorized resellers provide a website-hosting platform for their end-user customers, selling AudioEye accessibility solutions; and
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Organizations with non-platform custom websites seeking a fully managed solution engage directly with AudioEye sales personnel for custom pricing and solutions.
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Preliminary Estimated Unaudited Fourth
Quarter and Full Year 2020 Results
Our preliminary estimated results
for the fourth quarter and our full year ended December 31, 2020 are
subject to completion of our customary year-end closing, review and audit procedures and are not a comprehensive statement of our
financial results for the three months and twelve months ended December 31, 2020. We caution that our final results for the three
months and twelve months ended December 31, 2020 that we will file with the SEC could vary significantly from these preliminary
estimates as a result of the completion of our customary year-end closing, review and audit procedures and other developments arising
between now and the time that our financial results for the three months and twelve months ended December 31, 2020 are finalized.
These preliminary estimates should not be viewed as a substitute for complete financial statements prepared in accordance with
GAAP and they are not necessarily indicative of the results to be achieved in any future period. Accordingly, you should not place
undue reliance on these preliminary estimates. The preliminary estimates of results included below have been prepared by, and is
the responsibility of, the Company’s management. MaloneBailey LLP (“MaloneBailey”), the Company’s
independent registered public accounting firm, has not audited, reviewed, compiled or performed any procedures with respect to
the accompanying preliminary financial data. Accordingly, MaloneBailey does not express an opinion or any other form of assurance
with respect thereto.
Fourth quarter 2020 revenue is expected
to be between $5.5 million and $5.6 million and full year 2020 revenue is expected to be between $20.4 million and $20.5
million.
Net loss for the fourth quarter 2020 is
expected to be between $3.2 million and $2.9 million. Net loss for full year 2020 is expected to be between $7.4 million
and $7.1 million.
Cash on hand totaled approximately $9.1
million as of December 31, 2020.
Gross Margin for the fourth quarter 2020 is expected to be between 72% and 73%.
As of December 31, 2020, monthly recurring revenue (MRR) was about $1.9 million.
To supplement our condensed consolidated
financial statements presented on a GAAP basis, we use Non-GAAP earnings (loss) and Non-GAAP earnings (loss) per diluted share,
each a non-GAAP measure, which excludes certain items from net loss and net loss per common share, respectively, each a GAAP measure.
Non-GAAP earnings (loss) excludes from net loss non-cash valuation adjustments to liabilities, and includes interest expense, share-based
compensation expense and certain severance expense. Non-GAAP earnings (loss) per diluted share excludes from net loss per common
share non-cash valuation adjustments to liabilities, and includes interest expense, share-based compensation expense and certain
severance expense, each on a per share basis.
We use both GAAP and non-GAAP measures
when planning, monitoring, and evaluating our performance. We believe that Non-GAAP earnings (loss) and Non-GAAP earnings (loss)
per diluted share are useful to investors because they provide supplemental information that allows investors to review our results
of operations from the same perspective as management and our board of directors. Non-GAAP results are presented for supplemental
informational purposes only for understanding our operating results. The non-GAAP results should not be considered a substitute
for financial information presented in accordance with generally accepted accounting principles and may be different from non-GAAP
measures used by other companies.
See the table below for a reconciliation
of preliminary net loss, a GAAP measure, to preliminary Non-GAAP earnings (loss) and Non-GAAP earnings (loss) per diluted share,
each a non-GAAP measure, for the fourth quarter and full year ended December 31, 2020 and 2019. Due to rounding, numbers presented throughout this prospectus supplement may not add up precisely to the totals provided.
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Three Months Ended
December 31, 2020
(unaudited)
(estimated)
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Three Months Ended
December 31, 2019
(unaudited)
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Year Ended
December 31, 2020
(unaudited)
(estimated)
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Year Ended
December 31, 2019
(unaudited)
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(in millions, except per share data)
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Low End of Range
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High End of Range
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Actual
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Low End of Range
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High End of Range
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Actual
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Net loss (GAAP)
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$
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(3.2
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$
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(2.9
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$
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(1.4
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$
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(7.4
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$
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(7.1
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$
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(7.8
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Non-cash valuation adjustments to liabilities
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0
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0
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(0.1
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(0.1
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(0.1
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(0.1
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Interest expense
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0
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0
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0
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0.1
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0.1
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0.1
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Share-based compensation expense
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2.2
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2.1
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0.2
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4.2
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4.1
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1.2
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Severance (1)
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0
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0
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0
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0.4
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0.4
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0
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Non-GAAP earnings (loss)
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(1.1
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(0.8
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)
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(1.3
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(2.8
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(2.6
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)
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(6.6
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Non-GAAP Earnings (Loss) per Diluted Share Reconciliation
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Net loss per common share (GAAP) — diluted
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(0.32)
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(0.29)
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(0.16)
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(0.79)
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(0.76)
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(0.97)
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Non-cash valuation adjustments to liabilities
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0
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0
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(0.01)
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(0.01)
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(0.01)
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(0.01)
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Interest expense
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0
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0
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0
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0.02
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0.02
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0.01
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Share-based compensation expense
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0.22
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0.21
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0.03
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0.45
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0.44
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0.16
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Severance (1)
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0
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0
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0
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0.04
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0.04
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0
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Non-GAAP earnings (loss) per diluted share (2)
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(0.11)
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(0.08)
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(0.14)
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(0.30)
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(0.27)
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(0.81)
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(1)
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Represents severance expense associated with the move of our technology center to Portland, Oregon, and is exclusive of accrued
vacation paid upon termination of employment.
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(2)
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Non-GAAP earnings per adjusted diluted share for our common stock is computed using the more dilutive
of the two-class method or the if-converted method.
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Note: The number of diluted weighted average
shares used for this calculation is the same as the weighted average common shares outstanding share count when the Company reports
a GAAP and non-GAAP net loss.
Our Corporate Information
We were formed as a Delaware
corporation on May 20, 2005. We maintain our principal executive offices at 5210 E. Williams Circle, Suite 750, Tucson,
AZ 85711 and our telephone number is +1 (866) 331-5324. Our corporate website address is www.AudioEye.com. Our website and
the information contained on, or that can be accessed through, the website is not incorporated by reference in, and is not
part of, this prospectus supplement. You should not rely on any such information in making your decision whether to purchase our
securities.
The Offering
The following is a
brief summary of some of the terms of the offering and is qualified in its entirety by reference to the more detailed information
appearing elsewhere in this prospectus supplement and the accompanying base prospectus. For a more complete description of the
terms of our common stock, see description of our common stock in the accompanying base prospectus in the section, “Description
Of Capital Stock.”
Common stock
offered by us
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Shares of our common stock, par value $0.00001 per share, having an aggregate offering price of up to $30,000,000.
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Common stock to be
outstanding after this offering
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Up to 11,010,506 shares, assuming sales of 724,112 shares of our common stock in this offering at a price of $41.43 per share, which was the closing price of our common stock on The Nasdaq Capital Market on February 10, 2021. The actual number of shares issued will vary depending on the sales price under this offering.
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Manner of offering
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We have entered into an At Market Issuance Sales Agreement, or the Sales Agreement, with B. Riley Securities, Inc., or B. Riley Securities, relating to the sale of shares of our common stock offered by this prospectus supplement. In accordance with the terms of the Sales Agreement, under this prospectus supplement we may offer and sell common stock having an aggregate offering price of up to $30,000,000 from time to time through or to B. Riley Securities acting as our sales agent. Sales of common stock, if any, under this prospectus supplement will be made by any method permitted that is deemed an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended. See the section entitled “Plan of Distribution” in this prospectus supplement.
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Use of proceeds
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We
expect to use the net proceeds from this offering for working capital and other general corporate purposes, including, but
not limited to, capital expenditures, repayment or refinancing of borrowings, working capital, investments and acquisitions.
See “Use of Proceeds” in this prospectus supplement.
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Risk factors
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Investing in our common stock involves a high degree of risk. You should carefully read and consider the information set forth under “Risk Factors” in this prospectus supplement, the accompanying prospectus and in the documents incorporated by reference herein and therein to read about factors you should consider before buying shares of our common stock.
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The Nasdaq Capital Market symbol
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“AEYE”
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The number of shares
of our common stock expected to be outstanding after this offering is based on 10,286,394 shares of common stock outstanding as
of February 3, 2021 and excludes the following as of such date:
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790,934 additional shares of common stock reserved and available for future issuances under our equity compensation plans;
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81,053 additional shares of common stock issuable upon the exercise of outstanding warrants; and
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·
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264,429 shares of common stock issuable
upon conversion of shares of Series A Convertible Preferred Stock.
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RISK FACTORS
Investing
in our common stock involves a high degree of risk. Before purchasing our common stock, you should read and consider carefully
the following risk factors and the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2019 and any updates to those risk factors or new risk factors contained in our subsequent Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, all of which are incorporated by reference into prospectus
supplement and the accompanying base prospectus, including our consolidated financial statements and the related notes. Each of
these risk factors, either alone or taken together, could adversely affect our business, operating results and financial condition,
as well as adversely affect the value of an investment in our common stock. There may be additional risks that we do not presently
know of or that we currently believe are immaterial, which could also impair our business and financial position. If any of the
events described below were to occur, our financial condition, our ability to access capital resources, our results of operations
and/or our future growth prospects could be materially and adversely affected and the market price of our common stock could decline.
As a result, you could lose some or all of any investment you may make in our common stock.
Risks Related to This Offering
Future sales
of substantial amounts of our common stock, or the possibility that such sales could occur, could adversely affect the market price
of our common stock.
We cannot predict the
effect, if any, that future issuances or sales of our securities including sales of shares of our common stock pursuant to the
Sales Agreement or the availability of our securities for future issuance or sale, will have on the market price of our common
stock. Issuances or sales of substantial amounts of our securities, including sales of our common stock pursuant to the Sales Agreement,
or the perception that such issuances or sales might occur, could negatively impact the market price of our common stock and the
terms upon which we may obtain additional equity financing in the future.
It is not possible
to predict the actual number of shares of our common stock we will sell under the Sales Agreement, or the gross proceeds resulting
from those sales.
Subject to certain
limitations in the Sales Agreement and compliance with applicable law, we have the discretion to deliver a placement notice to
the sales agent at any time throughout the term of the Sales Agreement. The number of shares of our common stock that are sold
through the sales agent after delivering a placement notice will fluctuate based on a number of factors, including the market price
of our common stock during the sales period, the limits we set with the sales agent in any applicable placement notice, and the
demand for our common stock during the sales period. Because the price per share of each share sold will fluctuate during the sales
period, it is not currently possible to predict the number of shares that will be sold or the gross proceeds to be raised in connection
with those sales.
The common stock offered
hereby will be sold in “at the market offerings,” and investors who buy shares at different times will likely pay different
prices.
Investors who purchase
common stock in this offering at different times will likely pay different prices, and so may experience different levels of dilution
and different outcomes in their investment results. We will have discretion, subject to market demand, to vary the timing, prices,
and numbers of shares sold in this offering. In addition, there is no minimum or maximum sales price for shares to be sold in this
offering. Investors may experience a decline in the value of the shares they purchase in this offering as a result of sales made
at prices lower than the prices they paid.
You may experience immediate and substantial
dilution in the net tangible book value per common share you purchase.
The
price per common share being offered may be higher than the net tangible book value per common share outstanding prior to this
offering. Assuming that an aggregate of 724,112 shares are sold at a price of $41.43 per share, the last reported sale price of
our common stock on The Nasdaq Capital Market on February 10, 2021, for aggregate proceeds of up to $30,000,000 in this offering,
and after deducting commissions and estimated aggregate offering expenses payable by us, you will suffer immediate dilution of
$38.33 per share, representing the difference between the as adjusted net tangible book value per common share as of December 31,
2020 after giving effect to this offering and the assumed offering price. See the section entitled “Dilution” below
for a more detailed discussion of the dilution you will incur if you purchase common stock in this offering.
Our management
will have broad discretion over the use of the net proceeds from this offering, and you may not agree with how we use the proceeds
and the proceeds may not be invested successfully.
Our management will
have broad discretion as to the use of the net proceeds from this offering and could use them for purposes other than those contemplated
at the time of this offering. We will retain broad discretion over the use of the net proceeds from the sale of the securities
offered hereby. We currently expect to use the net proceeds from this offering for working capital and other general corporate
purposes, including, but not limited to, capital expenditures, working capital, investments and acquisitions. See the section entitled
“Use of Proceeds” below for a more detailed discussion. Accordingly, you will be relying on the judgment of our management
with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess
whether the proceeds will be used appropriately. It is possible that the proceeds will be invested in a way that does not yield
a favorable, or any, return for the Company and cause the price of our common stock to decline.
Risks Related to
Our Company
Our success is
dependent on members of our management team and employees, many of whom are relatively new in their positions with the Company.
Our success has depended,
and continues to depend, on the efforts and talents of our senior management team and employees, including our engineers, product
managers, sales and marketing personnel, and professional services personnel. Many members of
our executive management team and our employees are relatively new to
their positions, including our Interim Chief Executive Officer and Chief Strategy
Officer and our President, both of whom were appointed to their respective positions in August 2020. Our senior management team
has not worked with other members of management and
our employees for a significant period of time. We can provide no assurance that our management team
will be able to effectively work together or with our employees. If they are unable to do so, there may be delays in execution
of our business and operating strategies.
We
intend to pursue business through a variety of new channels. The new channels may result in the use of a significant amount of
our management resources and costs, and we cannot guarantee we will fully realize the expected benefits.
We intend to
pursue business through a variety of new channels. Although we may devote significant resources and costs to the development of
the new sales channels, we may struggle to successfully identify the channel partners, or to
successfully conclude transactions with the channel partners. Should we be unable to identify or conclude important channel partnerships,
or if our partners are unable to meet our expectations, our business prospects and operations could be adversely affected as a
result of the devotion of significant managerial effort required. In addition, there can be no assurance that we would fully realize
the potential benefit of the relationships. If we cannot do so, we may be unable to meet future revenue expectations.
Our new
technology platform may not function as expected, or may not be accepted by our clients.
We
released a new platform for our digital accessibility product in the first quarter of 2021. We cannot guarantee that our platform
will operate as expected or that our new product will be accepted by our clients. If our platform does not operate as expected
or is not accepted, our ability to pursue and maintain business may be damaged and our business and results of operations may be
materially and adversely affected.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
Certain statements made in this prospectus
supplement, the accompanying prospectus, the documents that are incorporated by reference herein and other written or oral statements
made by or on behalf of our company may constitute “forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Exchange Act. Forward-looking statements may
be identified by the use of words such as “may,” “will,” “forecast,” “estimate,”
“project,” “intend,” “plan,” “expect,” “should,” “believe”
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 it is made. These forward-looking statements involve known and unknown risks,
uncertainties, assumptions and other factors, including those discussed in “Risk Factors”, which may cause our actual
results, performance or achievements to be materially different from any future results, performance or achievements expressed
or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the following:
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The impact of the COVID-19 pandemic and the measures implemented to contain the spread of the virus have had, and are expected to continue to have, a material adverse impact on our business and results of operations;
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The uncertain market acceptance of our existing and future products;
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Our need for, and the availability of, additional capital in the future to fund our operations and the development of new products;
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The success, timing and financial consequences of new strategic relationships or licensing agreements we may enter into;
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Rapid changes in Internet-based applications that may affect the utility and commercial viability of our products;
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The timing and magnitude of expenditures we may incur in connection with our ongoing product development activities;
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The level of competition from our existing competitors and from new competitors in our marketplace; and
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The regulatory environment for our products and services.
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This list of factors that may affect future performance and
the accuracy of forward-looking statements is illustrative but not exhaustive. In addition, new risks and uncertainties may arise
from time to time. Accordingly, all forward-looking statements should be evaluated with an understanding of their inherent uncertainty
and we caution accordingly against relying on forward-looking statements.
Consider these factors carefully in evaluating the forward-looking
statements. Additional factors that may cause results to differ materially from those described in the forward-looking statements
are set forth in in our most recently filed Form 10-K and in subsequent reports filed by us with the SEC, including on Forms 10-K,
10-Q and 8-K. Because of the foregoing, you are cautioned against relying on forward-looking statements, which speak only as of
the date hereof. We do not undertake to update any of these statements in light of new information or future events, except as
required by applicable law.
USE OF PROCEEDS
We expect to use the
net proceeds from the sale of our common stock offered under this prospectus supplement for working capital and other general corporate
purposes, including, but not limited to, capital expenditures, working capital, investments and acquisitions. As a result, management
will retain broad discretion over the allocation of net proceeds.
DILUTION
If you invest in our
common stock, you will experience immediate dilution to the extent of the difference between the price per share you pay in this
offering and the net tangible book value per share of our common stock after this offering.
Our net tangible
book value as of December 31, 2020 was approximately $4.8 million, or approximately $0.47 per share. Net tangible book value
is determined by subtracting our total liabilities from our total tangible assets, and net tangible book value per share is
determined by dividing our net tangible book value by the number of outstanding shares of our common stock. After giving
effect to the sale of $30 million of our common stock during the term of the Sales Agreement at an assumed offering price of
$41.43 per share, the last reported sale price per common share on The Nasdaq Capital Market on February 10, 2021, and after
deducting commissions of up to 3% of the offering proceeds, totaling $900,000, and estimated aggregate offering expenses
payable by us, our adjusted net tangible book value as of December 31, 2020 would have been approximately $33.7 million, or
approximately $3.10 per share. This represents an immediate increase in net tangible book value of approximately $2.63
per share to our existing stockholders and an immediate dilution in net tangible book value of approximately $38.33 per share
to investors participating in this offering. The following table illustrates this calculation on a per share basis:
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Assumed public offering price per share of common stock
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$
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41.43
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Net tangible book value per share as of December 31, 2020
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$
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0.47
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Increase per share attributable to investors participating in this offering
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$
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2.63
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Adjusted net tangible book value per share after giving effect to this offering
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$
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3.10
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Dilution per share to investors participating in this offering
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$
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38.33
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The table above
assumes for illustrative purposes that an aggregate of 724,112 shares of our common stock are sold during the term of the
Sales Agreement at a price of $41.43 per share, the last reported sale price per common share on The Nasdaq Capital Market on
February 10, 2021 for aggregate gross proceeds of $30 million. The shares subject to the Sales Agreement are being sold from
time to time at various prices. An increase of $5.00 per share in the price at which the shares are sold from the assumed
offering price per share shown in the table above, assuming all common stock in the aggregate amount of $30 million during
the remaining term of the Sales Agreement are sold at that price, would increase our adjusted net tangible book value per
share after the offering to $3.13 per share and would decrease the dilution in net tangible book value per share to new
investors in this offering to $38.30 per share, after deducting commissions and expenses payable by us. A decrease of $5.00
per share in the price at which the shares are sold from the assumed offering price per share shown in the table above,
assuming all common stock in the aggregate amount of $30 million during the term of the Sales Agreement are sold at that
price, would instead decrease our adjusted net tangible book value per share after the offering to $3.08 per share, and would
increase the dilution in net tangible book value per share to new investors in this offering to $38.35 per share, after
deducting commissions and expenses payable by us. This information is supplied for illustrative purposes only.
The number of shares
of our common stock expected to be outstanding after this offering is based on 10,130,000 shares of common stock outstanding as
of December 31, 2020 and excludes the following as of such date:
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1,475,000 shares of common stock issuable upon the settlement of outstanding restricted stock
units and performance shares and the exercise of outstanding stock options;
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81,000 shares of common stock issuable upon the exercise of outstanding warrants; and
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263,000 shares of common stock
issuable upon conversion of shares of Series A Convertible Preferred Stock.
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The above illustration
of dilution per share to investors participating in this offering assumes no exercise of outstanding options or warrants to purchase
our common stock. To the extent that the options or warrants are exercised, investors participating in this offering will experience
further dilution. In addition, we may choose to raise additional capital depending on market conditions, our capital requirements
and strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. To the extent
that additional capital is raised through our sale of equity or convertible debt securities, the issuance of these securities could
result in further dilution to our stockholders.
DIVIDEND POLICY
We have never declared
or paid cash dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future.
Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to restrictions
on such ability to pay dividends, if any, set forth in the relevant terms of any preferred stock as may then be outstanding, and
subject to applicable laws and compliance with applicable agreements, which may restrict or limit our ability to pay dividends,
and will depend on our financial condition, results of operations, capital requirements, general business conditions and other
factors that our board of directors may deem relevant.
PLAN OF DISTRIBUTION
We have entered into
a Sales Agreement with B. Riley Securities under which we may offer and sell up to $30,000,000 of our shares of common stock from
time to time through B. Riley Securities acting as agent. Sales of our shares of common stock, if any, under this prospectus supplement
and the accompanying prospectus will be made by any method that is deemed to be an “at the market offering” as defined
in Rule 415(a)(4) under the Securities Act.
Each time we wish to
issue and sell our shares of common stock under the Sales Agreement, we will notify B. Riley Securities of the number of shares
to be issued, the dates on which such sales are anticipated to be made, any limitation on the number of shares to be sold in any
one day and any minimum price below which sales may not be made. Once we have so instructed B. Riley Securities, unless B. Riley
Securities declines to accept the terms of such notice, B. Riley Securities has agreed to use its commercially reasonable efforts
consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules
of The Nasdaq Stock Market LLC to sell such shares up to the amount specified on such terms. The obligations of B. Riley Securities
under the Sales Agreement to sell our shares of common stock are subject to a number of conditions that we must meet.
The settlement of sales
of shares between us and B. Riley Securities is generally anticipated to occur on the second trading day following the date on
which the sale was made. Sales of our shares of common stock as contemplated in this prospectus supplement will be settled through
the facilities of The Depository Trust Company or by such other means as we and B. Riley Securities may agree upon. There is no
arrangement for funds to be received in an escrow, trust or similar arrangement.
We will pay B.
Riley Securities a commission at a rate of up to 3% of the aggregate gross proceeds we receive from each sale of our shares
of common stock. Because there is no minimum offering amount required as a condition to close this offering, the actual total
public offering amount, commissions and proceeds to us, if any, are not determinable at this time. In addition, we have
agreed to reimburse B. Riley Securities for the fees and disbursements of its counsel, payable upon execution of the Sales
Agreement, in an amount not to exceed $40,000, plus up to $5,000 quarterly for ongoing diligence requirements, including
ongoing legal fees, following the execution date. We estimate that the total expenses for the offering, excluding any
commissions or expense reimbursement payable to B. Riley Securities under the terms of the Sales Agreement, will be
approximately $150,000. The remaining sale proceeds, after deducting any other transaction fees, will equal our net proceeds
from the sale of such shares.
B. Riley Securities
will provide written confirmation to us before the open on The Nasdaq Capital Market on the day following each day on which our
shares of common stock are sold under the Sales Agreement. Each confirmation will include the number of shares sold on that day,
the aggregate gross proceeds of such sales and the proceeds to us.
In connection with
the sale of our shares of common stock on our behalf, B. Riley Securities will be deemed to be an “underwriter” within
the meaning of the Securities Act, and the compensation of B. Riley Securities will be deemed to be underwriting commissions or
discounts. We have agreed to indemnify B. Riley Securities against certain civil liabilities, including liabilities under the Securities
Act. We have also agreed to contribute to payments B. Riley Securities may be required to make in respect of such liabilities.
The offering of our
shares of common stock pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all shares of common
stock subject to the Sales Agreement and (ii) the termination of the Sales Agreement as permitted therein. We and B. Riley
Securities may each terminate the Sales Agreement at any time upon five days’ prior notice.
This summary of the
material provisions of the Sales Agreement does not purport to be a complete statement of its terms and conditions. A copy of the
Sales Agreement is filed as an exhibit to a current report on Form 8-K filed under the Securities Exchange Act of 1934,
as amended, or the Exchange Act, and incorporated by reference in this prospectus supplement.
B. Riley Securities
and its affiliates have in the past and may in the future provide various investment banking, commercial banking, financial advisory
and other financial services for us and our affiliates, for which services they may in the future receive customary fees. In the
course of its business, B. Riley Securities may actively trade our securities for its own account or for the accounts of customers,
and, accordingly, B. Riley Securities may at any time hold long or short positions in such securities. To the extent required by
Regulation M, B. Riley Securities will not engage in any market making activities involving our common stock while the offering
is ongoing under this supplement.
A prospectus supplement and the accompanying
prospectus in electronic format may be made available on a website maintained by B. Riley Securities, and B. Riley Securities may
distribute the prospectus supplement and the accompanying prospectus electronically.
LEGAL MATTERS
The
validity of the securities offered by this prospectus supplement will be passed upon for us by Faegre Drinker Biddle & Reath
LLP. Certain legal matters in connection with this offering will be passed upon for the sales agent by The NBD Group, Inc.
EXPERTS
The
financial statements and management’s assessment of the effectiveness of internal control over financial reporting (which
is included in Management’s Report on Internal Control over Financial Reporting) incorporated in this Prospectus by reference
to the Annual Report on Form 10-K for the year ended December 31, 2019 have been so incorporated in reliance
on the report of MaloneBailey LLP, an independent registered public accounting firm, given on the authority of said firm as experts
in auditing and accounting.
INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE
The SEC permits us
to “incorporate by reference” the information and reports we file with it. This means that we can disclose important
information to you by referring to another document. The information that we incorporate by reference is considered to be part
of this prospectus supplement, and later information that we file with the SEC automatically updates and supersedes this information.
We incorporate by reference the documents listed below, except to the extent information in those documents is different from the
information contained in this prospectus supplement, and all future documents filed with the SEC under Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act (other than filings or portions thereof, including exhibits, deemed to be furnished to the SEC pursuant
to Item 9 or Item 12 of Form S-3) until we terminate the offering of these securities:
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The
Registrant’s Current Reports on Form 8-K filed on January 17, 2020, March 2, 2020, March 23, 2020, April 7, 2020, April 21, 2020, May 20, 2020, May 22, 2020, June 4, 2020, July 20, 2020, August 18, 2020 (as amended August 24, 2020, August 26, 2020 and September 24, 2020), August 27, 2020, and December 10, 2020; and
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To the extent that
any statement in this prospectus supplement is inconsistent with any statement that is incorporated by reference and that was made
on or before the date of this prospectus supplement, the statement in this prospectus supplement shall supersede such incorporated
statement. The incorporated statement shall not be deemed, except as modified or superseded, to constitute a part of this prospectus
supplement or the registration statement. Statements contained in this prospectus supplement as to the contents of any contract
or other document are not necessarily complete and, in each instance, we refer you to the copy of each contract or document filed
as an exhibit to our various filings made with the SEC.
We will provide to
each person, including any beneficial owner, to whom a prospectus supplement is delivered, without charge upon written or oral
request, a copy of any or all of the documents that are incorporated by reference into this prospectus supplement but not delivered
with the prospectus supplement, including exhibits which are specifically incorporated by reference into such documents. You may
request a copy of these filings, at no cost, by writing or telephoning us at the following address or telephone number:
AudioEye, Inc.
Attn: Investor Relations
5210 E. Williams Circle, Suite 750
Tucson, AZ 85711
+1 (866) 331-5324
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly
and current reports, proxy statements and other information with the SEC. The SEC maintains an Internet site that contains our
reports, proxy and other information regarding us and other issuers that file electronically with the SEC, at http://www.sec.gov.
Our SEC filings are also available at our website (www.audioeye.com). However, except for our filings with the SEC that are incorporated
by reference into this prospectus, the information on our website is not, and should not be deemed to be, a part of, or incorporated
by reference into this prospectus.
PROSPECTUS
AudioEye, Inc.
$150,000,000
Common Stock
Preferred Stock
Debt Securities
Stock Purchase Contracts
Warrants
Rights
Units
We may offer and sell, from time to time
in one or more offerings, up to $150,000,000 in the aggregate of common stock, preferred stock, debt securities, stock purchase
contracts, warrants, rights and units, in any combination. We intend to use the proceeds, if any, for general corporate purposes
unless otherwise indicated in the applicable prospectus supplement. In addition, the selling stockholders may offer and sell,
from time to time, up to 2,000,000 shares of our common stock under this prospectus. We will not receive any of the proceeds from
the sale of the common stock by the selling stockholders.
This prospectus provides you with a general
description of the securities offered. Each time we, and if applicable any of the selling stockholders, offer and sell securities,
we or such selling stockholders will file a prospectus supplement to this prospectus that contains specific information about
the offering and, if applicable, the amounts, prices and terms of the securities. Such supplements may also add, update or change
information contained in this prospectus. You should carefully read this prospectus and the applicable prospectus supplement before
you invest in any of our securities. This prospectus may not be used to consummate sales of securities unless accompanied by a
prospectus supplement.
We may offer and sell the securities described
in this prospectus and any prospectus supplement directly to our stockholders or to other purchasers or through agents on our
behalf or through underwriters or dealers as designated from time to time. In addition, the selling stockholders may offer and
sell shares of our common stock from time to time, together or separately. If any agents or underwriters are involved in the sale
of any of these securities, the applicable prospectus supplement will provide the names of the agents or underwriters and any
applicable fees, commission or discounts. See the sections of this prospectus entitled “About
this Prospectus” and “Plan of Distribution” for more information. This prospectus
may not be used by us to offer and sell our securities unless accompanied by a prospectus supplement describing the method and
terms of the offering of the securities.
Our common stock is listed on The Nasdaq
Capital Market (“Nasdaq”) under the symbol “AEYE”. On February 5, 2021, the last reported sale price of
our common stock on the Nasdaq was $29.60.
Investing in our securities involves
risks. You should carefully read and consider the “Risk Factors” included in this prospectus,
in our periodic reports, in any applicable prospectus supplement relating to a specific offering of securities and in any other
documents we file with the U.S. Securities and Exchange Commission (“SEC”). See the section entitled “Risk
Factors” on page 6 of this prospectus, in our other filings with the SEC and in the applicable prospectus supplement,
if any.
Neither the SEC nor any state securities
commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
The date of this prospectus is
February 11, 2021.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This prospectus is part of a registration
statement that we filed with the SEC using a “shelf” registration process. By using a shelf registration statement,
we may sell securities described in this prospectus from time to time and in one or more offerings up to a total dollar amount
of $150,000,000. This prospectus provides you with a general description of our securities that we may offer, which is not meant
to be a complete description of each of the securities.
In addition,
under this shelf registration process, the selling stockholders named herein may, from time to time, sell the securities offered
by them described in this prospectus. We will not receive any proceeds from the sale by such selling stockholders of the common
stock offered by them described in this prospectus.
We may also provide
a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information
contained in, this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective
amendment to the registration statement together with the additional information to which we refer you in the sections of this
prospectus titled “Where You Can Find More Information.”
To the extent required by applicable law,
each time we or the selling stockholders sell securities, we or the selling stockholders will provide you with this prospectus
and, to the extent required, a prospectus supplement that will contain more information about the specific terms of the offering.
The prospectus supplement may also add, update or change information contained in this prospectus or in documents incorporated
by reference in this prospectus. If there is any inconsistency between the information in this prospectus and the applicable prospectus
supplement, you should rely on the prospectus supplement, provided that if any statement in one of these documents is inconsistent
with a statement in another document having a later date — for example, a document incorporated by reference
in this prospectus or any prospectus supplement — the statement in the later-dated document automatically modifies
and supersedes the earlier statement. We urge you to carefully read this prospectus, any applicable prospectus supplement, if
any, together with the information incorporated herein and therein by reference as described under the headings “Where
You Can Find More Information“ and “Incorporation of Certain Documents by Reference“
before buying any of the securities being offered.
You should rely only on the information
contained in this prospectus, and any accompanying prospectus supplement, including the information incorporated by reference
herein as described under “Where You Can Find More Information“ and “Incorporation
of Certain Documents by Reference“, and any free writing prospectus that we prepare and distribute.
You should rely only on the information
contained in this prospectus and any accompanying prospectus supplement or incorporated by reference herein or therein. Neither
we, nor the selling stockholders, have authorized any other person to provide you with different or additional information. If
anyone provides you with different or additional information, you should not rely on it. We and the selling stockholders may only
offer to sell, and seek offers to buy any securities in jurisdictions where offers and sales are permitted.
This prospectus and any accompanying prospectus
supplement or other offering materials do not contain all of the information included in the registration statement as permitted
by the rules and regulations of the SEC. For further information, we refer you to the registration statement on Form S-3, including
its exhibits. We are subject to the informational requirements of the Securities Exchange Act of 1934 (the “Exchange Act”),
and, therefore, file reports and other information with the SEC. Statements contained in this prospectus and any accompanying
prospectus supplement or other offering materials about the provisions or contents of any agreement or other document are only
summaries. If SEC rules require that any agreement or document be filed as an exhibit to the registration statement, you should
refer to that agreement or document for its complete contents.
This prospectus incorporates by reference,
and any prospectus supplement or free writing prospectus may contain and incorporate by reference, certain market and industry
data obtained from independent market research, industry publications and surveys, governmental agencies and publicly available
information. Industry surveys, publications and forecasts generally state that the information contained therein has been obtained
from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We believe
the data from such third-party sources to be reliable. However, we have not independently verified any of such data and cannot
guarantee its accuracy or completeness. Similarly, internal market research and industry forecasts, which we believe to be reliable
based upon our management’s knowledge of the market and the industry, have not been verified by any independent sources.
While we are not aware of any misstatements regarding the market or industry data presented herein, our estimates involve risks
and uncertainties and are subject to change based on various factors.
You should assume that the information
in this prospectus, any accompanying prospectus supplement or any other offering materials is only accurate as of the date on
its respective cover, and that any information incorporated by reference is accurate only as of the date of the document incorporated
by reference, unless otherwise indicated. Our business, financial condition, results of operations and prospects may have changed
since such date.
Unless stated otherwise, references to
“we,” “us,” “our,” the “Company” refer to AudioEye, Inc.
WHERE YOU CAN FIND
MORE INFORMATION
We file annual, quarterly and current
reports, proxy statements and other information with the SEC. The SEC maintains an Internet site that contains our reports, proxy
and other information regarding us and other issuers that file electronically with the SEC, at http://www.sec.gov. Our SEC filings
are also available at our website (www.AudioEye.com). However, except for our filings with the SEC that are incorporated by reference
into this prospectus, the information on our website is not, and should not be deemed to be, a part of, or incorporated by reference
into this prospectus.
INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE
The SEC allows “incorporation by
reference” into this prospectus of information that we file with the SEC. This permits us to disclose important information
to you by referencing these filed documents. Any information referenced this way is considered to be a part of this prospectus
and any information filed by us with the SEC subsequent to the date of this prospectus automatically will be deemed to update
and supersede this information. We incorporate by reference the following documents which we have filed with the SEC (excluding
any documents or portions of such documents that have been “furnished” but not “filed” for purposes of
the Exchange Act):
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(3)
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The Registrant’s Current Reports
on Form 8-K filed on January
17, 2020, March
2, 2020, March
23, 2020, April
7, 2020, April
21, 2020, May
20, 2020, May
22, 2020, June
4, 2020, July
20, 2020, August
18, 2020 (as amended August
24, 2020, August
26, 2020 and September
24, 2020), August
27, 2020, and December
10, 2020; and
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We incorporate by reference any filings
made by us with the SEC in accordance with Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of this
prospectus and the date all of the securities offered hereby are sold or the offering is otherwise terminated, with the exception
of any information furnished under Item 2.02 and Item 7.01 (including any financial statements or exhibits relating thereto furnished
pursuant to Item 9.01) of Form 8-K, which is not deemed filed and which is not incorporated by reference herein. Any such filings
shall be deemed to be incorporated by reference and to be a part of this prospectus from the respective dates of filing of those
documents.
This prospectus and any accompanying prospectus
supplement are part of a registration statement that we filed with the SEC and do not contain all of the information in the registration
statement. The full registration statement may be obtained from the SEC or us, as provided below. Statements in this prospectus
or any accompanying prospectus supplement or free writing prospectus about these documents are summaries and each statement is
qualified in all respects by reference to the document to which it refers. You should refer to the actual documents for a more
complete description of the relevant matters. You may inspect a copy of the registration statement at the SEC’s website,
as provided above.
Any statement contained in a document
incorporated or deemed to be incorporated by reference in this prospectus will be deemed to be modified or superseded to the extent
that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by
reference in this prospectus modifies or supersedes that statement. Any statement so modified or superseded will not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.
We will provide to each person, including
any beneficial owner, to whom a prospectus is delivered, without charge, upon written or oral request, a copy of any or all of
the documents that are incorporated by reference into this prospectus but not delivered with this prospectus, excluding any exhibits
to those documents unless the exhibit is specifically incorporated by reference as an exhibit in this prospectus. You should direct
requests for documents to:
AudioEye, Inc.
Attn: Investor Relations
5210 E. Williams Circle, Suite 750
Tucson, AZ 85711
+1 (866) 331-5324
You should rely only on the information
incorporated by reference or presented in this prospectus or the applicable prospectus supplement. Neither we, the selling stockholders
nor any underwriters or agents, have authorized anyone else to provide you with different information. Neither we nor the selling
stockholders are making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume
that the information in this prospectus or the applicable prospectus supplement is accurate as of any date other than the dates
on the front of those documents.
PROSPECTUS SUMMARY
This summary highlights certain information
about us and selected information contained elsewhere in or incorporated by reference into this prospectus. This summary is not
complete and does not contain all of the information that you should consider before deciding to invest in our common stock. For
a more complete understanding of our company, we encourage you to read and consider carefully the more detailed information in
this prospectus, including the information incorporated by reference in this prospectus, and the information under the heading
“Risk Factors” in this prospectus, beginning on page 6, before making an investment decision.
THE COMPANY
Overview
AudioEye is an industry-leading software
solution provider delivering website accessibility compliance at all price points to businesses of all sizes. Our solutions advance
accessibility with patented technology that reduces barriers, expands access for individuals with disabilities, and enhances the
user experience for a broader audience. We believe that, when implemented, our solution offers businesses and organizations the
opportunity to reach more customers, improve brand image, build additional brand loyalty, and, most importantly, provide an accessible
and usable web experience to the expansive and ever-growing global population of individuals with disabilities. AudioEye provides
an always-on testing, remediation, and monitoring solution that continually improves conformance with the Web Content Accessibility
Guidelines (“WCAG”), helping businesses and organizations comply with WCAG standards, as well as applicable U.S.,
Canadian, Australian, and United Kingdom accessibility laws.
AudioEye stands out among its competitors
because it delivers machine-learning/artificial intelligence (“AI”)-driven accessibility without fundamental changes
to the website architecture. Our technology publishes more than one billion remediations daily, and our solution is trusted by
some of the largest and most influential companies in the world, including ADP, Tommy Hilfiger, 360 Media, Samsung, Darden, Landry’s
and more. Government agencies, both at the federal level and state and local levels, have also integrated our software in their
digital platforms, including the Federal Communications Commission and the Social Security Administration.
AudioEye primarily generates revenue through
the sale of subscriptions for our software-as-a-service (“SaaS”) accessibility solution plans. All plans are backed
by the power of AudioEye’s machine-learning/AI-driven technology that finds and fixes the most common accessibility errors.
Managed and Enterprise also come with the AudioEye Trusted Certification, our attestation of a site owner’s commitment to
digital inclusion as defined by WCAG success criteria, which mitigates a customer’s risk of a costly digital accessibility-related
legal action. AudioEye also provides Mobile App audits.
AudioEye customers may purchase tiered
plans directly through the AudioEye marketplace, in a platform partner marketplace, through a vertical Content Management System
(“CMS”) authorized reseller, or by working directly with the AudioEye sales team:
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The
AudioEye marketplace offers plans ideal for customers in any industry and platform;
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Certain
platforms, such as Duda, natively integrate our plans into their marketplace, enabling
web creators to build websites with our solution immediately improving compliance and
accessibility;
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Vertical
CMS authorized resellers provide a website-hosting platform for their end-user customers,
selling AudioEye accessibility solutions; and
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Organizations
with non-platform custom websites seeking a fully managed solution engage directly with
AudioEye sales personnel for custom pricing and solutions.
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Our Corporate Information
We were formed as a Delaware corporation
on May 20, 2005. We maintain our principal executive offices at 5210 E. Williams Circle, Suite 750, Tucson, AZ 85711 and
our telephone number is +1 (866) 331-5324. Our corporate website address is www.AudioEye.com. Our website and the information
contained on, or that can be accessed through, the website is not incorporated by reference in, and is not part of, this prospectus.
You should not rely on any such information in making your decision whether to purchase our securities.
Securities
that may be Offered
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Issuer
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AudioEye, Inc.
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Securities Offered
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Primary Securities Offered
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We may offer up to $150,000,000
of:
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common stock;
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preferred stock;
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debt securities;
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stock purchase contracts;
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warrants;
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rights; and
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units.
We may also offer securities of the types listed above
that are convertible or exchangeable into one or more of the securities listed above.
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Secondary Securities Offered
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Our selling stockholders may offer up to 2,000,000 shares of
our common stock.
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Use of Proceeds
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Primary Offering
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We intend to use the net proceeds from the sale of any securities
offered by us for general corporate purposes unless otherwise indicated in the applicable prospectus supplement.
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Secondary Offering
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We will not receive any proceeds from the resale of the shares
of our common stock by the selling stockholders.
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Risk Factors
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Investing in our common stock involves a high degree of risk.
See “Risk Factors” beginning on page 7 of this prospectus, and any other risk factors described in a prospectus
supplement and in the documents incorporated herein and therein by reference, for a discussion of certain factors that you
should carefully consider before deciding to invest in our common stock.
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Nasdaq Capital Market symbol
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AEYE
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CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made in this prospectus,
the documents that are incorporated by reference in this prospectus and other written or oral statements made by or on behalf
of our Company may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act
of 1933 (the “Securities Act”) and Section 21E of the Exchange Act. Forward-looking statements may be identified by
the use of words such as “may,” “will,” “forecast,” “estimate,” “project,”
“intend,” “plan,” “expect,” “should,” “believe” 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 it is made. These forward-looking statements involve known and unknown risks, uncertainties,
assumptions and other factors, including those discussed in “Risk Factors,” which may cause our actual results, performance
or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking
statements. These risks and uncertainties include, but are not limited to, the following:
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The
impact of the COVID-19 pandemic and the measures implemented to contain the spread of
the virus have had, and are expected to continue to have, a material adverse impact on
our business and results of operations;
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The
uncertain market acceptance of our existing and future products;
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Our
need for, and the availability of, additional capital in the future to fund our operations
and the development of new products;
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The
success, timing and financial consequences of new strategic relationships or licensing
agreements we may enter into;
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Rapid
changes in Internet-based applications that may affect the utility and commercial viability
of our products;
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The
timing and magnitude of expenditures we may incur in connection with our ongoing product
development activities;
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The
level of competition from our existing competitors and from new competitors in our marketplace;
and
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The
regulatory environment for our products and services.
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This list of factors that may affect future
performance and the accuracy of forward-looking statements is illustrative but not exhaustive. In addition, new risks and uncertainties
may arise from time to time. Accordingly, all forward-looking statements should be evaluated with an understanding of their inherent
uncertainty and we caution accordingly against relying on forward-looking statements.
Consider these factors carefully in evaluating
the forward-looking statements. Additional factors that may cause results to differ materially from those described in the forward-looking
statements are set forth in our most recently filed Form 10-K under the heading “Risk Factors” and in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in our most recently filed Form 10-K and in subsequent
reports filed by us with the SEC, including on Forms 10-K, 10-Q and 8-K. Because of the foregoing, you are cautioned against relying
on forward-looking statements, which speak only as of the date hereof. We do not undertake to update any of these statements in
light of new information or future events, except as required by applicable law.
RISK FACTORS
Investing
in our securities involves risks. You should carefully consider the risk factors included in this prospectus, as well as described
in Part I, Item 1A, “Risk Factors” in our Annual
Report on Form 10-K for the year ended December 31, 2019 and any updates to those
risk factors or new risk factors contained in our subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q or Current
Reports on Form 8-K, all of which are incorporated by reference into this prospectus, as the same may be amended, supplemented
or superseded from time to time by our filings under the Exchange Act, as well as any prospectus supplement relating to a specific
offering or resale. Before making any investment decision, you should carefully consider these risks as well as other information
we include or incorporate by reference in this prospectus or in any applicable prospectus supplement or free writing prospectus.
For more information, see the section entitled “Where You Can Find More Information” and “Incorporation
of Documents by Reference” elsewhere in this prospectus. These risks could materially affect our business, results of
operations or financial condition and affect the value of our securities. You could lose all or part of your investment. Additionally,
the risks and uncertainties discussed in this prospectus or in any document incorporated by reference into this prospectus are
not the only risks and uncertainties that we face, and additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also affect our business, results of operations or financial condition.
Risks Related to This Offering
Management will have broad discretion
as to the use of the proceeds from this offering, and we may not use the proceeds effectively.
You will be relying on the judgment of
our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment
decision, to assess whether the proceeds are being used appropriately. Our management will have broad discretion in the application
of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance
the value of our common stock. Our failure to apply these funds effectively could have a material adverse effect on our business
and cause the price of our common stock to decline.
You may experience dilution as a
result of this or future offerings.
In order to raise additional capital,
we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our
common stock. We cannot assure you that we will be able to sell shares or other securities in any other offering at a price per
share that is equal to or greater than the price per share paid by investors in this offering, and investors purchasing our shares
or other securities in the future could have rights superior to existing stockholders. The price per share at which we sell additional
shares of our common stock or other securities convertible into or exchangeable for our common stock in future transactions may
be higher or lower than the price per share in this offering.
Resales of our common stock in the
public market during this offering by our stockholders may cause the market price of our common stock to fall.
We may issue common or preferred stock
from time to time in connection with this offering. This issuance from time to time of these new shares, or our ability to issue
these shares in this offering, could result in resales of our common stock by our current stockholders concerned about the potential
dilution of their holdings. In turn, these resales could have the effect of depressing the market price for our common stock.
We are not currently paying dividends
and will likely continue not paying cash dividends on our common stock for the foreseeable future.
We have never paid cash dividends on our
common stock and do not anticipate paying any cash dividends on our common stock for the foreseeable future. Future credit facilities
may also restrict us from paying dividends on our securities. Investors should not rely on an investment in us if they require
income generated from dividends paid on our capital stock. Any income derived from our common stock may only come from a rise
in the market price of our common stock, which is uncertain and unpredictable.
USE OF PROCEEDS
Except as otherwise provided in the applicable
prospectus supplement, we intend to use the net proceeds from the sale of the securities by us offered by this prospectus for
general corporate purposes, which may include working capital, capital expenditures, the repayment or refinancing of existing
indebtedness and other investments. Additional information on the use of net proceeds from the sale of securities offered by us
by this prospectus may be set forth in the prospectus supplement relating to that offering.
We
will not receive any proceeds from the sale of securities by the selling stockholders. All of the securities offered by
the selling stockholders pursuant to this prospectus will be sold by the selling stockholders for their respective accounts.
DESCRIPTION OF CAPITAL
STOCK
As of the date of this prospectus, we
are authorized to issue up to 60,000,000 shares of capital stock, par value $0.00001 per share, divided into two classes designated,
respectively, common stock and preferred stock. Of such shares authorized, 50,000,000 shares are designated as common stock, and
10,000,000 shares are designated as preferred stock.
The following is a summary of the material
terms of our capital stock and certain provisions of our amended and restated certificate of incorporation, as amended (our “amended
and restated certificate of incorporation”) and amended and restated bylaws. It also summarizes some relevant provisions
of the Delaware General Corporation Law (“DGCL”), which we sometimes refer to as Delaware law. Since the terms of
our amended and restated certificate of incorporation and amended and restated bylaws, and Delaware law, are more detailed than
the general information provided below, you should only rely on the actual provisions of those documents and Delaware law. If
you would like to read our amended and restated certificate of incorporation or amended and restated bylaws, they are on file
with the SEC. See the section entitled “Where You Can Find More Information“ and “Incorporation
of Documents by Reference“ contained elsewhere.
Common Stock
As of February 3, 2021, there were 10,286,394
shares of common stock outstanding that were held of record by 191 stockholders.
Voting Rights. The holders of our
common stock are entitled to one vote for each share of record on all matters to be voted on by stockholders. On any matter presented
to the stockholders of the Company, holders of our Series A Convertible Preferred Stock (the “Series A Preferred”),
described below, are entitled to cast the number of votes equal to the number of shares of common stock into which the shares
of Series A Preferred are convertible as of the record date to vote on such matter. There is no cumulative voting with respect
to the election of our directors or any other matter. Therefore, the holders of more than 50% of the shares voted for the election
of those directors can elect all of the directors.
Dividend Rights. The holders of
our common stock are entitled to receive dividends when, as and if declared by our board of directors from funds legally available
therefore, subject to restrictions on such ability to pay dividends, if any, set forth in the relevant terms of any preferred
stock as may then be outstanding. Cash dividends are at the sole discretion of our board of directors. Each holder of our common
stock is entitled to a pro rata share of cash distributions made to stockholders, including dividend payments. The Series A Preferred
bears dividends at a rate of 5% percent (5.0%) per annum, which are cumulative and accrue daily from the date of issuance on the
$10.00 stated value, whether or not earned or declared. As of December 31, 2020, cumulative and unpaid dividends were $255,000.
The Series A Certificate of Designations does not contain a provision that restricts our ability to pay dividends on the common
stock even if there are accrued and unpaid dividends on the Series A Preferred.
Liquidation Rights. In the event
of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining
available for distribution to them after payment of our liabilities and after provision has been made for each class of stock,
if any, having any preference in relation to our common stock. The Series A Preferred ranks senior to our common stock as to distributions
and payments upon the liquidation, dissolution and winding up of the Company. As a result, no such distributions or payments may
be made to the holders of our common stock upon the liquidation, dissolution and winding up of the Company unless and until the
holders of Series A Preferred have received the stated value of $10.00 per share plus any accrued and unpaid dividends as to such
shares of Series A Preferred. As of December 31, 2020, the total liquidation preference was valued at $1,155,000.
Other Rights and Preferences. Holders
of shares of our common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions
applicable to our common stock. So long as any shares of Series A Preferred remain outstanding, neither we or any of our subsidiaries
may redeem, purchase or otherwise acquire any material amount of junior securities, which includes shares of our common stock.
Preferred Stock
Our board of directors is authorized to
issue up to 10,000,000 shares of preferred stock in one or more series, to fix the number of shares in each series, and to determine
the designations and preferences, limitations and relative rights of each series, including dividend rates, terms of redemption,
liquidation preferences, sinking fund requirements, conversion rights, voting rights, and whether the preferred stock can be issued
as a share dividend with respect to another class or series of shares, all without any vote or other action on the part of stockholders.
This power is limited by applicable laws or regulations and may be delegated to a committee of our board of directors. The preferred
stock is not secured, is not guaranteed by us or any of our affiliates and is not subject to any other arrangement that legally
or economically enhances the ranking of the preferred stock.
A prospectus supplement relating to any
shares of preferred stock being offered will include specific terms relating to the offering, including a description of any other
securities sold together with the preferred stock. These items may include:
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The
distinctive designation of each series and the number of shares that will constitute
the series;
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The
voting rights, if any, of shares of the series and the terms and conditions of the voting
rights;
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The
dividend rate on the shares of the series (if any), the dates on which dividends are
payable, any restriction, limitation or condition upon the payment of dividends, whether
dividends will be cumulative, and the dates from and after which dividends shall accumulate;
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The
prices at which, and the terms and conditions on which, the shares of the series may
be redeemed, if the shares are redeemable;
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The
terms and conditions of a sinking or purchase fund for the purchase or redemption of
shares of the series, if such a fund is provided;
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The
preferential amount, if any, payable upon the shares of the series in the vent of the
liquidation, dissolution or winding up of, or upon the distribution of any of our assets;
and
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The
prices or rates of conversion or exchange at which, and the terms and conditions on which,
the shares of the series may be converted or exchanged into other securities, if the
shares are convertible or exchangeable
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Any
terms relating to the amendment of the certificate of designation related thereto;
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Information
with respect to book-entry procedures, if any;
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Where
the shares of such series will be listed for trading on any national securities exchange.
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A
discussion of any material federal income tax considerations; and
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Any
other material terms of the shares, including terms, procedures, and limitations relating
to the transferability (including use of a transfer agent) and exchange thereof.
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As described below, as of the date of
this prospectus, we have authorized the issuance of up to 200,000 shares in the aggregate of Series A Preferred, leaving an aggregate
of 9,800,000 shares of preferred stock authorized but undesignated.
Series A Convertible Preferred Stock
Pursuant to authority granted to our board
of directors in our certificate of incorporation, we filed a Certificate of Designations of Series A Preferred Stock (the “Series
A Certificate of Designations”) designating 200,000 shares in the aggregate of our Series A Preferred, of which 90,000 shares
remain issued and outstanding as of February 3, 2021.
The Series A Preferred bears dividends
at a rate of 5% percent per annum, which are cumulative and accrue daily from the date of issuance on the $10.00 stated value,
whether or not earned or declared. As of December 31, 2020, cumulative and unpaid dividends were $255,000, or equivalent to 58,228
shares of our common stock based on a conversion price of $4.385 per share.
On any matter presented to the stockholders
of the Company, holders of the Series A Preferred are entitled to cast the number of votes equal to the number of shares of common
stock into which the shares of Series A Preferred are convertible as of the record date to vote on such matter. As long as any
shares of Series A Preferred are outstanding, we are subject to certain restrictions on share repurchases or amendments to our
certificate of incorporation in a manner that adversely affects any rights of the Series A Preferred holders.
Each share of Series A Preferred is convertible
at the option of the holder from and after the original date of issuance, at a conversion price of $4.385 per share, subject to
adjustment as set forth in the in the event of stock splits, dividends, certain pro rata distributions and fundamental transactions
such mergers, sales of all or substantially all of our assets or similar transactions. We may redeem the Series A Preferred at
any time for an amount equal to $12.50 (125% of the stated value) plus accumulated dividends.
The Series A Preferred ranks senior to
our common stock as to distributions and payments upon the liquidation, dissolution and winding up of the Company. No such distributions
or payments upon the liquidation, dissolution and winding up of the Company may be made to the holders of common stock unless
and until the holders of Series A Preferred have received the stated value of $10.00 per share plus any accrued and unpaid dividends.
At December 31, 2020, the total liquidation preference was valued at $1,155,000.
Anti-Takeover Provisions
We are governed by the DGCL. Certain provisions
of the DGCL and our certificate of incorporation and bylaws could make more difficult our acquisition by means of a tender offer,
a proxy contest or otherwise.
Vacancies on Board of
Directors
Our certificate of incorporation provides
that any newly created directorships resulting from any increase in the authorized number of directors or any vacancies resulting
from death, resignation, retirement, disqualification, removal from office or other cause will be filled solely by the affirmative
vote of a majority of the remaining directors then in office, even though less than a quorum of the board.
Stockholder Meetings
Under our certificate of incorporation
and subject to the rights of holders of preferred stock, if any, only a majority of the members of the board of directors, the
chairman of the board of directors or the chief executive officer or the president may call special meetings of stockholders.
This provision will make it more difficult for stockholders to take action opposed by the board of directors.
Authorized but Unissued
Shares
Our authorized but unissued shares of
common stock will be available for future issuance without stockholder approval. We may issue additional shares for a variety
of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit
plans. The existence of authorized but unissued shares of common stock could render more difficult or discourage an attempt to
obtain control of our company by means of a proxy contest, tender offer, merger or otherwise.
The overall effect of the foregoing provisions
may be to deter a future tender offer. Our stockholders might view such an offer to be in their best interest should the offer
include a substantial premium over the market price of our common stock at that time. In addition, these provisions may have the
effect of assisting our management to retain its position and place it in a better position to resist changes that the stockholders
may want to make if dissatisfied with the conduct of our business.
Business Combinations
We are subject to Section 203 of
the DGCL, which regulates corporate acquisitions. In general, Section 203 prohibits a publicly held Delaware corporation
from engaging in a business combination with an interested stockholder for a period of three years following the date the person
became an interested stockholder, unless:
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The
board of directors approved the transaction in which the stockholder became an interested
stockholder prior to the date the interested stockholder attained such status;
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Upon
consummation of the transaction that resulted in the stockholder becoming an interested
stockholder, the interested stockholders owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding shares owned
by persons who are directors and also officers and employee stock plans in which employee
participants do not have the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer; or
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The
business combination is approved by a majority of the board of directors and by the affirmative
vote of at least two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
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Listing
Our common stock is listed on the Nasdaq
Capital Market under the symbol “AEYE.”
Transfer Agent And Registrar
The transfer agent and registrar for our
common stock is Equiniti Trust Company (f//a/ Corporate Stock Transfer). Its address is 3200 Cherry Creek Drive, Suite 430, Denver,
Colorado, 80209, and its telephone number is (303) 282-4800.
DESCRIPTION OF DEBT
SECURITIES
This section describes the general terms
and provisions of our debt securities, which could be senior debt securities or subordinated debt securities. A prospectus supplement
will describe the specific terms of the debt securities offered through that prospectus supplement and any general terms outlined
in this section that will not apply to those debt securities.
The senior debt securities will be issued
under an indenture, referred to herein as the “senior indenture,” between us and the trustee named in the applicable
prospectus supplement. The subordinated debt securities will be issued under an indenture, referred to herein as the “subordinated
indenture,” between us and the trustee named in the applicable prospectus supplement.
We have summarized the anticipated material
terms and provisions of the senior and subordinated indentures in this section. We have also filed the forms of the indentures
summarized in this section as exhibits to the registration statement of which this prospectus is a part. You should read the applicable
indenture for additional information before you buy any debt securities. The summary that follows includes references to section
numbers of the indentures so that you can more easily locate these provisions.
General
The debt securities will be our direct
unsecured obligations. Neither of the indentures limits the amount of debt securities that we may issue. Both indentures permit
us to issue debt securities from time to time and debt securities issued under an indenture will be issued as part of a series
that has been established by us under such indenture.
The senior debt securities will be unsecured
and will rank equally with all of our other unsecured unsubordinated debt. The subordinated debt securities will be unsecured
and will rank equally with all of our other subordinated debt securities and, together with such other subordinated debt securities,
will be subordinated to all of our existing and future Senior Debt (as defined below). See “- Subordination” below.
The debt securities are our unsecured
senior or subordinated debt securities, as the case may be, but our assets include equity in our subsidiaries. As a result, our
ability to make payments on our debt securities may depend in part on our receipt of dividends, loan payments and other funds
from our subsidiaries. In addition, if any of our subsidiaries becomes insolvent, the direct creditors of that subsidiary will
have a prior claim on its assets. Our rights and the rights of our creditors, including your rights as an owner of our debt securities,
will be subject to that prior claim, unless we are also a direct creditor of that subsidiary. This subordination of creditors
of a parent company to prior claims of creditors of its subsidiaries is commonly referred to as structural subordination.
Unless otherwise specified in the applicable
prospectus supplement, we may, without the consent of the holders of a series of debt securities, issue additional debt securities
of that series having the same ranking and the same interest rate, maturity date and other terms (except for the price to public
and issue date) as such debt securities. Any such additional debt securities, together with the initial debt securities, will
constitute a single series of debt securities under the applicable indenture. No additional debt securities of a series may be
issued if an event of default under the applicable indenture has occurred and is continuing with respect to that series of debt
securities.
A prospectus supplement relating to a
series of debt securities being offered will include specific terms relating to the offering. These terms will include some or
all of the following:
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The
title and type of the debt securities;
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Any
limit on the total principal amount of the debt securities of that series;
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The
price at which the debt securities will be issued;
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The
date or dates on which the principal of and premium, if any, on the debt securities will
be payable;
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The
maturity date or dates of the debt securities or the method by which those dates can
be determined;
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If
the debt securities will bear interest:
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The
interest rate on the debt securities or the method by which the interest rate may be
determined;
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The
date from which interest will accrue;
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The
record and interest payment dates for the debt securities; and
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The
first interest payment date;
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The place or places where:
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We
can make payments on the debt securities;
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The
debt securities can be surrendered for registration of transfer or exchange; and
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Notices
and demands can be given to us relating to the debt securities and under the applicable
indenture;
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Any
optional redemption provisions that would permit us to elect redemption of the debt securities,
or the holders of the debt securities to elect repayment of the debt securities, before
their final maturity;
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Any
sinking fund provisions that would obligate us to redeem the debt securities before their
final maturity;
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Whether
the debt securities will be convertible and, if so, the terms and conditions of any such
conversion;
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If
the debt securities will be issued in bearer form, the terms and provisions contained
in the bearer securities and in the applicable indenture specifically relating to the
bearer securities;
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Whether
all or part of the debt securities will not be issued as permanent global securities
and the extent to which the description of the book-entry procedures described below
under “- Book-Entry, Delivery and Form” will not apply to such global securities - a
“global security” is a debt security that we issue in accordance with the
applicable indenture to represent all or part of a series of debt securities;
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Whether
all or part of the debt securities will be issued in whole or in part as temporary global
securities and, if so, the depositary for those temporary global securities and any special
provisions dealing with the payment of interest and any terms relating to the ability
to exchange interests in a temporary global security for interests in a permanent global
security or for definitive debt securities;
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Whether
any additional amounts will be payable;
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The
denominations of the debt securities, if other than $1,000 and any integral multiple
thereof for registered securities, and $5,000 for bearer securities;
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Any
portion of the principal amount of debt securities that shall be payable upon acceleration;
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The
currency or currencies in which the debt securities will be denominated and payable,
if other than U.S. dollars and, if a composite currency, any special provisions relating
thereto;
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Any
circumstances under which the debt securities may be paid in a currency other than the
currency in which the debt securities are denominated and the manner in which the exchange
rate shall be determined;
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Whether
the provisions described below under the heading “- Defeasance” will not
apply to the debt securities;
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Any
events of default that will apply to the debt securities in addition to those contained
in the applicable indenture;
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Any
additions or changes to the covenants contained in the applicable indenture and the ability,
if any, of the holders to waive our compliance with those additional or changed covenants;
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The
identity of the trustee, security registrar and paying agent for the debt securities;
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Any
material tax implications of the debt securities;
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Any special provisions relating
to the payment of any additional amounts on the debt securities; and
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Any other terms of the debt securities.
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When we use the term “holder”
in this prospectus with respect to a registered debt security, we mean the person in whose name such debt security is registered
in the security register.
Exchange and Transfer
At the option of the holder, any debt
securities of a series can be exchanged for other debt securities of that series so long as the other debt securities are denominated
in authorized denominations and have the same aggregate principal amount and same terms as the debt securities that were surrendered
for exchange, subject to limitations with respect to bearer securities in global form. The debt securities may be presented for
registration of transfer, duly endorsed or accompanied by a satisfactory written instrument of transfer, at the office or agency
maintained by us for that purpose in any place of payment that we may designate. However, holders of global securities may transfer
and exchange global securities only in the manner and to the extent set forth under “- Book-Entry, Delivery and Form”
below. There will be no service charge for any registration of transfer or exchange of the debt securities, but we may require
holders to pay any tax or other governmental charge payable in connection with a transfer or exchange of the debt securities.
If the applicable prospectus supplement refers to any office or agency, in addition to the security registrar, initially designated
by us where holders can surrender the debt securities for registration of transfer or exchange, we may at any time rescind the
designation of any such office or agency or approve a change in the location. However, we will be required to maintain an office
or agency in each place of payment for that series.
We will not be required to:
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Issue, register the transfer
of or exchange debt securities to be redeemed for a period of 15 calendar days preceding
the mailing of the relevant notice of redemption; or
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Register the transfer of
or exchange any registered debt security selected for redemption, in whole or in part,
except the unredeemed or unpaid portion of that registered debt security being redeemed
in part.
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Interest and Principal Payments
Payments. Holders may present
debt securities for payment of principal, premium, if any, and interest, if any, register the transfer of the debt securities
and exchange the debt securities at the agency maintained by us for such purpose and identified in the applicable prospectus supplement.
We refer to the applicable trustee acting in the capacity of a paying agent for the debt securities as the “paying agent.”
Any money that we pay to the paying agent
for the purpose of making payments on the debt securities and that remains unclaimed two years after the payments were due will,
at our request, be returned to us and after that time any holder of a debt security can only look to us for the payments on the
debt security.
Recipients of Payments.
The paying agent will pay interest to the person in whose name the debt security is registered at the close of business on the
applicable record date. However, upon maturity, redemption or repayment, the paying agent will pay any interest due to the person
to whom it pays the principal of the debt security. The paying agent will make the payment on the date of maturity, redemption
or repayment, whether or not that date is an interest payment date. An “interest payment date” for any debt security
means a date on which, under the terms of that debt security, regularly scheduled interest is payable.
Book-Entry Debt Securities.
The paying agent will make payments of principal, premium, if any, and interest, if any, to the account of The Depository Trust
Company, referred to herein as “DTC,” or other depositary specified in the applicable prospectus supplement, as holder
of book-entry debt securities, by wire transfer of immediately available funds. The “depositary” means the depositary
for global securities issued under the applicable indenture and, unless provided otherwise in the applicable prospectus supplement,
means DTC. We expect that the depositary, upon receipt of any payment, will immediately credit its participants’ accounts
in amounts proportionate to their respective beneficial interests in the book-entry debt securities as shown on the records of
the depositary. We also expect that payments by the depositary’s participants to owners of beneficial interests in the book-entry
debt securities will be governed by standing customer instructions and customary practices and will be the responsibility of those
participants.
Certificated Debt Securities.
Except as indicated below for payments of interest at maturity, redemption or repayment, the paying agent will make payments of
interest either:
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By check mailed to the address
of the person entitled to payment as shown on the security register; or
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By wire transfer to an account
designated by a holder, if the holder has given written notice not later than 10 calendar
days prior to the applicable interest payment date.
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Redemption and Repayment of Debt Securities
Optional Redemption by Us.
If applicable, the prospectus supplement will indicate the terms of our option to redeem the debt securities. We will mail a notice
of redemption to each holder which, in the case of global securities, will be the depositary, as holder of the global securities,
by first-class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption, or within
the redemption notice period designated in the applicable prospectus supplement, to the address of each holder as that address
appears upon the books maintained by the security registrar.
A partial redemption of the debt securities
may be effected by such method as required by us, the registrar or the trustee, and may provide for the selection for redemption
of a portion of the principal amount of debt securities held by a holder equal to an authorized denomination. If we redeem less
than all of the debt securities and the debt securities are then held in book-entry form, the redemption will be made in accordance
with the depositary’s customary procedures. We have been advised that it is DTC’s practice to determine by the lot
the amount of each participant in the debt securities to be redeemed.
Unless we default in the payment of the
redemption price, on and after the redemption date interest will cease to accrue on the debt securities called for redemption.
Repayment at Option of Holder. If
applicable, the prospectus supplement relating to a series of debt securities will indicate that the holder has the option to
have us repay a debt security of that series on a date or dates specified prior to its stated maturity date. Unless otherwise
specified in the applicable prospectus supplement, the repayment price will be equal to 100% of the principal amount of the debt
security, together with accrued interest to the date of repayment.
Each holder desiring to exercise such
holder’s option for repayment shall surrender the debt security to be repaid, together with written notice of the exercise,
at least 30 days but not more than 45 days prior to the repayment date, at any of our offices or agencies in a place of payment,
setting forth the principal amount of the debt security, the principal amount of the debt security to be repaid, and in the case
of partial repayment, shall specify the denomination or denominations of the debt securities of the same series and the portion
of the principal amount which is not to be repaid.
Exercise of the repayment option by the
holder of a debt security will be irrevocable. The holder may exercise the repayment option for less than the entire principal
amount of the debt security but, in that event, the principal amount of the debt security remaining outstanding after repayment
must be an authorized denomination.
If a debt security is represented by a
global security, the depositary or the depositary’s nominee will be the holder of the debt security and therefore will be
the only entity that can exercise a right to repayment. In order to ensure that the depositary’s nominee will timely exercise
a right to repayment of a particular debt security, the beneficial owner of the debt security must instruct the broker or other
direct or indirect participant through which it holds an interest in the debt security to notify the depositary of its desire
to exercise a right to repayment. Different firms have different cut-off times for accepting instructions from their customers
and, accordingly, each beneficial owner should consult the broker or other direct or indirect participant through which it holds
an interest in a debt security in order to ascertain the cut-off time by which an instruction must be given in order for timely
notice to be delivered to the depositary.
We may purchase debt securities at any
price in the open market or otherwise. Debt securities so purchased by us may, at our discretion, be held or resold or surrendered
to the applicable trustee for cancellation.
Denominations
Unless we state otherwise in the applicable
prospectus supplement, the debt securities may be issued in registered form in denominations of $1,000 each and integral multiples
of $1,000 in excess thereof, or in bearer form in denominations of $5,000.
Consolidation, Merger or Sale
Each of the indentures permits a consolidation
or merger between us and another entity, subject to certain conditions. They also permit the sale or transfer by us of all or
substantially all of our property and assets. These transactions are permitted if:
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The resulting or acquiring
entity, if other than us, is organized and existing under the laws of a domestic jurisdiction
and assumes all of our responsibilities and liabilities under the applicable indenture,
including the payment of all amounts due on the debt securities and performance of the
covenants in the applicable indenture; and
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Immediately after giving
effect to the transaction, no event of default under the applicable indenture exists.
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If we consolidate or merge with or into
any other entity or sell or lease all or substantially all of our assets according to the terms and conditions of the indentures,
the resulting or acquiring entity will be substituted for us in the indentures with the same effect as if it had been an original
party to the indentures. As a result, such successor entity may exercise our rights and powers under the indentures, in our name
and, except in the case of a lease of all or substantially all of our properties, we will be released from all our liabilities
and obligations under the indentures and under the debt securities.
Modification and Waiver
Under each of the indentures, certain
of our rights and obligations and certain of the rights of holders of the debt securities may be modified or amended with the
consent of the holders of at least a majority of the aggregate principal amount of the outstanding debt securities of all series
of debt securities affected by the modification or amendment, acting as one class. However, the following modifications and amendments
will not be effective against any holder without its consent:
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A change in the stated maturity
date of any payment of principal or interest;
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A reduction in payments due
on the debt securities;
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A change in the place of
payment or currency in which any payment on the debt securities is payable;
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A limitation of a holder’s
right to sue us for the enforcement of payments due on the debt securities;
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A reduction in the percentage
of outstanding debt securities required to consent to a modification or amendment of
the applicable indenture or required to consent to a waiver of compliance with certain
provisions of the applicable indenture or certain defaults under the applicable indenture;
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A reduction in the requirements
contained in the applicable indenture for quorum or voting;
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A limitation of a holder’s
right, if any, to repayment of debt securities at the holder’s option; and
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A modification of any of
the foregoing requirements contained in the applicable indenture.
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Under each of the indentures, the holders
of at least a majority of the aggregate principal amount of the outstanding debt securities of all series of debt securities affected
by a particular covenant or condition, acting as one class, may, on behalf of all holders of such series of debt securities, waive
compliance by us with any covenant or condition contained in the applicable indenture unless we specify that such covenant or
condition cannot be so waived at the time we establish the series.
In addition, under each of the indentures,
the holders of a majority in aggregate principal amount of the outstanding debt securities of any series of debt securities may,
on behalf of all holders of that series, waive any past default under the applicable indenture, except:
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A default in the payment
of the principal of or any premium or interest on any debt securities of that series;
or
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A default under any provision
of the applicable indenture which itself cannot be modified or amended without the consent
of the holders of each outstanding debt security of that series.
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Events of Default
Unless otherwise specified in the applicable
prospectus supplement, an “event of default,” when used in the senior indenture or the subordinated indenture with
respect to any series of debt securities issued thereunder, means any of the following:
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Failure to pay interest on
any debt security of that series for 30 days after the payment is due;
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Failure to pay the principal
of or any premium on any debt security of that series when due;
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Failure to deposit any sinking
fund payment on debt securities of that series when due;
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Failure to perform any other
covenant in the applicable indenture that applies to debt securities of that series for
90 days after we have received written notice of the failure to perform in the manner
specified in the applicable indenture;
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Certain events in bankruptcy,
insolvency or reorganization; or
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Any other event of default
that may be specified for the debt securities of that series when that series is created.
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If an event of default for any series
of debt securities occurs and continues, the trustee or the holders of at least 25% in aggregate principal amount of the outstanding
debt securities of the series may declare the entire principal of all the debt securities of that series to be due and payable
immediately. If such a declaration occurs, the holders of a majority of the aggregate principal amount of the outstanding debt
securities of that series can, subject to conditions, rescind the declaration.
Each of the indentures requires us to
file an officers’ certificate with the applicable trustee each year that states, to the knowledge of the certifying officers,
whether or not any defaults exist under the terms of the applicable indenture. The applicable trustee may withhold notice to the
holders of debt securities of any default, except defaults in the payment of principal, premium, interest or any sinking fund
installment, if it considers the withholding of notice to be in the interest of the holders. For purposes of this paragraph, “default”
means any event which is, or after notice or lapse of time or both would become, an event of default under the applicable indenture
with respect to the debt securities of the applicable series.
Other than its duties in the case of a
default, a trustee is not obligated to exercise any of its rights or powers under the applicable indenture at the request, order
or direction of any holders, unless the holders offer that trustee security or indemnity satisfactory to the trustee. If satisfactory
indemnification is provided, then, subject to other rights of the trustee, the holders of a majority in principal amount of the
outstanding debt securities of any series may, with respect to the debt securities of that series, direct the time, method and
place of:
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Conducting any proceeding
for any remedy available to the trustee; or
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Exercising any trust or power
conferred upon the trustee.
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The holder of a debt security of any series
will have the right to begin any proceeding with respect to the applicable indenture or for any remedy only if:
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The
holder has previously given the trustee written notice of a continuing event of default
with respect to that series;
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The holders of at least 25%
in aggregate principal amount of the outstanding debt securities of that series have
made a written request of, and offered reasonable indemnification to, the trustee to
begin such proceeding;
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The trustee has not started
such proceeding within 60 days after receiving the request; and
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The trustee has not received
directions inconsistent with such request from the holders of a majority in aggregate
principal amount of the outstanding debt securities of that series during those 60 days.
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However, the holder of any debt security
will have an absolute right to receive payment of principal of and any premium and interest on the debt security when due and
to institute suit to enforce this payment, subject to limitations with respect to subordinated debt securities.
Defeasance
Defeasance and Discharge.
At the time that we establish a series of debt securities under the applicable indenture, we can provide that the debt securities
of that series are subject to the defeasance and discharge provisions of that indenture. Unless we specify otherwise in the applicable
prospectus supplement, the debt securities offered thereby will be subject to the defeasance and discharge provisions of the applicable
indenture, and we will be discharged from our obligations on the debt securities of that series if:
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We deposit with the applicable
trustee, in trust, sufficient money or, if the debt securities of that series are denominated
and payable in U.S. dollars only, Eligible Instruments, to pay the principal, any interest,
any premium and any other sums due on the debt securities of that series, such as sinking
fund payments, on the dates the payments are due under the applicable indenture and the
terms of the debt securities;
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We deliver to the applicable
trustee an opinion of counsel that states that the holders of the debt securities of
that series will not recognize income, gain or loss for federal income tax purposes as
a result of the deposit and will be subject to federal income tax on the same amounts
and in the same manner and at the same times as would have been the case if no deposit,
defeasance and discharge had been made; and
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If the debt securities of
that series are listed on any domestic or foreign securities exchange, the debt securities
will not be delisted as a result of the deposit.
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When we use the term “Eligible Instruments”
in this section, we mean monetary assets, money market instruments and securities that are payable in U.S. dollars only and essentially
risk free as to collection of principal and interest, including:
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Monetary assets, money market
instruments and securities that are payable in U.S. dollars only and essentially risk
free as to collection of principal and interest; or
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Direct obligations of the
United States for the payment of which its full faith and credit is pledged, or obligations
of a person controlled or supervised by and acting as an agency or instrumentality of
the United States if the timely payment of the obligation is unconditionally guaranteed
as a full faith and credit obligation by the United States.
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In the event that we deposit money and/or
Eligible Instruments in trust and discharge our obligations under a series of debt securities as described above, then:
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The applicable indenture,
including, in the case of subordinated debt securities, the subordination provisions
contained in the subordinated indenture, will no longer apply to the debt securities
of that series; however, certain obligations to compensate, reimburse and indemnify the
trustee, to register the transfer and exchange of debt securities, to replace
lost, stolen or mutilated debt securities, to maintain paying agencies and the trust
funds and to pay additional amounts, if any, required as a result of U.S. withholding
taxes imposed on payments to non-U.S. persons will continue to apply; and
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Holders of debt securities
of that series can only look to the trust fund for payment of principal, any premium
and any interest on the debt securities of that series.
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Defeasance of Certain Covenants
and Certain Events of Default. At the time that we establish a series of debt securities under the applicable indenture,
we can provide that the debt securities of that series are subject to the covenant defeasance provisions of that indenture. Unless
we specify otherwise in the applicable prospectus supplement, the debt securities offered thereby will be subject to the covenant
defeasance provisions of the applicable indenture, and if we make the deposit and deliver the opinion of counsel described above
in this section under the heading “- Defeasance and Discharge,” we will not have to comply with any covenant we designate
when we establish the series of debt securities. In the event of a covenant defeasance, our obligations under the applicable indenture
and the debt securities, other than with respect to the covenants specifically designated upon establishing the debt securities,
will remain in effect.
If we exercise our option not to comply
with certain covenants as described above and the debt securities of the series become immediately due and payable because an
event of default has occurred, other than as a result of an event of default specifically relating to any of such covenants, the
amount of money and/or Eligible Instruments on deposit with the applicable trustee will be sufficient to pay the principal, any
interest, any premium and any other sums, due on the debt securities of that series, such as sinking fund payments, on the date
the payments are due under the applicable indenture and the terms of the debt securities, but may not be sufficient to pay amounts
due at the time of acceleration. However, we would remain liable for the balance of the payments.
Subordination
The subordinated debt securities will
be subordinate to all of our existing and future Senior Debt, as defined below. Our “Senior Debt” includes the senior
debt securities and means the principal of, premium, if any, and interest on, rent under, and any other amounts payable on or
in or in respect of any of our indebtedness (including, without limitation, any obligations in respect of such indebtedness and
any interest accruing after the filing of a petition by or against us under any bankruptcy law, whether or not allowed as a claim
after such filing in any proceeding under such bankruptcy law), whether outstanding on the date of the senior indenture or thereafter
created, incurred, assumed, guaranteed or in effect guaranteed by us (including all deferrals, renewals, extensions, refinancings
or refundings of, or amendments, modifications or supplements to the foregoing). However, Senior Debt does not include:
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Any liability for federal,
state, local or other taxes owed or owing by us;
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Our indebtedness to any of
our subsidiaries;
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Our trade payables and accrued
expenses (including, without limitation, accrued compensation) for goods, services or
materials purchased or provided in the ordinary course of business; and
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Any particular indebtedness
in which the instrument creating or evidencing the same expressly provides that such
indebtedness shall not be senior in right of payment to, or is pari passu with, or is
subordinated or junior to, the subordinated debt securities.
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If certain events in bankruptcy, insolvency
or reorganization occur, we will first pay all Senior Debt, including any interest accrued after the events occur, in full before
we make any payment or distribution, whether in cash, securities or other property, on account of the principal of or interest
on the subordinated debt securities. In such an event, we will pay or deliver directly to the holders of Senior Debt any payment
or distribution otherwise payable or deliverable to holders of the subordinated debt securities. We will make the payments to
the holders of Senior Debt according to priorities existing among those holders until we have paid all Senior Debt, including
accrued interest, in full. Notwithstanding the subordination provisions discussed in this paragraph, we may make payments or distributions
on the subordinated debt securities so long as:
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The payments or distributions
consist of securities issued by us or another company in connection with a plan of dissolution,
reorganization, readjustment or winding up; and
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Payment on those securities
is subordinate to outstanding Senior Debt and any securities issued with respect to Senior
Debt under such plan of dissolution, reorganization, readjustment or winding up at least
to the same extent provided in the subordination provisions of the subordinated debt
securities.
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If such events in bankruptcy, insolvency
or reorganization occur, after we have paid in full all amounts owed on Senior Debt:
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The holders of subordinated
debt securities,
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Together with the holders
of any of our other obligations ranking equal with those subordinated debt securities,
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will be entitled to receive from our remaining
assets any principal, premium or interest due at that time on the subordinated debt securities and such other obligations before
we make any payment or other distribution on account of any of our capital stock or obligations ranking junior to those subordinated
debt securities.
If we violate the subordinated indenture
by making a payment or distribution to holders of the subordinated debt securities before we have paid all of the Senior Debt
in full, then such holders of the subordinated debt securities will be deemed to have received the payments or distributions in
trust for the benefit of, and will have to pay or transfer the payments or distributions to, the holders of the Senior Debt outstanding
at the time. The payment or transfer to the holders of the Senior Debt will be made according to the priorities existing among
those holders. Notwithstanding the subordination provisions discussed in this paragraph, holders of subordinated debt securities
will not be required to pay, or transfer payments or distributions to, holders of Senior Debt so long as:
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The payments or distributions
consist of securities issued by us or another company in connection with a plan of reorganization
or readjustment; and
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Payment on those securities
is subordinated to outstanding Senior Debt and any securities issued with respect to
Senior Debt under such plan of reorganization or readjustment at least to the same extent
provided in the subordination provisions of those subordinated debt securities.
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Because of the subordination,
if we become insolvent, holders of Senior Debt may receive more, ratably, and holders
of the subordinated debt securities having a claim pursuant to those securities may receive
less, ratably, than our other creditors.
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We may modify or amend the subordinated
indenture as provided under “- Modification and Waiver” above. However, the modification or amendment may not, without
the consent of the holders of all Senior Debt outstanding, modify any of the provisions of the subordinated indenture relating
to the subordination of the subordinated debt securities in a manner that would adversely affect the holders of Senior Debt.
Payment of Additional Amounts
Unless we specify otherwise in the applicable
prospectus supplement, we will not pay any additional amounts on the debt securities offered thereby to compensate any beneficial
owner for any United States tax withheld from payments on such debt securities.
Book-Entry, Delivery and Form
We have obtained the information in this
section concerning DTC, Clearstream Banking S.A., or “Clearstream,” and Euroclear Bank S.A./N.V., as operator of the
Euroclear System, or “Euroclear,” and the book-entry system and procedures from sources that we believe to be reliable,
but we take no responsibility for the accuracy of this information. This information could change at any time. In addition, we
have no control over DTC, Clearstream or Euroclear, or any of their participants, and therefore we take no responsibility for
their activities.
Unless otherwise specified in the applicable
prospectus supplement, the debt securities will be issued as fully registered global securities that will be deposited with, or
on behalf of, DTC and registered, at the request of DTC, in the name of Cede & Co. Beneficial interests in the global securities
will be represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct or indirect
participants in DTC. The direct and indirect participants will remain responsible for keeping account of their holdings on behalf
of their customers. Investors may elect to hold their interests in the global securities through either DTC (in the United States)
or (in Europe) through Clearstream or through Euroclear. Investors may hold their interests in the global securities directly
if they are participants of such systems, or indirectly through organizations that are participants in these systems. Interests
held through Clearstream and Euroclear will be recorded on DTC’s books as being held by the U.S. Depositary for each of
Clearstream and Euroclear (the “U.S. Depositaries”), which U.S. Depositaries will, in turn, hold interests on behalf
of their participants’ customers’ securities accounts. Unless otherwise specified in the applicable prospectus supplement,
beneficial interests in the global securities will be held in denominations of $1,000 and multiples of $1,000 in excess thereof.
Except as set forth below, the global securities may be transferred, in whole and not in part, only to another nominee of DTC
or to a successor of DTC or its nominee.
Debt securities represented by a global
security can be exchanged for definitive securities in registered form only if:
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DTC notifies us that it is
unwilling or unable to continue as depositary for that global security and we do not
appoint a qualified successor depositary within 90 days after receiving that notice;
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At any time DTC ceases to
be a clearing agency registered under the Exchange Act and we do not appoint a successor
depositary within 90 days after becoming aware that DTC has ceased to be registered as
a clearing agency;
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We in our sole discretion
determine that such global security will be exchangeable for definitive securities in
registered Form or elect to terminate the book-entry system through DTC and notify the
applicable trustee of our decision; or
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An event of default with
respect to the debt securities represented by that global security has occurred and is
continuing.
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A global security that can be exchanged
as described in the preceding sentence will be exchanged for definitive securities issued in authorized denominations in registered
form for the same aggregate amount. The definitive securities will be registered in the names of the owners of the beneficial
interests in the global security as directed by DTC.
We will make principal and interest payments
on all debt securities represented by a global security to the paying agent which in turn will make payment to DTC or its nominee,
as the case may be, as the sole registered owner and the sole holder of the debt securities represented by a global security for
all purposes under the applicable indenture. Accordingly, we, the applicable trustee and any paying agent will have no responsibility
or liability for:
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Any aspect of DTC’s
records relating to, or payments made on account of, beneficial ownership interests in
a debt security represented by a global security;
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Any other aspect of the relationship
between DTC and its participants or the relationship between those participants and the
owners of beneficial interests in a global security held through those participants;
or
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The maintenance, supervision
or review of any of DTC’s records relating to those beneficial ownership interests.
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We understand that DTC’s current
practice is to credit direct participants’ accounts on each payment date with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such global security as shown on DTC’s records, upon DTC’s
receipt of funds and corresponding detail information. The underwriters or agents for the debt securities represented by a global
security will initially designate the accounts to be credited. Payments by participants to owners of beneficial interests in a
global security will be governed by standing instructions and customary practices, as is the case with securities held for customer
accounts registered in “street name,” and will be the sole responsibility of those participants, and not of DTC or
its nominee, the trustee, any agent of ours, or us, subject to any statutory or regulatory requirements. Book-entry notes may
be more difficult to pledge because of the lack of a physical note.
DTC
So long as DTC or its nominee is the registered
owner of a global security, DTC or its nominee, as the case may be, will be considered the sole owner and holder of the debt securities
represented by that global security for all purposes of the debt securities. Owners of beneficial interests in the debt securities
will not be entitled to have debt securities registered in their names, will not receive or be entitled to receive physical delivery
of the debt securities in definitive form and will not be considered owners or holders of debt securities under the applicable
indenture. Accordingly, each person owning a beneficial interest in a global security must rely on the procedures of DTC and,
if that person is not a DTC participant, on the procedures of the participant through which that person owns its interest, to
exercise any rights of a holder of debt securities. The laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of the securities in certificated form. These laws may impair the ability to transfer beneficial interests
in a global security. Beneficial owners may experience delays in receiving distributions on their debt securities since distributions
will initially be made to DTC and must then be transferred through the chain of intermediaries to the beneficial owner’s
account.
We understand that, under existing industry
practices, if we request holders to take any action, or if an owner of a beneficial interest in a global security desires to take
any action which a holder is entitled to take under the applicable indenture, then DTC would authorize the participants holding
the relevant beneficial interests to take that action and those participants would authorize the beneficial owners owning through
such participants to take that action or would otherwise act upon the instructions of beneficial owners owning through them.
Beneficial interests in a global security
will be shown on, and transfers of those ownership interests will be effected only through, records maintained by DTC and its
participants for that global security. The conveyance of notices and other communications by DTC to its participants and by its
participants to owners of beneficial interests in the debt securities will be governed by arrangements among them, subject to
any statutory or regulatory requirements in effect.
We understand that DTC is a limited-purpose
trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform
Commercial Code and a “clearing agency” registered under the Exchange Act. DTC is a wholly owned subsidiary of The
Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing
Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of
its regulated subsidiaries.
DTC holds the securities of its participants
and facilitates the clearance and settlement of securities transactions among its participants in such securities through electronic
book-entry changes in accounts of its participants. The electronic book-entry system eliminates the need for physical certificates.
DTC’s participants include securities brokers and dealers, including underwriters, banks, trust companies, clearing corporations
and certain other organizations, some of which, and/or their representatives, own DTCC. Banks, brokers, dealers, trust companies
and others that clear through or maintain a custodial relationship with a participant, either directly or indirectly, also have
access to DTC’s book-entry system. The rules applicable to DTC and its participants are on file with the SEC.
The above information with respect to
DTC has been provided for informational purposes only and is not intended to serve as a representation, warranty or contract modification
of any kind.
Clearstream
We understand that Clearstream was incorporated
under the laws of Luxembourg as an international clearing system. Clearstream holds securities for its participating organizations,
or “Clearstream Participants,” and facilitates the clearance and settlement of securities transactions between Clearstream
Participants through electronic book-entry changes in accounts of Clearstream Participants, thereby eliminating the need for physical
movement of certificates. Clearstream provides to Clearstream Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with
domestic securities markets in several countries. As a professional depositary, Clearstream is subject to regulation by the Luxembourg
Commission for the Supervision of the Financial Sector (Commission de Surveillance du Secteur Financier). Clearstream Participants
are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Clearstream’s U.S. Participants are limited to securities brokers
and dealers and banks. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Clearstream Participant either directly or indirectly.
Distributions with respect to debt securities
held beneficially through Clearstream will be credited to cash accounts of Clearstream Participants in accordance with its rules
and procedures, to the extent received by the U.S. Depositary for Clearstream.
Euroclear
We understand that Euroclear was created
in 1968 to hold securities for participants of Euroclear, or “Euroclear Participants,” and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need
for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Euroclear performs
various other services, including securities lending and borrowing and interacts with domestic markets in several countries. Euroclear
is operated by Euroclear Bank S.A./N.V., or the “Euroclear Operator,” under contract with Euroclear plc, a U.K. corporation.
All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts
are accounts with the Euroclear Operator, not Euroclear plc. Euroclear plc establishes policy for Euroclear on behalf of Euroclear
Participants. Euroclear Participants include banks, including central banks, securities brokers and dealers and other professional
financial intermediaries. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly. Euroclear is an indirect participant in DTC.
The Euroclear Operator is a Belgian bank.
As such it is regulated by the Belgian Banking and Finance Commission and the National Bank of Belgium.
Securities clearance accounts and cash
accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating
Procedures of the Euroclear System, and applicable Belgian law, which we will refer to herein as the “Terms and Conditions.”
The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear,
and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear Participants, and has no record of or relationship with persons holding through Euroclear
Participants.
Distributions with respect to debt securities
held beneficially through Euroclear will be credited to the cash accounts of Euroclear Participants in accordance with the Terms
and Conditions, to the extent received by the Euroclear Operator.
We further understand that investors that
acquire, hold and transfer interests in the debt securities by book-entry through accounts with the Euroclear Operator or any
other securities intermediary are subject to the laws and contractual provisions governing their relationship with their intermediary,
as well as the laws and contractual provisions governing the relationship between such an intermediary and each other intermediary,
if any, standing between themselves and the global securities.
Global Clearance and Settlement Procedures
Unless otherwise specified in the applicable
prospectus supplement, initial settlement for the debt securities will be made in immediately available funds. Secondary market
trading between DTC participants will occur in the ordinary way in accordance with DTC rules and will be settled in immediately
available funds using DTC’s Same-Day Funds Settlement System. Secondary market trading between Clearstream Participants
and/or Euroclear Participants will occur in the ordinary way in accordance with the applicable rules and operating procedures
of Clearstream and Euroclear and will be settled using the procedures applicable to conventional eurobonds in immediately available
funds.
Cross-market transfers between persons
holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream Participants or Euroclear
Participants, on the other, will be effected through DTC in accordance with DTC rules on behalf of the relevant European international
clearing system by its U.S. Depositary; however, such cross-market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in such system in accordance with its rules and procedures and within
its established deadlines (European time). The relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its U.S. Depositary to take action to effect final settlement on its behalf
by delivering or receiving debt securities through DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Clearstream Participants and Euroclear Participants may not deliver instructions
directly to their respective U.S. Depositaries.
Because of time-zone differences, credits
of debt securities received through Clearstream or Euroclear as a result of a transaction with a DTC participant will be made
during subsequent securities settlement processing and dated the business day following the DTC settlement date. Such credits
or any transactions in such debt securities settled during such processing will be reported to the relevant Euroclear Participants
or Clearstream Participants on such business day. Cash received in Clearstream or Euroclear as a result of sales of debt securities
by or through a Clearstream Participant or a Euroclear Participant to a DTC participant will be received with value on the DTC
settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following
settlement in DTC.
If the debt securities are cleared only
through Euroclear and Clearstream (and not DTC), you will be able to make and receive through Euroclear and Clearstream payments,
deliveries, transfers, exchanges, notices, and other transactions involving any securities held through those systems only on
days when those systems are open for business. Those systems may not be open for business on days when banks, brokers, and other
institutions are open for business in the United States. In addition, because of time-zone differences, U.S. investors who hold
their interests in the securities through these systems and wish to transfer their interests, or to receive or make a payment
or delivery or exercise any other right with respect to their interests, on a particular day may find that the transaction will
not be effected until the next business day in Luxembourg or Brussels, as applicable. Thus, U.S. investors who wish to exercise
rights that expire on a particular day may need to act before the expiration date.
Although DTC, Clearstream and Euroclear
have agreed to the foregoing procedures in order to facilitate transfers of debt securities among participants of DTC, Clearstream
and Euroclear, they are under no obligation to perform or continue to perform such procedures and such procedures may be modified
or discontinued at any time. Neither we nor any paying agent will have any responsibility for the performance by DTC, Euroclear
or Clearstream or their respective direct or indirect participants of their obligations under the rules and procedures governing
their operations.
Conversion and Exchange
If any offered debt securities are convertible
at the option of the holders or exchangeable at our option, the prospectus supplement relating to those debt securities will include
the terms and conditions governing any conversions and exchanges.
Governing Law
The indentures are, and the debt securities
will be, governed by and will be construed in accordance with New York law.
DESCRIPTION OF STOCK
PURCHASE CONTRACTS
We may issue stock purchase contracts,
including contracts obligating holders to purchase from us and contracts obligating us to sell to the holders, a specified number
of shares of common stock or other securities at a future date or dates. The price per share of the securities and the number
of shares of the securities may be fixed at the time the stock purchase contracts are issued or may be determined by reference
to a specific formula set forth in the stock purchase contracts. The stock purchase contracts may be issued separately or as part
of units consisting of a stock purchase contract and warrants or other securities or debt obligations of third parties, including
U.S. treasury securities, securing the holders’ obligations to purchase the securities under the stock purchase contracts.
The stock purchase contracts may require us to make periodic payments to the holders of the stock purchase contracts or vice versa,
and such payments may be unsecured or prefunded on some basis. They may also require holders to secure their obligations thereunder
in a specified manner and in certain circumstances we may deliver newly issued prepaid stock purchase contracts, or prepaid securities,
upon release to a holder of any collateral securing such holder’s obligations under the original stock purchase contract.
The stock purchase contracts, and, if
applicable, collateral or depositary arrangements will be filed with the SEC in connection with the offering of stock purchase
contracts. The prospectus supplement and any incorporated documents relating to any stock purchase contracts that we offer will
include specific terms relating to the offering, including, among other matters:
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If applicable, a discussion
of material U.S. federal income tax considerations; and
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Any other information we
think important about the stock purchase contracts.
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DESCRIPTION
OF WARRANTS
We may issue
warrants for the purchase of shares of our common stock or preferred stock or of debt securities. We may issue warrants independently
or together with other securities, and the warrants may be attached to or separate from any offered securities. Each series of
warrants will be issued under a separate warrant agreement to be entered into between us and the investors or a warrant agent.
The following summary of material provisions of the warrants and warrant agreements are subject to, and qualified in their entirety
by reference to, all the provisions of the warrant agreement and warrant certificate applicable to a particular series of warrants.
The terms of any warrants offered under a prospectus supplement may differ from the terms described below. We urge you to read
the applicable prospectus supplement and any related free writing prospectus, as well as the complete warrant agreements and warrant
certificates that contain the terms of the warrants.
The particular terms of any issue of warrants
will be described in the prospectus supplement relating to the issue. Those terms may include:
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The number of shares of common
stock or preferred stock purchasable upon the exercise of warrants to purchase such shares
and the price at which such number of shares may be purchased upon such exercise;
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The designation, stated value
and terms (including, without limitation, liquidation, dividend, conversion and voting
rights) of the series of preferred stock purchasable upon exercise of warrants to purchase
preferred stock;
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The principal amount of debt
securities that may be purchased upon exercise of a debt warrant and the exercise price
for the warrants, which may be payable in cash, securities or other property;
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The date, if any, on and
after which the warrants and the related debt securities, preferred stock or common stock
will be separately transferable;
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The terms of any rights to
redeem or call the warrants;
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The date on which the right
to exercise the warrants will commence and the date on which the right will expire;
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A discussion of certain United
States federal income tax consequences applicable to the warrants; and
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Any additional terms of the
warrants, including terms, procedures, and limitations relating to the exchange, exercise
and settlement of the warrants.
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Holders of equity warrants will not be
entitled to:
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Vote, consent or receive
dividends;
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Receive notice as stockholders
with respect to any meeting of stockholders for the election of our directors or any
other matter; or
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Exercise any rights as stockholders
of the Company.
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As of December 31, 2020, there were warrants
outstanding to purchase 81,053 shares of common stock at a weighted average exercise price of $6.25.
Each warrant will entitle its holder to
purchase the principal amount of debt securities or the number of shares of preferred stock or common stock at the exercise price
set forth in, or calculable as set forth in, the applicable prospectus supplement. Unless we otherwise specify in the applicable
prospectus supplement, holders of the warrants may exercise the warrants at any time up to the specified time on the expiration
date that we set forth in the applicable prospectus supplement. After the close of business on the expiration date, unexercised
warrants will become void.
A holder of warrant certificates may exchange
them for new warrant certificates of different denominations, present them for registration of transfer and exercise them at the
corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement. Until any warrants
to purchase debt securities are exercised, the holder of the warrants will not have any rights of holders of the debt securities
that can be purchased upon exercise, including any rights to receive payments of principal, premium or interest on the underlying
debt securities or to enforce covenants in the applicable indenture. Until any warrants to purchase common stock or preferred
stock are exercised, the holders of the warrants will not have any rights of holders of the underlying common stock or preferred
stock, including any rights to receive dividends or payments upon any liquidation, dissolution or winding up on the common stock
or preferred stock, if any.
DESCRIPTION OF
RIGHTS
We may issue rights to purchase our common
stock. The rights may or may not be transferable by the persons purchasing or receiving the rights. In connection with any rights
offering, we may enter into a standby underwriting or other arrangement with one or more underwriters or other persons pursuant
to which such underwriters or other persons would purchase any offered securities remaining unsubscribed for after such rights
offering. Each series of rights will be issued under a separate rights agent agreement to be entered into between us and one or
more banks, trust companies or other financial institutions, as rights agent, that we will name in the applicable prospectus supplement.
The rights agent will act solely as our agent in connection with the rights and will not assume any obligation or relationship
of agency or trust for or with any holders of rights certificates or beneficial owners of rights.
The prospectus supplement and any incorporated
documents relating to any rights that we offer will include specific terms relating to the offering, including, among other matters:
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The date of determining the
security holders entitled to the rights distribution;
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The aggregate number of rights
issued and the aggregate number of shares of common stock purchasable upon exercise of
the rights;
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The conditions to completion
of the rights offering;
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The date on which the right
to exercise the rights will commence and the date on which the rights will expire; and
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A discussion of certain United
States federal income tax consequences applicable to the rights offering.
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Each right would entitle the holder of
the rights to purchase for cash shares of common stock at the exercise price set forth in the applicable prospectus supplement.
Rights may be exercised at any time up to the close of business on the expiration date for the rights provided in the applicable
prospectus supplement. After the close of business on the expiration date, all unexercised rights will become void.
If less than all of the rights issued
in any rights offering are exercised, we may offer any unsubscribed securities directly to persons other than our security holders,
to or through agents, underwriters or dealers or through a combination of such methods, including pursuant to standby arrangements,
as described in the applicable prospectus supplement.
DESCRIPTION OF
UNITS
We may issue units consisting of any combination
of the other types of securities offered under this prospectus in one or more series. We may evidence each series of units by
unit certificates that we will issue under a separate agreement. We may enter into unit agreements with a unit agent. Each unit
agent will be a bank or trust company that we select. We will indicate the name and address of the unit agent in the applicable
prospectus supplement relating to a particular series of units.
The following description, together with
the additional information included in any applicable prospectus supplement, summarizes the general features of the units that
we may offer under this prospectus. You should read any prospectus supplement and any free writing prospectus that we may authorize
to be provided to you related to the series of units being offered, as well as the complete unit agreements that contain the terms
of the units. Specific unit agreements will contain additional important terms and provisions and we will file as an exhibit to
the registration statement of which this prospectus is a part, or will incorporate by reference from another report that we file
with the SEC, the form of each unit agreement relating to units offered under this prospectus.
If we offer any units, certain terms of
that series of units will be described in the applicable prospectus supplement, including, without limitation, the following,
as applicable:
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The title of the series of
units;
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Identification and description
of the separate constituent securities comprising the units;
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The price or prices at which
the units will be issued;
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The date, if any, on and
after which the constituent securities comprising the units will be separately transferable;
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A discussion of certain United
States federal income tax considerations applicable to the units; and
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Any other terms of the units
and their constituent securities.
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SELLING STOCKHOLDERS
The selling stockholders
listed in the table below, and their respective transferees, distributees, pledgees, donees, assignees or other successors, may
from time to time offer and sell any or all of the shares of common stock set forth below pursuant to this prospectus. Except as
may be set forth in any accompanying prospectus supplement, we will pay all of the expenses in connection with the registration
and the sale of the shares, other than selling commissions and the fees and expenses of counsel and other advisors to the selling
stockholders. We will not receive any proceeds from the sale of shares by the selling stockholders. Information concerning the
selling stockholders may change from time to time, and any changed information will be set forth if and when required in the applicable
prospectus supplements.
The following
table sets forth, based on written representations from the selling stockholders, certain information regarding the beneficial
ownership of our common stock by the selling stockholders and the shares of common stock being offered by the selling stockholders.
The applicable percentage ownership of common stock is based on approximately 10,286,394 shares of common stock outstanding as
of February 3, 2021, and excludes, as of such date:
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790,934 additional shares
of common stock reserved and available for future issuances under our equity compensation
plans;
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81,053 additional shares
of common stock issuable upon the exercise of outstanding warrants; or
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264,429 shares of common
stock issuable upon conversion of shares of Series A Convertible Preferred Stock.
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Information with
respect to shares of common stock owned beneficially after the offering assumes the sale of all of the shares of common stock
offered and no other purchases or sales of our common stock. The holders may offer and sell some, all or none of their shares
of common stock.
We have determined
beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on
the information furnished to us, that the selling stockholders have sole voting and investment power with respect to all shares
of common stock that they beneficially own, subject to applicable community property laws. Except as otherwise described below,
based on the information provided to us by the selling stockholders, no selling stockholder is a broker-dealer or an affiliate
of a broker-dealer.
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Shares
Beneficially Owned
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Maximum Number
of Shares That
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Shares
Beneficially
Owned after this
Offering
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Name of Selling Stockholder
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Shares
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%
of
Ownership
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May
be Offered
Pursuant to this
Prospectus
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Shares
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%
of
Ownership
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David Moradi(1)
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3,066,476
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29.35
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%
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1,500,000
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1,566,476
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14.99
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%
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Dr. Carr Bettis(2)
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929,297
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8.91
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%
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500,000
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429,297
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4.12
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%
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(1) Comprised of (i) 173,026 shares of
common stock, (ii) 11,280 RSUs that are scheduled to vest within 60 days following February 3, 2021, and warrants to purchase
4,000 shares of common stock that are exercisable as of or become exercisable within 60 days after February 3, 2021, held by Mr.
Moradi, (iii) 2,731,265 shares of common stock held by Sero Capital LLC, an entity for which David Moradi is deemed the beneficial
owner, and (iv) 146,905 shares of common stock that are issuable as of or become issuable within 60 days after February 3,
2021 upon conversion of 50,000 shares of Series A Convertible Preferred Stock held by Mr. Moradi. Mr Moradi’s shares were acquired from 2013 to 2020 through a series of Company equity grants, share purchase transactions and warrant
exercises. Mr.
Moradi is a member of our Board of Directors, as well as our Interim Chief Executive Officer and Chief Strategy Officer.
(2) Comprised of (i) 251,974 shares
of common stock and 97,340 RSUs that are vested as of or become vested within 60 days after February 3, 2021, held by
Dr. Bettis; (ii) 492,729 shares of common stock and warrants to purchase 11,680 shares of common stock that are
exercisable as of or become exercisable within 60 days after February 3, 2021, held by CSB IV US Holdings LLC, an entity for
which Dr. Bettis is deemed a beneficial owner; (iii) 18,600 shares of common stock held by Carr Bettis IRA, an account for
which Dr. Bettis is deemed the beneficial owner; and (iv) 27,593 shares of common stock and 29,381 shares of common stock
that are issuable as of or become issuable within 60 days after February 3, 2021 upon conversion of 10,000 shares of Series A
Convertible Preferred Stock, held by J. Carr & Stephanie V. Bettis Revocable Trust, dated January 1, 2003, an entity for
which Dr. Bettis is deemed a beneficial owner. Dr. Bettis' shares were acquired from 2003 to 2019 through a series of share
purchase transactions, warrant and option exercises. Dr. Bettis serves as the Executive Chairman of our Board of
Directors.
PLAN OF DISTRIBUTION
We may sell securities in any one or more
of the following ways from time to time: (i) to or through agents; (ii) to or through underwriters (including through syndicates
or acting alone for resale); (iii) to or through brokers or dealers; (iv) directly by us to purchasers, including through a specific
bidding, auction or other process; (v) upon the exercise of subscription rights that may be distributed to our stockholders; (vi)
through a combination of any of these methods of sale; or (vii) by any other method permitted by law. The applicable prospectus
supplement and/or other offering material will contain the terms of the transaction, name or names of any underwriters, dealers,
or agents and the respective amounts of securities underwritten or purchased by them, the initial public offering price of the
securities, and the applicable agent’s commission, dealer’s purchase price or underwriter’s discount. Any dealers
and agents participating in the distribution of the securities may be deemed to be underwriters, and compensation received by
them on resale of the securities may be deemed to be underwriting discounts.
Sales of the securities may be effected
from time to time in one or more transactions, including negotiated transactions, (a) at a fixed price or prices, which may be
changed; (b) at market prices prevailing at the time of sale; (c) at prices related to prevailing market prices; (d) at varying
prices determined at the time of sale; or (e) at negotiated prices. Any initial offering price, dealer purchase price, discount
or commission may be changed from time to time. The securities may be distributed from time to time in one or more transactions,
at negotiated prices, at a fixed price or fixed prices (that may be subject to change), at market prices prevailing at the time
of sale, at various prices determined at the time of sale or at prices related to prevailing market prices.
Offers to purchase securities may be solicited
directly by us or by agents designated by us from time to time. Any such agent may be deemed to be an underwriter, as that term
is defined in the Securities Act, of the securities so offered and sold.
If underwriters or dealers acting as principal
are utilized in the sale of any securities in respect of which this prospectus is being delivered, such securities will be acquired
by the underwriters or dealers for their own account and may be resold from time to time in one or more transactions, including
negotiated transactions, at fixed public offering prices or at varying prices determined by the underwriters or dealers at the
time of sale. Securities may be offered to the public either through underwriting syndicates represented by managing underwriters
or directly by one or more underwriters. If any underwriter or underwriters are utilized in the sale of securities, unless otherwise
indicated in the applicable prospectus supplement and/or other offering material, the obligations of the underwriters are subject
to certain conditions precedent, and the underwriters will be obligated to purchase all such securities if any are purchased.
If a dealer is utilized in the sale of
the securities in respect of which this prospectus is delivered, we will sell such securities to the dealer, as principal. The
dealer may then resell such securities to the public at varying prices to be determined by such dealer at the time of resale.
Transactions through brokers or dealers may include block trades in which brokers or dealers will attempt to sell shares as agent
but may position and resell as principal to facilitate the transaction or in crosses, in which the same broker or dealer acts
as agent on both sides of the trade. Any such dealer may be deemed to be an underwriter, as such term is defined in the Securities
Act, of the securities so offered and sold.
Offers to purchase securities may be solicited
directly by us and the sale thereof may be made directly to institutional investors or others, who may be deemed to be underwriters
within the meaning of the Securities Act with respect to any resale thereof.
If so indicated in the applicable prospectus
supplement and/or other offering material, we may authorize agents and underwriters to solicit offers by certain institutions
to purchase securities at the public offering price set forth in the applicable prospectus supplement and/or other offering material
pursuant to delayed delivery contracts providing for payment and delivery on the date or dates stated in the applicable prospectus
supplement and/or other offering material. Such delayed delivery contracts will be subject only to those conditions set forth
in the applicable prospectus supplement and/or other offering material.
Agents, underwriters and dealers may be
entitled under relevant agreements to indemnification against certain liabilities, including liabilities under the Securities
Act, or to contribution with respect to payments which such agents, underwriters and dealers may be required to make in respect
thereof. The terms and conditions of any indemnification or contribution will be described in the applicable prospectus supplement
and/or other offering material.
We may also sell shares of our common
stock through various arrangements involving mandatorily or optionally exchangeable securities, and this prospectus may be delivered
in connection with those sales.
We may enter into derivative, sale or
forward sale transactions with third parties, or sell securities not covered by this prospectus to third parties in privately
negotiated transactions. If the applicable prospectus supplement and/or other offering material indicates, in connection with
those transactions, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement
and/or other offering material, including in short sale transactions and by issuing securities not covered by this prospectus
but convertible into, or exchangeable for or representing beneficial interests in such securities covered by this prospectus,
or the return of which is derived in whole or in part from the value of such securities. The third parties may use securities
received under derivative, sale or forward sale transactions, or securities pledged by us or borrowed from us or others to settle
those sales or to close out any related open borrowings of stock, and may use securities received from us in settlement of those
transactions to close out any related open borrowings of stock. The third party in such sale transactions will be an underwriter
and will be identified in the applicable prospectus supplement (or a post-effective amendment) and/or other offering material.
Selling stockholders may also, pursuant
to this registration statement, sell securities offered hereby from time to time in the ways described herein, as applicable.
Alternately, they may sell their shares in accordance with Rule 144 under the Securities Act or other applicable exemptions, rather
than pursuant to this prospectus, regardless of whether the shares are covered by this prospectus.
In addition, the selling stockholders
may engage in hedging transactions with broker-dealers in connection with distributions of shares or otherwise. In those transactions,
broker-dealers may engage in short sales of shares in the course of hedging the positions they assume with the selling stockholders.
The selling stockholders also may sell shares short and redeliver shares to close out such short positions. The selling stockholders
may also enter into option or other transactions with broker-dealers which require the delivery of shares to the broker-dealer.
The broker-dealer may then resell or otherwise transfer such shares pursuant to this prospectus. The selling stockholders also
may loan or pledge shares, and the borrower or pledgee may sell or otherwise transfer the shares so loaned or pledged pursuant
to this prospectus. Such borrower or pledgee also may transfer those shares to investors in our securities or in connection with
the offering of other securities not covered by this prospectus.
Underwriters, broker-dealers or agents
may receive compensation in the form of commissions, discounts or concessions from us. Underwriters, broker-dealers or agents
may also receive compensation from the purchasers of shares for whom they act as agents or to whom they sell as principals, or
both. Compensation as to a particular underwriter, broker-dealer or agent might be in excess of customary commissions and will
be in amounts to be negotiated in connection with transactions involving shares. In effecting sales, broker-dealers may arrange
for other broker-dealers to participate in the resales.
Each series of securities will be a new
issue and, other than the common stock, which is listed on The Nasdaq Capital Market, will have no established trading market.
We may elect to list any series of securities on an exchange, and in the case of the common stock, on any additional or substitute
exchange, but, unless otherwise specified in the applicable prospectus supplement and/or other offering material, we shall not
be obligated to do so. No assurance can be given as to the liquidity of the trading market for any of the securities.
Agents, underwriters and dealers may engage
in transactions with, or perform services for us and our respective subsidiaries in the ordinary course of business.
Any underwriter may engage in overallotment,
stabilizing transactions, short covering transactions and penalty bids in accordance with Regulation M under the Exchange Act.
Overallotment involves sales in excess of the offering size, which create a short position. Stabilizing transactions permit bids
to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Short covering transactions
involve purchases of the securities in the open market after the distribution is completed to cover short positions. Penalty bids
permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased
in a covering transaction to cover short positions. Those activities may cause the price of the securities to be higher than it
would otherwise be. If commenced, the underwriters may discontinue any of the activities at any time. An underwriter may carry
out these transactions on The Nasdaq Capital Market, any additional or substitute exchange on which our common stock is listed,
in the over-the-counter market or otherwise. We do not make any representation or prediction as to the direction or magnitude
of any effect that the transactions described above might have on the price of the securities. In addition, we do not make any
representation that underwriters will engage in such transactions or that such transactions, once commenced, will not be discontinued
without notice.
The place and time of delivery for securities
by us will be set forth in the accompanying prospectus supplement and/or other offering material for such securities.
To comply with applicable state securities
laws, the securities offered by this prospectus will be sold, if necessary, in such jurisdictions only through registered or licensed
brokers or dealers. In addition, securities may not be sold in some states unless they have been registered or qualified for sale
in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
LEGAL MATTERS
The validity of the securities being offered
hereby will be passed upon for us by Faegre Drinker Biddle & Reath LLP. Additional legal matters may be passed upon for us,
the selling stockholders or any underwriters, dealers or agents, by counsel named in the applicable prospectus supplement.
EXPERTS
The financial statements and management’s
assessment of the effectiveness of internal control over financial reporting (which is included in Management’s Report on
Internal Control over Financial Reporting) incorporated in this Prospectus by reference to the Annual
Report on Form 10-K for the year ended December 31, 2019 have been so incorporated in reliance on the report of MaloneBailey
LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
AudioEye, Inc.
$150,000,000
Preferred Stock
Common Stock
Debt Securities
Stock Purchase Contracts
Warrants
Rights
Units
______________________________________
PROSPECTUS
______________________________________
February 11, 2021
$30,000,000
Common Stock
__________________________________
PROSPECTUS SUPPLEMENT
__________________________________
B. Riley Securities
February 12, 2021
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