Business Context and Reporting Period
This Form 8-K Current Report was filed by AudioEye, Inc. on May 7, 2015, covering events occurring on May 1, 2015. The company is incorporated in Delaware and headquartered in Tucson, Arizona.
Key Financial Metrics and Capital Structure
- Capital Raised: The company completed a private placement raising $1,750,000.
- Securities Issued: 175,000 shares of Series A Convertible Preferred Stock sold to 12 accredited investors.
- Purchase Price: $10.00 per share.
- Conversion Terms: Convertible to common stock at an initial price of $0.1754 per share (subject to adjustments).
- Redemption Terms: Redeemable by the company at $12.50 per share plus accumulated dividends.
- Dividends: 5% annual dividend on the purchase price, payable when and if declared by the Board.
- Use of Proceeds: General working capital purposes.
Note: This filing does not provide data on revenue, operating profit, cash flow, margins, or existing debt levels.
Material Changes and Management Actions
Effective May 1, 2015, the company implemented significant reductions in executive compensation:
- Sean Bradley (President, CTO, Secretary): Reduced annual base salary to $150,000.
- Nathaniel Bradley (Founder, Chief Innovation Officer, Treasurer): Reduced annual base salary to $125,000.
The securities were issued under Section 4(2) of the Securities Act and Regulation D exemptions. Purchasers were granted piggy-back registration rights for shares issuable upon conversion.
Outlook, Risks, and Contingencies
The filing does not contain forward-looking guidance, specific risk factors, or management commentary regarding future performance beyond the stated use of proceeds for working capital. The primary contingency noted is the restriction on resale of the Preferred Stock in the United States without an effective registration statement or exemption.
Investor Verification Checklist
- Verify the full terms of the Series A Convertible Preferred Stock in the Certificate of Designations (Exhibit 4.1).
- Confirm the company's current cash position and burn rate to assess the sufficiency of the $1.75 million raise for working capital.
- Review the press release (Exhibit 99.1) for additional context on the capital raise and salary reductions.
- Monitor future filings for the declaration of the 5% dividend or any redemption of the Preferred Stock.