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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

☐

Preliminary Proxy Statement

☐

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

☒

Definitive Proxy Statement

☐

Definitive Additional Materials

☐

Soliciting Material under §240.14a-12

AudioEye, Inc.

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

☒

No fee required

☐

Fee paid previously with preliminary materials

☐

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

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April 8, 2022

Dear Stockholders:

On behalf of the Board of Directors (the “Board”), it is my pleasure to invite you to attend the 2022 Virtual Annual Meeting of Stockholders (the “Annual Meeting”) of AudioEye, Inc. (“AudioEye” or the “Company”), to be held on Friday, May 20, 2022, at 10:00 a.m., Eastern Time. Because of the continuing uncertainty related to the coronavirus (COVID-19) pandemic and our desire for continued expanded access to the meeting and a lower cost to our stockholders, this year’s Annual Meeting will again be held in a virtual-only meeting format. You will be able to attend the Annual Meeting virtually and to vote and submit questions during the virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/AEYE2022 and entering the 16-digit control number provided in your proxy materials.

The Annual Meeting is being held for the purpose of considering and taking action with respect to the following:

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To elect five persons to serve as directors on our Board of Directors until the next Annual Meeting of Stockholders or until their successors have been duly elected and qualified;

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To hold an advisory vote on executive compensation;

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To approve amendments to the AudioEye, Inc. 2020 Equity Incentive Plan to increase the number of shares of common stock authorized for issuance under the Equity Plan, and the number of such shares that can be delivered in respect of incentive stock options, by 1,500,000 shares;

•

To approve the AudioEye, Inc. Employee Stock Purchase Plan; and

•

To ratify the appointment of MaloneBailey, LLP as AudioEye’s independent registered public accounting firm for the fiscal year ending December 31, 2022.

Regardless of whether you choose to attend the virtual Annual Meeting, please vote prior to the Annual Meeting by following the instructions contained in the accompanying Proxy Statement and in other proxy materials. Voting prior to the Annual Meeting does not deprive you of your right to attend the virtual Annual Meeting and to vote your shares at the Annual Meeting.

Sincerely,

DR. CARR BETTIS
Executive Chairman

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5210 E. Williams Circle, Suite 750
Tucson, Arizona 85711

NOTICE OF VIRTUAL ANNUAL MEETING OF STOCKHOLDERS

	TIME AND DATE			LOCATION
	Friday, May 20, 2022 10:00 a.m. Eastern Time			Online Meeting Only — No Physical Meeting Location Virtual Meeting Site: www.virtualshareholdermeeting.com/AEYE2022

NOTICE HEREBY IS GIVEN that the 2022 Virtual Annual Meeting of Stockholders (the “Annual Meeting”) of AudioEye, Inc. will be held on Friday, May 20, 2022, at 10:00 a.m., Eastern Time. The following matters will be considered and voted upon at the Annual Meeting:

A proposal to elect the five nominees named in the accompanying Proxy Statement to serve as directors until the 2023 Annual Meeting of Stockholders or until their successors have been duly elected and qualified;

A proposal to approve, on an advisory basis, AudioEye’s executive compensation; and

A proposal to approve amendments to the AudioEye, Inc. 2020 Equity Incentive Plan (the “2020 Equity Plan”) to increase the number of shares of common stock authorized for issuance under the 2020 Equity Plan, and the number of such shares that can be delivered in respect of incentive stock options, by 1,500,000 shares;

A proposal to approve the AudioEye, Inc. Employee Stock Purchase Plan; and

A proposal to ratify the appointment of MaloneBailey, LLP as the independent registered public accounting firm of AudioEye, Inc. for the fiscal year ending December 31, 2022.

The foregoing items of business are more fully described in the proxy statement accompanying this Notice. The Annual Meeting will be virtual and will be held entirely online via live webcast at www.virtualshareholdermeeting.com/AEYE2022. There will not be an option to attend the meeting in person. Stockholders will have the same opportunities to participate in the Annual Meeting as they would at an in-person meeting, including having the ability to vote and the opportunity to submit questions during the meeting using the directions on the meeting website.

The Board of Directors has fixed the close of business on March 23, 2022 as the record date for the Annual Meeting. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment thereof.

By Order of the Board of Directors

/s/ JAMES SPOLAR
James Spolar
General Counsel and Secretary

Tucson, Arizona
April 8, 2022

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on May 20, 2022 — this Proxy Statement, the Notice of Annual Meeting, the Form of Proxy and AudioEye’s Annual Report on Form 10-K for the year ended December 31, 2021 are available at www.proxyvote.com.

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PLEASE READ THE ACCOMPANYING PROXY STATEMENT AND ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021. WE RECOMMEND THAT YOU SUBMIT YOUR PROXY TO VOTE YOUR SHARES AS SOON AS POSSIBLE USING ONE OF THE CONVENIENT PROXY VOTING METHODS DESCRIBED BELOW. YOUR VOTE IS VERY IMPORTANT TO US.

A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING EXHIBITS, WILL ALSO BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN OR ORAL REQUEST TO AUDIOEYE, INC., ATTENTION JAMES SPOLAR, GENERAL COUNSEL AND CORPORATE SECRETARY, AUDIOEYE, INC., 5210 E. WILLIAMS CIRCLE, SUITE 750, TUCSON, ARIZONA 85711, USA; TELEPHONE (866) 331-5324.

VOTING

Internet	Telephone	Mail	Webcast

Visit the Web site noted on your proxy card or your Notice of Internet Availability to vote via the Internet.	Use the toll-free telephone number on your proxy card to vote by telephone.	Sign, date and return your proxy card in the enclosed envelope to vote by mail, if you have requested or receive paper copies of the proxy materials.	Participate in the meeting and vote electronically at www.virtualshareholdermeeting.com/AEYE2022.

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	QUESTIONS AND ANSWERS ABOUT THE VIRTUAL ANNUAL MEETING AND VOTING					2
	ELECTION OF DIRECTORS (PROPOSAL NO. 1)					6
	BOARD OF DIRECTORS AND CORPORATE GOVERNANCE					9
	Stockholder Communications with the Board of Directors					9
	Board Leadership Structure and Risk Oversight					9
	Director Independence					9
	Meetings and Committees of the Board of Directors					9
	Director Qualifications, Board Diversity and Stockholder Nominations for Directors					11
	Corporate Governance Policies					13
	Code of Business Conduct and Ethics					13
	DIRECTOR COMPENSATION FOR FISCAL YEAR 2021					14
	CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS					16
	Relationships and Transactions					16
	Approval of Related Party Transactions					16
	INFORMATION ABOUT OUR EXECUTIVE OFFICERS					17
	EXECUTIVE COMPENSATION					18
	Executive Summary					18
	Compensation Discussion and Analysis					18
	Summary Compensation Table for Fiscal Year 2021					20
	Summary of Compensatory Arrangements with Named Executive Officers, including in connection with a Termination or a Change in Control					21
	Outstanding Equity Awards at 2021 Fiscal Year End					23
	Additional Potential Payments for Accelerated Equity Awards					23
	ADVISORY VOTE ON EXECUTIVE COMPENSATION (PROPOSAL NO. 2)					25
	APPROVAL OF AMENDMENTS TO THE 2020 EQUITY PLAN (PROPOSAL NO. 3)					26
	APPROVAL OF THE AUDIOEYE, INC. EMPLOYEE STOCK PURCHASE PLAN (PROPOSAL NO. 4)					35
	AUDIT COMMITTEE REPORT AND PAYMENT OF FEES TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM					39
	Report of the Audit Committee					39
	Independent Registered Public Accounting Firm Fees and Services					39
	Policy on Audit Committee Pre-Approval					40
	RATIFICATION OF APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROPOSAL NO. 5)					41
	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT					42
	DELINQUENT SECTION 16(a) REPORTS					44
	STOCKHOLDER PROPOSALS FOR 2023 ANNUAL MEETING					45
	HOUSEHOLDING OF PROXY MATERIALS					46
	OTHER MATTERS					47
	APPENDIX A - AUDIOEYE, INC. 2020 EQUITY INCENTIVE PLAN, AS PROPOSED TO BE AMENDED					A-1
	APPENDIX B - AUDIOEYE, INC. EMPLOYEE STOCK PURCHASE PLAN					B-1

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PROXY STATEMENT

Our Board of Directors is soliciting proxies from our stockholders in connection with AudioEye’s 2022 Annual Meeting of Stockholders. When used in this Proxy Statement, the terms “we,” “us,” “our,” “the Company” and “AudioEye” refer to AudioEye, Inc. and any consolidated subsidiaries. On or before April 8, 2022, a Notice of Internet Availability of Proxy Materials (the “Notice”) is first being mailed to our stockholders of record as of the Record Date, and our proxy materials are first being posted on the website referenced in the Notice and this Proxy Statement.

SUMMARY

This summary highlights information contained in the Proxy Statement. It does not include all of the information that you should consider prior to voting, and we encourage you to read the entire document prior to voting. For more complete information regarding our 2021 financial performance, please review our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (the “SEC”) on March 11, 2022.

Stockholders are being asked to vote on the following matters at the 2022 Annual Meeting of Stockholders:

			Our Board’s Recommendation
ITEM 1. Election of Directors (page 6)
Our Board of Directors (the “Board”) and the Nominating and Corporate Governance Committee of the Board believe that the five director nominees possess the necessary qualifications, attributes, skills and experiences to provide quality advice and counsel to our management and effectively oversee the business and the long-term interests of our stockholders.			FOR each Director Nominee
ITEM 2. Advisory Vote to Approve Executive Compensation (page 25)
We seek a non-binding advisory vote to approve the compensation of our named executive officers as described in the Executive Compensation section of the Proxy Statement beginning on page 18. The Board values our stockholders’ opinions, and the Compensation Committee of the Board will take into account the outcome of the advisory vote when considering future executive compensation decisions.			FOR
ITEM 3. Approval of an Increase in Shares Under the 2020 Equity Plan (page 26)
We seek stockholder approval of amendments to the 2020 Equity Plan to increase the number of shares authorized for issuance under the 2020 Equity Plan, and the number of such shares that can be delivered in respect of incentive stock options, from 1,000,000 shares to 2,500,000 shares. This will provide us a share reserve that will enable us to continue to provide a competitive mix of compensation to key employees and potential new employees.			FOR
ITEM 4. Approval of the AudioEye, Inc. Employee Stock Purchase Plan (page 35)
We seek stockholder approval of the AudioEye, Inc. Employee Stock Purchase Plan. This will enable us to provide a means for employees to increase their ownership of our common stock at a discount to market prices.			FOR
ITEM 5. Ratification of the Appointment of MaloneBailey, LLP, as AudioEye’s Independent Registered Public Accounting Firm (page 41)
The Audit Committee of the Board believes that the retention of MaloneBailey, LLP, to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022, is in the best interest of AudioEye and its stockholders. As a matter of good corporate governance, stockholders are being asked to ratify the Audit Committee’s selection of the independent registered public accounting firm.			FOR

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QUESTIONS AND ANSWERS ABOUT THE VIRTUAL ANNUAL MEETING AND VOTING

How can I participate in the Virtual Annual Meeting?

Like last year, our Annual Meeting this year will be a completely virtual meeting. There will be no physical meeting location.

To participate in the Annual Meeting, visit www.virtualshareholdermeeting.com/AEYE2022 and enter the 16-digit control number included on your Notice, on your proxy card, or on the instructions that accompanied your proxy materials. You may begin to log into the meeting platform beginning at 9:30 a.m., Eastern Time (“ET”), on May 20, 2022. The meeting will begin promptly at 10:00 a.m. ET on May 20, 2022.

If you wish to submit a question during the meeting, log into the virtual meeting platform at www.virtualshareholdermeeting.com/AEYE2022 and follow the instructions in the virtual meeting platform for submitting a question.

Questions pertinent to meeting matters will be answered during the Annual Meeting, subject to time constraints and rules of conduct. Questions regarding personal matters, including those related to employment, product issues or suggestions for product innovations, are not pertinent to meeting matters and therefore will not be answered.

If you encounter any technical difficulties with the virtual meeting platform on the Annual Meeting day either during the check-in or meeting time, please call the technical support number that will be posted on the virtual meeting platform login page.

Who can vote at the Annual Meeting?

You are entitled to vote at the Annual Meeting if you owned shares of our common stock, par value $0.00001 per share as of the close of business on March 23, 2022 (the “Record Date”). Each share of our common stock entitles the holder of such share on the Record Date to one vote on each matter submitted to the stockholders at the Annual Meeting.

On the Record Date, 11,471,730 shares of common stock were outstanding and eligible to be voted at the Annual Meeting.

The presence, virtually or by proxy, of the holders of a majority of the voting power of our outstanding common stock entitled to vote at the Annual Meeting is necessary to constitute a quorum at the Annual Meeting.

Am I a stockholder of record?

If at the close of business on the Record Date, your shares were registered directly in your name with the Company’s transfer agent, then you are a stockholder of record.

What if my shares are not registered directly in my name but are held in street name?

If at the close of business on the Record Date, your shares were held in an account at a brokerage firm, bank, dealer, or other similar organization, then you are considered the “beneficial owner” of shares held in “street name” and the proxy materials are being forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares in your account.

What does it mean if I receive more than one proxy card or voting instruction form?

If you received more than one proxy card or voting instruction form, your shares are registered in more than one name or are registered in different accounts. Please follow the voting instructions included in each proxy card and voting instruction form to ensure that all of your shares are voted.

If I am a stockholder of record of common stock, how do I cast my vote?

Voting by Mail. You may vote your shares by proxy via mail. By marking, signing and dating the proxy card and returning it in the postage-prepaid and addressed envelope enclosed with these proxy materials, you

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are authorizing the individuals named on the proxy card (known as “proxies”) to vote your shares at the Annual Meeting in the manner you indicate. We encourage you to sign and return the proxy card even if you plan to attend the Annual Meeting virtually so that your shares will be voted even if you later find yourself unable to attend the Annual Meeting. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards that you receive to ensure that all of your shares are voted.

Voting at the Annual Meeting. If you plan to attend the Annual Meeting and to vote during the meeting, we will provide you with an online ballot during the Annual Meeting through the virtual stockholder meeting platform at www.virtualshareholdermeeting.com/AEYE2022.To vote at the meeting, please follow the instructions on your proxy card or Notice. We recommend you vote by proxy even if you plan to attend the Annual Meeting. You can always change your vote at the meeting.

Voting by Telephone. To vote by proxy over the telephone, please follow the voting instructions and use the toll-free telephone number on your proxy card. You may submit your proxy over the phone 24 hours a day until 11:59 p.m. ET on the day before the meeting date. If you are a record holder and you vote by proxy over the telephone, you do not need to complete and mail a proxy card.

Voting Online. If you wish to vote by proxy online, please follow the instructions included on your proxy card or Notice to obtain your records and to create an electronic voting instruction form. You may submit your proxy online 24 hours a day until 11:59 p.m. ET on the day before the meeting date. If you are a record holder and you vote by proxy online, you do not need to complete and mail a proxy card.

If I am a beneficial owner of the Company’s shares, how do I vote?

If you are a beneficial owner of shares held in street name through a brokerage firm, bank, dealer, or other similar organization, you will receive instructions from that organization, which you must follow to vote your shares. Brokerage firms, banks, dealers and other nominees typically have a process for their beneficial holders to provide voting instructions online or by telephone. If you hold your shares in street name and wish to vote at the virtual Annual Meeting, please obtain instructions on how to vote at the meeting from your broker, bank or other nominee.

Can I change my vote after submitting my proxy?

Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are a stockholder of record, you may revoke your proxy in any one of three ways:

•

You may timely submit a later-dated proxy via the Internet, by telephone or by mail;

•

You may send a written notice that you are revoking your proxy to AudioEye, Inc., Attention: James Spolar, General Counsel, 5210 E. Williams Circle, Suite 750, Tucson, Arizona 85711; or

•

You may attend and vote your shares at the Annual Meeting. Simply attending the Annual Meeting will not, by itself, revoke your proxy.

Please note, however, that any beneficial owner of our common stock whose shares are held in street name may (a) revoke his or her proxy and (b) attend and vote his or her shares at the Annual Meeting only in accordance with applicable rules and procedures that may then be employed by such beneficial owner’s brokerage firm, bank, dealer, or other similar organization.

What am I voting on?

The following proposals are scheduled for a vote at the Annual Meeting:

•

Proposal 1 — To elect the five nominees named in this Proxy Statement to serve as directors until the 2023 Annual Meeting of Stockholders or until their successors have been duly elected and qualified;

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Proposal 2 — To approve, on an advisory basis, AudioEye’s executive compensation;

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Proposal 3 — To approve amendments to the 2020 Equity Plan;

•

Proposal 4 — To approve the AudioEye, Inc. Employee Stock Purchase Plan; and

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•

Proposal 5 — To ratify the appointment of MaloneBailey, LLP as the independent registered public accounting firm of AudioEye, Inc. for the fiscal year ending December 31, 2022.

How many votes are needed to approve each proposal?

In voting with regard to Proposal 1, you may vote for or withhold authority to vote in favor of each nominee. Directors will be elected by a plurality of the votes cast by holders of our shares present virtually or represented by proxy at the Annual Meeting and entitled to vote on Proposal 1, provided a quorum is present. Abstentions will have no effect on the election of directors.

In voting with regard to Proposal 2, you may vote for the proposal, against the proposal, or abstain from voting. The vote required to approve Proposal 2 is a majority of the voting power of our shares present virtually or represented by proxy at the Annual Meeting and entitled to vote on Proposal 2, provided a quorum is present. Abstentions will be considered in determining the number of votes required to obtain the necessary majority vote for the proposal and therefore will have the same legal effect as votes against the proposal.

In voting with regard to Proposal 3, you may vote for the proposal, against the proposal, or abstain from voting. The vote required to approve Proposal 3 is a majority of the voting power of our shares present virtually or represented by proxy at the Annual Meeting and entitled to vote on Proposal 3, provided a quorum is present. Abstentions will be considered in determining the number of votes required to obtain the necessary majority vote for the proposal and therefore will have the same legal effect as votes against the proposal.

In voting with regard to Proposal 4, you may vote for the proposal, against the proposal, or abstain from voting. The vote required to approve Proposal 4 is a majority of the voting power of our shares present virtually or represented by proxy at the Annual Meeting and entitled to vote on Proposal 4, provided a quorum is present. Abstentions will be considered in determining the number of votes required to obtain the necessary majority vote for the proposal and therefore will have the same legal effect as votes against the proposal.

In voting with regard to Proposal 5, you may vote for the proposal, against the proposal, or abstain from voting. The vote required to approve Proposal 5 is a majority of the voting power of our shares present virtually or represented by proxy at the Annual Meeting and entitled to vote on Proposal 5, provided a quorum is present. Abstentions will be considered in determining the number of votes required to obtain the necessary majority vote for the proposal and therefore will have the same legal effect as votes against the proposal.

We are not aware, as of the date hereof, of any matters to be voted upon at the Annual Meeting other than those stated in this Proxy Statement. If any other matters are properly brought before the Annual Meeting, your proxy gives discretionary authority to the persons named as proxies to vote the shares represented thereby in their discretion.

How are votes counted?

Votes will be counted by the inspector of election appointed for the meeting, who will separately count votes “For” and “Against” (or, with respect to the election of directors, “For” and “Withhold”), abstentions and, if applicable, broker non-votes. A “broker non-vote” occurs when a stockholder of record, such as a broker, holding shares for a beneficial owner does not vote on a particular item because the stockholder of record does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner. Broker non-votes will be counted for the purpose of determining if a quorum is present. If your shares are held in street name and you do not vote your shares, your bank or brokerage firm can only vote your shares in their discretion for proposals which are considered “routine” proposals. Proposal 5, the ratification of the appointment of our independent registered public accounting firm, is considered a routine proposal, and therefore we do not expect any broker non-votes on Proposal 5. Proposals 1, 2, 3 and 4 are “non-routine” proposals, and therefore there may be broker non-votes with respect to Proposals 1, 2, 3 and 4, however broker non-votes will not affect the outcome of the vote on those proposals.

What if I return a proxy card but do not make specific choices?

If you complete and submit a proxy before the meeting, the persons named as proxies will vote the shares represented by your proxy in accordance with your instructions. If you submit a proxy without making any

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voting selections, then the shares represented by that proxy will be voted FOR the election of all five director nominees, FOR the approval of AudioEye’s executive compensation, FOR the approval of the amendments to the 2020 Equity Plan, FOR the approval of the AudioEye, Inc. Employee Stock Purchase Plan, and FOR the ratification of the appointment of MaloneBailey, LLP as our independent registered public accounting firm for the year ending December 31, 2022.

What are the costs of soliciting these proxies?

We will pay all of the costs of soliciting these proxies. Our officers, directors and employees may solicit proxies in person or by telephone, fax or email. We will pay these officers, directors and employees no additional compensation for these services. We will ask banks, brokers and other institutions, nominees and fiduciaries to forward these proxy materials to their principals and to obtain authority to execute proxies. We will then reimburse them for their expenses.

When will voting results be made available?

We will announce the final voting results in a Current Report on Form 8-K that will be filed with the SEC within four business days following the Annual Meeting (i.e., on or before Thursday, May 26, 2022).

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ELECTION OF DIRECTORS (PROPOSAL NO. 1)

Proposal No. 1 is a proposal to elect five persons to serve as directors on our Board of Directors. Each director will hold office until the next Annual Meeting of Stockholders and until his successor is elected and qualified, or his earlier resignation or removal. All of the Board’s director nominees have consented to be named in this proxy statement and to serve as a director, if elected.

The Board, based on the recommendation of the Nominating and Corporate Governance Committee, has nominated Dr. Carr Bettis, Anthony Coelho, Marc Lehmann, David Moradi and Jamil Tahir for re-election as directors at the 2022 Annual Meeting. If elected, each of the five nominees will serve a one-year term expiring at the 2023 Annual Meeting of Stockholders.

If, prior to the Annual Meeting, any of the nominees should be unavailable to serve for any reason, the Board may (i) designate a substitute nominee or nominees (in which event the persons named on the enclosed proxy card will vote the shares represented by all valid proxy cards for the election of such substitute nominee or nominees), (ii) allow the vacancy(ies) to remain open until a suitable candidate or candidates are located, or (iii) by resolution provide for a lesser number of directors. The Board has no reason to believe that any of its nominees will be unable to serve.

Directors are elected by a plurality of the votes cast by holders of our shares present virtually or represented by proxy at the Annual Meeting and entitled to vote on Proposal 1, provided a quorum is present. Stockholders do not have the right to cumulate their votes in the election of directors or with respect to any other proposal or matter. Assuming a quorum is present, the five validly nominated individuals receiving the highest number of votes cast at the Annual Meeting will be elected directors.

All five of the director nominees were elected at our 2021 Annual Meeting of Stockholders. Messrs. Moradi and Tahir were initially appointed by the Board in November 2019 following the exercise of director designation rights by Sero Capital LLC, a significant stockholder of the Company (“Sero Capital”), pursuant to the terms of a Letter Agreement dated as of August 14, 2019 between the Company and Sero Capital (the “Letter Agreement”). Mr. Moradi is the Chief Executive Officer and beneficial owner of Sero Capital. In the Letter Agreement, the Company agreed that, upon the request of Sero Capital and subject to the terms and conditions provided therein, the Company would take all action necessary to cause two individuals designated by Sero Capital to be appointed to the Board. The number of designees will be reduced to one at such time as Sero Capital and its affiliates collectively own less than 30% of the Company’s voting power. At such time as such ownership falls below 5%, Sero Capital will cease to have the right to designate any directors. Although Sero Capital did not designate any directors for election at the 2022 Annual Meeting, the Board is nominating Messrs. Moradi and Tahir for reelection.

Nominees for Director

Summarized below is certain information concerning the persons who are nominated by the Board for election to the Board, including a brief account of the education and business experience during at least the past five years. There are no family relationships between any director, executive officer, or person nominated to become a director. The Board recommends that stockholders vote FOR each of the five director nominees named below to constitute the Board. If not otherwise specified, proxies will be voted “FOR” each of the five nominees for director.

Dr. Carr Bettis. Dr. Bettis, age 58, has served as a director since December 2012 and previously served as a director from July 2007 to April 2010. Dr. Bettis has served as Executive Chairman/Chairman of the Board since March 2015. Dr. Bettis served as our principal financial officer and principal accounting officer from May 2021 until August 2021. Dr. Bettis founded and has been the Chief Architect of numerous financial technology businesses over the last 15 years that have been acquired by Merrill Lynch, Thomson Financial, Primark/Disclosure and Advanced Equities/Greenbook Financial. From 1996 to 2011, Dr. Bettis was the Chairman and Founder of Gradient Analytics, one of the largest independent equity research firms in the United States. He has served as Chairman and Co-Founder of Verus Analytics, a quantitative analytics and financial technology firm, since 1996. He also serves on the Board of First Contact Entertainment, Digital Air Technology Emmersive Entertainment. Dr. Bettis also manages his family’s private equity portfolio. Dr. Bettis is a former tenured professor and maintains a clinical-affiliation with Arizona State University as Research

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Professor of Finance at the W. P. Carey School of Business. He has been frequently cited in national and international financial media. His research has been published in academic and professional journals such as the Journal of Financial Economics, Review of Financial Studies, Journal of Accounting and Economics, Journal of Financial and Quantitative Analysis and the Financial Analyst Journal. Dr. Bettis holds undergraduate degrees in finance and accounting and received his Ph.D. from Indiana University in 1992. We believe that Dr. Bettis’ extensive education and background in finance make him qualified to serve as our Executive Chairman/Chairman of the Board and as a director.

Anthony Coelho. Mr. Coelho, age 79, has served as a director since June 2014. Mr. Coelho was a member of the U.S. House of Representatives from 1978 to 1989, where he authored the Americans With Disabilities Act (ADA). After leaving Congress, he joined Wertheim Schroder & Company, an investment banking firm in New York, and became President and CEO of Wertheim Schroder Financial Services from 1990 to 1995.From 1995 to 1997, he served as Chairman and CEO of an education and training technology company that he established and subsequently sold. In 1998, President Clinton appointed him as the U.S. Commissioner General for the World’s Fair in Lisbon, Portugal.He served as general chairman of the presidential campaign of former Vice President Al Gore from April 1999 until June 2000.Since 1997, Mr. Coelho has worked independently as a business and political consultant. Mr. Coelho also served as Chairman of the President’s Committee on Employment of People with Disabilities from 1994 to 2001.He previously served as Chairman of the Board of the Epilepsy Foundation and Chairman of the Board for the American Association for People with Disabilities. Mr. Coelho has served on a number of boards, including those of Circus Circus, Warren Resources, Kaiser Resources and Cyberonics. Since 1991, he has been a member of the Board of Service Corporation International (NYSE:SCI), a publicly traded company, as its Lead Director. Mr. Coelho is also currently a member of the Board of Esquire Financial Holdings, Inc. (Nasdaq: ESQ), a publicly traded company, as its Chairman. Mr. Coelho earned a Bachelor of Arts degree in Political Science from Loyola Marymount University in 1964. We believe that Mr. Coelho’s political acumen and contacts, as well as his extensive executive, financial and business experience, qualify him to serve as a director.

Marc Lehmann. Mr. Lehmann, age 49, has served as a director since July 2020. Mr. Lehmann currently manages Flamingo Drive Partners, LLC, and related entities. In this capacity, Mr. Lehmann invests in many start-up, growing businesses and publicly traded stocks. In addition, Flamingo Drive Partners owns and operates real estate, primarily in South Florida. Prior to launching Flamingo Drive Partners, Mr. Lehmann was the General Partner at Riverloft Capital Management from 2011 to 2016. Mr. Lehmann was a Partner and Director of Research at JANA Partners, a hedge fund from 2002 to 2010.Prior to JANA Partners, he was an analyst at Appaloosa Management from 1999 to 2002.During the majority of Mr. Lehmann’s career, he has regularly had roles on creditor committees in order to help distressed businesses restructure. Prior to Appaloosa, Mr. Lehmann completed his Master of Business Administration at The Wharton School at the University of Pennsylvania. Mr. Lehmann also worked at SAC Capital and began his career in investment research as an analyst at Morgan Stanley and Lehman Brothers. Mr. Lehmann also serves on the Board’s Audit Committee. He has a Bachelor of Science in Finance and International Business from New York University, where he was awarded the NYU President’s Service Award for Community Service for founding the largest community service organization at NYU. We believe that Mr. Lehmann’s extensive experience at investment firms focused on public-market investments and deep research on special situations qualify him to serve as director.

David Moradi. Mr. Moradi, age 46, has served as Chief Executive Officer since January 2022, served as Interim Chief Executive Officer and Chief Strategy Officer from August 2020 to January 2022, and has served as a director since November 2019. Mr. Moradi is an entrepreneur, investor, and advisor to numerous technology companies. In September 2018, Mr. Moradi founded and became Chief Executive Officer of Sero Capital LLC, a private investment firm that focuses on growth opportunities in the technology sector. Sero Capital LLC is a principal stockholder of the Company. Mr. Moradi also co-founded and is Executive Chairman of First Contact Entertainment Inc., a leading virtual reality video game development studio. He founded and was Chief Executive Officer of Anthion Management, a technology-focused investment fund. Prior to founding Anthion Management, Mr. Moradi was a portfolio manager at Pequot Capital Management and, prior to that, an analyst and portfolio manager for Soros Fund Management. Mr. Moradi started his career as a special situations analyst for Imperial Capital LLC. Mr. Moradi is also the founder and chairman of the David Moradi Foundation, a charitable foundation that supports education and veterans. He graduated

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with a B.A. in psychology from the University of California, Los Angeles. We believe that Mr. Moradi’s extensive executive, investment, financial and business experience qualify him to serve as a director.

Jamil Tahir. Mr. Tahir, age 45, has served as a director since November 2019 and the lead independent director since July 2020. Mr. Tahir is a co-founder and managing member of TurnMark Capital LLC, a private investment firm that was founded in 2008. Mr. Tahir has over 20 years of public stock and bond investing experience. Prior to founding TurnMark Capital, Mr. Tahir managed the research team for Cannell Capital LLC, an asset management company. Mr. Tahir began his career as an investment banking analyst in the Financial Entrepreneurs Group of Salomon Smith Barney, New York. He graduated from the University of California at Berkeley in 1999 earning a B.S. in Business Administration and a B.A. in Economics. We believe that Mr. Tahir’s extensive experience investing in publicly traded companies and in asset management and investment banking qualify him to serve as a director.

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Stockholder Communications with the Board of Directors

Stockholders of the Company wishing to send a written communication to the Board, a committee of the Board or an individual director should send the written communication to: AudioEye, Inc., Attention: Corporate Secretary, 5210 E. Williams Circle, Suite 750, Tucson, Arizona 85711. Any such communication should include the stockholder’s name and address and identify any individual directors or committees of the Board to which the stockholder would like to have the written communication sent. The Corporate Secretary, or his or her designee, will, in such manner as he or she deems appropriate, collect and organize such stockholder communications and periodically forward them to the Board or a committee or individual director, as applicable. The Corporate Secretary may refuse to forward material which he or she determines in good faith to be commercial, frivolous or otherwise inappropriate for delivery.

Board Leadership Structure and Risk Oversight

Dr. Bettis serves as Executive Chairman of the Board of Directors. In accordance with the Company’s Corporate Governance Guidelines, the Board has also designated a Lead Independent Director of the Board. In that position, the Lead Independent Director presides over executive sessions of the directors between meetings of the Board and serves as a liaison among the independent directors, the Executive Chairman and the Chief Executive Officer of the Company on various matters, including determining agenda items for Board meetings. Currently, Jamil Tahir serves as Lead Independent Director; however, the individual designated as Lead Independent Director may rotate from time to time. The Board believes that its current leadership structure is appropriate for the Company and its stockholders at this time. The structure allows our Executive Chairman to provide leadership to our Board and to our business, while also allowing Mr. Tahir as our Lead Independent Director to help us ensure independent oversight.

The Board oversees the risk management activities of management directly and through the committees of the Board by discussing with management the policies and practices utilized by management in assessing and managing risks and by providing input on those policies and practices. Each committee reports to the full Board on a regular basis, including reports with respect to the respective committee’s risk oversight activities as appropriate. Certain key risks and related mitigation plans are also reviewed more in depth throughout the year either by the Board or its committees. Management and the Board regularly review and discuss appropriate strategies to monitor and assess the effectiveness of risk treatment for long-term success.

Director Independence

Our Board has undertaken a review of the independence of each director. Based on information provided by each director concerning his background, employment and affiliations, our board has determined that Messrs. Coelho, Lehmann and Tahir do not have relationships with the Company that would interfere with the exercise of their independent judgment in carrying out the responsibilities of a director. These directors, constituting a majority of the Board, have been determined to be independent as that term is used in Section 10A of the Exchange Act of 1934 and as that term is defined in Rule 5605(a)(2) of the Nasdaq Stock Market Rules. The Board has determined that Dr. Bettis and Mr. Moradi are not independent as that term is defined in Rule 5605(a)(2) of the Nasdaq Stock Market Rules. In making these determinations, our Board considered the current and prior relationships that each non-employee director has or has had with our Company and all other facts and circumstances our Board of Directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director and the transactions (if any) involving them and described in the section of this Proxy Statement titled “Certain Relationships and Related Party Transactions.”

The independent directors of the Board meet in executive session periodically, but no less than two times per year or such greater number as required under the Nasdaq Stock Market Rules.

Meetings and Committees of the Board of Directors

The Board of Directors conducts its business through meetings of the full Board and through committees of the Board, consisting of an Audit Committee, a Compensation Committee and a Nominating and

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Corporate Governance Committee. Our Board held seven meetings in 2021. Our Corporate Governance Guidelines provide that all directors are expected to prepare for, attend and participate in all Board meetings and meetings of committees on which they serve, and to attend our Annual Meetings of Stockholders either in person or telephonically. In 2021, each director attended at least 75% of the total number of meetings of the Board and the committees of the Board on which he served. Each director then on the Board also attended our 2021 Annual Meeting of Stockholders.

Audit Committee

Our Board of Directors has established an Audit Committee, which represents and assists the Board of Directors in fulfilling its oversight responsibility relating to our financial statements and financial reporting process. Our Audit Committee is comprised of Jamil Tahir, Anthony Coelho and Marc Lehmann, each of whom meets the requirements for independence under the Nasdaq Stock Market Rules and the Exchange Act. Mr. Tahir is the chairman of our Audit Committee and qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, based on his extensive history of investing in publicly traded companies and in asset management and investment banking, as a result of which he has obtained extensive knowledge and expertise in financial and accounting matters. The Audit Committee met nine times in 2021.The Audit Committee is responsible for, among other things:

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selecting the Company’s independent registered public accounting firm and approving the fees for the independent registered public accounting firm;

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reviewing and discussing the scope and results of the annual audit with the independent registered public accounting firm and reviewing with management and the independent registered public accounting firm our interim and year-end operating results;

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reviewing our financial statements and our critical accounting policies and estimates;

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overseeing compliance with our Code of Business Conduct and Ethics;

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reviewing related party transactions in accordance with our Related Party Transactions Policies and Procedures; and

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pre-approving all audit and all permissible non-audit services to be performed by the independent registered public accounting firm.

Our Audit Committee operates under a written charter that satisfies the applicable rules and regulations of the SEC and the Nasdaq Stock Market Rules. The charter is available on our website at www.audioeye.com/governance-documents.

Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee is comprised of Anthony Coelho, Jamil Tahir and Marc Lehmann, each of whom meets the requirements for independence under the Nasdaq Stock Market Rules and SEC rules and regulations. Mr. Coelho is the chairman of our Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee met two times during 2021. Our Nominating and Corporate Governance Committee is responsible for, among other things:

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identifying, evaluating and selecting, or making recommendations to our Board of Directors regarding, nominees for election to our Board of Directors and its committees;

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overseeing the evaluation of the performance of our Board of Directors and of individual directors;

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overseeing our corporate governance practices; and

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developing and making recommendations to our Board of Directors regarding corporate governance guidelines and matters.

Our Nominating and Corporate Governance Committee operates under a written charter that satisfies the applicable Nasdaq Stock Market Rules. The charter is available on our website at www.audioeye.com/governance-documents.

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Compensation Committee

Our Compensation Committee is comprised of Jamil Tahir, Anthony Coelho and Marc Lehmann, each of whom meets the requirements for independence under the Nasdaq Stock Market Rules and SEC rules and regulations. Mr. Tahir is the chairman of the Compensation Committee. Each member of our Compensation Committee is also a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act. The Compensation Committee met five times in 2021. Our Compensation Committee is responsible for, among other things:

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reviewing, approving and determining, or making recommendations to our Board of Directors regarding, the compensation of our executive officers, including our CEO;

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reviewing, approving and administering our incentive compensation and equity compensation plans; and

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making recommendations regarding non-employee director compensation to our Board of Directors.

Our Compensation Committee operates under a written charter that satisfies the applicable rules and regulations of the SEC and the Nasdaq Stock Market Rules. The Compensation Committee may, from time to time and to the extent permitted by law and by the Company’s compensation plans, delegate any or all of its responsibilities as provided in the charter. The charter is available on our website at www.audioeye.com/governance-documents.

Director Qualifications, Board Diversity and Stockholder Nominations for Directors

The Board of Directors is responsible for approving candidates for Board membership. The Board has delegated the responsibility for evaluating, selecting and recommending director nominees to the Nominating and Corporate Governance Committee. In evaluating candidates and existing directors for service on the Board, the Nominating and Corporate Governance Committee considers certain minimum qualifications, including:

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the highest professional and personal ethics and values, consistent with our Code of Business Conduct and Ethics;

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broad experience and demonstrated excellence in his or her field;

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relevant expertise upon which to be able to offer advice and guidance to management and be committed to enhancing stockholder value;

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sufficient time to devote to AudioEye’s affairs and to carry out his or her duties as a director and/or committee member, as applicable;

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the ability to exercise sound business judgment and to provide insight and practical wisdom based on experience;

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service on other Boards of public companies that is limited to a number that permits him or her, given his or her individual circumstances, to perform responsibly all director duties; and

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ability to represent the interests of all stockholders.

Specific additional criteria may be added with respect to specific searches for new Board members. An acceptable candidate may not fully satisfy all of the criteria, but is expected to satisfy nearly all of them.

Candidates for director nominees are reviewed in the context of the current composition of the Board, the operating requirements of the Company and the long-term interests of stockholders. In conducting this assessment, the Nominating and Corporate Governance Committee considers age, skills, education, and such other factors as it deems appropriate given the current needs of the Board, its committees and the Company, to maintain a balance of knowledge, experience and capability. Although we do not have a specific Board diversity policy, the Nominating and Corporate Governance Committee looks at the diversity of experience, background and Board composition in recommending director candidates as required by the Nominating and Corporate Governance Committee’s charter. The following table sets forth diversity information related to the current members of our Board of Directors.

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Board Diversity Matrix (As of March 23, 2022)

Total Number of Directors

		Female		Male		Did Not Disclose Gender
Part I: Gender Identity
Directors			—		2		3
Part II: Demographic Background
White			—		2		—
LGBTQ+	1
Did Not Disclose Demographic Background	3
Directors with Disabilities	1
Directors who identify as Middle Eastern/North African	1

In the case of incumbent directors whose terms of office are set to expire, the Board reviews such directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, and any relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the Board also determines whether the nominee must be independent for purposes of the Nasdaq Stock Market Rules. The Board does not have term limits or a mandatory retirement age for directors.

The Nominating and Corporate Governance Committee uses a variety of methods for identifying and evaluating nominees for director. The Board periodically reviews the appropriate size of the Board, which may vary to accommodate the availability of suitable candidates and the needs of the Company. In the event that vacancies are anticipated or otherwise arise, the Nominating and Corporate Governance Committee will seek to identify director candidates based on input provided by a number of sources, including: committee members, other directors of AudioEye, management of AudioEye and stockholders of AudioEye. The Nominating and Corporate Governance Committee also has the authority to consult with or retain consultants, legal counsel, accounting or other advisors as appropriate to perform its duties.

The Nominating and Corporate Governance Committee will consider nominees recommended by stockholders as candidates for election to the Board. To recommend a nominee, a stockholder may write to the Nominating and Corporate Governance Committee c/o James Spolar, General Counsel and Corporate Secretary, AudioEye, Inc., 5210 E. Williams Circle, Suite 750, Tucson, Arizona 85711. Any such recommendation should include:

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the name and address of the stockholder and a representation about whether the stockholder is a holder of record of shares of our common stock;

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a brief biographical description for the nominee, including his or her name, age, business and residence addresses, occupation for at least the last five years and a statement of the qualifications of the candidate, taking into account the qualification requirements set forth above;

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a description of all arrangements or understandings between the stockholder and each nominee; and

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the candidate’s consent to serve as a director if elected.

All five current directors were elected at our 2021 Annual Meeting of Stockholders. Messrs. Moradi and Tahir were appointed by the Board in November 2019 following the exercise of director designation rights by Sero Capital, a significant stockholder of the Company, pursuant to the terms of the Letter Agreement dated as of August 14, 2019 between the Company and Sero Capital. Mr. Moradi is the Chief Executive Officer and beneficial owner of Sero Capital. In the Letter Agreement, the Company agreed that, upon the request of Sero Capital and subject to the terms and conditions provided therein, the Company would take all action necessary to cause two individuals designated by Sero Capital to be appointed to the Board. The number of designees will be reduced to one at such time as Sero Capital and its affiliates collectively own less than 30% of the Company’s voting power. At such time as such ownership falls below 5%, Sero Capital will cease to have the

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right to designate any directors. Although Sero Capital did not designate any directors for election at the 2022 Annual Meeting, the Board is nominating Messrs. Moradi and Tahir for reelection.

Corporate Governance Policies

We have adopted the Corporate Governance Guidelines that guide the Company and the Board on matters of corporate governance, including director responsibilities, Board committees and their charters, director independence, director qualifications, director evaluations, director orientation and education, director access to management, Board access to independent advisors, and management development and succession planning. The Corporate Governance Guidelines are available on our website at www.audioeye.com/governance-documents.

Code of Business Conduct and Ethics

The Company maintains a Code of Business Conduct and Ethics applicable to all directors, officers and employees of the Company. The Code of Business Conduct and Ethics is available without charge upon request in writing to James Spolar, General Counsel and Corporate Secretary, AudioEye, Inc., 5210 E. Williams Circle, Suite 750, Tucson, Arizona 85711.We intend to disclose any amendments to our Code of Business Conduct and Ethics, or waivers of its requirements granted to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, on our website at www.audioeye.com/governance-documents or in filings with the SEC under the Exchange Act as required by applicable law. The Code of Business Conduct and Ethics is available on our website at www.audioeye.com/governance-documents.

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DIRECTOR COMPENSATION FOR FISCAL YEAR 2021

During 2021, our non-employee director compensation program consisted of the following:

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each non-employee director receives an annual equity award of RSUs with a value of $85,000;

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the Lead Independent Director receives an additional annual equity award of RSUs with a value of $42,500;

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each non-employee director receives a quarterly equity award of RSUs with a value of $10,000;

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each Chair of the Compensation Committee, Nominating and Corporate Governance Committee and Audit Committee receives an additional quarterly equity award of RSUs with a value of $3,000; and

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the Lead Independent Director receives an additional quarterly equity award of RSUs with a value of $5,000.

The number of RSUs in each award is determined by dividing the applicable value by the volume-weighted average price of the Company’s common stock on the Nasdaq Capital Market over the 20 consecutive trading days immediately prior to the date of grant.

The annual RSUs are granted on the date of the annual meeting of stockholders in each year and vest on the earlier of (a) one year following the date of grant or (b) immediately prior to the next annual meeting of stockholders following the date of grant, provided the director’s service has not terminated prior to such date. Any of these vested RSUs are settled on the earlier of (i) the 7th anniversary of the grant date, (ii) immediately prior to the closing of a change in control, but in no case later than 90 days following the change in control, or (iii) the calendar year following the year of death, with payment made no later than the end of the year following the year of death. The quarterly RSUs are granted in advance on the first day of each calendar quarter and vest on the grant date. These vested RSUs are settled on the earlier of (i) the 3rd anniversary of the grant date, (ii) immediately prior to the closing of a change in control, but in no case later than 90 days following the change in control, or (iii) the calendar year following the year of death, with payment made no later than the end of the year following the year of death.

As the Executive Chairman of the Board, Dr. Carr Bettis is an employee of the Company, and his compensation is provided pursuant to the terms of an Executive Employment Agreement, dated July 1, 2015 between Dr. Bettis and the Company, as amended by the Amendment to Executive Employment Agreement dated May 18, 2021 (as amended, the “Bettis Employment Agreement”). Pursuant to the Bettis Employment Agreement, Dr. Bettis receives $175,000 in annual base salary for his service as Executive Chairman, of which $36,000 is paid in cash and $139,000 is paid in the form of fully vested shares of common stock of the Company. In addition, during the period that Dr. Bettis served as the Company’s principal financial officer and principal accounting officer between May of 2021 until August of 2021, Dr. Bettis received $20,000 per month in the form of fully vested shares of common stock of the Company.

2021 Compensation. The following table sets forth summary information concerning the compensation paid to our directors for the fiscal year ended December 31, 2021.Compensation paid to or earned by David Moradi, who was a director and a named executive officer during the fiscal year ended December 31, 2021, is set forth in the Summary Compensation Table in the section below titled “Executive Compensation — Summary Compensation Table.”

Director Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)(1)(2)		Total ($)
Dr. Carr Bettis		89,059		150,457(3)		239,516
Anthony Coelho		—		129,029(4)		129,029
Marc Lehmann		—		116,824(5)		116,824
Jamil Tahir		—		199,618(6)		199,618

(1)

Reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for stock granted during the reported fiscal year. For additional information regarding the assumptions we used to

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calculate the amounts in this column, please refer to Note 2 to our audited consolidated financial statements included in our 2021 Annual Report filed with the SEC on March 11, 2022.

(2)

On May 21, 2021, each of Messrs. Coelho and Lehmann was granted 4,216 RSUs as the annual equity grant to non-employee directors, and Mr. Tahir was granted 6,323 RSUs as the aggregate annual equity grant to non-employee directors and the annual equity grant to the Lead Independent Director. Each such award will vest on the earlier of the first anniversary of the grant date or immediately prior to the 2022 annual meeting of stockholders, provided the director’s service does not terminate prior to such date. The settlement date for any RSUs that become vested will be the first to occur of (x) the 7th anniversary of the grant date, (y) immediately prior to the closing of a change in control, but in no case later than 90 days following the change in control, or (z) the calendar year following the year of death, with payment made no later than the end of the year following the year of death.

(3)

Pursuant to the terms of the Bettis Employment Agreement as described above, during 2021, Dr. Bettis received 12,016 shares of common stock that were fully vested at the time of issuance. As of December 31, 2021, Dr. Bettis held 97,340 RSUs that were vested but not yet settled.

(4)

During 2021, Mr. Coelho received quarterly equity awards aggregating 2,887 RSUs. These vested RSUs are settled on the earlier of (i) the 3rd anniversary of the grant date, (ii) immediately prior to the closing of a change in control, but in no case later than 90 days following the change in control, or (iii) the calendar year following the year of death, with payment made no later than the end of the year following the year of death. As of December 31, 2021, Mr. Coelho held the following stock awards that had been granted to him as compensation for services provided to us in his capacity as director: (i) 54,176 RSUs that had vested but not yet settled and (iii) 4,216 unvested RSUs.

(5)

During 2021, Mr. Lehmann received quarterly equity awards aggregating 2,221 RSUs. These vested RSUs are settled on the earlier of (i) the 3rd anniversary of the grant date, (ii) immediately prior to the closing of a change in control, but in no case later than 90 days following the change in control, or (iii) the calendar year following the year of death, with payment made no later than the end of the year following the year of death. As of December 31, 2021, Mr. Lehmann held the following stock awards that had been granted to him as compensation for services provided to us in his capacity as director: (i) 10,494 RSUs that had vested but not yet settled and (ii) 4,216 unvested RSUs.

(6)

During 2021, Mr. Tahir received quarterly equity awards aggregating 4,663 RSUs. These vested RSUs are settled on the earlier of (i) the 3rd anniversary of the grant date, (ii) immediately prior to the closing of a change in control, but in no case later than 90 days following the change in control, or (iii) the calendar year following the year of death, with payment made no later than the end of the year following the year of death. As of December 31, 2021, Mr. Tahir held the following stock and awards that had been granted to him as compensation for services provided to us in his capacity as director: (i) 33,295 RSUs that had vested but not yet settled and (ii) 6,323 unvested RSUs.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Relationships and Transactions

Lease Assumption. Sero Capital, LLC (“Sero Capital”) is a principal stockholder of the Company. David Moradi, who has been a member of our Board since November 2019, our Chief Executive Officer since January 2022 and our Interim Chief Executive Officer and Chief Strategy Officer from August 2020 until January 2022, is also the Chief Executive Officer and the beneficial owner of Sero Capital.

In October of 2021, we assumed two lease agreements for office space in Miami Beach, Florida, from Sero Capital. Because the office space is predominately used by Mr. Moradi and other key company executives for their work with the Company, the Audit Committee deemed that assumption of the lease from Sero Capital and the related expense to be appropriately borne by the Company. The Audit Committee also determined that the material terms of the lease were market and no less favorable than the Company could have received on an arm’s length basis. The lease agreements assigned to the Company expire in May 2024 and provide for aggregate future lease payments totaling $554,000. In connection with the assignment of the leases, the Company paid Sero Capital $32,000 for the assignment of its rights to the security deposit.

Lease Agreement. The Company previously subleased office space in Scottsdale, Arizona from Verus Analytics, Inc. Dr. Carr Bettis, our Executive Chairman, is a director of and a holder of greater than 30% ownership interest in Verus Analytics, Inc. The Company paid to Verus Analytics, Inc. base rent of approximately $5,600 per month. The Company terminated the sublease in April 2021.

Approval of Related Party Transactions

The charter of the Audit Committee requires that the Audit Committee review and approve any transactions that would require disclosure under SEC rules and regulations. The Board has also adopted Related Party Transaction Policies and Procedures that set forth the procedures to be followed by the Audit Committee in reviewing actual or potential related party transactions. Those procedures include consideration of the material terms and conditions of the transaction, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, and the extent of the related party’s interest in the transaction. The Related Party Transaction Policies and Procedures also identify certain types of related party transactions that are to be deemed pre-approved.

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS

The executive officers of the Company serve at the discretion of the Board of Directors. As of March 23, 2022, our executive officers were:

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Dr. Carr Bettis, Chairman of the Board;

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David Moradi, Chief Executive Officer;

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Christopher Hundley, President;

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Kelly Georgevich, Chief Financial Officer; and

•

Dominic Varacalli, Chief Operating Officer.

Information regarding Dr. Bettis and Mr. Moradi is set forth above under “Election of Directors (Proposal No. 1) — Nominees for Director.” Below is information regarding Messrs. Hundley and Varacalli and Ms. Georgevich.

Christopher Hundley, 46, has served as President of the Company since September 2021. Mr. Hundley served as the Company’s Chief Technology Officer from March 2021 to September 17, 2021. From August 2018 to March 2020, Mr. Hundley served in engineering leadership roles for Drift, a hypergrowth startup that created the conversational marketing category. From September 2014 to August 2018, Mr. Hundley served as the Chief Executive Officer and Chief Technology Officer for Siftrock, an email marketing automation SaaS company Mr. Hundley founded that was acquired by Drift in 2018.

Kelly Georgevich, 39, has served as the Chief Financial Officer of the Company since June 2021. Ms. Georgevich has over 16 years of experience with high-growth companies with a specific focus on software-as-a-service and technology. Prior to joining the Company, Ms. Georgevich served as the chief financial officer of sticky.io, Inc., an e-commerce platform helping brands reduce customer acquisition costs, increase retention, and maximize their customers’ lifetime value, since September 2018, and as vice president of finance from March 2015 until September 2018. Prior to sticky.io, Kelly served as controller at Fuzebox Software Corporation where she supported the company through a successful acquisition. She also served on the Board of Directors for Girls in Tech as secretary and treasurer from 2015 until 2020.

Dominic Varacalli, 34, has served as Chief Operating Officer of the Company since September 2021. From August 2020 to September 2021, Mr. Varacalli was President of the Company, and from June 2020 until August 2020, he was Chief Technology Officer of the Company. From June 2019 through May 2020, he was Founding Partner of Kickstand LLC, a software agency in Portland, Oregon, where he led product and operations teams. From August 2015 until May 2019, Mr. Varacalli was Director of Engineering at The Kroger Co. in Cincinnati, Ohio where he managed teams of software engineers for the company’s digital and eCommerce presence.

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EXECUTIVE COMPENSATION

Executive Summary

Prior Year Say-on-Pay Results

The Board values the opinions of our stockholders and carefully reviews and considers the outcome of our Say-on-Pay vote, along with other relevant factors, in evaluating the compensation program for our named executive officers. In 2021, more than 92% of the votes cast were in favor of our executive compensation. The Compensation Committee devotes time and resources to understanding stockholder feedback and analyzing the executive compensation programs. In evaluating potential changes, the Compensation Committee also takes into consideration market practices and the Company’s overarching compensation philosophy of attracting and retaining exceptional leaders and enabling them to behave like owners. Our current programs are materially the same as the programs approved at our 2021 Annual Meeting. We believe our programs effectively align with the interests of our stockholders.

Key 2021 Management Changes

In September 2021, Christopher Hundley was appointed President of the Company, having previously served as the Company’s Chief Technology Officer from March 2021 to September 2021; and Dominic Varacalli was appointed Chief Operating Officer of the Company, having previously served as President of the Company from August 2020 to September 2021 and as Chief Technology Officer of the Company from June 2020 to August 2020. In June 2021, Kelly Georgevich was appointed Chief Financial Officer of the Company. Dr. Carr Bettis, the Company’s Executive Chairman of the Board, acted as the Company’s principal financial officer and principal accounting officer between May of 2021 until August of 2021, when Ms. Georgevich assumed those roles.

Compensation Discussion and Analysis

This compensation discussion and analysis is intended to provide an overview of the compensation awarded to, earned by, or paid to our named executive officers for 2021, including the material elements of the compensation paid to our named executive officers as outlined in the compensation tables included in this proxy statement. Our “named executive officers” or “NEOs” for 2021 are:

Name			Title
David Moradi(1)			Chief Executive Officer
Christopher Hundley(2)			President
Kelly Georgevich(3)			Chief Financial Officer

(1)

Mr. Moradi was promoted to Chief Executive Officer in January of 2022, having previously served as the Company’s Interim Chief Executive Officer and Chief Strategy Officer from August 2020 to January 2022.

(2)

Christopher Hundley has served as President of the Company since September 2021, having previously served as the Company’s Chief Technology Officer from March 2021 to September 2021.

(3)

Ms. Georgevich has served as Chief Financial Officer since June 2021.

Compensation Objectives and Philosophy

The primary objective of our executive compensation program is to attract and retain exceptional leaders and enable them to behave like owners. When setting executive compensation, we apply a consistent approach for all executive officers and intend that the combination of compensation elements closely aligns the executives’ financial interests with those of our stockholders. The program is primarily designed to:

•

Attract, motivate and retain a highly capable and performance-focused executive team;

•

Promote a culture of employee owners whose financial interests are aligned with those of our stockholders;

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•

Pay for performance such that total compensation reflects the individual performance of executives and the Company’s performance;

•

Promote a focus on equity value by tying executive compensation to the long-term enhancement of stockholder value;

•

Permit the Compensation Committee to exercise independent judgment and approval authority with respect to establishing executive compensation programs, performance measures, and awards; and

•

Consider the potential stock dilution, cash flow, tax and reported earnings implications of executive compensation, consistent with the other objectives of the program.

Target total compensation consists of an appropriate balance of cash and equity and is divided into three core elements: base salary, annual cash incentive compensation, and long-term equity incentive compensation. The Compensation Committee offers long-term equity incentive opportunities that encourage stock ownership. Generally, the amount of compensation realizable from prior compensation does not directly impact the level at which future pay opportunities are set. However, when granting equity awards, the Compensation Committee reviews and considers the number of outstanding and previously granted equity awards. In addition to promoting share ownership, our executive compensation objectives and philosophy focus on rewarding performance. This means that stockholder returns along with corporate and individual performance, both short-term and long-term, determine a significant portion of the executives’ pay opportunity.

Role of the Compensation Committee

The Compensation Committee oversees the administration of the executive compensation program and determines the compensation of our executive officers. The Compensation Committee is solely composed of non-management directors, all of whom meet the independence requirements of applicable Nasdaq rules.

Process for Determining Executive Compensation

The Compensation Committee reviews executive total compensation levels, including equity grants, during the first quarter of each fiscal year. Our CEO’s target total compensation package is set by the Compensation Committee during an executive session, where the CEO is not present, based on the Compensation Committee’s review of competitive information and assessment of the CEO’s individual performance in conjunction with the Company’s financial and operating performance. Target total compensation recommendations for other executive officers are made by the CEO who works closely with the Compensation Committee, after reviewing the executive’s and the Company’s performance in conjunction with the executive’s responsibilities and experience when compared to competitive information. The Compensation Committee then determines the compensation of these executive officers.

Anti-Hedging Policy

Our anti-hedging policy prohibits the purchase of any financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds), or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s common stock. The foregoing restriction applies to all shares of the Company’s common stock owned directly or indirectly by directors, officers, employees or agents (such as consultants or independent contractors) of the Company and entities (such as trusts, limited partnerships and corporations) over which such individuals have or share voting or investment control, as well as their respective family members and others in their households and their designees, including shares granted to an individual by the Company as part of his or her compensation and all other shares held, directly or indirectly, by such individual.

Equity Incentive Plans

A key component of an executive officer’s compensation is equity incentive awards, which are critical to focusing our executives on the Company’s long-term growth and creating stockholder value. The AudioEye, Inc. 2019 Equity Incentive Plan, as amended (the “2019 Plan”), and the AudioEye, Inc. 2020 Equity Incentive Plan (the “2020 Equity Plan”) are designed to attract and retain exceptional leaders and enable them to behave

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like owners. In 2021, we granted restricted stock unit awards, or RSUs, and performance stock units, or PSUs, to our executive officers. An RSU is a right to receive the fair market value of a specified number of shares of our common stock, payable in cash, shares, or a combination of both, that vests at such times, in such installments and subject to such conditions as may be determined by the Compensation Committee. A PSU is a right to receive the fair market value of a specified number of shares of our common stock, payable in cash, shares, or a combination of both, that is earned if and to the extent certain performance goals established by the Compensation Committee are achieved, and will vest at such times and in such installments as determined by the Compensation Committee. Until it vests, an RSU and a PSU is subject to restrictions and the possibility of forfeiture. Following the vesting of an RSU or a PSU, settlement of the award and payment to the participant will be made at such time as determined by the Compensation Committee. RSUs and PSUs will be subject to such terms and conditions, consistent with the other provisions of the 2019 Plan or 2020 Equity Plan, as applicable, as may be determined by the Compensation Committee. The Compensation Committee may provide for the payment of dividend equivalents on RSUs and other stock-based awards, but any such dividend equivalents will be subject to the same restrictions and risk of forfeiture as the underlying units or other share equivalents to which such dividend equivalents relate.

Summary Compensation Table for Fiscal Year 2021

The table below summarizes the compensation paid to or earned by our named executive officers for the fiscal years ended December 31, 2021 and December 31, 2020.

Name and Principal Position	Year		Salary ($)		Bonus ($)		Stock Awards(1) ($)		All Other Compensation ($)		Total ($)
David Moradi(2) Chief Executive Officer and Director		2021		1		—		2,773,500(3)		—		2,773,500
David Moradi(2) Chief Executive Officer and Director		2020		1		—		4,934,293(4)		—		4,934,293
Christopher Hundley, President		2021		273,269		—		1,603,722(5)		—		1,876,991
Kelly Georgevich Chief Financial Officer		2021		156,198		26,575		574,671(6)		—		757,444

(1)

Reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 (“ASC 718”) for stock awards granted during the reported fiscal years, plus the incremental fair value of any modified or canceled award, computed as of the modification or cancellation date in accordance with ASC 718. For additional information regarding the assumptions we used to calculate the amounts in these columns, please refer to Note 2 to our audited consolidated financial statements included in our 2021 Annual Report filed with the SEC on March 11, 2022. Grant date fair value of performance stock units (“PSUs”) was based on the assumption that the maximum performance is achieved.

(2)

Mr. Moradi was appointed Interim Chief Executive Officer and Chief Strategy Officer in August 2020.

(3)

On March 11, 2021, the Compensation Committee granted Mr. Moradi PSUs with respect to 100,000 shares of the Company’s common stock and, on November 11, 2021, the Compensation Committee canceled the grant at Mr. Moradi’s request. Total stock compensation expense recognized in connection with the canceled PSUs totaled $1,311,000, which represents the grant date fair value of the 50,000 PSUs with market conditions.

(4)

On May 20, 2020, the Compensation Committee granted each of our non-employee directors then serving on the Board an award of RSUs with respect to 11,280 shares of the Company’s common stock. Mr. Moradi was a non-employee director on that date. Such RSUs will vest on the first anniversary of the grant date, provided Mr. Moradi’s service does not terminate prior to such date. The settlement date for any RSUs that become vested will be the first to occur of (x) the 7th anniversary of the grant date or (y) the date on which the Company undergoes a change of control within the meaning of Treasury Regulation Section 1.409A-3(i)(5). On May 20, 2020, the Compensation Committee also granted Mr. Moradi an award of RSUs with respect to 17,857 shares of the Company’s common stock, which award vested on November 8, 2020 and was settled on November 20, 2020. On August 20, 2020, the Compensation Committee granted Mr. Moradi PSUs with respect to 260,000 shares of the Company’s common stock, for which vesting terms and performance conditions are described below in connection

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with Mr. Moradi’s employment agreement. The grant date fair value of these PSUs that is included in the amount in the table assumes that the maximum performance is achieved.

(5)

Mr. Hundley commenced employment with the Company in March 2021 as the Company’s Chief Technology Officer. On April 23, 2021, Mr. Hundley received an award of RSUs with respect to 35,335 shares of the Company’s common stock that will vest in three equal annual installments on each of the first three anniversaries of his employment commencement date. On June 15, 2021, Mr. Hundley received an award of RSUs with respect to 30,581 shares of the Company’s common stock that will vest in three equal annual installments on each of the first three anniversaries of the grant date. On April 23, 2021, Mr. Hundley also received an award of PSUs with respect to 23,556 shares of the Company’s common stock scheduled to vest over the three years following his employment commencement date based upon performance goals to be established by the Compensation Committee. The amount included in the table related to such PSUs represent (i) $151,406 in grant date fair value of 6,110 PSUs, plus (ii) $42,465 in incremental fair value associated with the modification of these 6,110 PSUs to fully vest on December 19, 2021. Total stock compensation expense recognized in connection with such 6,110 PSUs totaled $42,465.The performance goals with respect to the remaining 17,446 PSUs have not yet been established.

(6)

Ms. Georgevich commenced employment with the Company in June 2021 as Chief Financial Officer. On June 21, 2021, Ms. Georgevich received an award of RSUs with respect to 28,852 shares of the Company’s common stock that will vest over a three-year period as follows: one-third shall vest on the first anniversary of the grant date and the remaining two-thirds shall vest quarterly over the next two years, in equal installments, starting at the end of the first quarter occurring after the first anniversary of the grant date, provided that Ms. Georgevich is continuously employed on each of those vesting dates. On June 21, 2021, Ms. Georgevich also received an award of PSUs with respect to 28,852 shares of the Company’s common stock scheduled to vest over the three years following the grant based upon performance goals to be established by the Compensation Committee. The grant date fair value of 5,112 of such PSUs is included in the amount in the table and all 5,112 PSUs vested on December 19, 2021. The performance goals with respect to the remaining 23,740 PSUs have not yet been established.

Summary of Compensatory Arrangements with Named Executive Officers, including in connection with a Termination or a Change in Control

Employment Agreement with David Moradi. On August 20, 2020, Mr. Moradi and the Company entered into an Employment Agreement pursuant to which Mr. Moradi will receive an annual salary of $1. On April 5, 2022, Mr. Moradi and the Company entered into an Amended and Restated Employment Agreement (the “Moradi Employment Agreement”).

On August 20, 2020, Mr. Moradi received 260,000 PSUs that were granted under the 2019 Plan, as amended. Each PSU represents a contingent right to receive a share of the Company’s common stock upon vesting of the PSU. The PSUs will vest based on the Company’s achievement of performance conditions relating to its monthly recurring revenue and stock price as follows:

Performance Condition	Number of Performance Stock Units Vesting if Performance Condition Achieved
Monthly recurring revenue greater than or equal to $3.0 million for two consecutive calendar months		55,000
Monthly recurring revenue greater than or equal to $5.0 million for two consecutive calendar months		50,000
Volume Weight Average Price (“VWAP”) greater than or equal to $25 on The Nasdaq Stock Market LLC (“Nasdaq”) over 20 consecutive trading days		55,000
VWAP greater than or equal to $50 on Nasdaq over 20 consecutive trading days		50,000
VWAP greater than or equal to $100 on Nasdaq over 20 consecutive trading days		50,000

Any PSUs that have not vested on or prior to August 20, 2025 will be forfeited. Mr. Moradi must be serving as the Company’s Chief Executive Officer as of the date the applicable performance condition is

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achieved for the related PSUs to vest. On January 15, 2021, 55,000 PSUs vested as a result of the 20-VWAP for our common stock on Nasdaq being greater than $25.

On March 11, 2021, the Compensation Committee granted Mr. Moradi PSUs with respect to 100,000 shares of the Company’s common stock and, on November 11, 2021, the Compensation Committee canceled the grant at Mr. Moradi’s request. The Moradi Employment Agreement provides that, subject to approval by our stockholders of the increase in the number of shares authorized for issuance under the 2020 Equity Plan, Mr. Moradi will receive a grant of 400,000 RSUs, which will vest as follows: (i) 111,706 RSUs on January 20, 2023; (ii) 111,706 RSUs on January 20, 2024; (iii) 111,706 RSUs on January 20, 2025; and (iv) 64,882 RSUs on August 20, 2025, subject to his continued employment. The Moradi Employment Agreement provides that in the event of a Change in Control that involves a Corporate Transaction (each as defined in the 2020 Equity Plan), the RSUs will become fully vested immediately prior to the effective time of such Change in Control.

The Moradi Employment provides that any unvested RSUs and PSUs granted thereunder will become fully vested if, on or prior to August 20, 2025, Mr. Moradi’s employment is terminated by the Company without cause or upon his death. The Moradi Employment Agreement also provides that the Company will pay Mr. Moradi a gross-up payment for any excise tax imposed under Section 4999 of the Code and any interest or penalties with respect to such excise tax, plus the amount necessary to put Mr. Moradi in the same after-tax position that he would have been in if he had not incurred any tax liability under Section 4999 of the Code, in the event that any payments, rights, benefits, distributions, or entitlements provided or to be provided by the Company or any of its affiliates to Mr. Moradi or for his benefit pursuant to the terms of the Moradi Employment Agreement, the PSU agreement, the RSU agreement or otherwise would constitute parachute payments within the meaning of Section 280G of the Code.

Offer Letter with Christopher Hundley. Mr. Hundley is party to an Offer Letter with the Company, dated March 16, 2021 and amended September 17, 2021, which provides for an annual base salary of $350,000.

Employment Agreement with Kelly Georgevich. In connection with her employment, the Company and Ms. Georgevich executed an Executive Employment Agreement (the “Georgevich Employment Agreement”) on June 10, 2021. Beginning on the commencement of employment, Ms. Georgevich became part-time employee until July 26, 2021, at which point she became a full-time employee of the Company. Under the employment agreement, Ms. Georgevich will receive a base annual salary of $325,000 (pro-rated during her part-time employment). She shall also be eligible to receive an annual performance bonus of $50,000 (pro-rated for calendar year 2021 based on June 21, 2021 (the “Commencement Date”)).

Under the Georgevich Employment Agreement, if the Company terminates Ms. Georgevich’s employment for a reason other than death, disability, or Cause (as defined in the Georgevich Employment Agreement), or if Ms. Georgevich terminates her employment for Good Reason (as defined in the Georgevich Employment Agreement), then the Company shall pay or provide all of the following: (i) reimbursement of any and all reasonable business expenses paid or incurred through the termination date; (ii) receipt of any accrued but unused vacation through the termination date in accordance with Company policy; (iii) receipt of any earned but unpaid base salary and performance bonus accrued through her last date of employment with the Company; and (iv) subject to Ms. Georgevich’s satisfying certain release conditions described in the Employment Agreement, receipt of an amount equal to a portion of the her base salary as set forth below and certain medical benefits as described below (the “Separation Payment”).

The base salary portion of the Separation Payment described above shall be, (i) in the event Ms. Georgevich’s separation of employment prior to the one-year anniversary of the Commencement Date, 12 months of her base salary; and, (ii) in the event her separation of employment at any time on or after the first anniversary of the Commencement Date, six months of her base salary (in each case, at the rate that was in effect at the time of termination). Additionally, subject to Ms. Georgevich’s timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) with respect to the Company’s group health insurance plans in which she participated immediately prior to the termination date (“COBRA Continuation Coverage”), the Company will pay the cost of COBRA Continuation Coverage for Ms. Georgevich and her eligible dependents until the earliest of (i) Ms. Georgevich and her eligible dependents, as the case may be, ceasing to be eligible under COBRA; (ii) the date upon which she and her eligible dependents become covered under similar plans; (iii) in the case of her employment termination prior to the one-year anniversary of the Commencement Date, 12 months following the

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termination date; or (iv) in the case of her termination on or after the one-year anniversary of the Commencement Date, six months following the termination date.

Health, Welfare and Retirement Benefits. Our named executive officers are eligible to participate in our broad-based employee benefit plans, including a tax-qualified Section 401(k) savings plan, that are generally provided for all of our full-time employees. Our executive officers may participate in such plans on the same basis as all of our other full-time employees.

Outstanding Equity Awards at 2021 Fiscal Year End

The following table sets forth certain information as of December 31, 2021 concerning outstanding equity awards, including both awards subject to market-based and performance conditions and time-based awards, held as of such date by our named executive officers:

	Stock Awards
Name	Number of shares or units of stock that have not vested (#)		Market value of shares or units of stock that have not vested ($)(1)		Equity Incentive Plan Awards: Number of unearned shares, units or other rights that have not vested (#)(2)		Equity Incentive Plan Awards: Market or payout value of unearned shares, units or other rights that have not vested ($)(1)
David Moradi		—		—		205,000		1,439,100
Christopher Hundley(3)		65,916		462,730		17,446		122,471
Kelly Georgevich(4)		28,852		202,541		23,740		166,655

(1)

The market value of unvested stock awards is calculated using a value of $7.02 per share, which was the closing price of our common stock on the Nasdaq Capital Market on December 31, 2021.

(2)

Reflects PSUs that are subject to achievement of performance goals that had not been earned as of December 31, 2021. The number of PSUs shown assumes maximum performance is achieved.

(3)

On April 23, 2021, the Company granted to Mr. Hundley 35,335 RSUs that vest in three approximately equal annual installments on each of the first three anniversaries of his employment commencement date of March 22, 2021. On June 15, 2021, Mr. Hundley received an award of RSUs with respect to 30,581 shares of the Company’s common stock that will vest in three equal annual installments on each of the first three anniversaries of the grant date. On April 23, 2021, Mr. Hundley also received an award of PSUs with respect to 23,556 shares of the Company’s common stock scheduled to vest over the three-years following his employment commencement date based upon performance goals to be established by the Compensation Committee, of which 6,110 PSUs vested on December 19, 2021.

(4)

On June 21, 2021, Ms. Georgevich received an award of RSUs with respect to 28,852 shares of the Company’s common stock that will vest over a three-year period as follows: one-third shall vest on the first anniversary of the grant date and the remaining two-thirds shall vest quarterly over the next two years, in equal installments, starting at the end of the first quarter occurring after the first anniversary of the grant date, provided that Ms. Georgevich is continuously employed on each of those vesting dates. On June 21, 2021, Ms. Georgevich also received an award of PSUs with respect to 28,852 shares of the Company’s common stock scheduled to vest over the three-years following the grant based upon performance goals to be established by the Compensation Committee, of which 5,112 PSUs vested on December 19, 2021.

Additional Potential Payments for Accelerated Equity Awards

The 2019 Plan provides for accelerated vesting of time-based equity awards and the 2020 Equity Plan provides for vesting of time-based equity awards or performance-based equity awards based on both (1) the occurrence of a change in control and (2) an accompanying involuntary termination of service without cause or a termination for good reason, within 12 months after the change in control (other than in the event awards

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are not continued, assumed, or replaced in connection with a corporate transaction, in which case they will accelerate upon the change in control, or in the event the award agreement provides otherwise). For a change in control not involving a corporate transaction, both the 2019 Plan and the 2020 Equity Plan provide Compensation Committee with discretion to accelerate vesting of outstanding equity awards. Pursuant to the terms of the performance-based RSU award agreements, in the event of either type of change of control, the number of units that will accelerate will be based on actual performance through the date of the change in control or termination of employment, as applicable. In addition, the terms of the PSUs granted to Mr. Moradi in August 2020 provide that any unvested PSUs under that award will become fully vested if, on or prior to August 20, 2025, Mr. Moradi’s employment is terminated by the Company without cause.

If any such accelerated vesting had occurred on December 31, 2021, then each of our NEOs serving on such date would have had RSUs and PSUs accelerate having the values set forth in the table below. No other equity awards held by our NEOs as of such date would have had any value upon acceleration. The value of the accelerated RSUs and PSUs set forth in the table is based on the $7.02 closing price of our stock on December 31, 2021.

Name	Value of Accelerated RSUs and PSUs ($)
David Moradi		1,439,100
Christopher Hundley		585,201
Kelly Georgevich		369,196

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ADVISORY VOTE ON EXECUTIVE COMPENSATION (PROPOSAL NO. 2)

Proposal No. 2 is a proposal to approve, on an advisory basis, the 2021 compensation of the Company’s named executive officers as disclosed in this proxy statement.

In accordance with Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Section 14A of the Exchange Act, we are providing our stockholders the opportunity to vote on a non-binding, advisory resolution to approve the 2021 compensation of our named executive officers as described in this proxy statement (commonly referred to as a “Say-on-Pay” vote). In accordance with the recommendation of the Board and the preference expressed by our stockholders at the 2019 Annual Meeting, the Company holds an advisory vote on executive compensation annually.

Our executive compensation program has been designed to pay for performance and align our compensation programs with business strategies focused on long-term growth and creating value for stockholders while also paying competitively and focusing on total compensation. Our executive compensation programs are designed to attract, motivate and retain highly qualified executive officers who are able to achieve corporate objectives and create stockholder value. The Compensation Committee believes that our executive compensation program reflects a strong pay-for-performance philosophy without promoting excessive risk and is well aligned with our stockholders’ long-term interests.

The Board strongly endorses our executive compensation program and recommends that stockholders vote in favor of the following resolution:

RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K in the Proxy Statement for the Company’s 2022 Annual Meeting of Stockholders, including the compensation tables and narrative discussion, be, and hereby is, approved.

Because the vote on this proposal is advisory, it will not be binding on the Board of Directors or the Compensation Committee, and neither the Board of Directors nor the Compensation Committee will be required to take any action as a result of the outcome of the vote on this proposal. However, the Compensation Committee will consider the outcome of the vote when determining future executive compensation arrangements.

The Board unanimously recommends that you vote FOR Proposal No. 2 to approve, on an advisory basis, the 2021 compensation of our named executive officers as disclosed in this proxy statement. If not otherwise specified, proxies will be voted “FOR” the approval of AudioEye’s executive compensation.

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APPROVAL OF AMENDMENTS TO THE 2020 EQUITY PLAN (PROPOSAL NO. 3)

Proposal No. 3 is to approve amendments to the AudioEye, Inc. 2020 Equity Incentive Plan to increase the number of shares of Common Stock authorized for issuance under the 2020 Equity Plan, and the number of such shares that can be delivered in respect of incentive stock options, by 1,500,000 shares.

On October 29, 2020, the Board, at the recommendation of the Compensation Committee, approved the 2020 Equity Plan, and on December 9, 2020, our stockholders approved the 2020 Equity Plan at a special meeting of stockholders.

On April 4, 2022, the Board, based on the recommendation of the Compensation Committee, approved the following amendments to the 2020 Equity Plan, subject to stockholder approval:

•

an increase in the maximum number of shares that may be delivered under the 2020 Equity Plan by an additional 1,500,000 shares, from 1,000,000 shares to 2,500,000 shares; and

•

a corresponding increase in the maximum number of shares that may be delivered with respect to incentive stock options granted under the 2020 Equity Plan by an additional 1,500,000 shares, from 1,000,000 shares to 2,500,000 shares;

(collectively, the “Plan Amendments”). A copy of the 2020 Equity Plan, as proposed to be amended, is attached to this proxy statement as Appendix A and is marked to show the proposed Plan Amendments.

Stockholder Approval and Board Recommendation

Stockholder approval of the Plan Amendments is being sought in order to (i) satisfy the stockholder approval requirements of the Nasdaq Stock Market and (ii) obtain stockholder approval of the number of shares that may be subject to incentive stock options under Internal Revenue Code (“Code”) Section 422.

As of March 23, 2022, 167,959 shares remained available for issuance as new awards under the 2020 Equity Plan. If we do not increase the shares available for issuance under the 2020 Equity Plan, based on historical share usage rates and compensation practices, we may not have a sufficient number of shares authorized to grant equity awards in fiscal 2022. In that event, we would lose an important compensation tool aligned with stockholder interests to attract, motivate and retain highly qualified talent.

As is customary for high growth technology companies like ours, providing equity compensation to key employees and advisors has been an essential compensation tool to attract talented service providers, who expect to share in the value they create for our stockholders. Equity compensation continues to be a key component of providing competitive compensation needed to attract and retain top talent in the technology industry and grow the Company.

In the event the Plan Amendments are not approved by our stockholders, we would lose an important compensation tool aligned with stockholder interests to attract, motivate and retain highly qualified talent. In setting the number of shares by which to increase the share reserve under the 2020 Equity Plan, we considered our estimated going forward competitive usage needs for existing employees and potential new hires for approximately the next two to three years. However, our share usage depends on the future price of our common stock, competitive market practices, acquisition activity, award amounts, hiring, promotion activity and retention needs. As a result, the shares available for issuance under the Plan Amendments could last for a longer or shorter period of time depending on those factors. Based on these considerations, 1,500,000 additional shares are being proposed to be made available for issuance under the Plan Amendments, which the Compensation Committee and Board believe represents an appropriate amount at this time.

Each year, the Compensation Committee and our management review our overall compensation strategy and determine allocations of cash and equity compensation in light of our pay for performance philosophy. We believe that equity compensation is critical in motivating key employees and that it effectively aligns employee compensation with stockholder interests. We are also committed to effectively managing our share reserves for equity compensation while minimizing stockholder dilution. If the Plan Amendments are not approved and we are unable to grant equity compensation in the future, we may need to consider other compensation alternatives, such as increasing cash compensation, and we would be at a severe disadvantage if

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we could not use equity awards covering a meaningful number of shares to recruit and retain key talent in this competitive market for human capital.

The Board recommends that our stockholders vote FOR the amendments to the 2020 Equity Plan because the 2020 Equity Plan includes a number of features that we believe are consistent with the interests of our stockholders and sound corporate governance practices, and the Plan Amendments will provide us with a share reserve that will enable us to continue to provide a competitive mix of compensation to key employees and potential new employees.

Key Compensation Practices

The 2020 Equity Plan includes a number of features that we believe are consistent with the interests of our stockholders and sound corporate governance practices, including the following:

•

No repricing of underwater options or stock appreciation rights without stockholder approval. The 2020 Equity Plan prohibits, without stockholder approval, actions to reprice, replace, or repurchase options or stock appreciation rights (“SARs”) when the exercise price per share of an option or SAR exceeds the fair market value of the underlying shares.

•

No discounted option or SAR grants. The 2020 Equity Plan requires that the exercise price of options or SARs be at least equal to the fair market value of our common stock on the date of grant (except in the limited case of “substitute awards” as described below).

•

No liberal share recycling. We may not add back to the 2020 Equity Plan’s share reserve any shares that are delivered or withheld to pay the exercise price of an option award or to satisfy a tax withholding obligation in connection with any awards, shares that we repurchase using option exercise proceeds and shares subject to a SAR award that are not issued in connection with the stock settlement of that award upon its exercise.

•

No liberal definition of “change in control.” No change in control would be triggered by stockholder approval of a business combination transaction, the announcement or commencement of a tender offer or any Board assessment that a change in control may be imminent.

•

“Double trigger” acceleration of equity awards upon a change in control. The 2020 Equity Plan provides for vesting of time-based equity awards or performance-based equity awards based on both (1) the occurrence of a change in control and (2) an accompanying involuntary termination of service without cause or a termination for good reason, within 12 months after the change in control (other than in the event awards are not continued, assumed, or replaced in connection with a corporate transaction, in which case they will accelerate upon the change in control, or in the event the award agreement provides otherwise).

•

Limits on dividends and dividend equivalents. The 2020 Equity Plan prohibits the payment of dividend equivalents on stock options and SARs, and requires that any dividends and dividend equivalents payable or credited on unvested awards other than options and SARs (“full value awards”) must be subject to the same restrictions and risk of forfeiture as the underlying shares or share equivalents.

Description of the 2020 Equity Plan

The major features of the 2020 Equity Plan are summarized below. The summary is qualified in its entirety by reference to the full text of the 2020 Equity Plan, which is attached to this proxy statement as Appendix A and is marked to show the proposed Plan Amendments.

Eligible Participants. Employees, consultants and advisors of the Company or any subsidiary, as well as non-employee directors of the Company, will be eligible to receive awards under the 2020 Equity Plan. As of March 23, 2022, there were 124 employees, three non-employee directors and an indeterminate number of consultants and advisors who are eligible to receive awards under the 2020 Equity Plan.

Administration. The 2020 Equity Plan is administered by the Compensation Committee. To the extent not inconsistent with applicable law or stock exchange rules, the Compensation Committee may delegate its duties, power and authority under the 2020 Equity Plan to any one or more of its members, or, with respect to awards to participants who are not themselves our directors or executive officers, to one or more of our

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directors or executive officers or to a committee of the Board comprised of one or more directors. The Compensation Committee may also delegate non-discretionary administrative responsibilities in connection with the 2020 Equity Plan to such other persons as it deems advisable. The full Board will perform the duties and have the responsibilities of the Committee with respect to awards under the 2020 Equity Plan that are made to our non-employee directors.

The Compensation Committee has the authority to determine the persons to whom awards will be granted, the timing, type and number of shares covered by each award, and the terms and conditions of the awards. There is no minimum vesting period required for awards granted under the 2020 Equity Plan. The Compensation Committee may also establish and modify rules to administer the 2020 Equity Plan, adopt sub-plans applicable to certain awards, interpret the 2020 Equity Plan and any related award agreement, cancel or suspend an award, accelerate the vesting of an award, extend the exercise period of an award and otherwise modify or amend the terms of outstanding awards to the extent permitted under the 2020 Equity Plan. Unless an amendment to the terms of an award is necessary to comply with applicable laws or stock exchange rules or any compensation recovery policy, a participant whose rights would be materially impaired by such an amendment must consent to it.

Except in connection with equity restructurings and other situations in which share adjustments are specifically authorized, the 2020 Equity Plan prohibits us from repricing any outstanding option or SAR awards without the prior approval of our stockholders. For these purposes, a “repricing” includes amending the terms of an option or SAR award to lower the exercise price, canceling an option or SAR award in conjunction with granting a replacement option or SAR award with a lower exercise price, canceling an option or SAR award in exchange for cash, other property or grant of a new full value award at a time when the per share exercise price of the option or SAR award is greater than the fair market value of a share of our common stock, or otherwise making an option or SAR award subject to any action that would be treated under accounting rules as a “repricing.”

Available Shares and Limitations on Awards. Currently, a maximum of 1,000,000 shares of our common stock may be the subject of awards and issued under the 2020 Equity Plan. The Plan Amendments would increase that amount by an additional 1,500,000 shares. The shares of common stock issuable under the 2020 Equity Plan may come from authorized and unissued shares or treasury shares. Full value awards, options and SARs granted under the 2020 Equity Plan will count as one share against the 2020 Equity Plan’s authorized share reserve. The share limitations under the 2020 Equity Plan are subject to adjustment for changes in our corporate structure or shares, as described below.

Any shares of common stock subject to an award under the 2020 Equity Plan that expires, is canceled or forfeited, or is settled for cash will, to the extent of such expiration, cancellation, forfeiture or cash settlement, automatically replenish the 2020 Equity Plan share reserve and become available for future awards. Any shares tendered or withheld to pay the exercise price or satisfy a tax withholding obligation in connection with any award, any shares repurchased by the Company using option exercise proceeds, and any shares subject to a SAR award that are not issued in connection with the stock settlement of that award upon its exercise shall not become available for future awards or replenish the 2020 Equity Plan share reserve.

Awards that may be settled solely in cash will not reduce the share reserve. Awards granted or shares of our common stock issued under the 2020 Equity Plan upon the assumption of, or in substitution or exchange for, outstanding equity awards previously granted by an entity acquired by us or any of our subsidiaries (referred to as “substitute awards”) will not reduce the share reserve under the 2020 Equity Plan. Additionally, if a company acquired by us or any of our subsidiaries has shares available under a pre-existing plan approved by its stockholders and not adopted in contemplation of such acquisition, the shares available for grant pursuant to the terms of that pre-existing plan may be used for awards under the 2020 Equity Plan and will supplement the share reserve under the 2020 Equity Plan, but only if the awards are made to individuals who were not employed by or providing services to us or any of our subsidiaries immediately prior to such acquisition.

Limits on Awards to Non-Employee Directors. The maximum number of shares subject to awards granted to any non-employee director during any calendar year, together with any cash fees paid to such non-employee director during such calendar year, may not exceed a total value of $400,000.

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Share Adjustment Provisions. If certain transactions with our stockholders occur that cause the per share value of our common stock to change, such as stock splits, spin-offs, stock dividends, rights offerings or certain recapitalizations (referred to as “equity restructurings”), the Compensation Committee will make such adjustments as it deems equitable and appropriate to: (i) the aggregate number and kind of shares or other securities issued or reserved for issuance under the 2020 Equity Plan, (ii) the number and kind of shares or other securities subject to outstanding awards, (iii) the exercise price of outstanding options and SARs, and (iv) award limitations prescribed by the 2020 Equity Plan. Other types of transactions may also affect our common stock, such as reorganizations, mergers, consolidations or liquidations. If there is such a transaction and the Compensation Committee determines that adjustments of the type previously described in connection with equity restructurings would be appropriate to prevent any dilution or enlargement of benefits under the 2020 Equity Plan, the Compensation Committee will make such adjustments as it may deem equitable.

Types of Awards. The 2020 Equity Plan permits us to award stock options, SARs, restricted stock awards, stock unit awards, and other stock-based awards and cash incentive awards to eligible recipients. These types of awards are described in more detail below.

Options. Employees of our Company or any subsidiary may be granted options to purchase common stock that qualify as “incentive stock options” within the meaning of Section 422 of the Code, and any eligible recipient may be granted options to purchase common stock that do not qualify as incentive stock options, referred to as “nonqualified stock options.” The per share exercise price to be paid by a participant at the time an option is exercised may not be less than 100% of the fair market value of one share of our common stock on the date of grant, unless the option is granted as a substitute award as described earlier, and except that the exercise price of an incentive stock option granted to any employee who owns more than 10% of the voting power of all classes of stock in our company or a subsidiary shall not be less than 110% of the fair market value of one share of our common stock on the date of grant. “Fair market value” under the 2020 Equity Plan as of any date means the closing sale price of a share of our common stock on the Nasdaq Capital Market on that date. As of March 23, 2022, the closing sale price of a share of our common stock on the Nasdaq Capital Market was $7.35.

The total purchase price of the shares to be purchased upon exercise of an option will be paid by the participant in cash unless the Compensation Committee allows exercise payments to be made, in whole or in part, (i) by means of a broker-assisted sale and remittance program, (ii) by delivery to us (or attestation as to ownership) of shares of common stock already owned by the participant, or (iii) by a “net exercise” of the option in which a portion of the shares otherwise issuable upon exercise of the option are withheld by us. Any shares delivered or withheld in payment of an exercise price will be valued at their fair market value on the exercise date.

An option will vest and become exercisable at such time, in such installments and subject to such conditions as may be determined by the Compensation Committee, and no option may have a term greater than 10 years from its date of grant, provided that the term of an incentive stock option granted to any employee who owns more than 10% of the voting power of all classes of stock in our company or a subsidiary shall not be more than 5 years. No dividends or dividend equivalents may be paid or credited with respect to shares subject to an option award.

The aggregate fair market value of shares of our common stock with respect to which incentive stock options granted to any participant may first become exercisable during any calendar year may not exceed $100,000. Any incentive stock options that become exercisable in excess of this amount will be treated as nonqualified stock options. The maximum number of shares that may be issued upon the exercise of incentive stock option awards under the 2020 Equity Plan is currently 1,000,000, and is proposed to be increased by an additional 1,500,000 shares pursuant to the Plan Amendments.

Stock Appreciation Rights. A SAR award provides the right to receive a payment from us equal to the difference between (i) the fair market value as of the date of exercise of the number of shares of our common stock as to which the SAR is being exercised, and (ii) the aggregate exercise price of that number of shares. The Compensation Committee determines whether payment will be made in shares of our common stock, cash or a combination of both. The exercise price per share of a SAR award will be determined by the Compensation Committee, but may not be less than 100% of the fair market value of one share of our common stock on the date of grant, unless the SAR is granted as a substitute award as described earlier. No

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dividends or dividend equivalents may be paid or credited with respect to shares subject to a SAR award. A SAR award may not have a term greater than 10 years from its date of grant, and will be subject to such other terms and conditions, consistent with the terms of the 2020 Equity Plan, as may be determined by the Compensation Committee.

Restricted Stock Awards. A restricted stock award is an award of our common stock that vests at such times and in such installments as may be determined by the Compensation Committee. Until it vests, the shares subject to the award are subject to restrictions on transferability and the possibility of forfeiture. The Compensation Committee may impose such restrictions or conditions to the vesting of restricted stock awards as it deems appropriate, including that the participant remain continuously in our service for a certain period or that we, or any of our subsidiaries or business units, satisfy specified performance goals. Any dividends or distributions payable with respect to shares that are subject to the unvested portion of a restricted stock award will be subject to the same restrictions and risk of forfeiture as the shares to which such dividends or distributions relate. Unless otherwise provided in an award agreement, participants are entitled to vote restricted shares prior to the time they vest.

Stock Unit Awards. A stock unit award is a right to receive the fair market value of a specified number of shares of our common stock, payable in cash, shares, or a combination of both, that vests at such times, in such installments and subject to such conditions as may be determined by the Compensation Committee, including the satisfaction of specified performance goals. Until it vests, a stock unit award is subject to restrictions and the possibility of forfeiture. Following the vesting of a stock unit award, settlement of the award and payment to the participant will be made at such time as determined by the Compensation Committee. Stock unit awards will be subject to such terms and conditions, consistent with the other provisions of the 2020 Equity Plan, as may be determined by the Compensation Committee. The Compensation Committee may provide for the payment of dividend equivalents on stock unit awards and other stock-based awards, but any such dividend equivalents will be subject to the same restrictions and risk of forfeiture as the underlying units or other share equivalents to which such dividend equivalents relate.

Other Stock-Based Awards. The Compensation Committee may grant awards of common stock and other awards that are valued by reference to and/or payable in shares of our common stock under the 2020 Equity Plan. The Compensation Committee has discretion in determining the terms and conditions of such awards.

Cash Incentive Awards. Cash incentive awards are performance-based awards, the payment of which are contingent upon the achievement of one or more specified performance goals over a specified performance period. The Compensation Committee has discretion in determining the dollar-denominated amounts, terms and conditions of such awards. Payment of the settlement amount of a cash incentive award may be made in the form of cash, shares of our common stock under the 2020 Equity Plan, other forms of awards under the 2020 Equity Plan or any combination of the foregoing.

Transferability of Awards. In general, no right or interest in any award under the 2020 Equity Plan may be assigned, transferred, exchanged or encumbered by a participant, voluntarily or involuntarily, except by will or the laws of descent and distribution. However, the Compensation Committee may provide that an award (other than an incentive stock option) may be transferable by gift to a participant’s family member or pursuant to a domestic relations order. Any permitted transferee of such an award will remain subject to all the terms and conditions of the award applicable to the participant.

Change in Control. If a change in control of the Company that involves a corporate transaction occurs, then the consequences will be as described below, unless otherwise provided in an applicable award agreement or another written agreement between the participant and the Company. If outstanding awards are continued, assumed or replaced by the surviving or successor entity in connection with a corporate transaction, and if within 12 months after the corporate transaction a participant’s employment or other service is involuntarily terminated without cause or the participant voluntarily terminates his or her employment or other service for good reason, (i) each of the participant’s outstanding options and SARs will become exercisable in full and remain exercisable for one year, and (ii) each of the participant’s unvested full value awards will fully vest. For these purposes, a performance-based full value award will be considered fully vested if the performance goals are deemed to have been satisfied at the target level of performance and the vested portion of the award at that

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level of performance is proportionate to the portion of the performance period elapsed prior to the participant’s termination of employment or other service.

If any outstanding award is not continued, assumed or replaced in connection with a change in control involving a corporate transaction, then (i) all outstanding options and SARs will become fully exercisable for a period of time prior to the effective time of the corporate transaction and will then terminate at the effective time of the corporate transaction, and (ii) all full value awards will fully vest immediately prior to the effective time of the corporate transaction. In this scenario, performance-based full value awards will be considered fully vested in the same manner as described above, except that the proportionate vesting amount will be determined with respect to the portion of the performance period that elapsed prior to the corporate transaction. Alternatively, if outstanding awards are not continued, assumed or replaced, the Committee may elect to cancel such awards in exchange for a payment with respect to each award in an amount equal to the excess, if any, between the fair market value of the shares subject to the award immediately prior to the effective date of such corporate transaction (which may be the fair market value of the consideration to be received in the corporate transaction for the same number of shares) over the aggregate exercise price (if any) for the shares subject to such award (or, if there is no excess, such award may be terminated without payment).

Unless otherwise provided in an applicable award agreement or another written agreement between the participant and the Company, if a change in control of the Company occurs that does not involve a corporate transaction, all awards will continue with their terms; provided, however, if within 12 months after the change of control, a participant is involuntarily terminated from service for reasons other than cause or voluntarily terminates his or her service for good reason, then (i) outstanding options and SARs that are not yet fully exercisable shall immediately become exercisable in full and shall remain exercisable for one year following the participation’s termination, and (ii) each of the participant’s unvested full value awards will fully vest. For these purposes, a performance-based full value award will be considered fully vested if the performance goals are deemed to have been satisfied at the target level of performance and the vested portion of the award at that level of performance is proportionate to the portion of the performance period elapsed prior to the participant’s termination of employment or other service.

For purposes of the 2020 Equity Plan, the following terms have the meanings indicated:

“Cause” with respect to any participant will have the meaning specified in the participant’s award agreement or, in the absence of any definition in the award agreement, will have the equivalent meaning or the same meaning as “cause” or “for cause” set forth in any employment, consulting, or other agreement for the performance of services between the participant and us or, in the absence of any such agreement or any such definition in such agreement, such term shall mean (i) the participant’s failure to substantially perform the fundamental duties and responsibilities associated with the participant’s position for any reason other than a physical or mental disability, including the participant’s failure or refusal to carry out reasonable instructions; (ii) the participant’s material breach of any material written Company policy; (iii) the participant’s gross misconduct in the performance of the participant’s duties for the Company; (iv) the participant’s material breach of the terms of his or her employment, consulting or other similar agreement with us; (v) being arrested or charged with any fraudulent or felony criminal offense or any other criminal offense which reflects adversely on the Company or reflects conduct or character that the Board reasonably concludes is inconsistent with continued employment; or (vi) any criminal conduct that is a “statutory disqualifying event” (as defined under federal securities laws, rules and regulations).

“Change in control” generally refers to a corporate transaction (as defined above), the acquisition by a person or group of beneficial ownership of more than 80% of the combined voting power of our stock, or our “continuing directors” ceasing to constitute a majority of our Board.

“Corporate transaction” generally means (i) a sale or other disposition of all or substantially all of the assets of the Company, or (ii) a merger, consolidation, share exchange or similar transaction involving the Company.

“Good reason” with respect to any participant will have the meaning specified in the participant’s award agreement or, in the absence of any definition in the award agreement, will have the equivalent meaning or the same meaning as “good reason” or “for good reason” set forth in any employment, consulting, or other agreement for the performance of services between the participant and us or, in the absence of any such

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agreement or any such definition in such agreement, such term shall mean (i) the assignment to the participant of any duties inconsistent in any material respect with the participant’s duties or responsibilities as assigned by us, or any other action by us which results in a material diminution in such duties or responsibilities, excluding an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by us promptly after receipt of notice thereof given by the participant; or (ii) any material failure by us to comply with our obligations to the participant as agreed upon, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by us promptly after receipt of notice thereof given by the participant.

Effect of Termination of Employment. Unless otherwise set forth in an applicable agreement, if a participant ceases to be employed by or provide other services to us and our subsidiaries, awards under the 2020 Equity Plan will be treated as set forth in the 2020 Equity Plan. Upon termination for cause, all unexercised option and SAR awards and all unvested portions of any other outstanding awards will be immediately forfeited without consideration. Upon termination for any other reason, all unvested and unexercisable portions of any outstanding awards will be immediately forfeited without consideration. Upon termination for any reason other than cause, death or disability, the currently vested and exercisable portions of option and SAR awards may be exercised for a period of three months after the date of termination; however, if the participant dies during such three-month period, the vested and exercisable portions of the option and SAR awards may be exercised for a period of one year after the date of such termination. Upon termination due to death or disability, the currently vested and exercisable portions of option and SAR awards may be exercised for a period of one year after the date of termination.

Effective Date and Term of the 2020 Equity Plan. The 2020 Equity Plan became effective on December 9, 2021, the date it was approved by the Company’s stockholders. Unless terminated earlier, the 2020 Equity Plan will terminate on the tenth anniversary of the effective date. Awards outstanding under the 2020 Equity Plan at the time it is terminated will continue in accordance with their terms and the terms of the 2020 Equity Plan unless otherwise provided in the applicable agreements. The Board may suspend or terminate the 2020 Equity Plan at any time.

Amendment of the Plan. The Board may amend the 2020 Equity Plan from time to time, but no amendments to the 2020 Equity Plan will be effective without stockholder approval if such approval is required under applicable laws, regulations or stock exchange rules. No termination, suspension or amendment of the 2020 Equity Plan may materially impair the rights of any participant under a previously granted award without the consent of the affected participant, unless such action is necessary to comply with applicable laws or stock exchange rules.

U.S. Federal Income Tax Consequences

The following is a summary of the principal United States federal income tax consequences to the Company and to participants subject to U.S. taxation with respect to awards granted under the 2020 Equity Plan, based on current statutes, regulations and interpretations.

Non-Qualified Stock Options. If a participant is granted a non-qualified stock option under the 2020 Equity Plan, the participant will not recognize taxable income upon the grant of the option. Generally, the participant will recognize ordinary income at the time of exercise in an amount equal to the difference between the fair market value of the shares acquired at the time of exercise and the exercise price paid. The participant’s basis in the common stock for purposes of determining gain or loss on a subsequent sale or disposition of such shares generally will be the fair market value of our common stock on the date the option was exercised. Any subsequent gain or loss will be taxable as a capital gain or loss. The Company will generally be entitled to a federal income tax deduction at the time and for the same amount as the participant recognizes as ordinary income.

Incentive Stock Options. If a participant is granted an incentive stock option under the 2020 Equity Plan, the participant will not recognize taxable income upon grant of the option. Additionally, if applicable holding period requirements (a minimum of two years from the date of grant and one year from the date of exercise) are met, the participant will not recognize taxable income at the time of exercise. However, the excess of the fair market value of the shares acquired at the time of exercise over the aggregate exercise price is an item of tax preference income potentially subject to the alternative minimum tax. If shares acquired upon

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exercise of an incentive stock option are held for the holding period described above, the gain or loss (in an amount equal to the difference between the fair market value on the date of sale and the exercise price) upon disposition of the shares will be treated as a long-term capital gain or loss, and the Company will not be entitled to any deduction. Except in the event of death, if the holding period requirements are not met, there will be a “disqualifying disposition.” As a result of a disqualifying disposition, the participant will have ordinary income in an amount equal to the difference between the fair market value of the shares acquired at the time of exercise and the exercise price paid (and the Company will generally be entitled to a federal income tax deduction at the time and for the same amount as the participant recognizes as ordinary income); and the participant will have capital gain (which may be long term or short term) to the extent the fair market value on the date of the disqualifying disposition exceeds the fair market value of the shares acquired at the time of exercise. If the fair market value of the shares at the time of a disqualifying disposition are less than the exercise price paid, then the participant will have a capital loss, which may be subject to limitations.

Other Awards. The current federal income tax consequences of other awards authorized under the 2020 Equity Plan generally follow certain basic patterns. An award of restricted stock results in income recognition by a participant in an amount equal to the fair market value of the shares received at the time the restrictions lapse and the shares vest, unless the participant elects under Code Section 83(b) to accelerate income recognition and the taxability of the award to the date of grant. Stock unit awards generally result in income recognition by a participant at the time payment of such an award is made in an amount equal to the amount paid in cash or the then-current fair market value of the shares received, as applicable. SAR awards result in income recognition by a participant at the time such an award is exercised in an amount equal to the amount paid in cash or the then-current fair market value of the shares received by the participant, as applicable. In each of the foregoing cases, the Company will generally have a corresponding deduction at the time the participant recognizes ordinary income, subject to Code Section 162(m) with respect to covered employees.

Section 162(m) of the Code. Code Section 162(m) denies a deduction to any publicly-held corporation for compensation paid to certain “covered employees” in a taxable year to the extent that compensation to the covered employee exceeds $1,000,000.

Section 409A of the Code. The foregoing discussion of tax consequences of awards under the 2020 Equity Plan assumes that the award discussed is either not considered a “deferred compensation arrangement” subject to Section 409A of the Code, or has been structured to comply with its requirements. If an award is considered a deferred compensation arrangement subject to Section 409A but fails to comply, in operation or form, with the requirements of Section 409A, the affected participant would generally be required to include in income when the award vests the amount deemed “deferred,” would be required to pay an additional 20% income tax on such amount, and would be required to pay interest on the tax that would have been paid but for the deferral.

Awards Under the 2020 Equity Plan and New Plan Benefits

Because the Compensation Committee, in its discretion, will select the participants who receive awards and the timing, size and types of those awards, we cannot currently determine the awards that will be made to particular individuals or groups under the 2020 Equity Plan, as proposed to be amended, other than with respect to non-employee directors, whose compensation arrangements are set forth above under “Director Compensation for Fiscal Year 2021” and the 400,000 RSUs that will be granted to Mr. Moradi if the proposed amendments to the 2020 Equity Plan are approved.

For illustrative purposes only, the following table sets forth the awards received by the individuals and groups listed below under the 2020 Equity Plan during 2021:

Name	Number of Shares Subject to Awards (#)
David Moradi, Chief Executive Officer		100,000
Christopher Hundley, President		89,472
Kelly Georgevich, Chief Financial Officer		57,704
All current executive officers as a group		256,266
All non-employee directors as a group		24,526

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Name	Number of Shares Subject to Awards (#)
All employees, other than executive officers, as a group		472,687
All consultants, as a group		27,277

Equity Compensation Plan Information

The following table summarizes the information about outstanding options, RSUs, and PSUs, and available shares, under the 2020 Equity Plan and prior plans as of December 31, 2021:

Plan Category	(a) Number of securities to be issued upon exercise of outstanding options or settlement of outstanding RSUs and PSUs		(b) Weighted-average exercise price of outstanding options(1)			(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders		1,342,395(2)		$	12.94		246,199(3)
Equity compensation plans not approved by securityholders		—			—		—
Total		1,342,395			12.94		246,199

(1)

The weighted average exercise price of outstanding options does not take into account outstanding RSUs and PSUs since they do not have an exercise price.

(2)

Represents 191,340 shares of common stock issuable upon the exercise of outstanding stock options, 828,240 shares of common stock issuable upon the vesting and settlement, or settlement, as applicable, of outstanding RSUs, and 322,815 shares of common stock issuable upon the vesting and settlement, or settlement, as applicable of outstanding PSUs (at maximum level of performance) under our stockholder-approved equity incentive plans.

(3)

Represents 246,199 shares of common stock available for future equity awards under the 2020 Equity Plan.

The Board unanimously recommends that you vote “FOR” Proposal 3 to approve the amendments to the AudioEye, Inc. 2020 Equity Incentive Plan. If not otherwise specified, proxies will be voted "FOR" the amendments to the 2020 Equity Incentive Plan.

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APPROVAL OF THE AUDIOEYE, INC. EMPLOYEE STOCK PURCHASE PLAN (PROPOSAL NO. 4)

Proposal No. 4 is a proposal to approve the AudioEye, Inc. Employee Stock Purchase Plan.

On April 4, 2022, the Board, at the recommendation of the Compensation Committee, approved the AudioEye, Inc. Employee Stock Purchase Plan (the “ESPP”), and directed that the ESPP be submitted to stockholders for approval. If approved by stockholders at the Annual Meeting, the ESPP will become effective upon such stockholder approval with the first eligible purchase period commencing as of July 1, 2022.

The purpose of the ESPP is to provide our employees with a convenient means of purchasing shares of our common stock from time to time at a discount to market prices through the use of payroll deductions, subject to a maximum amount that an employee can purchase of $25,000 per calendar year pursuant to applicable law. The full text of the ESPP is contained in Appendix B to this proxy statement, and the material features of the ESPP are summarized below.

Administration

The Compensation Committee is authorized to administer the ESPP. The Compensation Committee has full power and authority to adopt rules and procedures to administer the ESPP, interpret the provisions of the ESPP, determine the terms and conditions of offerings under the ESPP, and designate which of our subsidiaries may participate in the ESPP. All costs and expenses incurred for ESPP administration are paid by us.

Share Reserve

Up to 500,000 shares of our common stock may be purchased by participants under the ESPP. In the event of any change to our outstanding common stock, such as a recapitalization, stock dividend, stock split or similar event, appropriate adjustments will be made to the number and class of shares available under the ESPP, the limit on the number of shares that a participant may purchase during any purchase period, and the number, class and purchase price of shares subject to purchase under any pending offering.

Eligibility and Participation

With one exception, any individual employed by our company or any participating subsidiary corporation is eligible to participate in the ESPP. However, no employee who owns stock possessing 5% or more of the total combined voting power or value of all classes of our stock or the stock of any of our subsidiaries may participate in the ESPP. The Compensation Committee may, consistent with the requirements of Section 423, impose additional eligibility requirements for individual offerings under the ESPP. As of March 23, 2022, we estimate that approximately 124 employees, including three of our executive officers who are employees, would be eligible to participate in the ESPP.

Eligible employees may enroll in the ESPP during an enrollment period prior to an offering period and will begin participating at the start of that offering period.

Purchase Periods and Purchase Dates

The ESPP permits eligible employees to purchase shares of our common stock through payroll withholding. Shares will be offered under the ESPP through a series of offerings, each of which will consist of a single purchase period of six months, or such other duration (up to 27 months) as the Compensation Committee may determine. We expect that, if the ESPP is approved by stockholders, the first purchase period will begin on July 1, 2022 and end on December 31, 2022, and thereafter the purchase periods generally will begin on January 1 of each year and end on June 30 and begin on July 1 in each calendar year and end on December 31. At the end of each purchase period, shares are issued based on payroll deductions accumulated during that period.

Purchase Price

Unless a different purchase price is established by the Compensation Committee, the purchase price per share at which the shares of our common stock are sold under the ESPP generally will be equal to 85% of the fair market value of our common stock on the last trading day of the purchase period.

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The fair market value of a share of our common stock on any relevant date under the ESPP will be deemed to be equal to the closing sale price per share on that date. The closing sale price of our common stock on March 23, 2022 was $7.35 per share, although the ESPP was not yet effective as of that date.

Payroll Deductions and Stock Purchases

Each participant may elect to have a percentage of eligible compensation between 1% and 10% withheld as a payroll deduction per pay period. The accumulated deductions will automatically be applied on each purchase date (the last trading day of a purchase period) to the purchase of shares of our common stock at the purchase price in effect for that purchase date. In connection with specific offerings under the ESPP, the Compensation Committee may permit participants to make additional contributions other than by payroll deductions during the applicable purchase period. For purposes of the ESPP, except as otherwise defined by the Compensation Committee, eligible compensation means the cash compensation classified as wages and salary, but not commissions, overtime earnings or bonuses, paid by the Company or any designated affiliate.

Special Limitations

The ESPP imposes certain limitations upon a participant’s right to purchase our common stock under the ESPP, including the following:

•

a participant may not be granted rights to purchase more than $25,000 worth of our common stock (valued at the time each purchase right is granted) for each calendar year in which such purchase rights are outstanding; and

•

no participant may purchase more than 1,500 shares of our common stock (or such other number of shares as the Compensation Committee may designate for a specific offering) on any one purchase date.

Changing Contribution Amounts; Withdrawal from the ESPP

A participant may, by written notice during an enrollment period, increase or decrease the amount of his or her payroll deduction contributions effective as of the first day of the next purchase period. A participant may also suspend the amount of his or her payroll deduction contributions during a purchase period by submitting written notice that complies with the rules set by the Compensation Committee. A participant may withdraw from the ESPP at any time by complying with the rules set by the Compensation Committee, and his or her accumulated (but not yet invested) contributions to the ESPP will be refunded.

Termination of Employment

A participant’s purchase right will immediately terminate upon his or her termination of employment for any reason. Any payroll deductions that the participant may have made for the purchase period in which such termination of employment occurs will be refunded and will not be applied to the purchase of common stock.

Shareholder Rights

No participant will have any shareholder rights with respect to the shares covered by his or her purchase rights under the ESPP until the shares are actually purchased on the participant’s behalf through the ESPP and issued and delivered.

Transferability of Purchase Rights

No purchase rights under the ESPP will be assignable or transferable by the participant, except by will or the laws of descent and distribution.

Withdrawal of Shares

A participant may direct the agent selected by the Company to sell any or all of the participant’s shares of our common stock credited to the participant’s share subaccount and distribute the net proceeds of such sale

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to the participant. Except for such sales, a participant may not withdraw shares or otherwise transfer shares from the participant’s share subaccount.

Corporate Transactions

If we are acquired by merger, consolidation or other reorganization, or sell all or substantially all our assets, each right to acquire shares on any purchase date scheduled to occur after the date of the consummation of the transaction shall be continued or assumed or an equivalent right shall be substituted by the surviving or successor corporation or its parent or subsidiary. If those rights are not continued, assumed or substituted, then our Board may terminate the ESPP or shorten the purchase period then in progress by setting a new purchase date to occur prior to the transaction.

Share Proration

Should the total number of shares of common stock to be purchased pursuant to outstanding purchase rights on any particular purchase date exceed the number of shares remaining available for issuance under the ESPP at that time, the Compensation Committee shall make to each participant a pro rata allocation in a uniform and nondiscriminatory manner of the available shares, and the payroll deductions of each participant not used to purchase shares will be refunded.

Amendment and Termination

The ESPP may be terminated at any time by the Compensation Committee and will terminate upon the date on which all shares remaining available for issuance under the ESPP are sold pursuant to exercised purchase rights. The Compensation Committee may at any time amend or suspend the ESPP. However, the Compensation Committee may not, without shareholder approval, amend the ESPP to effect any other change in the ESPP that would require shareholder approval under applicable law, exchange rules or to maintain compliance with Code Section 423.

U.S. Federal Income Tax Consequences

The following is a summary of the principal United States federal income tax consequences to the Company and to participants subject to U.S. taxation with respect to participation in the ESPP. This summary assumes the ESPP qualifies as an “employee stock purchase plan” within the meaning of Code Section 423, is not intended to be exhaustive and does not discuss the income tax laws of any city, state or foreign jurisdiction in which a participant may reside.

Under a qualified Code Section 423 arrangement, no taxable income will be recognized by a participant, and no deductions will be allowed to the Company, upon either the grant or the exercise of purchase rights under the ESPP. Taxable income will not be recognized until either there is a sale or other disposition of the shares acquired under the ESPP or in the event the participant should die while still owning the purchased shares.

If a participant sells or otherwise disposes of the purchased shares within two years after the first day of the purchase period in which such shares were acquired, or within one year after the actual purchase date of those shares, then the participant will recognize ordinary income in the year of sale or disposition equal to the amount by which the closing market price of the shares on the purchase date exceeded the purchase price paid for those shares, and the Company will be entitled to an income tax deduction, for the taxable year in which such disposition occurs, equal in amount to such excess. The participant also will recognize a capital gain to the extent the amount realized upon the sale of the shares exceeds the sum of the aggregate purchase price for those shares and the ordinary income recognized in connection with their acquisition.

If a participant sells or otherwise disposes of the purchased shares more than two years after the first day of the purchase period in which the shares were acquired and more than one year after the actual purchase date of those shares, the participant will recognize ordinary income in the year of sale or disposition equal to the lower of (i) the amount by which the selling price of the shares on the sale or disposition date exceeded the purchase price paid for those shares or (ii) 15% of the closing market price of the shares on the first day of the purchase period in which the shares were acquired (or such purchase price discount provided by the

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Compensation Committee for the purchase period, not to exceed 15%). Any additional gain upon the disposition will be taxed as a long-term capital gain. The Company will not be entitled to an income tax deduction with respect to such disposition.

If a participant still owns the purchased shares at the time of death, his or her estate will recognize ordinary income in the year of death equal to the lower of (i) the amount by which the closing market price of the shares on the date of death exceeds the purchase price or (ii) 15% of the closing market price of the shares on the first day of the purchase period in which those shares were acquired (or such purchase price discount provided by the Compensation Committee for the purchase period, not to exceed 15%).

Plan Benefits

The benefits to be received by our officers and employees under the ESPP are not determinable because the amounts of future purchases by participants are based on elective participant contributions.

The Board unanimously recommends that you vote FOR Proposal 4 to approve the Employee Stock Purchase Plan. If not otherwise specified, proxies will be voted "FOR" the approval of the Employee Stock Purchase Plan.

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AUDIT COMMITTEE REPORT AND PAYMENT OF FEES
TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Report of the Audit Committee

The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to the accuracy and integrity of AudioEye’s financial reporting, including the performance and the independence of AudioEye’s independent registered public accounting firm, MaloneBailey, LLP. The responsibilities of our Audit Committee are set forth in our Audit Committee Charter. The charter is available on our website at www.audioeye.com/governance-documents. In the discharge of its responsibilities, the Audit Committee:

•

reviewed and discussed with management and MaloneBailey, LLP our audited financial statements for the fiscal year ended December 31, 2021;

•

discussed with MaloneBailey, LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC;

•

received the written disclosures and the letter from MaloneBailey, LLP required by the applicable requirements of the PCAOB regarding MaloneBailey, LLP’s communications with the Audit Committee concerning independence; and

•

discussed with MaloneBailey, LLP their independence.

Based on the review and discussions noted above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for filing with the SEC.

				Audit Committee

				Jamil Tahir (Chairman) Anthony Coelho Marc Lehmann

Independent Registered Public Accounting Firm Fees and Services

The following table sets forth by fee category the aggregate fees for professional services rendered by MaloneBailey, LLP for the fiscal years ended December 31, 2021 and December 31, 2020:

	Year Ended December 31,
	2021			2020
Audit Fees		$	179,000		$	146,000
Audit-Related Fees			13,000			18,650
Tax Fees			—			—
All Other Fees			—			—
Total		$	192,000		$	164,500

Audit Fees consist of fees for professional services rendered for the audit of the Company’s annual financial statements and for the review of the Company’s financial statements included in its quarterly reports on Form 10-Q. These fees also include fees for services that are normally provided by an independent registered public accounting firm in connection with statutory and regulatory filings or engagements.

Audit-Related Fees consist of fees for professional services that are reasonably related to the audit or review of the Company’s financial statements but are not reported under “Audit Fees.” In 2021, such fees related to services rendered in connection with the Company’s At-The-Market offering initiated in 2021. In 2020, such fees related solely to services rendered in connection with the Company’s Registration Statements on Form S-3 and Form S-8.

Tax Fees consist of fees related to tax compliance, tax advice and tax planning services. In 2021 and 2020, there were no such fees.

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All Other Fees consist of fees for services other than the services described above. In 2021 and 2020, there were no such fees.

Policy on Audit Committee Pre-Approval

Pursuant to its charter, the Audit Committee must approve in advance the engagement of the registered public accounting firm for all audit services and non-audit services based on independence, qualifications and, if applicable, performance, and must also approve in advance fees and other terms of any such engagement. The Audit Committee may delegate pre-approval authority to a member of the Audit Committee. The decisions of any Audit Committee member to whom such pre-approval authority is delegated are required to be presented to the full Audit Committee at its next scheduled meeting.

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RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM (PROPOSAL NO. 5)

Proposal No. 5 is a proposal to ratify the appointment of MaloneBailey, LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022.

The Audit Committee of our Board of Directors, in accordance with its charter and authority delegated to it by the Board, has appointed the firm of MaloneBailey, LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2022. As a matter of good corporate practice, the Board has directed that such appointment be submitted to our stockholders for ratification at the Annual Meeting. MaloneBailey, LLP has served as our independent registered public accounting firm since 2011 and is considered by our Audit Committee to be well qualified.

If the stockholders do not ratify the appointment of MaloneBailey, LLP, the Audit Committee will reconsider the appointment. Even if the stockholders ratify the appointment, the Audit Committee, in its discretion, may appoint a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of AudioEye and its stockholders. Representatives of MaloneBailey, LLP will be present at our Annual Meeting and will have the opportunity to make a statement and respond to questions.

The Board unanimously recommends that you vote FOR Proposal No. 5 to ratify the appointment of MaloneBailey, LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022. If not otherwise specified, proxies will be voted “FOR” the ratification of MaloneBailey, LLP.

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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

We have one class of securities outstanding, namely our common stock, par value $0.00001 per share, of which 11,471,730 shares were outstanding as of the close of business on March 23, 2022. Each share of our common stock entitles the holder to one vote on all matters put to a vote of stockholders at the Annual Meeting.

The following table sets forth information regarding the beneficial ownership of our common stock as of March 23, 2022 by:

•

each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;

•

each of our directors and named executive officers who beneficially owns shares; and

•

all of our current directors and executive officers as a group.

The following table also sets forth, as of March 23, 2022 and for the beneficial owners listed in the table, their respective percentages of the Company’s total voting power on March 23, 2022. Such percentages are based on our shares of common stock outstanding as of the close of business on March 23, 2022. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock, subject to community property laws where applicable. For purposes of this table, “beneficial ownership” is determined in accordance with Rule 13d-3(d) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), pursuant to which a person is deemed to have beneficial ownership of any shares of common stock that such stockholder has the right to acquire within 60 days after March 23, 2022. The inclusion of any securities in the following table does not constitute an admission of beneficial ownership by the persons named below.

Unless otherwise indicated, the business address of each of the individuals listed in the table is c/o AudioEye, Inc., 5210 E. Williams Circle, Suite 750, Tucson, Arizona 85711.

	Common Stock
5% or Greater Beneficial Owners	Number of Shares Beneficially Owned(1)		Percentage Beneficially Owned(1)(2)
Keith Kosow KTK Capital, Inc. Cedar Holdings MGMT(3)		621,058(4)		5.4%
J. Carlo Cannell Cannell Capital LLC(5)		595,614(6)		5.2%
Directors and Executive Officers
David Moradi		3,227,252(7)		28.1%
Dr. Carr Bettis		793,835(8)		6.9%
Kelly Georgevich		5,112(9)		*
Dominic Varacalli		25,254(10)		*
Marc Lehmann		96,638(11)		*
Jamil Tahir		200,000(12)		1.7%
Anthony Coelho		85,471(13)		*
Christopher Hundley		22,029(14)		*
All current directors and executive officers as a group (8 persons)		4,455,591(15)		38.8%

Less than 1%

(1)

Shares of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assume the vesting, exercise or settlement, as applicable, of all options, warrants, RSUs

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and PSUs beneficially owned by such person or entity that are exercisable or can be settled as of, or vest or become exercisable, as applicable, within 60 days after, March 23, 2022. Shares of common stock issuable pursuant to the vesting of and the right to settle RSUs, PSUs, exercise of stock options or warrants as of or within 60 days after March 23, 2022 are deemed outstanding and held by the holder of such options, warrants, RSUs or PSUs for the purpose of computing the percentage of outstanding common stock beneficially owned by such person but are not deemed outstanding for computing the percentage of outstanding common stock beneficially owned by any other person. A holder of options, warrants, RSUs, or PSUs that do not vest, become exercisable, or are scheduled to be settled, as applicable, within 60 days after March 23, 2022 is not deemed the beneficial owner thereof for purposes of this table.

(2)

These percentages have been calculated based on 11,471,730 shares of the Company’s common stock outstanding on March 23, 2022.

(3)

The reporting persons’ business address is 100 South Pointe Drive #1610, Miami Beach, Florida 33139.

(4)

Based on a Schedule 13G/A filed with the SEC on February 17, 2022 by Keith Kosow, KTK Capital, Inc. (“KTK Capital”), and Cedar Holdings MGMT, and includes (i) 621,058 shares held by Keith Kosow, (ii) 389,748 shares held by KTK Capital and (iii) 231,310 shares held by Cedar Holdings MGMT. Mr. Kosow controls KTK Capital and Cedar Holdings MGMT and Mr. Kosow is deemed the beneficial owner of the shares owned by each company.

(5)

The reporting persons’ business address is 245 Meriwether Circle, Alta, WY 83414.

(6)

Based on a Schedule 13G filed with the SEC on February 14, 2022 by J. Carlo Cannell and Cannell Capital LLC in which the reporting persons report that they have shared voting and dispositive power over 595,614 shares.

(7)

Comprised of (i) 369,663 shares of common stock held by Mr. Moradi, and (ii) 2,857,589 shares of common stock held by Sero Capital LLC, an entity for which David Moradi is deemed the beneficial owner. Excludes 22,560 RSUs that are vested, but are not scheduled to be settled within 60 days after March 23, 2022.

(8)

Comprised of (i) 321,751 shares of common stock held by Dr. Bettis; (ii) 432,375 shares of common stock 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) 21,109 shares of common stock held in a donor advised fund over which Dr. Bettis has dispositive power. Excludes 97,340 RSUs that are vested as of March 23, 2022, but that are not scheduled to be settled within 60 days after March 23, 2022.

(9)

Comprised of 5,112 shares of common stock owned by Ms. Georgevich.

(10)

Comprised of (i) 18,588 shares of common stock owned by Mr. Varacalli; and (ii) 6,666 RSUs which are scheduled to vest and settle within 60 days after March 23, 2022.

(11)

Comprised of 96,638 shares of common stock owned by Mr. Lehmann. Excludes 16,091 RSUs that are vested as of or are scheduled to vest within 60 days after March 23, 2022, but that are not scheduled to be settled within 60 days after March 23, 2022.

(12)

Comprised of 200,000 shares of common stock owned by TurnMark Partners, L.P., an investment partnership beneficially owned by Mr. Tahir. Excludes 42,518 RSUs held by Mr. Tahir that are vested as of or are scheduled to vest within 60 days after March 23, 2022, but that are not scheduled to be settled within 60 days after March 23, 2022.

(13)

Comprised of 85,471 shares of common stock held by Mr. Coelho. Excludes 60,187 RSUs that are vested as of or are scheduled to vest within 60 days after March 23, 2022, but that are not scheduled to be settled within 60 days after March 23, 2022.

(14)

Comprised of 22,029 shares of common stock held by Mr. Hundley.

(15)

Comprised of (i) an aggregate of 4,448,925 shares of common stock; and (ii) 6,666 RSUs that are scheduled to vest and be settled within 60 days after March 23, 2022.

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DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Securities Exchange Act of 1934 and the regulations promulgated thereunder require directors and certain officers and persons who own more than ten percent of any class of our voting securities to file reports of their ownership of our common stock and changes in their ownership with the SEC. Based on a review of reports filed by these reporting persons and written representations by our directors and executive officers, we believe that all of our directors, executive officers and persons who own more than ten percent of any class of our voting securities complied with all filing requirements applicable to them during 2021 except that Dr. Bettis filed two delinquent Form 4s.

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STOCKHOLDER PROPOSALS FOR 2023 ANNUAL MEETING

Any stockholder proposal to be considered for inclusion in our proxy statement and form of proxy for the 2023 Annual Meeting must be received by us at our executive offices in Tucson, Arizona, on or before December 9, 2022, the date that is 120 calendar days prior to the first anniversary of the date that this proxy statement is released to stockholders.

All such proposals must be in writing and must comply with Rule 14a-8 under the Exchange Act, which lists the requirements for inclusion for stockholder proposals in company-sponsored proxy materials.

The failure of a stockholder to deliver a proposal in accordance with the requirements of the preceding paragraph may result in the exclusion of the proposal from our proxy statement and such proposal being ineligible for consideration at the 2023 Annual Meeting. Further, the submission of a proposal in accordance with the requirements of the immediately preceding paragraph does not guarantee that we will include it in our proxy statement or that it will be eligible for consideration at the 2023 Annual Meeting.

Notice of any director nomination or other proposal that a stockholder intends to present at the 2023 Annual Meeting, but does not intend to have included in our proxy statement and form of proxy for the 2023 Annual Meeting, must be received by us at our executive offices in Tucson, Arizona, on or before February 22, 2023, the date that is 45 calendar days prior to the first anniversary of the date that this proxy statement is released to stockholders.

We strongly encourage any stockholder interested in submitting a proposal to contact our Corporate Secretary in advance of the submission deadline to discuss the proposal.

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HOUSEHOLDING OF PROXY MATERIALS

The SEC’s proxy rules permit companies and intermediaries, such as brokers and banks, to satisfy delivery requirements for notices, proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single copy of such materials to those stockholders. This method of delivery, often referred to as “householding,” should reduce the amount of duplicate information that stockholders receive and lower printing and mailing costs. AudioEye and certain intermediaries will be householding notices, proxy statements and annual reports for stockholders of record in connection with our 2022 Annual Meeting. This means that:

•

Only one notice, proxy statement and annual report will be delivered to multiple stockholders sharing an address unless you notify your broker or bank to the contrary;

•

You can contact AudioEye by calling 866.331.5324 or by writing to James Spolar, General Counsel and Corporate Secretary, AudioEye, Inc., 5210 E. Williams Circle, Suite 750, Tucson, Arizona 85711, to request a separate copy of the notice, proxy statement and annual report for the 2022 Annual Meeting and for future meetings or, if you are currently receiving multiple copies, to receive only a single copy in the future, or you can contact your bank or broker to make a similar request; and

•

You can request delivery of a single copy of the notice, proxy statement and annual report from your bank or broker if you share the same address as another AudioEye stockholder and your bank or broker has determined to household proxy materials.

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OTHER MATTERS

Our Board knows of no matters other than those referred to in the accompanying Notice of Annual Meeting of Stockholders which may properly come before the Annual Meeting. However, if any other matter should be properly presented for consideration and vote at the Annual Meeting or any adjournment(s) thereof, it is the intention of the persons named as proxies on the enclosed form of proxy card to vote the shares represented by all valid proxy cards in accordance with their judgment of what is in the best interest of AudioEye and its stockholders.

	By Order of the Board of Directors
	/s/ JAMES SPOLAR James Spolar General Counsel and Secretary

Tucson, Arizona
April 8, 2022

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APPENDIX A

AUDIOEYE, INC.
2020 EQUITY INCENTIVE PLAN

(As Proposed to be Amended May 20, 2022)

1. Purpose. The purpose of the AudioEye, Inc. 2020 Equity Incentive Plan (the “Plan”) is to attract and retain the best available personnel for positions of responsibility with the Company, to provide additional incentives to them and align their interests with those of the Company’s stockholders, and to thereby promote the Company’s long-term business success.

2. Definitions. In this Plan, the following definitions will apply.

(a) “Affiliate” means any entity that is a Subsidiary or Parent of the Company.

(b) “Award” means a grant made under the Plan in the form of Options, Stock Appreciation Rights, Restricted Stock, Stock Units, Other Stock-Based Awards or Cash Incentive Awards.

(c) “Award Agreement” means the written or electronic agreement, notice or other document containing the terms and conditions applicable to each Award granted under the Plan, including all amendments thereto. An Award Agreement is subject to the terms and conditions of the Plan.

(d) “Board” means the Board of Directors of the Company.

(e) “Cash Incentive Award” means a dollar-denominated performance-based Award as described in Section 11(b).

(f) “Cause” with respect to any Participant shall have the meaning specified in the Participant’s Award Agreement. In the absence of any definition in the Award Agreement, “Cause” shall have the equivalent meaning or the same meaning as “cause” or “for cause” set forth in any employment, consulting, or other agreement for the performance of services between the Participant and the Company or an Affiliate or, in the absence of any such agreement or any such definition in such agreement, such term shall mean (i) Participant’s failure to substantially perform the fundamental duties and responsibilities associated with Participant’s position for any reason other than a physical or mental disability, including Participant’s failure or refusal to carry out reasonable instructions; (ii) Participant’s material breach of any material written Company policy; (iii) Participant’s gross misconduct in the performance of Participant’s duties for the Company; (iv) Participant’s material breach of the terms of his or her employment, consulting or other similar agreement with the Company or an Affiliate, if any; (v) being arrested or charged with any fraudulent or felony criminal offense or any other criminal offense which reflects adversely on the Company or reflects conduct or character that the Board reasonably concludes is inconsistent with continued employment; or (vi) any criminal conduct that is a “statutory disqualifying event” (as defined under federal securities laws, rules and regulations).

(g) “Change in Control” means, unless otherwise defined in a then-effective written agreement (including an Award Agreement) between a Participant and the Company or any Affiliate, one of the following:

(1) An Exchange Act Person becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing more than 80% of the combined voting power of the Company’s then outstanding Voting Securities, except that the following will not constitute a Change in Control:

(A) any acquisition of securities of the Company by an Exchange Act Person from the Company for the purpose of providing financing to the Company;

(B) any formation of a Group consisting solely of beneficial owners of the Company’s Voting Securities as of the effective date of this Plan; or

(C) any repurchase or other acquisition by the Company of its Voting Securities that causes any Exchange Act Person to become the beneficial owner of more than 80%.

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If, however, an Exchange Act Person or Group referenced in clause (A), (B) or (C) above acquires beneficial ownership of additional Company Voting Securities after initially becoming the beneficial owner of more than 80% of the combined voting power of the Company’s Voting Securities by one of the means described in those clauses, then a Change in Control will be deemed to have occurred.

(2) Individuals who are Continuing Directors cease for any reason to constitute a majority of the members of the Board.

(3) A Corporate Transaction is consummated, unless, immediately following such Corporate Transaction: (A) all or substantially all of the individuals and entities who were the beneficial owners of the Company’s Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 80% of the combined voting power of the then outstanding Voting Securities of the surviving or acquiring entity resulting from such Corporate Transaction (including beneficial ownership through any Parent of such entity) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Company’s Voting Securities; (B) no Exchange Act Person beneficially owns, directly or indirectly, more than 80% of the combined voting power of the Voting Securities of the entity resulting from such Corporate Transaction; and (C) at least a majority of the members of the board of directors (or comparable governors) of the entity resulting from such Corporate Transaction were Continuing Directors at the time of the initial agreement, or the action of the Board, providing for such Corporate Transaction.

Notwithstanding the foregoing, to the extent that any Award constitutes a deferral of compensation subject to Code Section 409A, and if that Award provides for a change in the time or form of payment upon a Change in Control, then no Change in Control shall be deemed to have occurred upon an event described in this Section 2(g) unless the event would also constitute a change in ownership or effective control of, or a change in the ownership of a substantial portion of the assets of, the Company under Code Section 409A.

(h) “Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time. For purposes of the Plan, references to sections of the Code shall be deemed to include any applicable regulations thereunder and any successor or similar statutory provisions.

(i) “Committee” means two or more Non-Employee Directors designated by the Board to administer the Plan under Section 3, each member of which shall be (i) an independent director within the meaning of applicable stock exchange rules and regulations and (ii) a non-employee director within the meaning of Exchange Act Rule 16b-3.

(j) “Company” means AudioEye, Inc., a Delaware corporation, and any successor thereto.

(k) “Continuing Director” means an individual (i) who is, as of the effective date of the Plan, a director of the Company, or (ii) who becomes a director of the Company after the effective date hereof and whose initial election, or nomination for election by the Company’s stockholders, was approved by at least a majority of the then Continuing Directors, but excluding, for purposes of this clause (ii), an individual whose initial assumption of office occurs as the result of an actual or threatened proxy contest involving the solicitation of proxies or consents by a person or Group other than the Board, or by reason of an agreement intended to avoid or settle an actual or threatened proxy contest.

(l) “Corporate Transaction” means (i) a sale or other disposition of all or substantially all of the assets of the Company, or (ii) a merger, consolidation, share exchange or similar transaction involving the Company, regardless of whether the Company is the surviving entity.

(m) “Disability” means (A) any permanent and total disability under any long-term disability plan or policy of the Company or its Affiliates that covers the Participant, or (B) if there is no such long-term disability plan or policy, “total and permanent disability” within the meaning of Code Section 22(e)(3).

(n) “Employee” means an employee of the Company or an Affiliate.

(o) “Exchange Act” means the Securities Exchange Act of 1934, as amended and in effect from time to time.

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(p) “Exchange Act Person” means any natural person, entity or Group other than (i) the Company or any Affiliate; (ii) any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate; (iii) an underwriter temporarily holding securities in connection with a registered public offering of such securities; or (iv) an entity whose Voting Securities are beneficially owned by the beneficial owners of the Company’s Voting Securities in substantially the same proportions as their beneficial ownership of the Company’s Voting Securities.

(q) “Fair Market Value” means the fair market value of a Share determined as follows:

(1) If the Shares are readily tradable on an established securities market (as determined under Code Section 409A), then Fair Market Value will be the closing sales price for a Share on the principal securities market on which it trades on the date for which it is being determined, or if no sale of Shares occurred on that date, on the next preceding date on which a sale of Shares occurred, as reported in The Wall Street Journal or such other source as the Committee deems reliable; or

(2) If the Shares are not then readily tradable on an established securities market (as determined under Code Section 409A), then Fair Market Value will be determined by the Committee as the result of a reasonable application of a reasonable valuation method that satisfies the requirements of Code Section 409A.

(r) “Full Value Award” means an Award other than an Option Award, Stock Appreciation Right Award or Cash Incentive Award.

(s) “Good Reason” with respect to any Participant shall have the meaning specified in the Participant’s Award Agreement. In the absence of any definition in the Award Agreement, “Good Reason” shall have the equivalent meaning or the same meaning as “good reason” or “for good reason” set forth in any employment, consulting, or other agreement for the performance of services between the Participant and the Company or an Affiliate or, in the absence of any such agreement or any such definition in such agreement, such term shall mean (i) the assignment to the Participant of any duties inconsistent in any material respect with the Participant’s duties or responsibilities as assigned by the Company or an Affiliate, or any other action by the Company or an Affiliate which results in a material diminution in such duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company or an Affiliate promptly after receipt of notice thereof given by the Participant; or (ii) any material failure by the Company or an Affiliate to comply with its obligations to the Participant as agreed upon, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company or an Affiliate promptly after receipt of notice thereof given by the Participant. An event or action will not give the Participant grounds for Good Reason unless (A) the Participant gives the Company written notice within 60 days after the initial existence of the event or action that the Participant intends to resign for Good Reason due to such event or action; (B) the event or action is not reasonably cured by the Company within 30 days after the Company receives written notice from the Participant; and (C) the Participant terminates service within 30 days after the end of the cure period.

(t) “Grant Date” means the date on which the Committee approves the grant of an Award under the Plan, or such later date as may be specified by the Committee on the date the Committee approves the Award.

(u) “Group” means two or more persons who act, or agree to act together, as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding, voting or disposing of securities of the Company.

(v) “Non-Employee Director” means a member of the Board who is not an Employee.

(w) “Option” means a right granted under the Plan to purchase a specified number of Shares at a specified price. An “Incentive Stock Option” or “ISO” means any Option designated as such and granted in accordance with the requirements of Code Section 422. A “Non-Qualified Stock Option” or “NQSO” means an Option other than an Incentive Stock Option.

(x) “Other Stock-Based Award” means an Award described in Section 11(a) of this Plan.

(y) “Parent” means a “parent corporation,” as defined in Code Section 424(e).

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(z) “Participant” means a Service Provider to whom a then-outstanding Award has been granted under the Plan.

(aa) “Plan” means this AudioEye, Inc. 2020 Equity Incentive Plan, as amended and in effect from time to time.

(bb) “Restricted Stock” means Shares issued to a Participant that are subject to such restrictions on transfer, vesting conditions and other restrictions or limitations as may be set forth in this Plan and the applicable Award Agreement.

(cc) “Service” means the provision of services by a Participant to the Company or any Affiliate in any Service Provider capacity. A Service Provider’s Service shall be deemed to have terminated either upon an actual cessation of providing services to the Company or any Affiliate or upon the entity to which the Service Provider provides services ceasing to be an Affiliate. Except as otherwise provided in this Plan or any Award Agreement, Service shall not be deemed terminated in the case of (i) any approved leave of absence; (ii) transfers among the Company and any Affiliates in any Service Provider capacity; or (iii) any change in status so long as the individual remains in the service of the Company or any Affiliate in any Service Provider capacity.

(dd) “Service Provider” means an Employee, a Non-Employee Director, or any natural person who is a consultant or advisor, or is employed by a consultant or advisor retained by the Company or any Affiliate, and who provides services (other than in connection with (i) a capital-raising transaction or (ii) promoting or maintaining a market in Company securities) to the Company or any Affiliate.

(ee) “Share” means a share of Stock.

(ff) “Stock” means the common stock, $0.00001 par value per Share, of the Company.

(gg) “Stock Appreciation Right” or “SAR” means the right to receive, in cash and/or Shares as determined by the Committee, an amount equal to the appreciation in value of a specified number of Shares between the Grant Date of the SAR and its exercise date.

(hh) “Stock Unit” means a right to receive, in cash and/or Shares as determined by the Committee, the Fair Market Value of a Share, subject to such restrictions on transfer, vesting conditions and other restrictions or limitations as may be set forth in this Plan and the applicable Award Agreement.

(ii) “Subsidiary” means a “subsidiary corporation,” as defined in Code Section 424(f), of the Company.

(jj) “Substitute Award” means an Award granted upon the assumption of, or in substitution or exchange for, outstanding awards granted by a company or other entity acquired by the Company or any Affiliate or with which the Company or any Affiliate combines. The terms and conditions of a Substitute Award may vary from the terms and conditions set forth in the Plan to the extent that the Committee at the time of the grant may deem appropriate to conform, in whole or in part, to the provisions of the award in substitution for which it has been granted.

(kk) “Voting Securities” of an entity means the outstanding equity securities (or comparable equity interests) entitled to vote generally in the election of directors of such entity.

3. Administration of the Plan.

(a) Administration. The authority to control and manage the operations and administration of the Plan shall be vested in the Committee in accordance with this Section 3.

(b) Scope of Authority. Subject to the terms of the Plan, the Committee shall have the authority, in its discretion, to take such actions as it deems necessary or advisable to administer the Plan, including:

(1) determining the Service Providers to whom Awards will be granted, the timing of each such Award, the type of and the number of Shares covered by each Award, the terms, conditions, performance criteria, restrictions and other provisions of Awards, and the manner in which Awards are paid or settled;

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(2) cancelling or suspending an Award, accelerating the vesting or extending the exercise period of an Award, or otherwise amending the terms and conditions of any outstanding Award, subject to the requirements of Sections 15(d) and 15(e);

(3) adopting sub-plans or special provisions applicable to Awards, establishing, amending or rescinding rules to administer the Plan, interpreting the Plan and any Award or Award Agreement, reconciling any inconsistency, correcting any defect or supplying an omission in the Plan or any Award Agreement, and making all other determinations necessary or desirable for the administration of the Plan;

(4) granting Substitute Awards under the Plan;

(5) taking such actions as are provided in Section 3(c) with respect to Awards to foreign Service Providers; and

(6) requiring or permitting the deferral of the settlement of an Award, and establishing the terms and conditions of any such deferral.

Notwithstanding the foregoing, the Board shall perform the duties and have the responsibilities of the Committee with respect to Awards made to Non-Employee Directors.

(c) Awards to Foreign Service Providers. The Committee may grant Awards to Service Providers who are foreign nationals, who are located outside of the United States or who are not compensated from a payroll maintained in the United States, or who are otherwise subject to (or could cause the Company to be subject to) legal or regulatory requirements of countries outside of the United States, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to comply with applicable foreign laws and regulatory requirements and to promote achievement of the purposes of the Plan. In connection therewith, the Committee may establish such subplans and modify exercise procedures and other Plan rules and procedures to the extent such actions are deemed necessary or desirable, and may take any other action that it deems advisable to obtain local regulatory approvals or to comply with any necessary local governmental regulatory exemptions.

(d) Acts of the Committee; Delegation. A majority of the members of the Committee shall constitute a quorum for any meeting of the Committee, and any act of a majority of the members present at any meeting at which a quorum is present or any act unanimously approved in writing by all members of the Committee shall be the act of the Committee. Any such action of the Committee shall be valid and effective even if one or more members of the Committee at the time of such action are later determined not to have satisfied all of the criteria for membership in clauses (i) and (ii) of Section 2(i). To the extent not inconsistent with applicable law or stock exchange rules, the Committee may delegate all or any portion of its authority under the Plan to any one or more of its members or, as to Awards to Participants who are not subject to Section 16 of the Exchange Act, to one or more directors or executive officers of the Company or to a committee of the Board comprised of one or more directors of the Company. The Committee may also delegate non-discretionary administrative responsibilities in connection with the Plan to such other persons as it deems advisable.

(e) Finality of Decisions. The Committee’s interpretation of the Plan and of any Award or Award Agreement made under the Plan and all related decisions or resolutions of the Board or Committee shall be final and binding on all parties with an interest therein.

(f) Indemnification. Each person who is or has been a member of the Committee or of the Board, and any other person to whom the Committee delegates authority under the Plan, shall be indemnified by the Company, to the maximum extent permitted by law, against liabilities and expenses imposed upon or reasonably incurred by such person in connection with or resulting from any claims against such person by reason of the performance of the individual’s duties under the Plan. This right to indemnification is conditioned upon such person providing the Company an opportunity, at the Company’s expense, to handle and defend the claims before such person undertakes to handle and defend them on such person’s own behalf. The Company will not be required to indemnify any person for any amount paid in settlement of a claim unless the Company has first consented in writing to the settlement. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person or persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise.

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4. Shares Available Under the Plan.

(a) Maximum Shares Available. Subject to Section 4(b) and to adjustment as provided in Section 12(a), the number of Shares that may be the subject of Awards and issued under the Plan shall be 1,000,0002,500,000. No further awards may be made under the AudioEye, Inc. 2019 Equity Incentive Plan after the effective date of this Plan. Shares issued under the Plan may come from authorized and unissued shares or treasury shares. In determining the number of Shares to be counted against this share reserve in connection with any Award, the following rules shall apply:

(1) Where the number of Shares subject to an Award is variable on the Grant Date, the number of Shares to be counted against the share reserve shall be the maximum number of Shares that could be received under that particular Award, until such time as it can be determined that only a lesser number of shares could be received.

(2) Where two or more types of Awards are granted to a Participant in tandem with each other, such that the exercise of one type of Award with respect to a number of Shares cancels at least an equal number of Shares of the other, the number of Shares to be counted against the share reserve shall be the largest number of Shares that would be counted against the share reserve under either of the Awards.

(3) Shares subject to Substitute Awards shall not be counted against the share reserve, nor shall they reduce the Shares authorized for grant to a Participant in any calendar year.

(4) Awards that may be settled solely in cash shall not be counted against the share reserve, nor shall they reduce the Shares authorized for grant to a Participant in any calendar year.

(b) Effect of Forfeitures and Other Actions. Any Shares subject to an Award that expires, is cancelled or forfeited or is settled for cash shall, to the extent of such cancellation, forfeiture, expiration or cash settlement, again become available for Awards under this Plan, and the share reserve under Section 4(a) shall be correspondingly replenished. The following Shares shall not, however, again become available for Awards or replenish the share reserve under Section 4(a): (i) Shares tendered (either actually or by attestation) by the Participant or withheld by the Company in payment of the exercise price of a stock option issued under this Plan, (ii) Shares tendered (either actually or by attestation) by the Participant or withheld by the Company to satisfy any tax withholding obligation with respect to an award under this Plan, (iii) Shares repurchased by the Company with proceeds received from the exercise of a stock option issued under this Plan, and (iv) Shares subject to a stock appreciation right award issued under this Plan that are not issued in connection with the stock settlement of that award upon its exercise.

(c) Effect of Plans Operated by Acquired Companies. If a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall supplement the Share reserve under Section 4(a). Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan absent the acquisition or combination, and shall only be made to individuals who were not Employees or Non-Employee Directors prior to such acquisition or combination.

(d) No Fractional Shares. Unless otherwise determined by the Committee, the number of Shares subject to an Award shall always be a whole number. No fractional Shares may be issued under the Plan, but the Committee may, in its discretion, adopt any rounding convention it deems suitable or pay cash in lieu of any fractional Share in settlement of an Award.

(e) Limits on Awards to Non-Employee Directors. The maximum number of Shares subject to Awards granted to any Non-Employee Director during any calendar year, together with any cash fees paid to such Non-Employee Director during such calendar year, shall not exceed a total value of $400,000 (calculating the value of any Awards based on the grant date fair value for financial reporting purposes).

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5. Eligibility. Participation in the Plan is limited to Service Providers. Incentive Stock Options may only be granted to Employees.

6. General Terms of Awards.

(a) Award Agreement. Each Award shall be evidenced by an Award Agreement setting forth the amount of the Award together with such other terms and conditions applicable to the Award (and not inconsistent with the Plan) as determined by the Committee. An Award to a Participant may be made singly or in combination with any form of Award. Two types of Awards may be made in tandem with each other such that the exercise of one type of Award with respect to a number of Shares reduces the number of Shares subject to the related Award by at least an equal amount.

(b) Vesting and Term. Each Award Agreement shall set forth the period until the applicable Award is scheduled to vest and, if applicable, expire (which shall not be more than ten years from the Grant Date), and the applicable vesting conditions and any applicable performance period. The Committee may provide in an Award Agreement for such vesting conditions and timing as it may determine.

(c) Transferability. Except as provided in this Section 6(c), (i) during the lifetime of a Participant, only the Participant or the Participant’s guardian or legal representative may exercise an Option or SAR, or receive payment with respect to any other Award; and (ii) no Award may be sold, assigned, transferred, exchanged or encumbered, voluntarily or involuntarily, other than by will or the laws of descent and distribution. Any attempted transfer in violation of this Section 6(c) shall be of no effect. The Committee may, however, provide in an Award Agreement or otherwise that an Award (other than an Incentive Stock Option) may be transferred pursuant to a domestic relations order or may be transferable by gift to any “family member” (as defined in General Instruction A.1(a)(5) to Form S-8 under the Securities Act of 1933) of the Participant. Any Award held by a transferee shall continue to be subject to the same terms and conditions that were applicable to that Award immediately before the transfer thereof. For purposes of any provision of the Plan relating to notice to a Participant or to acceleration or termination of an Award upon the death or termination of Service of a Participant, the references to “Participant” shall mean the original grantee of an Award and not any transferee.

(d) Designation of Beneficiary. Each Participant under the Plan may from time to time name any beneficiary or beneficiaries by whom any right under the Plan is to be exercised in case of such Participant’s death. Each designation will revoke all prior designations by the same Participant, shall be in a form reasonably prescribed by the Committee and shall be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime.

(e) Termination of Service. Unless otherwise provided in an applicable Award Agreement or another then-effective written agreement between a Participant and the Company, and subject to Section 12 of this Plan, if a Participant’s Service with the Company and all of its Affiliates terminates, the following provisions shall apply (in all cases subject to the scheduled expiration of an Option or SAR Award, as applicable):

(1) Upon termination of Service for Cause, all unexercised Option and SAR Awards and all unvested portions of any other outstanding Awards shall be immediately forfeited without consideration.

(2) Upon termination of Service for any other reason, all unvested and unexercisable portions of any outstanding Awards shall be immediately forfeited without consideration.

(3) Upon termination of Service for any reason other than Cause, death or Disability, the currently vested and exercisable portions of Option and SAR Awards may be exercised for a period of three months after the date of such termination. However, if a Participant thereafter dies during such three-month period, the vested and exercisable portions of the Option and SAR Awards may be exercised for a period of one year after the date of such termination.

(4) Upon termination of Service due to death or Disability, the currently vested and exercisable portions of Option and SAR Awards may be exercised for a period of one year after the date of such termination.

(f) Rights as Stockholder. No Participant shall have any rights as a stockholder with respect to any Shares covered by an Award unless and until the date the Participant becomes the holder of record of the Shares, if any, to which the Award relates.

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(g) Performance-Based Awards. Any Award may be granted as a performance-based Award if the Committee establishes one or more measures of corporate, business unit or individual performance which must be attained, and the performance period over which the specified performance is to be attained, as a condition to the grant, vesting, exercisability, lapse of restrictions and/or settlement in cash or Shares of such Award. In connection with any such Award, the Committee shall determine the extent to which performance measures have been attained and other applicable terms and conditions have been satisfied, and the degree to which the grant, vesting, exercisability, lapse of restrictions and/or settlement of such Award has been earned. The Committee shall also have the authority to provide, in an Award Agreement or otherwise, for the modification of a performance period and/or adjustments to or waivers of the achievement of performance goals under specified circumstances such as (i) the occurrence of events that are unusual in nature or infrequently occurring, such as a Change in Control, an equity restructuring (as described in Section 12(a)), acquisitions, divestitures, restructuring activities, recapitalizations, or asset write-downs, (ii) a change in applicable tax laws or accounting principles, or (iii) the Participant’s death or Disability.

(h) Dividends and Dividend Equivalents. No dividends, dividend equivalents or distributions will be paid with respect to Shares subject to an Option or SAR Award. Any dividends or distributions payable with respect to Shares that are subject to the unvested portion of a Restricted Stock Award will be subject to the same restrictions and risk of forfeiture as the Shares to which such dividends or distributions relate. In its discretion, the Committee may provide in an Award Agreement for a Stock Unit Award or an Other Stock-Based Award that the Participant will be entitled to receive dividend equivalents, based on dividends actually declared and paid on outstanding Shares, on the units or other Share equivalents subject to the Stock Unit Award or Other Stock-Based Award, and such dividend equivalents will be subject to the same restrictions and risk of forfeiture as the units or other Share equivalents to which such dividend equivalents relate. The additional terms of any such dividend equivalents will be as set forth in the applicable Award Agreement, including the time and form of payment and whether such dividend equivalents will be credited with interest or deemed to be reinvested in additional units or Share equivalents. Any Shares issued or issuable during the term of this Plan as the result of the reinvestment of dividends or the deemed reinvestment of dividend equivalents in connection with an Award shall be counted against, and replenish upon any subsequent forfeiture, the Plan’s share reserve as provided in Section 4.

(i) Deferrals of Full Value Awards and Cash Incentive Awards. The Committee may, in its discretion, permit or require the deferral by a Participant of the issuance of Shares or payment of cash in settlement of any Full Value Award or Cash Incentive Award, subject to such terms, conditions, rules and procedures as it may establish or prescribe for such purpose and with the intention of complying with the applicable requirements of Code Section 409A. The terms, conditions, rules and procedures for any such deferral shall be set forth in writing in the relevant Award Agreement or in such other agreement, plan or document as the Committee may determine, or some combination of such documents. The terms, conditions, rules and procedures for any such deferral shall address, to the extent relevant, matters such as: (i) the amount of compensation that may or must be deferred (or the method for calculating the amount); (ii) the permissible time(s) and form(s) of payment of deferred amounts; (iii) the terms and conditions of any deferral elections by a Participant or of any deferral required by the Company; and (iv) the crediting of interest or dividend equivalents on deferred amounts.

7. Stock Option Awards.

(a) Type and Exercise Price. The Award Agreement pursuant to which an Option Award is granted shall specify whether the Option is an Incentive Stock Option or a Non-Qualified Stock Option. The exercise price at which each Share subject to an Option Award may be purchased shall be determined by the Committee and set forth in the Award Agreement, and shall not be less than the Fair Market Value of a Share on the Grant Date, except in the case of Substitute Awards (to the extent consistent with Code Section 409A and, in the case of Incentive Stock Options, Code Section 424).

(b) Payment of Exercise Price. The purchase price of the Shares with respect to which an Option Award is exercised shall be payable in full at the time of exercise. The purchase price may be paid in cash or in such other manner as the Committee may permit, including by payment under a broker-assisted sale and remittance program, by withholding Shares otherwise issuable to the Participant upon exercise of the Option or by delivery to the Company of Shares (by actual delivery or attestation) already owned by the Participant

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(in either case, such Shares having a Fair Market Value as of the date the Option is exercised equal to the purchase price of the Shares being purchased).

(c) Exercisability and Expiration. Each Option Award shall be exercisable in whole or in part on the terms provided in the Award Agreement. No Option Award shall be exercisable at any time after its scheduled expiration. When an Option Award is no longer exercisable, it shall be deemed to have terminated.

(d) Incentive Stock Options.

(1) An Option Award will constitute an Incentive Stock Option Award only if the Participant receiving the Option Award is an Employee, and only to the extent that (i) it is so designated in the applicable Award Agreement and (ii) the aggregate Fair Market Value (determined as of the Option Award’s Grant Date) of the Shares with respect to which Incentive Stock Option Awards held by the Participant first become exercisable in any calendar year (under the Plan and all other plans of the Company and its Affiliates) does not exceed $100,000 or such other amount specified by the Code. To the extent an Option Award granted to a Participant exceeds this limit, the Option Award shall be treated as a Non-Qualified Stock Option Award. The maximum number of Shares that may be issued upon the exercise of Incentive Stock Option Awards under the Plan shall be 1,000,0002,500,000, subject to adjustment as provided in Section 12(a).

(2) No Participant may receive an Incentive Stock Option Award under the Plan if, immediately after the grant of such Award, the Participant would own (after application of the rules contained in Code Section 424(d)) Shares possessing more than 10% of the total combined Voting Power of all classes of stock of the Company or an Affiliate, unless (i) the per Share exercise price for such Award is at least 110% of the Fair Market Value of a Share on the Grant Date and (ii) such Award will expire no later than five years after its Grant Date.

(3) For purposes of continued Service by a Participant who has been granted an Incentive Stock Option Award, no approved leave of absence may exceed three months unless reemployment upon expiration of such leave is provided by statute or contract. If reemployment is not so provided, then on the date six months following the first day of such leave, any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Non-Qualified Stock Option.

(4) If an Incentive Stock Option Award is exercised after the expiration of the exercise periods that apply for purposes of Code Section 422, such Option shall thereafter be treated as a Non-Qualified Stock Option.

(5) The Award Agreement covering an Incentive Stock Option Award shall contain such other terms and provisions that the Committee determines necessary to qualify the Option Award as an Incentive Stock Option Award.

(e) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of an Option Award during the applicable post-termination of Service exercise period as set forth in Section 6(e) or in the applicable Award Agreement is prevented by Section 16(c), the Option shall remain exercisable until the later of (i) 30 days after the date the exercise of the Option would no longer be prevented by such provision, or (ii) the end of the applicable post-termination exercise period, but in no event later than the scheduled expiration date of the Option as set forth in the applicable Award Agreement.

8. Stock Appreciation Right Awards.

(a) Nature of Award. An Award of Stock Appreciation Rights shall be subject to such terms and conditions as are determined by the Committee, and shall provide a Participant the right to receive upon exercise of the SAR Award all or a portion of the excess of (i) the Fair Market Value as of the date of exercise of the SAR Award of the number of Shares as to which the SAR Award is being exercised, over (ii) the aggregate exercise price for such number of Shares. The per Share exercise price for any SAR Award shall be determined by the Committee and set forth in the applicable Award Agreement, and shall not be less than the Fair Market Value of a Share on the Grant Date, except in the case of Substitute Awards (to the extent consistent with Code Section 409A).

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(b) Exercise of SAR. Each SAR Award may be exercisable in whole or in part at the times, on the terms and in the manner provided in the Award Agreement. No SAR Award shall be exercisable at any time after its scheduled expiration. When a SAR Award is no longer exercisable, it shall be deemed to have terminated. Upon exercise of a SAR Award, payment to the Participant shall be made at such time or times as shall be provided in the Award Agreement in the form of cash, Shares or a combination of cash and Shares as determined by the Committee. The Award Agreement may provide for a limitation upon the amount or percentage of the total appreciation on which payment (whether in cash and/or Shares) may be made in the event of the exercise of a SAR Award.

9. Restricted Stock Awards.

(a) Vesting and Consideration. Shares subject to a Restricted Stock Award shall be subject to vesting and the lapse of applicable restrictions based on such conditions or factors and occurring over such period of time as the Committee may determine in its discretion. The Committee may provide whether any consideration other than Services must be received by the Company or any Affiliate as a condition precedent to the grant of a Restricted Stock Award, and may correspondingly provide for Company reacquisition or repurchase rights if such additional consideration has been required and some or all of a Restricted Stock Award does not vest.

(b) Shares Subject to Restricted Stock Awards. Unvested Shares subject to a Restricted Stock Award shall be evidenced by a book-entry in the name of the Participant with the Company’s transfer agent or by one or more Stock certificates issued in the name of the Participant. Any such Stock certificate shall be deposited with the Company or its designee, together with an assignment separate from the certificate, in blank, signed by the Participant, and bear an appropriate legend referring to the restricted nature of the Restricted Stock evidenced thereby. Any book-entry shall be subject to comparable restrictions and corresponding stop transfer instructions. Upon the vesting of Shares of Restricted Stock, and the Company’s determination that any necessary conditions precedent to the release of vested Shares (such as satisfaction of tax withholding obligations and compliance with applicable legal requirements) have been satisfied, such vested Shares shall be made available to the Participant in such manner as may be prescribed or permitted by the Committee. Except as otherwise provided in the Plan or an applicable Award Agreement, a Participant with a Restricted Stock Award shall have all the rights of a shareholder, including the right to vote the Shares of Restricted Stock.

10. Stock Unit Awards.

(a) Vesting and Consideration. A Stock Unit Award shall be subject to vesting and the lapse of applicable restrictions based on such conditions or factors and occurring over such period of time as the Committee may determine in its discretion. If vesting of a Stock Unit Award is conditioned on the achievement of specified performance goals, the extent to which they are achieved over the specified performance period and the number of Stock Units that will be earned and eligible to vest shall be determined by the Committee. The Committee may provide whether any consideration other than Services must be received by the Company or any Affiliate as a condition precedent to the settlement of a Stock Unit Award.

(b) Settlement of Award. Following the vesting of a Stock Unit Award, and the Company’s determination that any necessary conditions precedent to the settlement of the Award (such as satisfaction of tax withholding obligations and compliance with applicable legal requirements) have been satisfied, settlement of the Award and payment to the Participant shall be made at such time or times in the form of cash, Shares (which may themselves be considered Restricted Stock under the Plan) or a combination of cash and Shares as determined by the Committee.

11. Other Awards.

(a) Other Stock-Based Awards. The Committee may from time to time grant Shares and other Awards that are valued by reference to and/or payable in whole or in part in Shares under the Plan. The Committee shall determine the terms and conditions of such Awards, which shall be consistent with the terms and purposes of the Plan. The Committee may direct the Company to issue Shares subject to restrictive legends and/or stop transfer instructions that are consistent with the terms and conditions of the Award to which the Shares relate.

(b) Cash Incentive Awards. A Cash Incentive Award shall be considered a performance-based Award for purposes of, and subject to, Section 6(g), the payment of which shall be contingent upon the degree to

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which one or more specified performance goals have been achieved over the specified performance period. Cash Incentive Awards may be granted to any Participant in such dollar-denominated amounts and upon such terms and at such times as shall be determined by the Committee. Following the completion of the applicable performance period and the vesting of a Cash Incentive Award, payment of the settlement amount of the Award to the Participant shall be made at such time or times in the form of cash, Shares or other forms of Awards under the Plan (valued for these purposes at their grant date fair value) or a combination of cash, Shares and other forms of Awards as determined by the Committee and specified in the applicable Award Agreement.

12. Changes in Capitalization, Corporate Transactions, Change in Control.

(a) Adjustments for Changes in Capitalization. In the event of any equity restructuring (within the meaning of FASB ASC Topic 718) that causes the per share value of Shares to change, such as a stock dividend, stock split, spinoff, rights offering or recapitalization through an extraordinary dividend, the Committee shall make such adjustments as it deems equitable and appropriate to (i) the aggregate number and kind of Shares or other securities issued or reserved for issuance under the Plan, (ii) the number and kind of Shares or other securities subject to outstanding Awards, (iii) the exercise price of outstanding Options and SARs, and (iv) any maximum limitations prescribed by the Plan with respect to certain types of Awards or the grants to individuals of certain types of Awards. In the event of any other change in corporate capitalization, including a merger, consolidation, reorganization, or partial or complete liquidation of the Company, such equitable adjustments described in the foregoing sentence may be made as determined to be appropriate and equitable by the Committee to prevent dilution or enlargement of rights of Participants. In either case, any such adjustment shall be conclusive and binding for all purposes of the Plan. No adjustment shall be made pursuant to this Section 12(a) in connection with the conversion of any convertible securities of the Company, or in a manner that would cause Incentive Stock Options to violate Section 422(b) of the Code or cause an Award to be subject to adverse tax consequences under Section 409A of the Code.

(b) Corporate Transactions. Unless otherwise provided in an applicable Award Agreement or another written agreement between a Participant and the Company, the following provisions shall apply to outstanding Awards in the event of a Change in Control that involves a Corporate Transaction.

(1) Continuation, Assumption or Replacement of Awards. In the event of a Corporate Transaction, then the surviving or successor entity (or its Parent) may continue, assume or replace Awards outstanding as of the date of the Corporate Transaction (with such adjustments as may be required or permitted by Section 12(a)), and such Awards or replacements therefor shall remain outstanding and be governed by their respective terms, subject to Section 12(b)(4) below. A surviving or successor entity may elect to continue, assume or replace only some Awards or portions of Awards. For purposes of this Section 12(b)(1), an Award shall be considered assumed or replaced if, in connection with the Corporate Transaction and in a manner consistent with Code Section 409A (and Code Section 424 if the Award is an ISO), either (i) the contractual obligations represented by the Award are expressly assumed by the surviving or successor entity (or its Parent) with appropriate adjustments to the number and type of securities subject to the Award and the exercise price thereof that preserves the intrinsic value of the Award existing at the time of the Corporate Transaction, or (ii) the Participant has received a comparable equity-based award that preserves the intrinsic value of the Award existing at the time of the Corporate Transaction and contains terms and conditions that are substantially similar to those of the Award.

(2) Acceleration. If and to the extent that outstanding Awards under the Plan are not continued, assumed or replaced in connection with a Corporate Transaction, then (i) all outstanding Option and SAR Awards shall become fully vested and exercisable for such period of time prior to the effective time of the Corporate Transaction as is deemed fair and equitable by the Committee, and shall terminate at the effective time of the Corporate Transaction, (ii) all outstanding Full Value Awards shall fully vest immediately prior to the effective time of the Corporate Transaction, and (iii) to the extent vesting of any Award is subject to satisfaction of specified performance goals, such Award shall be deemed “fully vested” for purposes of this Section 12(b)(2) if the performance goals are deemed to have been satisfied at the target level of performance and the vested portion of the Award at that level of performance is proportionate to the portion of the performance period that has elapsed as of the effective time of the Corporate Transaction. The Committee shall provide written notice of the period of accelerated exercisability of Option and SAR Awards to all affected Participants. The exercise of any Option or SAR

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Award whose exercisability is accelerated as provided in this Section 12(b)(2) shall be conditioned upon the consummation of the Corporate Transaction and shall be effective only immediately before such consummation.

(3) Payment for Awards. If and to the extent that outstanding Awards under the Plan are not continued, assumed or replaced in connection with a Corporate Transaction, then the Committee may provide that some or all of such outstanding Awards shall be canceled at or immediately prior to the effective time of the Corporate Transaction in exchange for payments to the holders as provided in this Section 12(b)(3). The Committee will not be required to treat all Awards similarly for purposes of this Section 12(b)(3). The payment for any Award canceled shall be in an amount equal to the difference, if any, between (i) the fair market value (as determined in good faith by the Committee) of the consideration that would otherwise be received in the Corporate Transaction for the number of Shares subject to the Award, and (ii) the aggregate exercise price (if any) for the Shares subject to such Award. If the amount determined pursuant to the preceding sentence is not a positive number with respect to any Award, such Award may be canceled pursuant to this Section 12(b)(3) without payment of any kind to the affected Participant. With respect to an Award whose vesting is subject to the satisfaction of specified performance goals, the number of Shares subject to such an Award for purposes of this Section 12(b)(3) shall be the number of Shares as to which the Award would have been deemed “fully vested” for purposes of Section 12(b)(2). Payment of any amount under this Section 12(b)(3) shall be made in such form, on such terms and subject to such conditions as the Committee determines in its discretion, which may or may not be the same as the form, terms and conditions applicable to payments to the Company’s stockholders in connection with the Corporate Transaction, and may, in the Committee’s discretion, include subjecting such payments to vesting conditions comparable to those of the Award canceled, subjecting such payments to escrow or holdback terms comparable to those imposed upon the Company’s stockholders under the Corporate Transaction, or calculating and paying the present value of payments that would otherwise be subject to escrow or holdback terms.

(4) Termination After a Corporate Transaction. If and to the extent that Awards are continued, assumed or replaced under the circumstances described in Section 12(b)(1), and if within 12 months after the Corporate Transaction a Participant experiences an involuntary termination of Service for reasons other than Cause, or voluntarily terminates his or her Service for Good Reason, then (i) outstanding Option and SAR Awards issued to the Participant that are not yet fully exercisable shall immediately become exercisable in full and shall remain exercisable for one year following the Participant’s termination of Service, and (ii) any Full Value Awards that are not yet fully vested shall immediately vest in full (with vesting in full for a performance-based award determined as provided in Section 12(b)(2), except that the proportionate vesting amount will be determined with respect to the portion of the performance period during which the Participant was a Service Provider).

(c) Other Change in Control. Unless otherwise provided in an applicable Award Agreement or another written agreement between a Participant and the Company, in the event of a Change in Control that does not involve a Corporate Transaction, all Awards will continue in accordance with their terms; provided, however, if within 12 months after the Change in Control a Participant experiences an involuntary termination of Service for reasons other than Cause or voluntarily terminates his or her Service for Good Reason, then (i) outstanding Option and SAR Awards issued to the Participant that are not yet fully exercisable shall immediately become exercisable in full and shall remain exercisable for one year following the Participant’s termination of Service, (ii) subject to clause (iii) below, any Full Value Awards that are not yet fully vested shall immediately vest in full, and (iii) to the extent vesting of any Award is subject to satisfaction of specified performance goals, such Award shall be deemed “fully vested” for purposes of this Section 12(c) if the performance goals are deemed to have been satisfied at the target level of performance and the vested portion of the Award at that level of performance is proportionate to the portion of the performance period that has occurred up to the date of such Participant’s termination of Service.

(d) Dissolution or Liquidation. Unless otherwise provided in an applicable Award Agreement, in the event of a proposed dissolution or liquidation of the Company, the Committee will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. An Award will terminate immediately prior to the consummation of such proposed action.

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13. Plan Participation and Service Provider Status. Status as a Service Provider shall not be construed as a commitment that any Award will be made under the Plan to that Service Provider or to eligible Service Providers generally. Nothing in the Plan or in any Award Agreement or related documents shall confer upon any Service Provider or Participant any right to continued Service with the Company or any Affiliate, nor shall it interfere with or limit in any way any right of the Company or any Affiliate to terminate the person’s Service at any time with or without Cause or change such person’s compensation, other benefits, job responsibilities or title.

14. Tax Withholding. The Company or any Affiliate, as applicable, shall have the right to (i) withhold from any cash payment under the Plan or any other compensation owed to a Participant an amount sufficient to cover any required withholding taxes related to the grant, vesting, exercise or settlement of an Award, and (ii) require a Participant or other person receiving Shares under the Plan to pay a cash amount sufficient to cover any required withholding taxes before actual receipt of those Shares. In lieu of all or any part of a cash payment from a person receiving Shares under the Plan, the Committee may permit the Participant to satisfy all or any part of the required tax withholding obligations (but not to exceed the maximum individual statutory tax rate in each applicable jurisdiction) by authorizing the Company to withhold a number of the Shares that would otherwise be delivered to the Participant pursuant to the Award, or by transferring to the Company Shares already owned by the Participant, with the Shares so withheld or delivered having a Fair Market Value on the date the taxes are required to be withheld equal to the amount of taxes to be withheld.

15. Effective Date, Duration, Amendment and Termination of the Plan.

(a) Effective Date. The Plan shall become effective on the date it is approved by the Company’s stockholders, which shall be considered the date of its adoption for purposes of Treasury Regulation §1.422-2(b)(2)(i). No Awards shall be made under the Plan prior to its effective date.

(b) Duration of the Plan. The Plan shall remain in effect until all Shares subject to it are distributed, all Awards have expired or terminated, the Plan is terminated pursuant to Section 15(c), or the tenth anniversary of the effective date of the Plan, whichever occurs first (the “Termination Date”). Awards made before the Termination Date shall continue to be outstanding in accordance with their terms and the terms of the Plan unless otherwise provided in the applicable Award Agreements.

(c) Amendment and Termination of the Plan. The Board may at any time terminate, suspend or amend the Plan. The Company shall submit any amendment of the Plan to its stockholders for approval only to the extent required by applicable laws or regulations or the rules of any securities exchange on which the Shares may then be listed. No termination, suspension, or amendment of the Plan may materially impair the rights of any Participant under a previously granted Award without the Participant’s consent, unless such action is necessary to comply with applicable law or stock exchange rules.

(d) Amendment of Awards. Subject to Section 15(e), the Committee may unilaterally amend the terms of any Award Agreement evidencing an Award previously granted, except that no such amendment may materially impair the rights of any Participant under the applicable Award without the Participant’s consent, unless such amendment is necessary to comply with applicable law or stock exchange rules or any compensation recovery policy as provided in Section 16(i).

(e) No Option or SAR Repricing. Except as provided in Section 12(a), no Option or Stock Appreciation Right Award granted under the Plan may be (i) amended to decrease the exercise price thereof, (ii) cancelled in conjunction with the grant of any new Option or Stock Appreciation Right Award with a lower exercise price, (iii) cancelled in exchange for cash, other property or the grant of any Full Value Award at a time when the per share exercise price of the Option or Stock Appreciation Right Award is greater than the current Fair Market Value of a Share, or (iv) otherwise subject to any action that would be treated under accounting rules as a “repricing” of such Option or Stock Appreciation Right Award, unless such action is first approved by the Company’s stockholders.

16. Other Provisions.

(a) Unfunded Plan. The Plan shall be unfunded and the Company shall not be required to segregate any assets that may at any time be represented by Awards under the Plan. Neither the Company, its Affiliates, the Committee, nor the Board shall be deemed to be a trustee of any amounts to be paid under the Plan nor

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shall anything contained in the Plan or any action taken pursuant to its provisions create or be construed to create a fiduciary relationship between the Company and/or its Affiliates, and a Participant. To the extent any person has or acquires a right to receive a payment in connection with an Award under the Plan, this right shall be no greater than the right of an unsecured general creditor of the Company.

(b) Limits of Liability. Except as may be required by law, neither the Company nor any member of the Board or of the Committee, nor any other person participating (including participation pursuant to a delegation of authority under Section 3(c) of the Plan) in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability to any party for any action taken, or not taken, in good faith under the Plan.

(c) Compliance with Applicable Legal Requirements and Company Policies. No Shares distributable pursuant to the Plan shall be issued and delivered unless and until the issuance of the Shares complies with all applicable legal requirements, including compliance with the provisions of applicable state and federal securities laws, and the requirements of any securities exchanges on which the Company’s Shares may, at the time, be listed. During any period in which the offering and issuance of Shares under the Plan is not registered under federal or state securities laws, Participants shall acknowledge that they are acquiring Shares under the Plan for investment purposes and not for resale, and that Shares may not be transferred except pursuant to an effective registration statement under, or an exemption from the registration requirements of, such securities laws. Any stock certificate or book-entry evidencing Shares issued under the Plan that are subject to securities law restrictions shall bear or be accompanied by an appropriate restrictive legend or stop transfer instruction. Notwithstanding any other provision of this Plan, the acquisition, holding or disposition of Shares acquired pursuant to the Plan shall in all events be subject to compliance with any applicable Company policies, including those relating to insider trading, pledging or hedging transactions, minimum post-vesting holding periods and stock ownership guidelines, and to forfeiture or recovery of compensation as provided in Section 16(i).

(d) Other Benefit and Compensation Programs. Payments and other benefits received by a Participant under an Award made pursuant to the Plan shall not be deemed a part of a Participant’s regular, recurring compensation for purposes of the termination, indemnity or severance pay laws of any country and shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan, contract or similar arrangement provided by the Company or an Affiliate unless expressly so provided by such other plan, contract or arrangement, or unless the Committee expressly determines that an Award or portion of an Award should be included to accurately reflect competitive compensation practices or to recognize that an Award has been made in lieu of a portion of competitive cash compensation.

(e) Governing Law. To the extent that federal laws do not otherwise control, the Plan and all determinations made and actions taken pursuant to the Plan shall be governed by the laws of the State of Delaware without regard to its conflicts-of-law principles and shall be construed accordingly.

(f) Severability. If any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

(g) Code Section 409A. It is intended that (i) all Awards of Options, SARs and Restricted Stock under the Plan will not provide for the deferral of compensation within the meaning of Code Section 409A and thereby be exempt from Code Section 409A, and (ii) all other Awards under the Plan will either not provide for the deferral of compensation within the meaning of Code Section 409A, or will comply with the requirements of Code Section 409A, and Awards shall be structured and the Plan administered and interpreted in accordance with this intent. The Plan and any Award Agreement may be unilaterally amended by the Company in any manner deemed necessary or advisable by the Committee or Board in order to maintain such exemption from or compliance with Code Section 409A, and any such amendment shall conclusively be presumed to be necessary to comply with applicable law. Notwithstanding anything to the contrary in the Plan or any Award Agreement, with respect to any Award that constitutes a deferral of compensation subject to Code Section 409A:

(1) If any amount is payable under such Award upon a termination of Service, a termination of Service will be deemed to have occurred only at such time as the Participant has experienced a “separation from service” as such term is defined for purposes of Code Section 409A;

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(2) If any amount shall be payable with respect to any such Award as a result of a Participant’s “separation from service” at such time as the Participant is a “specified employee” within the meaning of Code Section 409A, then no payment shall be made, except as permitted under Code Section 409A, prior to the first business day after the earlier of (i) the date that is six months after the Participant’s separation from service or (ii) the Participant’s death. Unless the Committee has adopted a specified employee identification policy as contemplated by Code Section 409A, specified employees will be identified in accordance with the default provisions specified under Code Section 409A.

None of the Company, the Board, the Committee nor any other person involved with the administration of this Plan shall (i) in any way be responsible for ensuring the exemption of any Award from, or compliance by any Award with, the requirements of Code Section 409A, (ii) have any obligation to design or administer the Plan or Awards granted thereunder in a manner that minimizes a Participant’s tax liabilities, including the avoidance of any additional tax liabilities under Code Section 409A, and (iii) shall have any liability to any Participant for any such tax liabilities.

(h) Rule 16b-3. It is intended that the Plan and all Awards granted pursuant to it shall be administered by the Committee so as to permit the Plan and Awards to comply with Exchange Act Rule 16b-3. If any provision of the Plan or of any Award would otherwise frustrate or conflict with the intent expressed in this Section 16(h), that provision to the extent possible shall be interpreted and deemed amended in the manner determined by the Committee so as to avoid the conflict. To the extent of any remaining irreconcilable conflict with this intent, the provision shall be deemed void as applied to Participants subject to Section 16 of the Exchange Act to the extent permitted by law and in the manner deemed advisable by the Committee.

(i) Forfeiture and Compensation Recovery.

(1) The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award will be subject to reduction, cancellation, forfeiture or recovery by the Company upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include termination of Service for Cause; violation of any material Company or Affiliate policy; breach of noncompetition, non-solicitation or confidentiality provisions that apply to the Participant; a determination that the payment of the Award was based on an incorrect determination that financial or other criteria were met or other conduct by the Participant that is detrimental to the business or reputation of the Company or its Affiliates.

(2) Awards and any compensation associated therewith may be made subject to forfeiture, recovery by the Company or other action pursuant to any compensation recovery policy adopted by the Board or the Committee at any time, including in response to the requirements of Section 10D of the Exchange Act and any implementing rules and regulations thereunder, or as otherwise required by law. Any Award Agreement may be unilaterally amended by the Committee to comply with any such compensation recovery policy.

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APPENDIX B

AUDIOEYE, INC.
EMPLOYEE STOCK PURCHASE PLAN

1. Purpose of the Plan. The purpose of this AudioEye, Inc. Employee Stock Purchase Plan (the “Plan”) is to provide the employees of AudioEye, Inc. (the “Company”) and its participating subsidiaries with a convenient means of purchasing shares of Company common stock from time to time at a discount to market prices through the use of payroll deductions. The Company intends that the Plan shall qualify as an “employee stock purchase plan” under Code § 423. Accordingly, the Plan will be construed so as to extend and limit Plan participation in any Offering subject to Code § 423 in a uniform and nondiscriminatory basis consistent with the requirements of Code § 423.

2. Definitions. The terms defined in this section are used (and capitalized) elsewhere in this Plan.

2.1. “Affiliate” means each domestic or foreign entity that is a “parent corporation” or “subsidiary corporation” of the Company, as defined in Code §§ 424(e) and 424(f) or any successor provisions.

2.2. “Board” means the Board of Directors of the Company.

2.3. “Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time. For purposes of the Plan, references to sections of the Code shall be deemed to include any applicable regulations thereunder and any successor or similar statutory provisions.

2.4. “Committee” means the Compensation Committee of the Board (or such successor committee responsible for executive compensation matters).

2.5. “Common Stock” means the common stock, par value $0.00001 per share, of the Company.

2.6. “Company” means AudioEye, Inc., a Delaware corporation, or any successor corporation.

2.7. “Corporate Transaction” means (i) a merger, consolidation or other reorganization of the Company with or into another corporation, or (ii) the sale of all or substantially all of the assets of the Company.

2.8. “Designated Affiliate” means any Affiliate which has been expressly designated by the Committee as a corporation whose Eligible Employees may participate in the Plan.

2.9. “Eligible Compensation” shall be defined from time to time by the Committee in its sole discretion with respect to any Offering and Purchase Period. Except as otherwise defined by the Committee from time to time in its sole discretion, (i) Eligible Compensation means the cash compensation classified as wages and salary paid by the Company or any Designated Affiliate to a Participant in accordance with the Participant’s terms of employment, (ii) Eligible Compensation includes contributions made by the Participant by payroll deduction to any qualified cash or deferred arrangement that forms part of a plan maintained by the Company or an Affiliate (while it is an Affiliate), or to a cafeteria plan maintained by the Company or an Affiliate (while it is an Affiliate), or under any qualified transportation fringe benefit plan, and (iii) Eligible Compensation shall not include any commissions, overtime earnings, bonuses, employer contributions to a 401(k) or other retirement plan, amounts deferred to a non-qualified deferred compensation plan, any expense reimbursements or allowances, vacation pay in lieu of time off, coverage provided or amounts paid under any welfare benefit plan (unless provided above), amounts paid by an insurance company, amounts paid in a form other than cash and other fringe benefits, or any income (whether paid in Shares or cash) realized by the Participant as a result of participation in any equity-based compensation plan of the Company or an Affiliate.

2.10. “Eligible Employee” means any employee of the Company or a Designated Affiliate, except for any employee who, immediately after a right to purchase is granted under the Plan, would be deemed, for purposes of Code § 423(b)(3), to own stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or any Affiliate. Notwithstanding the foregoing, with respect to any Offering, the Committee may provide for the exclusion of certain employees within the limitations described in Treasury Regulations §1.423-2(e)(1), (2) and (3).

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2.11. “Enrollment Period” means the period of time prior to a Purchase Period during which Eligible Employees may elect to participate in the Plan as determined by the Committee for an Offering.

2.12. “Fair Market Value” of a Share of Common Stock as of any date means the closing sale price for a Share on the principal securities market on which the Shares trade on said date.

2.13. “Offering” means the right provided to Participants to purchase Shares under the Plan with respect to a Purchase Period.

2.14. “Offering Date” means the first Trading Day of a Purchase Period.

2.15. “Participant” means an Eligible Employee who has elected to participate in the Plan in the manner set forth in Section 4 and whose participation has not ended pursuant to Section 8.1 or Section 9.

2.16. “Plan” means this AudioEye, Inc. Employee Stock Purchase Plan, as it may be amended from time to time.

2.17. “Purchase Date” means the last Trading Day of a Purchase Period.

2.18. “Purchase Period” means a period of time during which offers to purchase Common Stock are outstanding under the Plan. Prior to the start of a Purchase Period, the Committee shall determine the length of each Purchase Period, which need not be uniform; provided that no Purchase Period shall exceed twenty-seven (27) months in length. A Purchase Period shall commence on such date as may be established by the Committee. Unless the Committee determines otherwise, the Purchase Period will be a period of six months beginning either (i) on January 1 of each calendar year and ending on the next June 30, or (ii) on July 1 in each calendar year and ending on the next December 31.

2.19. “Recordkeeping Account” means the account maintained in the books and records of the Company (or its agent) recording the amount contributed to the Plan by each Participant through payroll deductions.

2.20. “Shares” means shares of Common Stock.

2.21. “Trading Day” means a day on which the national stock exchanges in the United States are open for trading.

3. Shares Available. Subject to adjustment as provided in Section 14.1, the maximum number of Shares that may be sold by the Company to Eligible Employees under the Plan shall be 500,000 Shares. If the purchases by all Participants in an Offering would otherwise cause the aggregate number of Shares to be sold under the Plan to exceed the number specified in this Section 3, the Company shall make to each Participant in that Offering a pro rata allocation in a uniform and nondiscriminatory manner of the remaining number of Shares which may be sold under the Plan.

4. Eligibility and Participation. To be eligible to participate in the Plan for a given Purchase Period, an employee must be an Eligible Employee on the first day of such Purchase Period. An Eligible Employee may elect to participate in the Plan by filing an election form with the Company (or its agent) before the Offering Date for a Purchase Period that authorizes regular payroll deductions from Eligible Compensation beginning with the first payday in such Purchase Period and continuing until the Plan is terminated or the Eligible Employee withdraws from the Plan, modifies his or her authorization, or ceases to be an Eligible Employee, as hereinafter provided.

5. Amount of Common Stock Each Eligible Employee May Purchase.

5.1. Purchase Amounts and Limitations. Subject to the provisions of this Plan, each Participant shall be offered the right to purchase on the Purchase Date the maximum number of whole Shares that can be purchased with the balance in the Participant’s Recordkeeping Account at the per Share price specified in Section 5.2. Notwithstanding the foregoing, no Participant shall be entitled to:

(a) the right to purchase Shares under this Plan and all other employee stock purchase plans (within the meaning of Code § 423(b)), if any, of the Company and its Affiliates that accrues at a rate

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which in the aggregate exceeds $25,000 of Fair Market Value (determined on the Offering Date of a Purchase Period when the right is granted) for each calendar year in which such right is outstanding at any time; or

(b) purchase Shares in excess of 1,500 Shares per Offering (or such other maximum Share limit, other than no share limit, as established by the Committee in its sole discretion), with such limit subject to adjustment from time to time as provided in Section 14.1.

5.2. Purchase Price. Unless a different purchase price is established by the Committee for an Offering prior to the commencement of the applicable Purchase Period, the purchase price of each Share sold pursuant to this Plan will be 85% of the Fair Market Value of such Share on the Purchase Date (the “Purchase Price”). In no event shall the Purchase Price be less than the lesser of (i) 85% of the Fair Market Value of such Share on the Offering Date of the applicable Purchase Period, or (ii) 85% of the Fair Market Value of such Share on the Purchase Date.

6. Method of Participation.

6.1. Notice and Date of Grant. The Company shall give notice to each Eligible Employee of the opportunity to purchase Shares pursuant to this Plan and the terms and conditions of such Offering. The Company contemplates that for tax purposes, the Offering Date for a Purchase Period will be considered the date of the grant of the right to purchase such Shares.

6.2. Contribution Elections. Each Eligible Employee who desires to participate in the Plan for a Purchase Period shall signify his or her election to do so by completing an election with the Company (or its agent) in a manner approved by the Committee. An Eligible Employee may elect to have any whole percent of Eligible Compensation (that is, 1%, 2%, 3%, etc.) withheld as a payroll deduction, but not exceeding 10% per pay period (or such other maximum percentage as the Committee may establish from time to time prior to the commencement of an Offering). An election to participate in the Plan and to authorize payroll deductions as described herein must be made prior to the Offering Date of a Purchase Period in accordance with the rules set by the Committee for the Purchase Period, and shall be effective beginning with the first payday in the Purchase Period immediately following the filing of such election. Any election submitted shall remain in effect until the Plan is terminated or such Participant withdraws from the Plan, modifies his or her authorization, or ceases to be an Eligible Employee, as hereinafter provided.

6.3 Additional Contributions. If specifically provided by the Committee in connection with an Offering (including for purposes of complying with applicable local law), in addition to or instead of making contributions by payroll deductions, a Participant may make additional contributions to his or her Recordkeeping Account through the payment by cash or check prior to a Purchase Date. A Participant may make such additional contributions into his or her Recordkeeping Account only if the Participant has not already had the maximum permitted amount withheld during the Offering through payroll deductions, subject to the limitations set forth in Section 5.1.

6.4. Offering Terms and Conditions. Each Offering shall consist of a single Purchase Period and shall be in such form and shall contain such terms and conditions as the Committee shall deem appropriate, consistent with the terms of the Plan. The Committee may provide for separate Offerings for different Designated Affiliates, and the terms and conditions of the separate Offerings, including the applicable Purchase Period, need not be consistent. Any Offering shall comply with the requirement of Code § 423 that all Participants shall have the same rights and privileges for such Offering. The terms and conditions of any Offering shall be incorporated by reference into the Plan and treated as part of the Plan.

7. Recordkeeping Accounts.

7.1. Crediting Payroll Deduction Contributions. The Company (or its agent) shall maintain a Recordkeeping Account for each Participant. Payroll deductions pursuant to Section 6 will be credited to such Recordkeeping Accounts on or within a reasonable amount of time following each payday.

7.2. No Interest Payable. No interest will be credited to a Participant’s Recordkeeping Account (unless required under local law).

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7.3. No Segregation of Accounts. The Recordkeeping Account is established solely for accounting purposes, and all amounts credited to the Recordkeeping Account will remain part of the general assets of the Company and need not be segregated from other corporate funds (unless required under local law).

7.4. Additional Contributions. A Participant may not make any separate cash payment into a Recordkeeping Account, except as may be permitted in accordance with Section 6.3, and any such additional contributions will be credited to the Recordkeeping Accounts within a reasonable amount of time following receipt by the Company.

8. Right to Adjust Participation; Withdrawals from Recordkeeping Account.

8.1. Withdrawal from Plan. A Participant may at any time withdraw from the Plan by complying with the rules set by the Committee. If a Participant withdraws from the Plan, the Company will pay to the Participant in cash the entire balance in such Participant’s Recordkeeping Account and no further deductions will be made from the Participant’s Eligible Compensation during such Purchase Period. A Participant who withdraws from the Plan will not be eligible to reenter the Plan until the next succeeding Purchase Period, and any such reentry shall be through the enrollment process described in Section 6.2.

8.2. Adjusting Level of Participation. A Participant may adjust his or her rate of payroll deduction contributions to the Plan as follows:

(a) A Participant may, by written notice during an Enrollment Period, direct the Company to increase or decrease his or her rate of payroll deduction contributions, with such change to be effective as of the first day of the next Purchase Period.

(b) A Participant may, by written notice that complies with the rules set by the Committee, direct the Company to decrease his or her rate of payroll deduction contributions during a Purchase Period to 0%, which shall be considered a suspension of contributions and shall become effective as soon as reasonably practicable. Any Participant who has decreased his or her rate of payroll deductions to 0% and does not increase such rate of payroll deductions from 0% to at least 1% in accordance with Section 8.2(a) during the next Enrollment Period will be withdrawn from the Plan effective as of the first day of that next Purchase Period.

8.3. Submission of Notices. Notification of a Participant’s election to withdraw from the Plan as provided in Section 8.1 or to change his or her rate of payroll deductions as provided in Section 8.2 shall be made by completing an updated election or notice with the Company (or its agent) in a manner approved by the Committee. The Committee may promulgate rules regarding the time and manner for submitting any such updated election or notice, which may include a requirement that the election or notice be on file for a reasonable period before it will be effective.

8.4. Adjustments by the Company. To the extent necessary to comply with Code § 423(b)(8) or Section 5.1, a Participant’s payroll deduction contributions to the Plan may be decreased by the Company to 0% at any time during a Purchase Period.

9. Termination of Employment.

9.1. Refund of Recordkeeping Account. If the employment of a Participant is terminated for any reason, including death, disability, or retirement, the entire balance in the Participant’s Recordkeeping Account will be refunded in cash to the Participant within 30 days after the date of termination of employment. For purposes of the Plan, a Participant will not be deemed to have terminated employment while the Participant is on sick leave, military leave or other leave of absence approved by the Company. Where the period of leave exceeds 90 days and the Participant’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the ninety-first day of such leave. Unless determined otherwise by the Committee in a manner that is permitted by, and in compliance with Code § 423, a Participant whose employment transfers between entities through a termination with an immediate rehire (with no break in service) by the Company or a Designated Affiliate shall not be treated as a termination under the Plan.

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9.2. Designation of Beneficiary. If permitted by the Committee, a Participant may file a beneficiary designation for who is to receive the Participant’s Recordkeeping Account or Share subaccount, if any, following the death of a Participant. If no beneficiary is named, the beneficiary shall be the Participant’s spouse, or if none, the Participant’s estate. All beneficiary designations will be in such form and manner as the Committee may designate from time to time.

10. Purchase of Shares.

10.1. Number of Shares Purchased. As of each Purchase Date, the balance in each Participant’s Recordkeeping Account will be used to purchase the maximum number of whole Shares (subject to the limitations of Section 5.1) at the Purchase Price determined in accordance with Section 5.2, unless the Participant has filed an appropriate form with the Company in advance of that date to withdraw from the Plan in accordance with Section 8.1. Any amount remaining in a Participant’s Recordkeeping Account that represents the Purchase Price for any fractional share will be carried over in the Participant’s Recordkeeping Account to the next Purchase Period. Any amount remaining in a Participant’s Recordkeeping Account that represents the Purchase Price for any whole Shares that could not be purchased by reason of the limitations of Section 5.1 or under the circumstances described in Section 3 will be refunded to the Participant.

10.2. Conversion of Foreign Currency. In circumstances where payroll deductions have been taken from a Participant’s Eligible Compensation in a currency other than United States dollars, Shares shall be purchased by converting the balance in the Participant’s Recordkeeping Account to United States dollars at the exchange rate in effect for payroll purposes for the month in which the Purchase Date occurs as determined by the Company’s finance department or at such other exchange rate determined by the Committee or its delegate for this purpose, and such dollar amount shall be used to purchase Shares as of the Purchase Date.

10.3. Crediting of Shares. Promptly after the end of each Purchase Period, the number of Shares purchased by all Participants as of the applicable Purchase Date shall be issued and delivered to an agent selected by the Company. Delivery of the shares to the agent shall be effected by an appropriate book-entry in the stock register maintained by the Company’s transfer agent or delivery of a certificate. The agent will hold the Shares for the benefit of all Participants who have purchased Shares and will maintain a Share subaccount for each Participant reflecting the number of Shares credited to each Participant. Each Participant will be entitled to direct the voting by the agent of all Shares credited to such Participant’s Share subaccount, and the agent may reinvest any dividends paid on Shares credited to a Participant’s Share subaccount in additional Shares in accordance with such rules as the Committee may prescribe.

10.4 Withdrawal of Shares from Share Subaccount. Each Participant may direct the agent to sell any or all of the Shares credited to the Participant’s Share subaccount and distribute the net proceeds of such sale to the Participant. Except for sales through the agent as provided in this Section 10.4, a Participant may not withdraw Shares or otherwise transfer Shares from the Participant’s Share subaccount.

11. Rights as a Shareholder. A Participant shall not be entitled to any of the rights or privileges of a shareholder of the Company with respect to Shares offered for purchase under the Plan, including the right to vote or direct the voting or to receive any dividends that may be declared by the Company, until (i) the Participant actually has paid the Purchase Price for such Shares and (ii) such Shares have been issued and delivered, as provided in Section 10.3.

12. Rights Not Transferable. A Participant’s rights under this Plan are exercisable only by the Participant during his or her lifetime, and may not be sold, pledged, assigned, transferred or disposed of in any manner other than by will or the laws of descent and distribution. Any attempt to sell, pledge, assign, transfer or dispose of the same shall be void and without effect. The amounts credited to a Recordkeeping Account may not be sold, pledged, assigned, transferred or disposed of in any way, and any attempted sale, pledge, assignment, transfer or other disposition of such amounts will be void and without effect.

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13. Administration of the Plan.

13.1. Authority of the Committee. This Plan shall be administered by the Committee. Subject to the express provisions of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to:

(a) Determine when each Purchase Period under this Plan shall occur, and the terms and conditions of each related Offering (which need not be identical);

(b) Designate from time to time which Affiliates of the Company shall be eligible to participate in the Plan;

(c) Construe and interpret the Plan and establish, amend and revoke rules, regulations and procedures for the administration of the Plan. The Committee may, in the exercise of this power, correct any defect, omission or inconsistency in the Plan, in such manner and to the extent it may deem necessary, desirable or appropriate to make the Plan fully effective;

(d) Exercise such powers and perform such acts as the Committee may deem necessary, desirable or appropriate to promote the best interests of the Company and its Designated Affiliates and to carry out the intent that the Offerings made under the Plan are treated as qualifying under Code § 423(b);

(e) As more fully described in Section 18, to adopt such rules, procedures and sub-plans as may be necessary, desirable or appropriate to permit participation in the Plan by employees who are foreign nationals or employed outside the United States by a non-U.S. Designated Affiliate, and to achieve tax, securities law and other compliance objectives in particular locations outside the United States; and

(f) Adopt and amend, as the Committee deems appropriate, a Plan rule specifying that Shares purchased by a Participant during a Purchase Period may not be sold by the Participant for a specified period of time after the Purchase Date on which the Shares were purchased by the Participant, and establish such procedures as the Committee may deem necessary to implement such rule.

13.2. Interpretations and Decisions by the Committee. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all persons, including the Company, any Affiliate, any Participant and any Eligible Employee.

13.3. Delegation by the Committee. Subject to the terms of the Plan and applicable law, the Committee may delegate ministerial duties associated with the administration of the Plan to such of the Company’s officers, employees or agents as the Committee may determine.

13.4. Indemnification. No member of the Board or Committee shall be liable for any action taken or determination made in good faith with respect to the Plan. In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of the Company or a Designated Affiliate, members of the Board and Committee and any officers or employees of the Company or Designated Affiliate to whom authority to act for the Committee is delegated shall be indemnified by the Company from and against any and all liabilities, costs and expenses incurred by such persons as a result of any act or omission to act in connection with the performance of such person’s duties, responsibilities and obligations under the Plan if such person has acted in good faith and in a manner that he or she reasonably believes to be in, or not opposed to, the best interests of the Company.

14. Changes in Capitalization and Corporate Transactions.

14.1. Adjustments. In the event of any change in the Common Stock of the Company by reason of a stock dividend, stock split, reverse stock split, corporate separation, recapitalization, merger, consolidation, combination, exchange of shares and the like, the Committee shall make such equitable

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adjustments as it deems appropriate in the aggregate number and class of Shares or other securities available under this Plan, the Share limitation referred to in Section 5.1(b) of the Plan, and the number, class and Purchase Price of Shares or other securities subject to purchase under any pending Offering.

14.2. Corporate Transactions. In the event of a Corporate Transaction, each right to acquire Shares on any Purchase Date that is scheduled to occur after the date of the consummation of the Corporate Transaction may be continued or assumed or an equivalent right may be substituted by the surviving or successor corporation or a parent or subsidiary of such corporation. If such surviving or successor corporation or parent or subsidiary thereof refuses to continue, assume or substitute for such outstanding rights, then the Board may, in its discretion, either terminate the Plan or shorten the Purchase Period then in progress by setting a new Purchase Date for a specified date before the date of the consummation of the Corporate Transaction. Each Participant shall be notified in writing, prior to any new Purchase Date, that the Purchase Date for the existing Offering has been changed to the new Purchase Date and that the Participant’s right to acquire Shares will be exercised automatically on the new Purchase Date unless prior to such date the Participant’s employment has been terminated or the Participant has withdrawn from the Plan. In the event of a dissolution or liquidation of the Company, any Offering and Purchase Period then in progress will terminate immediately prior to the consummation of such action, unless otherwise provided by the Board.

15. Amendment or Suspension of Plan. The Committee, in its sole discretion, may at any time suspend this Plan or amend it in any respect, but no such amendment may, without shareholder approval, increase the number of shares reserved under this Plan, or effect any other change in the Plan that would require shareholder approval under applicable law or regulations or the rules of any securities exchange on which the Shares may then be listed, or to maintain compliance with Code § 423. No such amendment or suspension shall adversely affect the rights of Participants pursuant to Shares previously acquired under the Plan. During any suspension of the Plan, no new Offering or Purchase Period shall begin and no Eligible Employee shall be offered any new right to purchase Shares under the Plan or any opportunity to elect to participate in the Plan, and any existing payroll deduction authorizations shall be suspended, but any such right to purchase Shares previously granted for a Purchase Period that began prior to the Plan suspension shall remain subject to the other provisions of this Plan and the discretion of the Board and the Committee with respect thereto.

16. Effective Date and Term of Plan. The Plan will become effective on the date it is approved by the shareholders of the Company, which approval must be within 12 months of the date the Plan is adopted by the Board. The Plan and all rights of Participants hereunder shall terminate (i) at any time, at the discretion of the Committee, or (ii) upon the completion of any Offering under which the limitation on the total number of Shares to be issued during the entire term of the Plan, as determined in accordance with Section 3, has been reached. Except as otherwise determined by the Board, upon termination of this Plan, the Company shall pay to each Participant cash in an amount equal to the entire remaining balance in such Participant’s Recordkeeping Account.

17. Governmental Regulations and Listing. All rights granted or to be granted to Eligible Employees under this Plan are expressly subject to all applicable laws and regulations and to the approval of all governmental authorities required in connection with the authorization, issuance, sale or transfer of the Shares reserved for this Plan, including, without limitation, there being a current registration statement of the Company under the Securities Act of 1933, as amended, covering the Shares purchasable on the Purchase Date applicable to such Shares. If applicable, all such rights hereunder are also similarly subject to effectiveness of an appropriate listing application to a national securities exchange covering the Shares issuable under the Plan upon official notice of issuance.

18. Rules for Foreign Jurisdictions. The Committee may adopt rules, procedures or subplans relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures. Without limiting the generality of the foregoing, the Committee is specifically authorized to adopt rules and procedures regarding handling of payroll deductions, payment of interest, conversion of local currency, payroll tax, the definition of Eligible Compensation, withholding procedures and handling of stock certificates that vary with local requirements.

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19. Miscellaneous.

19.1. Effect on Employment Status. This Plan shall not be deemed to constitute a contract of employment between the Company or any Designated Affiliate and any Participant, nor shall it interfere with the right of the Company (or any Affiliate) to terminate the employment of any Participant and treat him or her without regard to the effect that such treatment might have upon him or her under this Plan.

19.2. Governing Law. This Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Delaware.

19.3. Electronic Documentation and Signatures. Any reference in the Plan to election or enrollment forms, notices, authorizations or any other document to be provided in writing shall include the provision of any such form, notice, authorization or document by electronic means, including through the Company’s intranet or with the Company’s agent, and any reference in the Plan to the signing of any document shall include the authentication of any such document provided in electronic form, in each case in accordance with procedures established by the Committee.

19.4. Book-Entry and Electronic Transfer of Shares. Any reference in this Plan to the issuance or transfer of a stock certificate evidencing Shares shall be deemed to include, in the Committee’s discretion, the issuance or transfer of such Shares in book-entry or electronic form. Uncertificated Shares shall be deemed delivered for all purposes of this Plan when the Company or its agent shall have provided to the recipient of the Shares a notice of issuance or transfer by electronic mail (with proof of receipt) or by United States mail, and have recorded the issuance or transfer in its records.

19.5. Registration of Share Accounts and Certificates. Any Share account contemplated by Section 10.3 and certificate to be issued to a Participant shall be registered in the name of the Participant, or jointly in the name of the Participant and another person, as the Participant may direct on an appropriate form filed with the Company or the agent.

19.6. Code § 409A. The Plan is exempt from the application of Code § 409A and any ambiguities herein will be interpreted to so be exempt from Code § 409A. In furtherance of the foregoing and notwithstanding any provision in the Plan to the contrary, if the Committee determines that an option granted under the Plan may be subject to Code § 409A or that any provision in the Plan would cause an option under the Plan to be subject to Code § 409A, the Committee may amend the terms of the Plan and/or of an outstanding Offering under the Plan, or take such other action as the Committee determines is necessary or appropriate, in each case, without the Participant’s consent, to exempt any outstanding option or future option that may be granted under the Plan from or to allow any such options to comply with Code § 409A, but only to the extent any such amendments or actions by the Committee would not violate Code § 409A. Notwithstanding the foregoing, the Company and the Committee shall have no liability to a Participant or any other party if the option to purchase Shares under the Plan that is intended to be exempt from or compliant with Code § 409A is not exempt or compliant or for any action taken by the Committee with respect thereto. The Company makes no representations that the option to purchase Shares under the Plan is compliant with Code § 409A.

19.7. Severability. If any provision of the Plan is or becomes or is deemed to be invalid, illegal, or unenforceable for any reason in any jurisdiction or as to any Participant, such invalidity, illegality or unenforceability shall not affect the remaining parts of the Plan and the Plan shall be construed and enforced as to such jurisdiction or Participant as if the invalid, illegal or unenforceable provision had not been included.

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AUDIOEYE, INC.5210 E. WILLIAMS CIRCLE, SUITE 750TUCSON, ARIZONA 85711 SCAN TOVIEW MATERIALS & VOTE VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode aboveUse the Internet to transmit your voting instructions up until 11:59 p.m., Eastern Time, the daybefore the meeting date. Have your proxy card in hand when you access the web site and followthe instructions to obtain your records and to create an electronic voting instruction form.ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALSIf you would like to reduce the costs incurred by our company in mailing proxy materials, you canconsent to receiving all future proxy statements, proxy cards and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions above tovote using the Internet and, when prompted, indicate that you agree to receive or access proxymaterials electronically in future years.DURING THE VIRTUAL MEETING:Go to www.virtualshareholdermeeting.com/AEYE2022You may attend the virtual-only meeting via the Internet and vote during the virtual meeting. Havethe information that is printed in the box marked by the arrow available and follow the instructions.VOTE BY PHONE - 1-800-690-6903Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m., EasternTime, the day before the meeting date. Have your proxy card in hand when you call and thenfollow the instructions.VOTE BY MAILMark, sign and date your proxy card and return it in the postage-paid envelope we have providedor return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D75343-P67389-Z81892KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. AUDIOEYE, INC. ForAllWithholdAllFor AllExcept To withhold authority to vote for any individual nominee(s),mark "For All Except" and write the number(s) of the nominee(s)for whom your vote is withheld on the line below. The Board of Directors recommends you vote FOR thefollowing:1. Election of DirectorsNominees: 01) Dr. Carr Bettis02) Anthony Coelho03) Marc Lehmann 04) David Moradi05) Jamil Tahir The Board of Directors recommends you vote FOR the following proposals:2. To approve, by non-binding advisory vote, the compensation of AudioEye, Inc.’s named executive officers.3. To approve amendments to the AudioEye, Inc. 2020 Equity Incentive Plan.4. To approve the AudioEye, Inc. Employee Stock Purchase Plan.5. To ratify the appointment of MaloneBailey, LLP as AudioEye, Inc.’s independent registered public accounting firm for the fiscal year endingDecember 31, 2022.For Against AbstainNOTE: Such other business as may properly come before the meeting or any adjournment thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor,administrator, or other fiduciary, please give full title as such. Joint owners should each signpersonally. All holders must sign. If a corporation or partnership, please sign in full corporateor partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date

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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:The Notice and Proxy Statement and the Annual Report on Form 10-K are available atwww.proxyvote.com. D75344-P67389-Z81892 AUDIOEYE, INC.THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSANNUAL MEETING OF STOCKHOLDERSMAY 20, 2022 The undersigned hereby appoints James Spolar and Kelly Georgevich, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this proxy card, all of the shares of Common Stock of AudioEye, Inc. that the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held virtually at 10:00 a.m., Eastern Time, on Friday, May 20, 2022, and any adjournment or postponement thereof.THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED. IF NO SUCH DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS AND FOR PROPOSALS 2, 3, 4 AND 5.PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE CONTINUED AND TO BE SIGNED ON REVERSE SIDE

SEC Form DEF 14A filed by AudioEye Inc.