What changed in this filing

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Item 1. Financial Statements

2024-08-07 compared with 2024-05-14 · 538 added, 102 removed, 367 unchanged (64% of the section changed)

2 unchanged sentences

(In thousands, except share amounts and par value data)

March 31, 2024 December 31, 2023

June 30, 2024

December 31, 2023

CURRENT ASSETS:

Cash and cash equivalents

$ 11,215 $ 16,932

Marketable securities

16,774 19,591

Accounts receivable, net

2 unchanged sentences

Total current assets

30,171 39,754

Right-of-use assets

10,499 11,226

Property and equipment, net

1 unchanged sentence

Other noncurrent assets

Total assets $ 45,427 $ 54,317

$ 44,014 $ 54,317

LIABILITIES AND STOCKHOLDERS’ EQUITY

1 unchanged sentence

Accounts payable

$ 3,678 $ 3,442

Accrued expenses and other current liabilities

Contract liabilities

Total current liabilities

Operating lease liabilities, noncurrent

14,064 14,858

Convertible note

Other noncurrent liabilities

Total liabilities

23,204 25,294

COMMITMENTS AND CONTINGENCIES (Note 15)

5 unchanged sentences

600,000,000 shares authorized;

6,503,019 and 6,310,090 shares issued and outstanding at March 31, 2024 and December 31, 2023

8,437,733 and 6,310,090 shares issued and outstanding at June 30, 2024 and December 31, 2023

Additional paid-in capital

376,658 366,647

Accumulated other comprehensive (loss) income

Accumulated deficit

( 355,841 ) ( 337,635 )

Total stockholders’ equity

20,810 29,023

Total liabilities and stockholders’ equity

$ 44,014 $ 54,317

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

(In thousands, except share amounts and per share data)

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

Prototype sales

2 unchanged sentences

Cost of revenue

Gross loss ( 243 ) ( 1,625 )

OPERATING EXPENSES:

11 unchanged sentences

Provision for income tax expense

Net loss $ ( 10,219 ) $ ( 26,265 )

PER SHARE DATA

Net loss per common share (basic and diluted) $ ( 1.61 ) $ ( 4.75 )

Weighted average common shares outstanding (basic and diluted) 6,352,835 5,528,862

Net loss per share (basic and diluted)

Weighted average shares outstanding (basic and diluted)

COMPREHENSIVE LOSS:

Net loss $ ( 10,219 ) $ ( 26,265 )

Change in net unrealized gain (loss) on available-for-sale securities, net of tax

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

For the three months ended March 31, 2024 and 2023

For the six months ended June 30, 2024 and 2023

(In thousands, except share amounts)

Preferred Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss)

Accumulated Deficit Total Stockholders’ Equity

Shares Amount Shares Amount

Accumulated Other

Preferred Stock

Comprehensive

Stockholders’

Income (Loss)

BALANCE—December 31, 2023

— $ — 6,310,090 $ 1 $ 366,647 $ 10 $ ( 337,635 ) $ 29,023

Stock-based compensation

3 unchanged sentences

Other comprehensive loss, net of tax

Net loss — — — — — — ( 10,219 ) ( 10,219 )

BALANCE—March 31, 2024

Preferred Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss)

Accumulated Deficit Total Stockholders’ Equity

Shares Amount Shares Amount

Stock-based compensation

Issuance of common stock upon exercise of options

Issuance of common stock upon vesting of restricted stock units

Taxes related to net share settlement of equity awards

Issuance of common stock under the Common Stock Purchase Agreements

Stock issuance costs related to Common Stock Purchase Agreements

Issuance of common stock through Employee Stock Purchase Plan

Other comprehensive loss, net of tax

BALANCE—June 30, 2024

Accumulated Other

Preferred Stock

Comprehensive

Stockholders’

Income (Loss)

BALANCE—December 31, 2022

5 unchanged sentences

Other comprehensive income, net of tax

Net loss — — — — — — ( 26,265 ) ( 26,265 )

BALANCE—March 31, 2023

Stock-based compensation

Issuance of common stock upon vesting of restricted stock units

Taxes related to net share settlement of equity awards

Conversion of convertible note into common stock

Issuance of common stock through Employee Stock Purchase Plan

Other comprehensive income, net of tax

BALANCE—June 30, 2023

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

(In thousands)

Three months ended March 31,

Six months ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ ( 10,219 ) $ ( 26,265 )

Adjustments to reconcile net loss to net cash used in operating activities:

2 unchanged sentences

Noncash lease expense relating to operating lease right-of-use assets

Impairment of right-of-use assets

Inventory write-downs, net of scrapped inventory

11 unchanged sentences

Operating lease liabilities

Other noncurrent liabilities ( 358 ) —

Contract liabilities

Other noncurrent liabilities

Net cash used in operating activities

7 unchanged sentences

Proceeds from exercise of stock options

Proceeds from the issuance of convertible note

Payments for convertible note redemptions

Taxes paid related to the net share settlement of equity awards

Proceeds from issuance of common stock under the Common Stock Purchase Agreement 165 —

Proceeds from issuance of common stock under the Common Stock Purchase Agreements

Stock issuance costs related to the Common Stock Purchase Agreements

Proceeds from issuance of common stock through the Employee Stock Purchase Plan

Net cash provided by (used in) financing activities

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 7,397 ) 1,437

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period

5 unchanged sentences

Purchases of property and equipment included in accounts payable and accrued liabilities

Proceeds from exercise of stock options included in prepaid and other current assets — 68

Conversion of convertible notes and accrued interest into Class A common stock

Stock issuance costs included in accounts payable and accrued liabilities

Taxes related to net share settlement of equity awards included in accrued liabilities

3 unchanged sentences

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

AEye (the “Company” or “AEye”) is a provider of high-performance, active lidar systems for vehicle autonomy, advanced driver-assistance systems (ADAS), and smart industrial applications.

(the “Company” or “AEye”) is a provider of high-performance, active lidar systems for vehicle autonomy, advanced driver-assistance systems (ADAS), and smart industrial applications.

AEye’s software-definable 4Sight TM Intelligent Sensing Platform combines solid-state active lidar and integrated deterministic artificial intelligence to capture more intelligent information with less data, enabling faster, more accurate, and more reliable perception of the surroundings.

AEye, Inc., formerly known as CF Finance Acquisition Corp.

AEye, formerly known as CF Finance Acquisition Corp.

III (“CF III”), was originally incorporated in Delaware on March 15, 2016 under the name CF SPAC Re Inc.

17 unchanged sentences

The Company has funded its operations primarily through the business combination and issuances of stock.

As of March 31, 2024, the Company’s existing sources of liquidity included cash, cash equivalents, and marketable securities of $ 28,909 .

As of June 30, 2024 , the Company’s existing sources of liquidity included cash, cash equivalents, and marketable securities of $ 27,989 .

ASC 205 - 40, Presentation of Financial Statements - Going Concern , requires management to assess an entity’s ability to continue as a going concern within one year of the date the financial statements are issued.

8 unchanged sentences

Since its inception, the Company has incurred net losses and negative cash flows from operations.

As of March 31, 2024, the Company had an accumulated deficit of $ 347,854 .

For the three months ended March 31, 2024 and 2023, the Company incurred a net loss of $ 10,219 and $ 26,265 , respectively, and the Company had net cash outflows from operating activities of $ 7,885 and $ 17,195 , respectively.

As of March 31, 2024, the Company had $ 28,909 of cash and marketable securities.

As of June 30, 2024 , the Company had an accumulated deficit of $ 355,841 .

For the six months ended June 30, 2024 and 2023 , the Company incurred a net loss of $ 18,206 and $ 42,296 , respectively, and the Company had net cash outflows from operating activities of $ 14,241 and $ 32,445 , respectively.

As of June 30, 2024 , the Company had $ 27,989 of cash, cash equivalents, and marketable securities.

As the Company is still in its early stages, it is expected to incur additional operating losses and negative cash flows as it continues to focus on achieving commercialization of its lidar solutions.

When conditions and events, in the aggregate, impact an entity’s ability to continue as a going concern, management evaluates the mitigating effect of its plans to determine if it is probable that the plans will be effectively implemented, and, when implemented, the plans will mitigate the relevant conditions or events.

The decision in late 2023 by the Company's former Tier 1 partner, Continental AG, to discontinue its joint lidar development program with the Company, may have a material and adverse effect on the Company's business, which is predicated on licensing its lidar designs and other intellectual property to Tier 1 partners.

Primarily, the Company is dependent upon raising additional capital to provide the cash necessary to continue the Company's ongoing operations.

Should the Company not be able to do so, the Company will require alternative sources of liquidity to continue its operations over the next 12 months.

The Company plans to adjust spending in order to preserve and extend liquidity, and has plans which would further reduce operating expenses and cash outlays.

The Company believes that these plans alleviate substantial doubt about the Company's ability to continue as a going concern, which will result in adequate cash flows to support its ongoing operations for at least one year following the date these financial statements are issued.

Based upon the results of management’s assessment, which has been performed as of May 14, 2024, these condensed consolidated financial statements have been prepared on a going concern basis.

The Company is dependent upon raising additional capital to provide the cash necessary to continue its ongoing operations.

The Company has been able to do so;

for example, during the second quarter of 2024 it was able to raise $5,541 in gross proceeds from financing activities.

Should the Company not be able to raise additional capital, the Company will require alternative sources of liquidity to continue its operations over the next 12 months.

In those circumstances, the Company would also plan to adjust spending in order to preserve and extend liquidity, and has plans to further reduce operating expenses and cash outlays should it need to.

The Company believes that these plans can be successfully implemented and alleviate substantial doubt about the Company's ability to continue as a going concern, which will result in adequate cash flows to support its ongoing operations for at least one year following the date these financial statements are issued.

Based upon the results of management’s assessment, which has been performed as of August 7, 2024 , these condensed consolidated financial statements have been prepared on a going concern basis.

Reverse Stock Split

29 unchanged sentences

Level 3 —Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company's financial instruments that are not remeasured at fair value include accounts receivable, prepaid and other current assets, accounts payable, accrued expenses, and other current liabilities.

The carrying values of these financial instruments approximate their fair values.

The Company’s financial assets and liabilities measured at fair value on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):

Fair Value Measured as of March 31, 2024 Using:

Adjusted Cost Unrealized losses

Fair Value Cash and Cash Equivalent

Fair Value Measured as of June 30, 2024 Using:

Adjusted Cost

Unrealized Losses

Cash and Cash Equivalent

Marketable Securities

Money market funds

$ 9,464 $ — $ 9,464 $ 9,464 $ —

Corporate bonds

10,062 ( 3 ) 10,059 1,272 8,787

Commercial paper

6,135 ( 5 ) 6,130 — 6,130

Government securities

1,857 — 1,857 — 1,857

Total financial assets

$ 27,518 $ ( 8 ) $ 27,510 $ 10,736 $ 16,774

Private placement warrant liability

$ — $ — $ — $ — $ —

Derivative warrant liability

Total financial liabilities

$ — $ — $ 39 $ — $ —

Fair Value Measured as of December 31, 2023 Using:

Adjusted Cost Unrealized gains

Fair Value Cash and Cash Equivalent

Adjusted Cost

Unrealized Gains

Cash and Cash Equivalent

Marketable Securities

Money market funds

$ 16,377 $ — $ 16,377 $ 16,377 $ —

Corporate bonds

2,880 1 2,881 — 2,881

Commercial paper

8,809 5 8,814 — 8,814

Government securities

7,892 4 7,896 — 7,896

Total financial assets

$ 35,958 $ 10 $ 35,968 $ 16,377 $ 19,591

Private placement warrant liability

$ — $ — $ — $ — $ —

Derivative warrant liability

Total financial liabilities

$ — $ — $ 26 $ — $ —

The Company’s financial assets and liabilities subject to fair value procedures were comprised of the following:

18 unchanged sentences

Treasury rates, commensurate with a similar term to the warrants.

The term to expiration was calculated as the contractual term of the warrants of 4 years.

The term to expiration was calculated as the contractual term of the warrants of four years.

Finally, the Company does not currently anticipate paying a dividend.

7 unchanged sentences

Private Placement Warrant liability is included within other noncurrent liabilities on the condensed consolidated balance sheets.

For the three months ended March 31, 2024, there were no net transfers between Level 1 and Level 2 inputs.

The following table presents a summary of the changes in fair value of the Company’s Level 3 financial instruments for the three months ended March 31, 2024 (in thousands):

For the six months ended June 30, 2024 , there were no net transfers between Level 1 and Level 2 inputs.

The following table presents a summary of the changes in fair value of the Company’s Level 3 financial instruments for the six months ended June 30, 2024 (in thousands):

Derivative Warrant Liability

1 unchanged sentence

Change in fair value included in other income (expense), net

Balance at March 31, 2024 $ 24

The key inputs into the Monte-Carlo simulation model for the derivative warrant liability valued at March 31, 2024 are as follows:

March 31, 2024

Balance at June 30, 2024

The key inputs into the Monte-Carlo simulation model for the derivative warrant liability valued at June 30, 2024 are as follows:

June 30, 2024

Expected term (years)

7 unchanged sentences

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

Cash, cash equivalents, and restricted cash as of March 31, 2024 and December 31, 2023 were as follows (in thousands):

March 31, 2024 December 31, 2023

Cash, cash equivalents, and restricted cash as of June 30, 2024 and December 31, 2023 were as follows (in thousands):

June 30, 2024

December 31, 2023

Cash and cash equivalents

1 unchanged sentence

Total cash, cash equivalents, and restricted cash

Inventory, net of write-downs, as of March 31, 2024 and December 31, 2023 were as follows (in thousands):

March 31, 2024 December 31, 2023

Inventory, net of write-downs, as of June 30, 2024 and December 31, 2023 were as follows (in thousands):

June 30, 2024

December 31, 2023

Raw materials

2 unchanged sentences

Total inventory, net

The Company also had $ 197 and $ 208 of non-current inventory (raw materials), net of write-downs, classified within other noncurrent assets on the condensed consolidated balance sheet as of March 31, 2024 and December 31, 2023, respectively.

The Company's current and non-current inventory as of March 31, 2024 and December 31, 2023 was written down by $ 5,025 and $ 5,062 , respectively, in order to reduce inventory to the lower of cost or net realizable value.

The Company also had $ 209 and $ 208 of non-current inventory (raw materials), net of write-downs, classified within other noncurrent assets on the condensed consolidated balance sheet as of June 30, 2024 and December 31, 2023 , respectively.

The Company's current and non-current inventory as of June 30, 2024 and December 31, 2023 was written down by $ 5,097 and $ 5,062 , respectively, in order to reduce inventory to the lower of cost or net realizable value.

PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets as of March 31, 2024 and December 31, 2023 were as follows (in thousands):

March 31, 2024 December 31, 2023

Prepaid and other current assets as of June 30, 2024 and December 31, 2023 were as follows (in thousands):

June 30, 2024

December 31, 2023

Prepaid expenses

$ 1,666 $ 2,386

Advances to suppliers

Total prepaid and other current assets

As of March 31, 2024 and December 31, 2023, the Company recorded a loss on advances to suppliers of $ 1,385 associated with the winding down of its existing industrial product as part of its revised strategic plan.

$ 1,793 $ 2,517

The Company's advances to suppliers as of June 30, 2024 and December 31, 2023 was written down by $ 1,385 associated with the winding down of its existing industrial product as part of its revised strategic plan.

See Note 13, Restructuring, for further details.

The components of operating lease expenses for the three months ended March 31, 2024 and 2023 are as follows (in thousands):

Three months ended March 31,

The components of operating lease expenses for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands):

Three months ended June 30,

Six months ended June 30,

Operating lease cost

$ 582 $ 602 $ 1,171 $ 1,204

Variable lease cost

85 80 169 159

Total operating lease cost

$ 667 $ 682 $ 1,340 $ 1,363

Maturities of lease liabilities are as follows (in thousands):

1 unchanged sentence

Years ending - December 31:

2024 (remaining nine months) $ 1,852

Thereafter 8,400

2024 (remaining six months)

Total lease payments

3 unchanged sentences

2022 Convertible Note

On September 14, 2022, the Company entered into a Securities Purchase Agreement, or SPA, with an investor allowing for the sale and issue of up to two convertible notes, each with a principal balance of $ 10,500 and gross cash proceeds of $ 10,000 , for a total of $ 20,000 in proceeds between the two issuances (each, a "Note Closing").

On September 14, 2022 , the Company entered into a Securities Purchase Agreement with an investor allowing for the sale and issue of up to two convertible notes, each with a principal balance of $ 10,500 and gross cash proceeds of $ 10,000 , for a total of $ 20,000 in proceeds between the two issuances (each, a "Note Closing").

The first Note Closing ("First Closing") occurred on September 15, 2022 , and the Company entered into a Senior Unsecured Convertible Note with the investor pursuant to which the Company issued to the investor one convertible note ( "2022 Note") with a principal balance of $ 10,500 for net cash proceeds of $ 9,850 .

2 unchanged sentences

As of March 15, 2024 , the Company did not effect a Second Closing.

The 2022 Note bore interest at an annual rate of 5.0 %, in addition to an original issue discount of 4.76 %, and had an initial a maturity date of March 15, 2024 (“Maturity Date”).

The 2022 Note bore interest at an annual rate of 5.0 %, in addition to an original issue discount of 4.76 %, and had an initial maturity date of March 15, 2024 .

Beginning December 14, 2022 , and the first trading day of each subsequent month (each a "Monthly Redemption Date" or an "Installment Date"), the Company was required to redeem the Monthly Redemption Amount until the 2022 Note was fully redeemed.

The Monthly Redemption Amount, in most instances, was 1/15th of the original principal amount, plus any amount accelerated pursuant to the 2022 Note, accrued but unpaid interest, and late fees, if any.

The principal and interest could be settled in cash or, so long as certain equity conditions were met and at the option of the Company, shares of common stock and was payable together with the Monthly Redemption Amount.

The principal and interest could be settled in cash or, so long as certain equity conditions were met and at the option of the Company, shares of common stock, which was payable together with the Monthly Redemption Amount.

If the Company elected to settle the Monthly Redemption Amount in shares of common stock, the number of shares to be settled was based on an Installment Conversion Price equal to the lower of (i) $ 2.50 or (ii) 95 % of the lowest daily volume weighted average price of the common stock during the five trading days immediately preceding the applicable Monthly Redemption Date.

2 unchanged sentences

The Acceleration Conversion Price was the lower of (i) the Installment Conversion Price for such current Installment Date or (ii) the greater of $ 9.00 and 95 % of the lowest daily volume weighted average price of the Common Stock during the five trading days immediately preceding the Acceleration Date.

If either the relevant Installment Conversion Price or Acceleration Conversion Price, as applicable, was less than $ 9.00 per share, then a Conversion Floor Price Condition existed and the Company must deliver to the investor the Conversion Installment Floor Amount in cash, in addition to the required number of shares, which were valued at $ 9.00 re gardless of the actual trading price of the Company’s shares.

If either the relevant Installment Conversion Price or Acceleration Conversion Price, as applicable, was less than $ 9.00 per share, then a Conversion Floor Price Condition existed and the Company must deliver to the investor the Conversion Installment Floor Amount in cash, in addition to the required number of shares, which were valued at $ 9.00 regardless of the actual trading price of the Company’s shares.

The Conversion Installment Floor Amount was an amount in cash equal to the product obtained by multiplying (A) the higher of (i) the highest price that the common stock traded at on the Trading Day immediately preceding the relevant Share Delivery Date and (ii) the applicable Installment Conversion Price or Acceleration Conversion Price and (B) the difference obtained by subtracting (i) the number of shares of common stock delivered to the investor on the applicable Share Delivery Date with respect to such Conversion from (ii) the quotient obtained by dividing ( x ) the applicable Installment or Acceleration amount subject to such Conversion, by (y) the applicable Installment Conversion Price.

5 unchanged sentences

The 2022 Note was fully settled through Monthly Redemptions and Accelerations in 2023.

As part of the debt extinguishment, the Company reclassified the accumulated change in fair value due to instrument-specific credit risk out of accumulated other comprehensive loss on the condensed consolidated balance sheet and into interest expense and other on the condensed consolidated statement of operations.

2024 Convertible Note

On May 10, 2024 , the Company entered into a Securities Purchase Agreement with an investor for the sale and issuance of 330,823 shares of common stock and a 5 -year convertible note with a principal balance of $ 146 ( "2024 Note") for total gross cash proceeds of $ 1,000 .

The 2024 Note bears interest at an annual rate equal to the Secured Overnight Financing Rate plus 1.0 %, which is compounded quarterly in arrears, and has a maturity date of June 4, 2029 .

At maturity, the principal balance and accrued, unpaid and uncapitalized interest can be settled in cash, shares of common stock based on the closing price of the common stock as of the immediately preceding trading day, or any combination of the foregoing at the option of the investor.

INTEREST EXPENSE AND OTHER

Interest expense and other for the three months ended March 31, 2024 and 2023 consisted of the following (in thousands):

Three months ended March 31,

Interest expense and other for the three and six months ended June 30, 2024 and 2023 consisted of the following (in thousands):

Three months ended June 30,

Six months ended June 30,

Amortization of premiums (accretion of discounts) on marketable securities, net

$ ( 170 ) $ ( 41 ) $ ( 441 ) $ ( 229 )

Expected credit losses

Other ( 60 ) 12

Impairment of right-of-use assets

Interest expense and other

$ ( 56 ) $ 11 $ ( 373 ) $ ( 165 )

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2024 and 2023 are as follows (in thousands):

The changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2024 and 2023 are as follows (in thousands):

Unrealized gains (losses) on available-for-sale securities

2 unchanged sentences

Balance at March 31, 2024

Other comprehensive loss, net of tax

Balance at June 30, 2024

Unrealized gains (losses) on available-for-sale securities

Change in fair value due to instrument-specific credit risk Total

Change in fair value due to instrument-specific credit risk

Balance at December 31, 2022

1 unchanged sentence

Balance at March 31, 2023

Other comprehensive income, net of tax

Balance at June 30, 2023

NET LOSS PER SHARE

The following table sets forth the basic and diluted net loss per share attributable to common stockholders for the periods presented (in thousands, except per share data):

Three months ended March 31,

The following table sets forth the basic and diluted net loss per share attributable to common stockholders for the periods presented (in thousands, except share amounts and per share data):

Three months ended June 30,

Six months ended June 30,

Net loss attributable to common stockholders

$ ( 7,987 ) $ ( 16,031 ) $ ( 18,206 ) $ ( 42,296 )

Weighted average common shares outstanding - Basic

6,874,454 5,855,866 6,499,089 5,632,091

Weighted average common shares outstanding - Diluted

6,874,454 5,855,866 6,499,089 5,632,091

Net loss per share attributable to common stockholders - Basic and Diluted

Due to net losses for the three months ended March 31, 2024 and 2023, basic and diluted net loss per share were the same, as the effect of all potentially dilutive securities would have been anti-dilutive.

$ ( 1.16 ) $ ( 2.74 ) $ ( 2.80 ) $ ( 7.51 )

Due to net losses for the six months ended June 30, 2024 and 2023 , basic and diluted net loss per share were the same, as the effect of all potentially dilutive securities would have been anti-dilutive.

The following table sets forth the anti-dilutive common share equivalents for the periods listed:

Three months ended March 31, 2024

Six months ended June 30,

Common stock options issued and outstanding

144,287 416,634

Unvested restricted stock units

Warrants 319,443 319,443

715,297 876,578

319,443 319,443

Common Stock Purchase Agreement

206,780 990,681

Conversion of convertible notes

ESPP 33,655 67,586

Total 1,895,404 3,254,408

75,469 307,841

30,679 213,196

1,491,955 3,124,373

STOCK-BASED COMPENSATION

The following table summarizes stock-based compensation expense recorded in each financial statement line item in the Company’s condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023 (in thousands):

Three months ended March 31,

The following table summarizes stock-based compensation expense recorded in each financial statement line item in the Company’s condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024 and 2023 (in thousands):

Three months ended June 30,

Six months ended June 30,

Cost of revenue

$ — $ 34 $ — $ 95

Research and development

499 1,530 1,708 3,808

Sales and marketing

3 674 185 2,042

General and administrative

1,238 1,872 2,861 4,678

Total stock-based compensation

$ 1,740 $ 4,110 $ 4,754 $ 10,623

The Company uses the Monte-Carlo simulation model to estimate the grant date fair value of awards with a market condition, which requires the input of subjective assumptions such as expected term, expected stock price volatility, risk-free interest rate and dividend yield as discussed below.

3 unchanged sentences

Dividend Yield —The expected dividend-yield assumption is based on the Company’s current expectations about its anticipated dividend policy.

There were no awards granted with a market condition during the three months ended March 31, 2024.

There were no awards granted with a market condition during the six months ended June 30, 2024 .

Sale of Prototypes

The Company recorded revenue for prototype sales of $ 20 and $ 125 in the three months ended March 31, 2024 and 2023, respectively.

The Company does not incur significant contract costs in fulfilling or obtaining their contracts with customers.

Development Contracts

The Company has entered into research and development contracts with companies primarily in the automotive industry.

The Company assessed the number of performance obligations associated with the promises under each agreement, primarily the delivery of customized 4Sight TM perception-related goods and services, and recognized $ 0 and $ 511 in revenue for performance obligations satisfied during the three months ended March 31, 2024 and 2023, respectively, in the condensed consolidated statements of operations and comprehensive loss.

The Company recorded revenue for prototype sales of $ 6 and $ 26 in the three and six months ended June 30, 2024 , respectively, and $ 245 and $ 370 in the three and six months ended June 30, 2023 , respectively.

The Company does not incur significant contract costs in fulfilling or obtaining its contracts with customers.

D evelopment Contracts

The Company has entered into research and development contracts as well as a sales, marketing and technical support services contract with companies primarily in the automotive industry.

The Company assessed the number of performance obligations associated with the promises under each agreement, primarily the delivery of customized 4Sight TM perception-related goods and services, and recognized $ 26 in revenue for performance obligations satisfied during both the three and six months ended June 30, 2024 and $ 326 and $ 837 during the three and six months ended June 30, 2023 , respectively, in the condensed consolidated statements of operations and comprehensive loss.

Disaggregation of Revenue

1 unchanged sentence

Total revenue based on the disaggregation criteria described above are as follows (in thousands):

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

Revenue by primary geographical market:

United States

Asia-Pacific — 57

$ 26 $ 443 $ 41 $ 990

$ 32 $ 571 $ 52 $ 1,207

Revenue by timing of recognition:

Recognized at a point in time

$ 6 $ 245 $ 26 $ 370

Recognized over time

26 326 26 837

$ 32 $ 571 $ 52 $ 1,207

Contract Liabilities

The Company does not have any contract liabilities as of March 31, 2024 and December 31, 2023.

The following table shows the significant changes in contract liabilities balance for the three months ended March 31, 2024 and 2023 (in thousands):

Three months ended March 31,

The Company had $ 74 and $ 0 contract liabilities as of June 30, 2024 and December 31, 2023 , respectively.

The following table shows the significant changes in contract liabilities balance for the six months ended June 30, 2024 and 2023 (in thousands):

Six months ended June 30,

Beginning balance

Revenue recognized that was included in the contract liabilities beginning balance

Increase due to cash received and not recognized as revenue and billings in excess of revenue recognized during the period

Ending balance

7 unchanged sentences

In 2023, the Company implemented a revised strategic plan, which focused on key products and critical customer engagements in the Automotive market, and aligned the Company's operations with evolving business needs by focusing on a transition from research and development to the commercialization of the Company's automotive products, while winding down the existing industrial product and reducing fixed operating costs.

As a result of the implementation of the revised strategic plan, the Company recorded restructuring charges of $ 123 and $ 1,253 in the three months ended March 31, 2024 and 2023, respectively, primarily relating to one-time employee termination benefits.

As a result of the implementation of the revised strategic plan, the Company recorded restructuring charges of $ 0 and $ 123 in the three and six months ended June 30, 2024 , respectively, and $ 45 and $ 1,298 in the three and six months ended June 30, 2023 , respectively, primarily relating to one -time employee termination benefits and losses on purchase commitments.

Restructuring-related liabilities are included in accrued expenses and other current liabilities in the condensed consolidated balance sheets.

Restructuring activity is summarized as follows as of March 31, 2024 (in thousands):

One-time employee termination benefits Losses on purchase commitments

Restructuring activity is summarized as follows as of June 30, 2024 (in thousands):

One-time employee termination benefits

Losses on purchase commitments

Balance as of December 31, 2023

$ 402 $ 233 $ 56 $ 691

Charges 18 105 — 123

Cash payments

( 220 ) ( 2 ) ( 23 ) ( 245 )

Balance as of March 31, 2024

$ 200 $ 336 $ 33 $ 569

Restructuring charges were included in the condensed consolidated statements of operations and comprehensive loss during the three months ended March 31, 2024 and 2023 as follows (in thousands):

Three months ended March 31,

Cash payments

( 200 ) ( 34 ) — ( 234 )

Balance as of June 30, 2024

$ — $ 302 $ 33 $ 335

Restructuring charges were included in the condensed consolidated statements of operations and comprehensive loss during the three and six months ended June 30, 2024 and 2023 as follows (in thousands):

Three months ended June 30,

Six months ended June 30,

Cost of revenue

$ — $ — $ 105 $ 50

Research and development

2 unchanged sentences

Total restructuring charges

For the three months ended March 31, 2024 and 2023, the Company recognized $ 2 and $ 19 provision for income taxes, respectively.

$ — $ 45 $ 123 $ 1,298

For the three and six months ended June 30, 2024 , the Company recognized $ 0 and $ 2 provision for income taxes, respectively.

For the three and six months ended June 30, 2023 , the Company recognized $ 19 and $ 38 provision for income taxes, respectively.

The income tax rates vary from the federal and state statutory rates due to the valuation allowances on the Company's net operating losses and foreign tax rate differences.

7 unchanged sentences

Dussan, a director and the Company’s former Chief Technology Officer, who held the position of Director, Human Resources during 2023.

For the three months ended March 31, 2023, Mr.

For the six months ended June 30, 2023 , Mr.

Dussan’s sibling received total cash compensation of $ 77 and was granted 2,000 RSUs.

In addition, he participated in all other benefits that the Company generally offers to all of its employees.

There were no related party transactions for the three months ended March 31, 2024.

There were no related party transactions for the six months ended June 30, 2024 .

SUBSEQUENT EVENTS

Management has evaluated subsequent events through May 14, 2024 and determined that there were no such events requiring recognition or disclosure in the financial statements.

Management has evaluated subsequent events through August 7, 2024 and determined that there were no such events requiring recognition or disclosure in the condensed consolidated financial statements, other than as noted below.

On July 25, 2024 , the Company entered into a Share Purchase Agreement ("Purchase Agreement") with an investor, in which the investor has committed to purchase, subject to certain limitations, up to $ 50,000 ("Total Commitment") of the Company's common stock.

Under the terms and subject to the conditions of the Purchase Agreement, the Company has the right, but not the obligation, to sell to the investor, and the investor is obligated to purchase, up to the Total Commitment.

Such sales of common stock by the Company, if any, will be subject to certain limitations, and may occur from time-to-time in the Company’s sole discretion, commencing once certain customary conditions are satisfied, including the filing and securing effectiveness of a resale registration statement with the U.S.

Securities and Exchange Commission (the “SEC”) with respect to the shares to be sold to the investor under the Purchase Agreement.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

This Management ’ s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that are based on current expectations, estimates, assumptions, and projections about our industry, business, and future financial results.

Our actual results and the timing of events may differ materially from those described in or implied by these forward-looking statements due to a number of factors, including those discussed below and those set forth under “ Risk Factors ” herein and other filings we make with the SEC from time to time.

Unless the context otherwise requires, references in this Management ’ s Discussion and Analysis of Financial Condition and Results of Operations to “ we, ” “ our, ” “ us, ” and “ AEye, ” refer to the business and operations of AEye, Inc.

This overview provides a high-level discussion of our operating results and some of the trends that affect our business.

We believe that an understanding of these trends is important to understanding our financial results for the three and six months ended June 30, 2024, as well as our future prospects.

This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this Quarterly Report, including our condensed consolidated financial statements and accompanying notes.

All dollar amounts expressed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are in thousands of dollars, except for per share amounts and unless otherwise specified.

Reverse Stock Split

On December 27, 2023, we effected a 1-for-30 reverse stock split of its issued and outstanding shares of common stock (the "Reverse Stock Split").

Pursuant to the Reverse Stock Split, every thirty (30) shares of issued and outstanding shares of common stock were combined into one (1) share of common stock.

We did not issue fractional shares in connection with the Reverse Stock Split.

Stockholders who were otherwise entitled to fractional shares of common stock were instead entitled to receive a proportional cash payment.

The number of outstanding warrants was also proportionately adjusted.

In connection with the Reverse Stock Split, there was no change to the number of shares authorized or in the par value per share $0.0001.

Accordingly, unless we indicate otherwise, all historical per share data, number of shares issued and outstanding, stock awards, and other common stock equivalents for the periods presented in this Quarterly Report on Form 10-Q have been adjusted retroactively, where applicable, to reflect the Reverse Stock Split.

Dowslake Transaction

On May 10, 2024, we entered into a Securities Purchase Agreement with Dowslake Microsystems Corporate, pursuant to which Dowslake has agreed to purchase 330,823 shares of Common Stock for the purchase price of $854, which represents a per share purchase price of $2.58, and an unsecured promissory note with the principal amount of $146 for an aggregate purchase price of $1,000.

Registered Direct Offering

On May 29, 2024, we entered into Securities Purchase Agreement with certain institutional investors pursuant to which we agreed to issue and sell, in a registered direct offering, an aggregate of 727,706 shares of Common Stock at a per share purchase price of $3.448 for gross proceeds of approximately $2,509, before deducting estimated offering expenses payable by the us.

New Circle Transaction

On July 25, 2024, we entered into the Purchase Agreement with New Circle Principal Investments LLC ("New Circle") pursuant to which we have the right, but not the obligation, to sell to New Circle, and New Circle is obligated to purchase, up to $50,000 of our Common Stock.

Such sales of Common Stock by us, if any, and may occur from time-to-time in our sole discretion, over the period commencing once certain customary conditions are satisfied, including the filing and securing effectiveness of the resale registration statement with the SEC with respect to the shares to be sold to New Circle under the Purchase Agreement.

Key Factors Affecting Our Operating Results

We believe that our future performance and success depends to a substantial extent on our ability to capitalize on the opportunities described herein, which in turn are subject to significant risks and challenges, including those discussed below and the risk factors described in the “Risk Factors” section of this Quarterly Report on Form 10-Q.

We are subject to those risks common in the technology industry and also those risks common to early stage companies including, but not limited to:

the possibility of not being able to successfully develop or commercialize our products;

securing additional capital in a timely manner in order to meet operating cash flow needs;

doing so on terms that are favorable to us, or at all, may be challenging given the current capital markets and overall macroeconomic conditions;

maintain and establish relationships with one or more Tier 1 automotive suppliers to facilitate “design wins” with potential end customers, which in our case are automotive OEMs;

develop and protect our intellectual property;

comply with existing and new or modified laws and regulations applicable to our business;

maintain and enhance the value of our reputation and brand;

hire, integrate, and retain talented people at all levels of our organization;

successfully develop new solutions to enhance the experience of, and deliver value to, our customers.

Market Trends and Uncertainties

We anticipate future demand for our 4Sight TM Intelligent Sensing Platform will come from two major markets, Automotive and Industrial.

In the near term, we anticipate concentrating on the Automotive market by more effectively leveraging our business model, focusing on advanced driver-assistance systems, or ADAS, autonomous driving, and commercial trucking.

In the longer term, we will look for opportunities in the Industrial market, such as in the railway and intelligent transportation systems, or ITS segments, when it becomes cost-effective to do so based on higher volume production in the Automotive market.

This strategy provides us with multiple opportunities for sustained growth by enabling new applications and product features across these market segments.

However, as our customers continue their R&D projects to commercialize solutions that rely on lidar technology, it is difficult to estimate the timing of ultimate end market demand and customer adoption.

In the Automotive market for example, which accounted for 0% and 71% of revenue in the six months ended June 30, 2024 and 2023, respectively, our growth and financial performance will be heavily influenced by our ability to successfully integrate into OEM programs that require years of development, testing, and validation.

Because of the size and complexity of these OEM programs, having Tier 1 partnerships should provide a substantial competitive advantage over our competitors given their large scale, mass-production capabilities, and existing OEM relationships.

The decision by our former Tier 1 partner, Continental, to discontinue our joint lidar development program was a setback to our business, however, we were able to able engage LITEON as a replacement Tier 1 automotive supplier.

If we are unable to establish and maintain our relationship with LITEON or find other Tier 1 automotive suppliers in the future, this could have a material and adverse effect on our business, as our business model is predicated on licensing our lidar designs and other intellectual property to Tier 1 automotive suppliers.

Our primary focus in the Automotive market is on ADAS for passenger and commercial vehicle autonomy, particularly highway autonomy applications.

We believe that growth in that market is driven by both more stringent safety regulations and consumer demand for vehicles offering increased safety and advanced driver assist features.

We will need to anticipate and adapt to any changes in the regulatory environment, as well as changes in consumer demand, in order to take advantage of this opportunity.

As is common in early-stage companies with limited operating histories, we are subject to risks and uncertainties such as those described in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Since inception, we have incurred net losses and negative cash flows from operations and expect to continue incurring losses until after we reach commercialization.

We are dependent upon raising additional capital to provide the cash necessary to continue our ongoing operations.

We have been able to do so in the past, for example during the second quarter of 2024, we were able to raise approximately $5,541 in gross proceeds from financing activities.

Should we not be successful in raising additional capital we will require alternative sources of liquidity to continue our operations for the next twelve months.

In those circumstances, we would also plan to adjust spending in order to preserve and extend liquidity, and we have plans to further reduce operating expenses and cash outlays should we need to.

We believe that these plans can be successfully implemented, which would likely result in adequate cash flows to support our ongoing operations for at least one year from the date of this Quarterly Report on Form 10-Q.

Partnerships and Commercialization

Our technology is designed to be a key enabler in certain Automotive and Industrial market applications.

Because our technology must be integrated into a broader solution by our customers, it is critical that we achieve design wins with these customers.

The time to achieve a design win varies based on the market and application.

We consider design wins to be critical to our future success, although the revenue that may be generated by each design win and the time necessary to achieve such a design win can vary significantly, making it difficult to predict our financial performance.

In the Industrial market, our strategy has been to sell our lidar solutions to customers utilizing components that are sourced, in part, from the Tier 2 automotive supply chain and assembled by our contract manufacturing partners.

In the Automotive market, we will utilize a licensing model with Tier 1 suppliers that would generate a royalty for us and, hence, can be more easily replicated with multiple Tier 1 suppliers.

As the Tier 2 automotive supply chain matures, we intend to leverage those suppliers, and the volume created for the Automotive market, to participate in the Industrial market.

With that in mind, in the fourth quarter of 2023, we made the decision to wind down our existing product line for the Industrial market and curtail support until we achieve sufficient scale in our automotive products, which we believe represents our largest market opportunity.

If we fail to achieve sufficient scale in our automotive products, we may not be in a position to reenter the Industrial market in the time frame we expect, or at all.

Recently, we have engaged with LITEON as our new Tier 1 automotive supplier and are actively working with LITEON to bring our products to market.

We have also recently engaged with new partners in an effort to penetrate the lidar market in China, initially focused on the autonomous trucking and railway segments.

Given both our engagement with LITEON and our partners in the China market are recent, there is no guarantee that either or both endeavors will be successful.

We believe our revenue and profitability will also be dependent upon our success in licensing our technology to Tier 1 automotive suppliers, such as our new Tier 1 partner, LITEON, or our previous partner, Continental, which represented 0% and 71% of revenue in the six months ended June 30, 2024 and 2023, respectively, that intend to use our technology in volume production of lidar sensors for OEMs.

Delays in autonomy programs by OEMs that we are currently or plan to be working with through our Tier 1 partners could result in us being unable to achieve our revenue and profitability targets in the timeframe we anticipate, or at all.

Restructuring

In 2023, we implemented a revised strategic plan, which focused on key products and critical customer engagements in the Automotive market and aligned our operations with evolving business needs by focusing on our transition from research and development to the commercialization of our automotive products, while winding down our existing industrial product and reducing fixed operating costs.

Our gross margins will depend on numerous factors, including, among others, the selling price of our products, pricing of our development contracts with customers, royalty rates on licenses we grant to our customers, unit volumes, product mix, component costs, personnel costs, contract manufacturing costs, overhead costs, and product features.

Our gross margins have in the past been, and may continue to be, negatively impacted by inventory write-downs.

As an example, in 2023, we recorded inventory write-downs of $7,005 relating to the transition to certain higher grade components in our automotive products as well as the winding down of our existing product line for the Industrial market.

In the future, we expect to generate attractive gross margins from licensing our lidar technology and software to our Tier 1 partners in the Automotive market.

We also anticipate being able to leverage on our foundation in the Automotive market to move to other markets.

To date, our revenue has primarily been generated through development contracts with OEMs and Tier 1 suppliers, as well as unit sales of our products to Industrial customers.

These development contracts primarily focus on customization of our proprietary 4Sight TM product capabilities to our customers’ applications, typically involving software implementation to assist with sensor connection and control, customization of scan patterns, and enhancement of particular perception capabilities to meet specific customer needs.

In general, development contracts that require more complex configurations have higher prices.

We expect development contracts to remain a significant part of our business in the near term, but represent a smaller share of our total revenue over time as we increase our focus on technology licensing in the Automotive market and over time leverage the economies of scale we achieve to move into other markets including the Industrial market.

Investment and Innovation

Our proprietary adaptive intelligent lidar technology delivers industry-leading performance that helps to solve the most difficult challenges in delivering partial or full autonomy.

While traditional sensing systems passively collect data, our active 4Sight TM Intelligent Sensing Platform leverages principles from automated targeting systems and biomimicry to scan the environment, while intelligently focusing on what matters most in order to enable safer, smarter, and faster decisions in complex scenarios.

We believe our financial performance is significantly dependent on our ability to maintain a technology leadership position.

This is further dependent on the investments we make in research and development and our ability to commercialize our products.

We believe price is becoming a critical differentiator in the marketplace and OEMs are favoring companies that have the infrastructure to build lower cost products at higher volumes.

It is essential that we continually identify and respond to rapidly evolving customer requirements, develop and introduce innovative new products, enhance and service existing products, lower bill of materials, or BOM, costs, industrialize the manufacturing process, and generate strong market demand for our products.

If we fail to do this, our market position and revenue may be adversely affected, and our investments in that area will not be recovered.

Basis of Presentation

We currently conduct our business through one operating segment.

Components of Results of Operations

Total Revenues

We categorize our revenue as (1) prototype sales and (2) development contracts.

In 2024 and 2023, our prototype sales revenue primarily related to unit sales of our 4Sight TM product.

Revenue from prototype sales is typically recognized at a point in time when the control of goods is transferred to the customer, generally upon delivery or shipment to the customer.

Development contracts represented the majority of our total revenues in 2023.

Revenue from development and/or collaboration arrangement contracts are earned from R&D activities and collaboration with OEMs and Tier 1 suppliers.

These contracts primarily focus on customization of our proprietary 4Sight TM capabilities to our customers’ applications, typically involving software implementation to assist with sensor connection and control, customization of scan patterns, and enhancement of perception capabilities to meet specific customer needs.

Revenue from development contracts is recognized when we satisfy performance obligations in the contract, which can result in recognition at either a point in time or over time.

This assessment is made at the outset of the arrangement for each performance obligation.

We expect our 2024 revenues related to prototype sales and development contracts to remain flat or marginally higher than in 2023.

Cost of Revenue

Cost of revenue includes the costs directly associated with the production of prototypes and certain costs associated with development contracts.

Such costs for prototypes include direct materials, direct labor, indirect labor, inventory write downs, losses on purchase commitments, warranty expense, and allocation of overhead.

Costs associated with development contracts include the direct costs and allocation of overhead costs involved in the execution of the contracts.

We expect our 2024 costs of revenue to fluctuate in line with 2024 revenues.

Operating Expenses

Research and Development

Our research and development, or R&D, efforts are focused primarily on hardware, software, and system engineering related to the design and development of our advanced lidar solutions.

R&D expenses include:

personnel-related expenses, including salaries, benefits, bonuses, one-time termination benefits, and stock-based compensation expense;

third-party engineering and contractor costs;

lab equipment;

engineering parts and test units;

new hardware and software expenses;

allocated overhead expenses.

R&D costs are expensed as they are incurred.

We expect our investment in R&D to be reduced as a result of our revised strategic plan, with a reduced workforce and consolidated global footprint.

We also plan to execute more focused spending with vendors in critical areas that support our strategy and product development, in line with our revised strategic plan and manage costs more efficiently.

Sales and Marketing

Our sales and marketing, or S&M, efforts are focused primarily on sales, business development, and marketing programs in pursuit of revenue contracts from potential and existing customers.

S&M expenses include:

personnel-related expenses, including salaries, benefits, bonuses, one-time termination benefits, and stock-based compensation expense;

demonstration equipment;

trade shows expenses, advertising, and promotions expenses for press releases and other public relations services;

allocated overhead expenses.

We expect our S&M expenses to be significantly reduced as a result of our revised strategic plan to focus on the commercialization of our automotive products.

Through our capital light business, we are able to significantly reduce our workforce and consolidate our global footprint as we expect to leverage our Tier 1 partners to commercialize our products and manage relationships with the OEMs.

General and Administrative

Our general and administrative, or G&A, spending supports all business functions.

G&A expenses include:

personnel-related costs, including salaries, benefits, bonuses, one-time termination benefits, and stock-based compensation expense for executive, finance, legal, operations, human resources, technical support, and other administrative personnel;

consulting, accounting, audit, legal, and other professional fees;

insurance premiums, software and computer equipment costs, general office expenses;

allocated overhead expenses.

We expect our G&A expenses to be reduced as a result of our revised strategic plan with a reduced workforce and consolidated global footprint.

We also plan to manage spending with vendors more effectively to support our revised strategic plan to manage costs.

Change in Fair Value of Convertible Note and Warrant Liabilities

Changes in fair value of the 2022 Note and warrant liabilities are the result of the change in fair value at each reporting date.

The 2022 Note and warrant liabilities are recorded at fair value for each reporting period, and the changes in fair value are reported within other income (expense), net during the period.

We also elected to record interest expense on the 2022 Note as changes in fair value.

Interest Income, Interest Expense and Other

Interest income and other consists primarily of interest earned on our cash, cash equivalents, and marketable securities.

These amounts will vary based on our cash and cash equivalents balances and market rates.

Interest income and other also includes gains on sale of property and equipment.

Interest expense and other consists primarily of convertible note issuance costs and amortization of premiums and accretion of discounts on marketable securities, net.

Results of Operations

Comparison of the three months ended June 30, 2024 and 2023

The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this report.

The following table sets forth our consolidated results of operations data for the three months ended June 30, 2024 and 2023 (in thousands, except for percentages):

Three months ended June 30,

Prototype sales

Development contracts

Total revenue

Cost of revenue

Research and development

Sales and marketing

General and administrative

Total operating expenses

Loss from operations

Change in fair value of convertible note and warrant liabilities

Interest income and other

Interest expense and other

Total other income, net

Loss before income tax expense

Provision for income tax expense

Prototype Sales

Prototype sales decreased by $239, or 98%, to $6 for the three months ended June 30, 2024, from $245 for the three months ended June 30, 2023.

This was primarily due to a decrease in units sold of our 4Sight™-based industrial product due to our focus on executing key milestones in the Automotive market.

Development Contracts

Development contracts decreased by $300, or 92%, to $26 for the three months ended June 30, 2024, from $326 for the three months ended June 30, 2023.

The decrease was primarily due to lower development contract costs as we fulfilled our obligations on a Tier 1 automotive supplier contract in the fourth quarter of 2023.

Cost of Revenue

Cost of revenue decreased by $1,751, or 92%, to $160 for the three months ended June 30, 2024, from $1,911 for the three months ended June 30, 2023.

This decrease was primarily due to fewer units sold in the current period due to the wind-down of our existing industrial product and also lower development contract costs as we fulfilled our obligations on a Tier 1 automotive supplier contract in the fourth quarter of 2023.

Operating Expenses

Research and Development

Research and development expenses decreased by $2,059, or 35%, to $3,838 for the three months ended June 30, 2024, from $5,897 for the three months ended June 30, 2023.

This decrease was primarily driven by the implementation of our revised strategic plan, with decreases in stock-based compensation expense of $1,031, personnel costs of $795, and engineering parts and lab equipment expense of $124.

Sales and Marketing

Sales and marketing expenses decreased by $2,537, or 97%, to $67 for the three months ended June 30, 2024, from $2,604 for the three months ended June 30, 2023.

This decrease was primarily driven by the implementation of our revised strategic plan, with decreases in personnel costs of $1,274, stock-based compensation of $671, trade show, marketing, and consultant spend of $285, and information technology and facilities expense of $180.

General and Administrative

General and administrative expenses decreased by $2,122, or 33%, to $4,223 for the three months ended June 30, 2024, from $6,345 for the three months ended June 30, 2023.

This decrease was primarily driven by the implementation of our revised strategic plan, with decreases in stock-based compensation of $633, accounting, legal, and consulting fees of $590, personnel costs of $365, and insurance of $357.

Change in Fair Value of Convertible Note and Warrant Liabilities

Change in fair value of convertible note and warrant liabilities decreased by $101, or 87%, to a loss of $15 for the three months ended June 30, 2024, from a loss of $116 for the three months ended June 30, 2023.

This decrease was primarily due to settlement of the 2022 Note in the third quarter of 2023.

Interest Income and Other

Interest income and other decreased by $73, or 24%, to $228 for the three months ended June 30, 2024, from $301 for the three months ended June 30, 2023.

This decrease was primarily due to less interest earned on our marketable securities in the current period.

Interest Expense and Other

Interest expense and other decreased by $67, or 609%, to a gain of $56 for the three months ended June 30, 2024, from a loss of $11 for the three months ended June 30, 2023.

This decrease was primarily due to a favorable increase in accretion of discounts on marketable securities of $129, offset by an unfavorable increase in foreign exchange loss of $89.

Provision for Income Tax Expense

Provision for income tax expenses decreased to $0 for the three months ended June 30, 2024, from $19 for the three months ended June 30, 2023.

This change is due to changes in pretax income (loss) in the U.S.

and certain foreign entities and changes in tax rates.

Net loss decreased by $8,044, or 50%, to $7,987 for the three months ended June 30, 2024, from $16,031 for the three months ended June 30, 2023.

This decrease was primarily due to decreases in operating expenses following restructuring and cost reduction efforts in connection with our revised strategic plan as announced during 2023.

Results of Operations

Comparison of the six months ended June 30, 2024 and 2023

The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this report.

The following table sets forth our consolidated results of operations data for the six months ended June 30, 2024 and 2023 (in thousands, except for percentages):

Six months ended June 30,

Prototype sales

Development contracts

Total revenue

Cost of revenue

Research and development

Sales and marketing

General and administrative

Total operating expenses

Loss from operations

Change in fair value of convertible note and warrant liabilities

Interest income and other

Interest expense and other

Total other income (expense), net

Loss before income tax expense

Provision for income tax expense

Prototype Sales

Prototype sales decreased by $344, or 93%, to $26 for the six months ended June 30, 2024, from $370 for the six months ended June 30, 2023.

This was primarily due to a decrease in units sold of our 4Sight™-based industrial product due to our focus on executing key milestones in the Automotive market.

Development Contracts

Development contracts decreased by $811, or 97%, to $26 for the six months ended June 30, 2024, from $837 for the six months ended June 30, 2023.

The decrease was primarily due to lower development contract costs as we fulfilled our obligations on a Tier 1 automotive supplier contract in the fourth quarter of 2023.

Cost of Revenue

Cost of revenue decreased by $3,749, or 90%, to $423 for the six months ended June 30, 2024, from $4,172 for the six months ended June 30, 2023.

Operating Expenses

Research and Development

Research and development expenses decreased by $6,969, or 45%, to $8,370 for the six months ended June 30, 2024, from $15,339 for the six months ended June 30, 2023.

This decrease was primarily driven by the implementation of our revised strategic plan, with decreases in personnel costs of $3,186, stock-based compensation expense of $2,100, third party research and development work of $732, engineering parts and lab equipment expense of $570, and information technology and facilities expense of $175.

Sales and Marketing

Sales and marketing expenses decreased by $8,464, or 95%, to $408 for the six months ended June 30, 2024, from $8,872 for the six months ended June 30, 2023.

This decrease was primarily driven by the implementation of our revised strategic plan, with decreases in personnel costs of $3,837, trade show, marketing, and consultant spend of $1,864, stock-based compensation of $1,857, information technology and facilities expense of $434, and travel and entertainment expense of $381.

General and Administrative

General and administrative expenses decreased by $5,061, or 34%, to $9,838 for the six months ended June 30, 2024, from $14,899 for the six months ended June 30, 2023.

This decrease was primarily driven by the implementation of our revised strategic plan, with decreases in stock-based compensation of $1,817, personnel costs of $1,131, accounting, legal, and consulting fees of $1,101, insurance of $749, and travel and entertainment expense of $114.

Change in Fair Value of Convertible Note and Warrant Liabilities

Change in fair value of convertible note and warrant liabilities decreased by $913, or 99%, to a loss of $13 for the six months ended June 30, 2024, from a loss of $926 for the six months ended June 30, 2023.

This decrease was primarily due to settlement of the 2022 Note in the third quarter of 2023.

Interest Income and Other

Interest income and other decreased by $155, or 27%, to $423 for the six months ended June 30, 2024, from $578 for the six months ended June 30, 2023.

This decrease was primarily due to less interest earned on our marketable securities in the current period.

Interest Expense and Other

Interest expense and other decreased by $208, or 126%, to a gain of $373 for the six months ended June 30, 2024, from a gain of $165 for the six months ended June 30, 2023.

This decrease was primarily due to a favorable increase in accretion of discounts on marketable securities of $212

Provision for Income Tax Expense

Provision for income tax expenses decreased to $2 for the six months ended June 30, 2024, from $38 for the six months ended June 30, 2023.

This change is due to changes in pretax income (loss) in the U.S.

and certain foreign entities and changes in tax rates.

Net loss decreased by $24,090, or 57%, to $18,206 for the six months ended June 30, 2024, from $42,296 for the six months ended June 30, 2023.

This decrease was primarily due to decreases in operating expenses following restructuring and cost reduction efforts in connection with our revised strategic plan as announced during 2023.

Liquidity and Capital Resources

Sources of Liquidity

Our capital requirements will depend on many factors, including, but not exclusively, sales volume and timing of revenue, our efforts to establish and maintain relationships with one or more Tier 1 automotive suppliers and the timing of an OEM design win, our ability to extend our cash runway based on the restructuring initiatives announced in the previous year, the timing and extent of spending to support R&D efforts, how quickly we can commercialize our products, and market adoption of new and enhanced products and features.

As of June 30, 2024, our cash, cash equivalents, and marketable securities totaled $27,989.

For the six months ended June 30, 2024 and 2023, we had a net loss of $18,206 and $42,258, respectively.

We anticipate that we will continue to incur losses for at least the next several years.

To date, our principal sources of liquidity have been proceeds received from the issuance of equity.

In December 2021, we entered into a Common Stock Purchase Agreement with Tumim Stone Capital LLC, or Tumim Stone, pursuant to which we have the right, but not the obligation, to issue and sell to Tumim Stone over a 36-month period, up to $125,000 of our common stock.

On May 6, 2022, we filed a Registration Statement on Form S-1, which related to the offer and resale of up to 1,028,847 shares of our common stock to be purchased by Tumim Stone, pursuant to the Common Stock Purchase Agreement.

As of July 25, 2024, 996,866 shares have been issued under this Common Stock Purchase Agreement.

On July 24, 2024, this agreement was terminated in conjunction with us entering into the Purchase Agreement with New Circle Principal Investments LLC.

In September 2022, we entered into a Securities Purchase Agreement, with an investor allowing for the sale and issuance of up to two convertible notes, each with cash proceeds of $10,000, for a total of $20,000 in proceeds between the two issuances (each, a "Note Closing").

On September 15, 2022, we closed the first Note Closing with the investor and received cash proceeds of $9,850 (net of fees paid to the investor).

On March 15, 2024, our right to effect a Second Closing under the Securities Purchase Agreement terminated.

On September 26, 2023, the U.S.

Securities and Exchange Commission declared our registration statement on Form S-3 to be effective.

On May 10, 2024, we entered into a Securities Purchase Agreement with Dowslake, pursuant to which Dowslake agreed to purchase 330,823 shares of Common Stock for the purchase price of approximately $854, which represents a per share purchase price of $2.58, and an unsecured convertible promissory note with the principal amount of $146 for an aggregate purchase price of $1,000.

On May 29, 2024, we entered into a Securities Purchase Agreement with certain institutional investors pursuant to which we agreed to issue and sell, in a registered direct offering using the Shelf Registration, an aggregate of 727,706 shares of Common Stock at a per share purchase price of $3.448 for gross proceeds of approximately $2,509, before deducting estimated offering expenses payable by us.

On July 25, 2024, we entered into the Purchase Agreement with New Circle, pursuant to which we agreed to issue and sell up to $50.0 million of Common Stock, at our discretion from time to time, subject to the satisfaction of the conditions in the Purchase Agreement.

Until we can generate sufficient revenue from the sale of our products to cover operating expenses, working capital, and capital expenditures, we expect the funds raised in the transactions described above, and other potential sources of capital, to fund our near-term cash needs .

If we are required to raise additional funds by issuing equity securities, dilution of stockholders will result.

Any debt securities issued may also have rights, preferences, and privileges senior to those of holders of our common stock.

The terms of debt securities or borrowings could impose significant restrictions on our operations.

We may also be unable to raise additional capital through the sale of securities and debt financing, or to do so on terms that are favorable to us, particularly given current capital market and overall macroeconomic condition s.

Accounting Standards Codification, or ASC, Subtopic 205-40, Presentation of Financial Statements - Going Concern , requires us to assess our ability to meet our future financial obligations as they become due within one year after the date that the financial statements are issued.

Despite the recent restructuring initiatives, we expect that our expenses will continue to exceed our operating income and, as a result, we may need additional capital resources to fund our operations.

We believe that the net proceeds from the transactions described above together with our existing cash, cash equivalents, and marketable securities and the implementation of our plans should we be unable to secure additional financing will sufficiently alleviate the risk of substantial doubt about our ability to continue as a going concern and will enable us to fund our operating expenses, working capital, and capital expenditure requirements for a period of at least twelve months from the date of this Quarterly Report on Form 10-Q.

For additional discussion of our plans, see Note 1 in the Notes to the Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

If our cash needs are greater than we anticipate, we may be required to reduce our operating expenses further or raise additional capital sooner.

Given the current macroeconomic environment, OEMs appear to be more cautious about their capital spending and investments into new technologies and as a result we have seen the timelines for certain opportunities delayed, which may negatively impact the time for us to reach positive cash flows from operations.

Our plans for the use of cash in the long term (beyond twelve months from this Quarterly Report on Form 10-Q) are primarily related to funding operating expenses to support the commercialization of our products.

For additional information regarding our cash requirements from lease obligations and contractual obligations, see Notes 6 and 15 to the Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

On March 10, 2023, Silicon Valley Bank, or SVB, was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation, or FDIC, was appointed as receiver.

On March 27, 2023, First Citizens Bank entered into a whole bank purchase of SVB.

We had and continue to have deposit accounts at SVB.

The standard deposit insurance amount is up to $250 per depositor, per insured bank, for each account ownership category.

We do not maintain any other material accounts or lines of credit with SVB.

Although we continue to maintain an operating account at SVB, we subsequently established operating accounts at other financial institutions to mitigate the risks associated with any one financial institution's potential risk of insolvency or receivership.

Cash Flow Summary

Six months ended June 30,

(in thousands)

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

Operating Activities

For the six months ended June 30, 2024, net cash used in operating activities was $14,241.

Factors affecting our operating cash flows during this period were net loss of $18,206, amortization of premiums and accretion of discounts on marketable securities, net of $428, offset by stock-based compensation of $4,754, and noncash lease expense of $727.

Within operating activities, the net changes in operating assets and liabilities were cash used of $1,303, primarily driven by decreases in accrued expenses and other liabilities, operating lease liabilities, and other noncurrent liabilities of $1,402, $799 and $358, respectively.

Cash used was offset by cash provided by decreases in prepaid and other current assets, and other noncurrent assets of $724 and $171, respectively, and an increase in accounts payable of $108.

For the six months ended June 30, 2023, net cash used in operating activities was $32,445.

Factors affecting our operating cash flows during this period were a net loss of $42,296, offset by stock-based compensation of $10,623, change in fair value of convertible note and warrant liabilities of $926, noncash lease expense of $706, depreciation and amortization of $666, and inventory write-downs of $544.

Within operating activities, the net change in operating assets and liabilities was cash used of $3,544, primarily driven by decreases in contract liabilities, accrued expenses and other liabilities, and operating lease liabilities of $837, $785, and $749, respectively, and increases in inventories and other noncurrent assets of $2,502 and $2,164, respectively.

Cash used was partially offset by cash provided by decreases in prepaid and other current assets and accounts receivable of $2,884 and $327, respectively, and an increase in accounts payable of $282.

Investing Activities

For the six months ended June 30, 2024, net cash provided by investing activities was $2,993.

The primary factors affecting net cash provided by investing activities during this period were proceeds from redemptions and maturities of marketable securities of $18,400, offset by the purchases of marketable securities of $15,173 and purchases of property and equipment of $234.

For the six months ended June 30, 2023, net cash provided by investing activities was $35,138.

The primary factor affecting net cash provided by investing activities during this period were the proceeds from redemptions and maturities of marketable securities of $35,850, offset by purchases of property and equipment of $808.

Financing Activities

For the six months ended June 30, 2024, net cash provided by financing activities was $5,531.

The primary factors affecting our financing cash flows during this period were proceeds from the common stock purchase agreements of $5,560, partially offset by stock issuance costs related to the common stock purchase agreements of $288.

For the six months ended June 30, 2023, net cash used in financing activities was $5,515.

The primary factors affecting our financing cash flows during this period were payments for convertible note redemptions of $4,973 and payments for taxes related to net settlement of equity awards of $1,051, partially offset by proceeds from the exercise of stock options of $391.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are in accordance with GAAP.

We are required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods, fair value measures, and the related disclosures in the condensed consolidated financial statements.

Our actual results may differ significantly from these estimates due to changes in judgments, assumptions and conditions as a result of unforeseen events or otherwise, which could have a material impact on our financial position and results of operations.

We believe our critical accounting policies involve the greatest degree of judgment and complexity and have the greatest potential impact on our condensed consolidated financial statements.

During the six months ended June 30, 2024, there were no significant changes in our critical accounting policies and estimates as compared to those previously disclosed in "Critical Accounting Policies and Estimates" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2023 Annual Report on Form 10-K.

Emerging Growth Company Status

Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable.

We are an “emerging growth company” as defined in Section 2(a) of the Securities Act, and we have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of common stock that is held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period, or (iv) December 31, 2025.

We expect to continue to take advantage of the benefits of the extended transition period, although we may decide to early adopt such new or revised accounting standards to the extent permitted by such standards.

This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.

Recent Accounting Pronouncements

See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements as of the date of this Quarterly Report on Form 10-Q.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements