AEye, Inc. 10-K

Item 8. Financial Statements and Supplementary Data AEye, Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID 34 ) 64 Consolidated Balance Sheets 66 Consolidated Statements of Operations and Comprehensive Loss 67 Consolidated Statements of Stockholders ’ Equity (Deficit) 68 Consolidated Statements of Cash Flows 69 Notes to Consolidated Financial Statements 70 63 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and Board of Directors of AEye, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of AEye, Inc. and subsidiaries (the "Company") as of December 31, 2024, the related consolidated statement of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes to the consolidated financial statements. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ KPMG LLP We have served as the Company’s auditor since 2024. Santa Clara, California February 24, 2025 64 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and Board of Directors of AEye, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of AEye, Inc. and subsidiaries (the "Company") as of December 31, 2023, and 2022, the related consolidated statements of operations and comprehensive loss, stockholders' equity (deficit), and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 16 to the financial statements, the accompanying 2023 and 2022 financial statements have been retrospectively adjusted for the adoption of Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ DELOITTE & TOUCHE LLP San Francisco, California March 26, 2024 (February 24, 2025 as to Note 16) We began serving as the Company’s auditor in 2018. In 2024 we became the predecessor auditor. 65 Table of Contents AEYE, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and par value) As of December 31, 2024 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 10,266 $ 16,932 Marketable securities 12,012 19,591 Accounts receivable, net 11 131 Inventories, net 176 583 Prepaid and other current assets 2,706 2,517 Total current assets 25,171 39,754 Right-of-use assets 652 11,226 Property and equipment, net 605 281 Restricted cash — 2,150 Other noncurrent assets 692 906 Total assets $ 27,120 $ 54,317 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 3,598 $ 3,442 Accrued expenses and other current liabilities 7,709 6,585 Total current liabilities 11,307 10,027 Operating lease liabilities, noncurrent 479 14,858 Convertible notes 146 — Other noncurrent liabilities 64 409 Total liabilities 11,996 25,294 COMMITMENTS AND CONTINGENCIES (Note 20) STOCKHOLDERS’ EQUITY: Preferred stock—$ 0.0001 par value: 1,000,000 shares authorized; no shares issued and outstanding — — Common stock—$ 0.0001 par value: 600,000,000 shares authorized; 13,734,160 and 6,310,090 shares issued and outstanding at December 31, 2024 and 2023 1 1 Additional paid-in capital 388,213 366,647 Accumulated other comprehensive income 5 10 Accumulated deficit ( 373,095 ) ( 337,635 ) Total stockholders’ equity 15,124 29,023 Total liabilities and stockholders’ equity $ 27,120 $ 54,317 The accompanying notes are an integral part of these consolidated financial statements. 66 Table of Contents AEYE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except share and per share data) Year Ended December 31, 2024 2023 REVENUE: Prototype sales $ 97 $ 477 Development contracts 105 987 Total revenue 202 1,464 Cost of revenue 778 15,319 Gross loss ( 576 ) ( 13,855 ) OPERATING EXPENSES: Research and development 16,389 26,171 Sales and marketing 551 12,528 General and administrative 18,312 25,234 Impairment of long-lived assets — 9,988 Total operating expenses 35,252 73,921 LOSS FROM OPERATIONS ( 35,828 ) ( 87,776 ) OTHER INCOME (EXPENSE): Change in fair value of convertible note and warrant liabilities — ( 858 ) Interest income and other 799 1,317 Interest expense and other ( 433 ) 248 Total other income (expense), net 366 707 Loss before income tax ( 35,462 ) ( 87,069 ) (Benefit) provision for income tax ( 2 ) 57 Net loss $ ( 35,460 ) $ ( 87,126 ) Change in net unrealized (loss) gain on available-for-sale securities, net of tax ( 5 ) 1,264 Change in fair value due to instrument-specific credit risk, net of tax — ( 21 ) Net losses reclassified into income during the period, net of tax — 46 Comprehensive loss $ ( 35,465 ) $ ( 85,837 ) PER SHARE DATA Net loss per common share (basic and diluted) $ ( 4.89 ) $ ( 14.95 ) Weighted average common shares outstanding (basic and diluted) 7,253,683 5,827,721 The accompanying notes are an integral part of these consolidated financial statements. 67 Table of Contents AEYE, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY (DEFICIT) (In thousands, except share data) Accumulated Additional Other Total Paid-in Comprehensive Accumulated Stockholders’ Preferred Stock Common Stock Capital Income (Loss) Deficit Equity Shares Amount Shares Amount BALANCE—December 31, 2023 — $ — 6,310,090 $ 1 $ 366,647 $ 10 $ ( 337,635 ) $ 29,023 Stock-based compensation — — — — 9,047 — — 9,047 Issuance of common stock upon exercise of stock options — — 44,255 — 134 — — 134 Issuance of common stock upon vesting of restricted stock units — — 558,223 — — — — — Taxes related to net share settlement of equity awards — — ( 137,803 ) — ( 161 ) — — ( 161 ) Issuance of common stock under the Common Stock Purchase Agreements — — 6,852,059 — 13,041 — — 13,041 Stock issuance costs related to the Common Stock Purchase Agreements — — — — ( 588 ) — — ( 588 ) Issuance of common stock through the Employee Stock Purchase Plan — — 107,336 — 93 — — 93 Other comprehensive loss, net of tax — — — — — ( 5 ) — ( 5 ) Net loss — — — — — — ( 35,460 ) ( 35,460 ) BALANCE—December 31, 2024 — $ — 13,734,160 $ 1 $ 388,213 $ 5 $ ( 373,095 ) $ 15,124 Accumulated Additional Other Total Paid-in Comprehensive Accumulated Stockholders’ Preferred Stock Common Stock Capital Income (Loss) Deficit Equity Shares Amount Shares Amount BALANCE—December 31, 2022 — $ — 5,436,637 $ 1 $ 345,757 $ ( 1,279 ) $ ( 250,509 ) $ 93,970 Stock-based compensation — — — — 18,071 — — 18,071 Issuance of common stock upon exercise of stock options — — 81,814 — 455 — — 455 Issuance of common stock upon vesting of restricted stock units — — 330,661 — — — — — Taxes related to net share settlement of equity awards — — ( 125,825 ) — ( 1,441 ) — — ( 1,441 ) Issuance of common stock under the Common Stock Purchase Agreement — — 19,500 — 136 — — 136 Stock issuance costs related to the Common Stock Purchase Agreement — — — — ( 3 ) — — ( 3 ) Issuance of common stock through the Employee Stock Purchase Plan — — 64,773 — 334 — — 334 Conversions of convertible note into common stock — — 502,530 — 3,338 — — 3,338 Other comprehensive income, net of tax — — — — — 1,289 — 1,289 Net loss — — — — — — ( 87,126 ) ( 87,126 ) BALANCE—December 31, 2023 — $ — 6,310,090 $ 1 $ 366,647 $ 10 $ ( 337,635 ) $ 29,023 The accompanying notes are an integral part of these consolidated financial statements. 68 Table of Contents AEYE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 35,460 ) $ ( 87,126 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 129 1,547 (Gain) loss on sale of property and equipment, net ( 12 ) 59 Noncash lease expense relating to operating lease right-of-use assets 956 1,406 Gain on termination of operating lease, net ( 491 ) ( 35 ) Impairment of long-lived assets — 9,988 Common stock purchase agreement costs 1,124 — Inventory write-downs, net of scrapped inventory 161 7,712 Loss on advances to suppliers — 1,385 Change in fair value of convertible note and warrant liabilities — 858 Realized loss on instrument-specific credit risk — 46 Stock-based compensation 9,047 18,071 Amortization of premiums and accretion of discounts on marketable securities, net of change in accrued interest ( 611 ) ( 211 ) Expected credit losses, net of write-off 35 35 Changes in operating assets and liabilities: Accounts receivable, net 85 451 Inventories, current and noncurrent, net 245 ( 2,459 ) Prepaid and other current assets 1,490 2,279 Other noncurrent assets 215 284 Accounts payable 156 252 Accrued expenses and other current liabilities ( 2,389 ) ( 3,135 ) Operating lease liabilities ( 955 ) ( 1,528 ) Contract liabilities — ( 987 ) Other noncurrent liabilities ( 345 ) 383 Net cash used in operating activities ( 26,620 ) ( 50,725 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 486 ) ( 1,951 ) Proceeds from sale of property and equipment 45 283 Proceeds from redemptions and maturities of marketable securities 32,426 76,350 Purchases of marketable securities ( 24,241 ) ( 19,331 ) Net cash provided by investing activities 7,744 55,351 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options 134 455 Proceeds from the issuance of convertible notes 146 — Payments for convertible note redemptions — ( 6,235 ) Taxes paid related to the net share settlement of equity awards ( 161 ) ( 1,445 ) Proceeds from issuance of common stock under the Common Stock Purchase Agreements 11,080 136 Stock issuance costs related to the Common Stock Purchase Agreements ( 1,232 ) ( 3 ) Proceeds from issuance of common stock through the Employee Stock Purchase Plan 93 334 Net cash provided by (used in) financing activities 10,060 ( 6,758 ) NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 8,816 ) ( 2,132 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 19,082 21,214 CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period $ 10,266 $ 19,082 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ - $ 115 Cash (refunded) paid for income taxes, net ( 2 ) 16 SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Operating lease liabilities extinguished upon termination of lease 16,325 335 Operating lease right-of-use asset derecognized upon termination of lease 10,371 — Operating lease right-of-use assets obtained in exchange for lease obligation 753 — Conversion of convertible notes and accrued interest into Class A common stock — 3,338 Stock issuance costs included in accounts payable and accrued liabilities 198 — Stock issuance costs through issuance of common stock 282 — Proceeds from issuance of common stock in prepaid and other current assets 1,679 — The accompanying notes are an integral part of these consolidated financial statements. 69 Table of Contents AEYE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data or otherwise stated) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AEye, Inc. and its wholly owned subsidiaries (the “Company” or “AEye”) is a provider of high-performance, active lidar systems for vehicle autonomy, advanced driver-assistance systems, or ADAS, and robotic vision applications. AEye's 4Sight™ Intelligent Sensing Platform includes a solid-state software definable active lidar sensor, an adaptive sensing SmartScan architecture to scan dynamic scenes/targets, and a sophisticated signal processing capability that provides precise measurements and imaging for various safety-critical applications. The 4Sight™ Intelligent Sensing platform captures more information with less data, facilitating faster, more accurate, and more reliable perception of the environment. 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. On February 17, 2021, AEye Technologies, Inc., then known as AEye, Inc., entered into an Agreement and Plan of Merger with CF III. Based on CF III’s business activities, it was a “shell company” as defined under the Securities Exchange Act of 1934, as amended. On August 16, 2021, the business combination contemplated by the Agreement and Plan of Merger was closed and CF III changed its name to AEye, Inc. The Company’s common stock and public warrants are listed on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “LIDR” and “LIDRW”, respectively. Unless otherwise specified, “we,” “us,” “our,” “AEye,” and the “Company” refers to AEye, Inc. and its wholly owned subsidiaries. Principle of Consolidation and Liquidity The accompanying consolidated financial statements include the accounts of AEye, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company has funded its operations primarily through the business combination and issuances of stock. As of December 31, 2024 , the Company’s existing sources of liquidity included cash, cash equivalents and marketable securities of $ 22,278 . 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. In each reporting period, including interim periods, an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance date. As is common in early-stage companies with limited operating histories, the Company is subject to risks and uncertainties such as its ability to develop and commercialize its products; produce and deliver lidar and software products meeting acceptable performance metrics; attract new and retain existing customers; develop, obtain, or progress strategic partnerships; secure an automotive OEM design win; secure additional capital to support the business plan; and other risks and uncertainties related to liquidity. Since its inception, the Company has incurred net losses and negative cash flows from operations. As of December 31, 2024 , the Company had an accumulated deficit of $ 373,095 . For the years ended December 31, 2024 and 2023 , the Company incurred a net loss of $ 35,460 and $ 87,126 , respectively, and the Company had net cash outflows from operating activities of $ 26,620 and $ 50,725 , respectively. As of December 31, 2024 , the Company had $ 22,278 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. It remains critical for the Company to preserve cash and manage spending to extend its liquidity. 70 Table of Contents [ The Company is dependent upon raising additional capital to provide the cash necessary to continue its ongoing operations and execute against its strategic objectives. During the twelve months ended December 31, 2024 , the Company issued shares through stock purchase agreements and a convertible note totaling $ 12,905 . Subsequent to year-end, the Company raised an additional $ 11,055 in gross proceeds through financing activities (see Note 23, Subsequent Events.) However, successfully raising capital is outside of management's control and there can be no assurance that the Company will be able to obtain additional financing on terms acceptable to the Company, on a timely basis, or at all. Based on cash, cash equivalents and marketable securities at December 31, 2024, together with the net proceeds from financing activities subsequent to year-end, cash, available cash equivalents and marketable securities is sufficient to fund the Company’s operations for at least the next 12 months from the filing date of these consolidated financial statements. At some point after that time, the Company anticipates it will require additional financing to fund its future operations. Based upon the results of Management’s assessment, which has been performed as of February 24, 2025 , these consolidated financial statements have been prepared on a going concern basis. Reverse Stock Split On December 27, 2023 , the Company 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. The Company 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 shares of common stock issuable under our equity incentive plans and exercisable under the outstanding warrants were 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 of common stock of $ 0.0001 . Accordingly, all historical per share data, number of shares issued and outstanding, stock awards, and other common stock equivalents for the periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the Reverse Stock Split. Emerging Growth Company The Company is an “emerging growth company,” as defined in Section 2 (a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, Section 102 (b)( 1 ) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. This may make it difficult or impossible to compare the Company’s 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. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include lease termination liability, write-downs of inventory to the lower of cost or net realizable value, investments, embedded derivative and warrant liabilities, stock-based compensation, impairment of long-lived assets, and fair value of the 2022 convertible note. 71 Table of Contents Cash, Cash Equivalents, and Marketable Securities The Company considers all highly liquid investments, such as treasury bills, commercial paper, certificates of deposit, and money market instruments with maturities of three months or less at the time of acquisition to be cash equivalents. Cash equivalents primarily consist of amounts held in interest-bearing money market accounts that are readily convertible to cash. Cash equivalents are stated at cost, which approximates fair market value. Marketable securities have been classified as available-for-sale and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Unrealized gains and losses in fair value of the available-for-sale (“AFS”) debt securities are reported in other comprehensive income (loss). When the AFS debt securities are sold, cost is based on the specific identification method, and the realized gains and losses are included in other income (expense), net in the consolidated statements of operations and comprehensive loss. The Company determines the appropriate classification of its investments at the time of purchase and reevaluates such designation at each balance sheet date. The Company considers all AFS debt securities as available for use to support current operations, including those with maturity dates beyond one year and are classified as current assets under marketable securities in the accompanying consolidated balance sheets. AFS debt securities included in marketable securities on the consolidated balance sheets consist of securities with original maturities greater than three months at the time of purchase. Interest on marketable securities is included within interest income and other on the consolidated statements of operations. Amortization of premiums and accretion of discounts are included within interest expense and other on the consolidated statements of operations. Restricted Cash Restricted cash of $ 2,150 as of December 31, 2023 , consisted of funds that were contractually restricted as to usage or withdrawal due to a contractual agreement. The Company had a letter of credit to the amount of $ 2,150 with Citibank N.A. as of December 31, 2023 as security for the payment of rent on its headquarters. In August 2024, the former landlord drew down on the letter of credit and the restricted cash was used to offset the letter of credit draw (see further discussion in Note 6 ). The Company had no restricted cash as of December 31, 2024 . Concentration of Credit Risk Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, and marketable securities, and accounts receivable. The Company places its cash and cash equivalents with major financial institutions, which management assesses to be of high credit quality, to limit the exposure of each investment. The Company’s marketable securities have investment grade ratings when purchased which mitigates risk. The Company’s accounts receivable are derived from customers located in the U.S. and Europe. The Company mitigates its credit risks by performing ongoing credit evaluations of its customers’ financial conditions. The Company generally does not require collateral. 72 Table of Contents The Company’s concentration of risk related to accounts receivable and accounts payable was determined by evaluating the number of customers and vendors accounting for 10% or more of accounts receivable (“AR”) and accounts payable (“AP”). As of December 31, 2024 , the Company had three customers, each accounting for 10 % or more of AR and one vendor accounting for 10 % or more of AP. As of December 31, 2023 , the Company had four customers, each accounting for 10 % or more of AR and one vendor accounting for 10 % or more of AP. For the years ended December 31, 2024 and 2023 , revenue from the Company’s major customers representing 10% or more of total revenue was as follows: Year ended December 31, 2024 2023 Customer A 50 % * Customer B 32 % * Customer C * 70 % *Customer accounted for less than 10% of total revenue in the period. Fair Value of Financial Instruments The Company defines fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. For additional discussion on fair value of financial instruments, see Note 2. Derivatives The Company accounts for derivative instruments in accordance with Financial Accounting Standards Board's (FASB) Accounting Standards Codification (ASC) Topic 815, Derivatives and Hedging (“ASC 815” ). The Company’s objectives and strategies for using derivative instruments, and how the derivative instruments and related hedged items are accounted for affect the financial statements. The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risk. Terms of convertible debt instruments are reviewed to determine whether they contain embedded derivative instruments that are required under ASC 815 to be accounted for separately from the host contract and recorded on the consolidated balance sheets at fair value. An evaluation of specifically identified conditions is made to determine whether the fair value of the derivative issued is required to be classified as equity or as a derivative liability. The fair value of derivative liabilities is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. For additional discussion of derivatives, see Note 2. Accounts Receivable, net Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. If necessary, accounts receivable are reduced by a provision for expected credit losses, which is the Company’s best estimate of the amount of credit losses inherent in its existing accounts receivable. The Company reviews the provision quarterly based on historical experience with each customer and the specifics of each arrangement. During the years ended December 31, 2024 and 2023 , the Company had write-offs of $ 70 and $ 0 , respectively. As of December 31, 2023, the Company recorded a $ 35 provision for expected credit losses. There is no provision for credit losses as of December 31, 2024. Inventories, net Inventories consist of raw materials, work in progress, and finished goods. Inventories are stated at the lower of cost and net realizable value and costs are computed under the standard cost method. Inventories that are not expected to be consumed in the next 12 months are classified within Other noncurrent assets. Prototype inventory cost consists of the associated raw material, direct labor, indirect labor and other overhead costs. The Company evaluates the need for inventory write-downs associated with obsolete, slow moving, and non-sellable inventory by reviewing estimated net realizable values on a periodic basis and records a provision for excess and obsolete inventory to adjust the carrying value of inventory as needed. The Company's current and noncurrent inventory held as of December 31, 2024 and 2023 was written down by $ 4,659 and $ 5,062 , respectively, in order to record inventory at its estimated net realizable value. 73 Table of Contents Property and Equipment, net Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from 2 to 7 years. Leasehold improvements are amortized over the shorter of the lease term or expected useful life of the improvements. Construction in progress is the construction or development of property and equipment that have not yet been placed in service. Maintenance and repairs are charged to expense as incurred, and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the consolidated balance sheet and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive loss in the period realized. Impairment of Long-Lived Assets The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If the test for recoverability identifies a possible impairment, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The fair value is calculated based on estimated salvage value, estimated orderly liquidation value, or a value-in-use approach depending on the asset's highest and best use. When an impairment loss is recognized for assets to be held and used, the adjusted carrying amount of the long-lived asset becomes its new cost basis which is depreciated over the asset's remaining useful life. The Company recorded $ 9,988 of non-cash impairment charges in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023 . No impairment charges were recorded for the year ended December 31, 2024. Warrant Liability The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance. The warrants assumed in connection with the 2022 convertible note are accounted for in accordance with ASC 815 - 40, Derivatives and Hedging — Contracts in Entity ’ s Own Equity , under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. The Private Placement Warrants issued in connection with the business combination are classified as liabilities. The Company adjusts the warrants to fair value at each reporting period. The warrant liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the consolidated statements of operations. Leases The Company determines if an arrangement is or contains a lease at inception. The Company evaluates the classification of leases at commencement, and, as necessary, at modification. Operating leases, consisting of office leases, are included in Right-of-use ("ROU") assets, Accrued expenses and other current liabilities, and Operating lease liabilities, noncurrent, on the Company's consolidated balance sheets. The Company did not have any finance leases as of December 31, 2024. ROU assets represent the Company's right to an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made prior to lease commencement and initial direct costs and excludes lease incentives. Variable lease payments not dependent on an index or a rate are expensed as incurred and are not included within the ROU asset and lease liability calculation. Variable lease payments primarily include reimbursements of costs incurred by lessors for common area maintenance and utilities. As most of the Company's leases do not include an implicit rate, the Company uses the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date in determining the present value of future payments. The incremental borrowing rate is a hypothetical rate based on the Company's understanding of what its credit rating would be for a secured borrowing when the lease was executed. The Company's lease term includes the noncancelable period, any rent-free periods provided by the lessor, and options to extend or terminate the lease when it is reasonably certain that it will exercise that option. At lease inception, and in subsequent periods as necessary, the Company estimates the lease term based on its assessment of extension and termination options that are reasonably certain to be exercised. Operating lease expense for lease payments is recognized on a straight-line basis over the lease term and is included in operating expenses on the consolidated statements of operations and comprehensive loss. The Company elected to exclude from its balance sheets recognition of leases having a term of 12 months or less (short-term leases) and elected to not separate lease components and non-lease components for its long-term real estate leases. 74 Table of Contents Convertible Notes The Company adopted Accounting Standards Update (“ASU”) 2020 - 06, Debt—Debt with Conversion and Other Options (Subtopic 470 - 20 ) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815 - 40 ): Accounting for Convertible instruments and Contracts in an Entity’s Own Equity (“ASU 2020 - 06” ). The Company has elected to apply the fair value measurement option to the 2022 convertible note on the date that the Company first recognized the convertible note on September 15, 2022. The Company acknowledges that its election to apply the fair value option is irrevocable. As of December 31, 2024 , the 2022 convertible note has no outstanding principal balance as all outstanding principal and accrued interest has been fully settled. Changes in fair value were recorded in the consolidated statements of operations and changes in fair value related to credit risk are recorded in other comprehensive loss. The Company reported interest expense, including accrued interest, related to this convertible debt under the fair value option, within the change in fair value of convertible notes in the consolidated statement of operations. Revenue Recognition The Company generates revenues from the sale of prototypes and from development arrangements with automakers and suppliers to automakers. Under FASB ASC Topic 606, Revenue from Contracts with Customers (“ASC 606” ), the Company accounts for such arrangements as contracts with customers and accordingly recognizes revenue by applying the following steps: • Identification of the contract, or contracts, with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, the Company satisfies a performance obligation Revenue from the sale of prototypes is generally recognized at a point in time when control of the goods is transferred. Certain prototype sales contracts include services to install and commission or customize the prototypes for customers. Revenues from these services are categorized as prototype revenue and recognized either over time as the services are being performed, or at a point in time, depending on the nature of the services and whether the criteria for recording revenue over time are met in accordance with ASC 606. Revenue from development arrangements is either recognized at a point in time or over time depending on the performance obligations in the contract. For performance obligations that are satisfied over time, such as services which require engineering and development based on customer requirements, the Company recognizes revenue using an input method based on contract costs incurred to date compared to total estimated contract costs. See Note 17, Revenue, for additional information related to the application of ASC 606 to the Company’s primary revenue streams. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from revenues in the consolidated statements of operations and comprehensive loss. 75 Table of Contents Arrangements with Multiple Performance Obligations When a contract involves multiple performance obligations, the Company accounts for individual products and services separately if the customer can benefit from the product or service on its own or with other resources that are readily available to the customer and the product or service is separately identifiable from other promises in the arrangement. The consideration is allocated between separate performance obligations in proportion to their estimated standalone selling price (SSP). The SSP reflects the price the Company would charge for a specific product or service if it were sold separately in similar circumstances and to similar customers. If the selling price is not directly observable, the Company determines SSP using information that may include other observable inputs, such as the cost plus margin approach, to estimate SSP. In instances where SSP is not directly observable, the Company determines SSP using information that may include other observable inputs such as expected costs plus margin, or uses the residual approach for performance obligations whose SSP is highly variable or uncertain. The Company provides standard product warranties for a term of typically 30 days to one year to ensure that its products comply with agreed-upon specifications. Standard warranties are considered to be assurance type warranties and are not accounted for as separate performance obligations. Estimated future warranty costs are accrued and charged to cost of sales in the period that the related revenue is recognized. These estimates are based on historical warranty experience and any known or expected changes in warranty exposure, such as trends of product reliability and costs of repairing and replacing defective products. The Company assesses the adequacy of its recorded warranty liabilities on a quarterly basis and adjusts the amounts as necessary. Warranty costs are included within accrued expenses and other liabilities on the consolidated balance sheets. Refer to Note 9 for further information on warranty reserve amounts. Other Policies, Judgments and Practical Expedients Contract assets and liabilities. Contract assets primarily represent revenues recognized for performance obligations that have been satisfied but for which amounts have not been billed. Contract liabilities relate to deferred revenue. Deferred revenue consists of amounts that have been invoiced and/or cash received but for which revenue has not been earned. This generally includes unrecognized revenue balances for development arrangements. Deferred revenue that will be realized during the succeeding 12 -month period is recorded within current liabilities and the remaining deferred revenue is recorded as noncurrent liabilities. The Company did not have any contract assets or contract liabilities as of December 31, 2024 . Right of return. The Company’s general terms and conditions for its contracts do not contain a right of return that allows the customer to return products and receive a credit. Therefore, the Company does not estimate returns and generally recognizes revenue at contract price upon product shipment or delivery. Significant financing component. In certain arrangements, the Company receives payment from a customer either before or after the performance obligation has been satisfied. The expected timing difference between the payment and satisfaction of performance obligations for all of the Company’s contracts is one year or less; therefore, the Company applies a practical expedient and does not consider the effects of the time value of money on transaction price. The Company’s contracts with customer prepayment terms do not include a significant financing component because the primary purpose is not to receive financing from the customers. The Company did not have any outstanding receivables with financing components as of December 31, 2024 . Contract modifications. The Company may modify contracts to offer customers additional products or services. Each of the additional products and services are generally considered distinct from those products or services transferred to the customer before the modification. The Company evaluates whether the contract price for the additional products and services reflects the standalone selling price as adjusted for facts and circumstances applicable to that contract. In these cases, the Company accounts for the additional products or services as a separate contract. In other cases where the pricing in the modification does not reflect the standalone selling price as adjusted for facts and circumstances applicable to that contract, the Company accounts for the additional products or services as part of the existing contract primarily on a prospective basis. Judgments and estimates. Accounting for contracts recognized over time under ASC 606 involves the use of various techniques to estimate total contract revenue and costs. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a contract will be revised in the near term. The Company reviews and updates its contract-related estimates quarterly, and records adjustments as needed. For those performance obligations for which revenue is recognized using a cost-to-cost input method, changes in total estimated costs, and related progress towards complete satisfaction of the performance obligation, are recognized in the period in which the revisions to the estimates are made. Cost of Revenue Cost of revenue primarily consists of costs directly associated with the production of those prototypes that are held for sale and certain costs associated with development arrangements. Such costs for prototypes are direct materials, direct labor, indirect labor, inventory write-downs, losses on purchase commitments, warranty expense, and allocation of overhead. Direct and indirect labor includes personnel-related costs and packaging and procurement respectively associated with the production of prototypes. Other costs such as indirect manufacturing costs are recognized in research and development and general and administrative expenses on the consolidated statements of operations and comprehensive loss. Costs associated with development arrangements include the direct costs and allocation of overhead costs involved in the execution of the contract. 76 Table of Contents Research and Development Expenses Research and development expenses include personnel costs (including salaries, benefits, bonuses, one -time termination benefits, and stock-based compensation), new hardware and software materials to the extent no future economic benefits are expected, other related expenses such as lab equipment, third party development-related contractors, and allocated overhead expenses. Substantially all the R&D expenses are related to the development of new products and services, including contract development expenses. They are expensed as incurred and included in the consolidated statements of operation and comprehensive loss. Stock-Based Compensation The Company accounts for stock-based compensation by measuring and recognizing compensation expense for all share-based awards based on estimated grant-date fair values. The Company uses the straight-line attribution method to allocate compensation cost to reporting periods over each awardee’s requisite service period, which is generally the vesting period of the award. The Company measures nonemployee awards at the date of grant, which generally is the date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. The Company’s policy is to recognize the effect of forfeitures in the period they occur. The grant-date fair value of the restricted stock units, or “RSUs,” is equal to the fair market value of the Company’s common stock on the grant date. The grant-date fair value for stock options and stock purchase rights under the employee stock purchase plan ("ESPP") is estimated using the Black-Scholes option-pricing model. The grant-date fair value for RSUs with an associated market condition is estimated using the Monte-Carlo simulation model. Both the Black-Scholes option-pricing model and the Monte-Carlo simulation model require the input of subjective assumptions, including the award’s expected term and the price volatility of the underlying stock. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases, as well as net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize deferred tax assets in the future in excess of their net recorded amount, an adjustment to the deferred tax asset valuation allowance would be made to reduce the provision for income taxes. The Company records uncertain tax positions in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740” ) on the basis of a two -step process in which determinations are made ( 1 ) whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and ( 2 ) for those tax positions that meet the more-likely-than- not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income tax expense in the accompanying consolidated statements of operations and comprehensive loss. Accrued interest and penalties are included in accrued expenses and other current liabilities in the consolidated balance sheets. As of and for the year ended December 31, 2024 and 2023 , there were no interest or penalties recorded. 77 Table of Contents Net Loss per Share Basic net loss per share is computed using net loss available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted net loss per share reflects the dilutive effects of stock options, restricted stock units, preferred stock, stock to be issued under the ESPP, convertible notes, and warrants outstanding during the period to the extent such securities would not be anti-dilutive and is determined using the if-converted and treasury stock methods. The Company calculates weighted average number of common shares outstanding during the period using the Company’s common stock outstanding. Basic and diluted net loss per share attributable to common stockholders was the same for all periods presented as the inclusion of all potentially dilutive securities outstanding was anti-dilutive, as AEye is currently operating in a net loss position. Comprehensive Income (Loss) Comprehensive income (loss) includes all changes in equity (net assets) from non-owner sources during a period, changes in fair value due to instrument-specific credit risk, and net unrealized gains (losses) on available-for-sale debt securities. Recent Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update ("ASU") 2023 - 09, Income Taxes (Topic 740 ) - Improvements to Income Tax Disclosures to increase the transparency and usefulness of income tax information through improvements to the income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The guidance is effective for fiscal years beginning after December 15, 2024. The Company is currently in the process of evaluating the effects of the new guidance. In November 2024, the FASB issued ASU 2024 - 03, Disaggregation of Income Statement Expenses , which requires annual and interim disclosure of disaggregated disclosures of certain costs and expenses on the income statement. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, .2027, with early adoption permitted. Amendments are applied on a prospective basis with retrospective application permitted. The Company is currently evaluating the impact of this guidance. Recently Adopted Accounting Pronouncements The Company adopted ASU 2023 - 07, Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures , in the fourth quarter of 2024. The amendments in this update require public entities to disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (the “CODM”) and which are included within each reported measure of segment profit or loss as well as disclosure of other segment items and a description of their composition. The amendments also require public entities to disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The adoption of this guidance resulted in incremental disclosures in the Company’s consolidated financial statements. . 2. FAIR VALUE MEASUREMENTS The fair value of the Company’s financial assets and liabilities is determined in accordance with the fair value hierarchy established in FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820” ). ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy of ASC 820 requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels: Level 1 —Observable inputs, such as quoted prices in active markets for identical assets or liabilities. Level 2 —Observable inputs, other than Level 1 inputs, which are observable either directly or indirectly or can be corroborated by observable market data using quoted prices for similar assets or liabilities. Level 3 —Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. 78 Table of Contents The Company's financial instruments that are not remeasured at fair value include accounts receivable, prepaid and other current assets, accounts payable, accrued expenses, other current and noncurrent liabilities, and convertible note. 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 December 31, 2024 Using: Cash and Adjusted Unrealized Fair Cash Marketable Cost gains Value Equivalent Securities Assets Level 1 Money market funds $ 5,823 $ — $ 5,823 $ 5,823 $ — Level 2 Corporate bonds 9,660 4 9,664 — 9,664 Commercial paper 945 — 945 — 945 U.S. Government securities 1,402 1 1,403 — 1,403 Total financial assets $ 17,830 $ 5 $ 17,835 $ 5,823 $ 12,012 Liabilities Level 2 Private placement warrant liability $ — $ — $ — $ — $ — Level 3 Derivative warrant liability — — 26 — — Total financial liabilities $ — $ — $ 26 $ — $ — 79 Table of Contents Fair Value Measured as of December 31, 2023 Using: Cash and Adjusted Unrealized Fair Cash Marketable Cost gains Value Equivalent Securities Assets Level 1 Money market funds $ 16,377 $ — $ 16,377 $ 16,377 $ — Level 2 Corporate bonds 2,880 1 2,881 — 2,881 Commercial paper 8,809 5 8,814 — 8,814 U.S. Government securities 7,892 4 7,896 — 7,896 Total financial assets $ 35,958 $ 10 $ 35,968 $ 16,377 $ 19,591 Liabilities Level 2 Private placement warrant liability $ — $ — $ — $ — $ — Level 3 Derivative warrant liability — — 26 — — Total financial liabilities $ — $ — $ 26 $ — $ — The Company’s financial assets and liabilities subject to fair value procedures were comprised of the following: Money Market Funds: The Company holds financial assets consisting of money market funds. These securities are valued using observable inputs, such as quoted prices in active markets for identical assets or liabilities. Marketable Securities : The Company holds financial assets consisting of fixed-income U.S. government agency securities, corporate bonds, and commercial paper. The securities are valued using prices from independent pricing services based on quoted prices of identical instruments in less active or inactive markets. Additionally, quoted prices of similar instruments in active market or industry models using data inputs such as interest rates and prices that can be directly observed or corroborated in active markets are used to value marketable securities. Derivative Warrant Liability : On September 15, 2022, the Company entered into a convertible note agreement with a face value of $ 10,500 (the "2022 Note"). The Company’s derivative warrant liability includes the warrants that were issued by the Company as part of the 2022 Note. The warrants are recorded on the consolidated balance sheets at fair value. The fair value is based on unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The fair value estimate of the warrants was based on a Monte-Carlo simulation model. Inherent in a Monte-Carlo simulation model are assumptions related to price, volatility, risk-free interest rate, term to expiration, and dividend yield. The price is based on the publicly traded price of the Company's common stock as of the measurement date. The Company estimated the volatility for the warrants based on the historical and implied volatilities of the Company's publicly traded common stock. The risk-free interest rate is based on interpolated U.S. Treasury rates, commensurate with a similar term to the warrants. 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. Any changes in these assumptions can change the valuation significantly. Changes in fair value are recognized in other income (expense) for each reporting period. Derivative Warrant Liability is included within other noncurrent liabilities on the consolidated balance sheets. 80 Table of Contents Private Placement Warrant Liability : The Private Placement Warrants are recorded on the consolidated balance sheets at fair value. The fair value is based on observable Level 2 inputs, specifically, the observable input of the Company's public warrants, as terms of both warrants are substantially similar. Any changes in the fair value of the liability are reflected in other income (expense), net, on the consolidated statements of operations and comprehensive loss. Private Placement Warrant liability is included within other noncurrent liabilities on the consolidated balance sheets. The Company measures certain nonfinancial assets at fair value on a nonrecurring basis, primarily property and equipment and ROU assets, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The fair value of the Company's property and equipment was based upon estimated salvage value or estimated orderly liquidation value, depending on the asset's highest and best use. As the fair value of property and equipment was estimated using primarily unobservable inputs, these are considered Level 3 fair value measurements. The fair value of the Company’s headquarters ROU asset and associated leasehold improvements were based on a value-in-use approach utilizing market rent comparable information, and is considered a Level 2 fair value measurement. For more information regarding impairment charges, see Notes 1, 6, 7, and 18. For the years ended December 31, 2024 and 2023 , there were no transfers between Level 1 and Level 2 inputs. 81 Table of Contents 3. CASH, CASH EQUIVALENTS, AND RESTRICTED CASH Cash, cash equivalents, and restricted cash as of December 31, 2024 and 2023 were as follows (in thousands): As of December 31, 2024 2023 Cash and cash equivalents $ 10,266 $ 16,932 Restricted cash — 2,150 Total cash, cash equivalents, and restricted cash $ 10,266 $ 19,082 Restricted cash of $ 2,150 as of December 31, 2023 consisted of funds that were contractually restricted as to usage or withdrawal due to a contractual agreement. The Company had a letter of credit in the amount of $ 2,150 with Citibank N.A. as security for the payment of rent on its headquarters. In August 2024, the landlord drew down on the letter of credit and the restricted cash was used to offset the letter of credit draw (see further discussion in Note 6, Leases). 4. INVENTORIES Inventory, net of write-downs, as of December 31, 2024 and 2023 were as follows (in thousands): As of December 31, 2024 2023 Raw materials $ 158 $ 405 Work in-process — 159 Finished goods 18 19 Total inventory, net $ 176 $ 583 The Company also had $ 209 and $ 208 of noncurrent inventory (raw materials), net of write-downs, classified within other noncurrent assets on the consolidated balance sheet as of December 31, 2024 and December 31, 2023 , respectively. 5. PREPAID AND OTHER CURRENT ASSETS Prepaid and other current assets as of December 31, 2024 and 2023 were as follows (in thousands): As of December 31, 2024 2023 Prepaid expenses $ 966 $ 2,386 Advances to suppliers — 79 Receivable for issuance of common stock 1,679 — Other 61 52 Total prepaid and other current assets $ 2,706 $ 2,517 The Company's advances to suppliers as of December 31, 2024 and 2023 were written down by $ 1,041 and $ 1,385 , respectively, associated with the winding down of its legacy Non-Automotive product as part of its revised strategic plan in 2023. See Note 18, Restructuring, for further details. 82 Table of Contents 6. LEASES The Company leases office facilities in Northern California under non-cancelable operating leases. In July 2024, the Company entered into two new long-term leases, one of which the Company uses as its headquarters. Some of the Company's leases include options to renew, with renewal terms that, if exercised by the Company, extend the lease term from two to five years. The exercise of these renewal options is at the Company's discretion. The Company's lease agreements do not contain any material terms and conditions of residual value guarantees or material restrictive covenants. The Company's short-term lease expense was determined to not be material. On November 14, 2023, the Company assigned an operating lease resulting in the Company being relieved of its primary obligation under this lease. As a result of the lease assignment, a new tenant assumed the primary obligation under the lease, with the Company becoming secondarily liable. If the new tenant should fail to perform under the lease, the Company could be liable to fulfill any remaining lease obligations. The lease had a remaining term of 2.7 years as of December 31, 2024 with the Company serving as guarantor for the remaining term. The resulting maximum exposure includes $ 265 of undiscounted future minimum lease payments plus potential additional payments to satisfy maintenance, taxes, and insurance requirements for the remainder of the lease term. In August 2024, one of the Company's existing leases, originally set to expire on November 30, 2026, was terminated early. In conjunction with the early termination, the Company recorded a net gain of $ 491 on termination of the operating lease during the year ended December 31, 2024. The net gain included a gain of $ 5,954 , comprised of a $ 16,325 net liability reduction, partially offset by a $ 10,371 decrease in its remaining right of use asset. Additionally, in accordance with terms in the lease agreement and based on certain assumptions, the Company recorded a lease termination loss of $ 5,463 , representing estimated unpaid rent for the remaining term. The net gain was recorded in general and administrative expenses in the condensed consolidated statement of operations and comprehensive loss. The lease termination liability was reduced by the draw-down of the $ 2,150 letter of credit by the landlord in August 2024; the remaining lease termination liability of $ 3,313 is recorded in accrued expenses and other current liabilities in the consolidated balance sheets. See Note 18, Restructuring, and Note 21, Commitments and Contingencies, for further discussion. The Company recorded a gain of $ 35 on early lease termination for one of its leases, originally set to expire in August 2027, within interest income and other on the consolidated statements of operations during the twelve months ended December 31, 2023. During the year ended December 31, 2023, the Company recorded an impairment charge on right-of-use assets of $ 2,570 , included within impairment of long-lived assets within the Company's consolidated statements of operations. See Note 18, Restructuring. No impairment charges were recorded for the year ended December 31, 2024. The components of operating lease expenses, excluding the gain on lease termination, for the years ended December 31, 2024 and 2023 were as follows (in thousands): Year ended December 31, 2024 2023 Operating lease cost $ 1,498 $ 2,379 Variable lease cost 204 340 Total operating lease cost $ 1,702 $ 2,719 Supplemental cash flow information for the years ended December 31, 2024 and 2023 were as follows (in thousands): Year ended December 31, 2024 2023 Cash paid for operating leases included in operating cash flows $ ( 1,497 ) $ ( 2,500 ) Supplemental balance sheet information related to operating leases as of December 31, 2024 and 2023 was as follows (in thousands): As of December 31, 2024 2023 Operating lease right-of-use assets $ 652 $ 11,226 Operating lease liabilities: Operating lease liabilities, current $ 267 $ 2,415 Lease termination liability 3,313 — Operating lease liabilities, non-current 479 14,858 Total operating lease liabilities $ 4,059 $ 17,273 As of December 31, 2024 2023 Weighted average remaining lease term (in years) 2.89 7.89 Weighted average discount rate 6.40 % 5.32 % 83 Table of Contents Maturities of lease liabilities, excluding the lease termination liability, were as follows (in thousands). Years ending - December 31: 2025 $ 275 2026 283 2027 258 Total lease payments 816 Less amount to discount to present value ( 70 ) Present value of lease liabilities $ 746 7. PROPERTY AND EQUIPMENT, NET Property and equipment, net as of December 31, 2024 and 2023 consists of the following (in thousands): As of December 31, 2024 2023 Machinery and equipment $ 171 $ 171 Computers, software and related equipment 25 26 Office furniture and equipment 5 24 Vehicles 56 60 Leasehold improvements 204 — Construction in progress 246 — Total property and equipment 707 281 Less accumulated depreciation and amortization ( 102 ) — Property and equipment, net $ 605 $ 281 During the year ended December 31, 2023 , the Company recorded impairment charges on assets classified as property and equipment of $ 7,418 , included within impairment of long-lived assets within the Company's consolidated statements of operations. No impairment charges were recorded for the year ended December 31, 2024 . Depreciation and amortization expense related to property and equipment amounted to $ 129 and $ 1,547 recognized within research and development, sales and marketing, and general and administrative expenses within the consolidated statements of operations and comprehensive loss for the years ended December 31, 2024 and 2023 , respectively. The Company recorded disposals of gross property and equipment of $ 59 and $ 1,041 in the years ended December 31, 2024 and 2023 , respectively. The carrying amounts of the property and equipment disposed in the years ended December 31, 2024 and 2023 were $ 32 and $ 342 , respectively. 84 Table of Contents 8. OTHER NONCURRENT ASSETS Other noncurrent assets as of December 31, 2024 and 2023 were as follows (in thousands): As of December 31, 2024 2023 Noncurrent inventory $ 209 $ 208 Long-term prepaid expenses 352 626 Security deposits 131 72 Total other noncurrent assets $ 692 $ 906 9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities as of December 31, 2024 and 2023 were as follows (in thousands): As of December 31, 2024 2023 Lease termination liability $ 3,313 $ — Accrued bonuses 2,875 2,053 Accrued payroll 347 540 Operating lease liabilities 267 2,415 Accrued severance — 402 Accrued payroll taxes 159 317 Accrued other 748 858 Total accrued expenses and other current liabilities $ 7,709 $ 6,585 10. CONVERTIBLE NOTES 2022 Convertible Note 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 . As part of the First Closing, the Company also issued warrants to the investor see Note 12 for further details. The second Note Closing ("Second Closing") lapsed on March 15, 2024 , upon which the Company's right to effect a Second Closing automatically terminated. 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 . 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 1/15 th 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, 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) $ 75.00 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. If the Company elected to settle the Monthly Redemption Amount in cash, the Monthly Redemption Amount would have included a 5 % premium. 85 Table of Contents The investor was permitted to accelerate up to four Monthly Redemption Amounts in any calendar month (each, an "Acceleration," and each such amount, an "Acceleration Amount", and the Conversion Date of any such Acceleration, each an "Acceleration Date") at the Acceleration Conversion Price, subject to a $ 2,800 limit per month. 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 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. Interest payments were also trued-up in cash when the value of the Company's shares was below $ 9.00 per share. The Company elected to apply the fair value option to the measurement of the 2022 Note. As a result of adopting the fair value option, no embedded derivatives were bifurcated from the 2022 Note. The Company classified the 2022 Note as a liability at fair value and remeasured the 2022 Note to fair value at each reporting period. The fair value measurement included the assumption of accrued interest and expense and thus a separate amount was not reflected on the consolidated statement of operations. 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 consolidated balance sheet and into interest expense and other on the consolidated statement of operations and comprehensive loss. The Company evaluated the Second Closing and associated warrants to be a contingently issuable financial asset with a fair value of zero at inception in accordance with ASC 815 - 40 Contracts in an Entity's own Equity. The contingently issuable warrants are considered issued for accounting purposes - see Note 12 for further details. 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 promissory note with a principal balance of $ 146 ( “May 2024 Note”) for total gross cash proceeds of $ 1,000 . The May 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. 11. INTEREST EXPENSE AND OTHER Interest expense and other for the years ended December 31, 2024 and 2023 consisted of the following (in thousands): Year ended December 31, 2024 2023 Common stock purchase agreement costs $ 1,124 $ — Amortization of premiums (accretion of discounts) on marketable securities, net ( 694 ) ( 474 ) Expected credit losses 35 35 Loss on disposal of assets — 111 Other ( 32 ) 80 Interest expense and other $ 433 $ ( 248 ) 86 Table of Contents 12. STOCKHOLDERS ’ EQUITY The Company is authorized to issue 600,000,000 shares of common stock, par value $ 0.0001 per share. As of December 31, 2024 , the Company had 13,734,160 shares of common stock issued and outstanding. Class A Common Stock — Class A common stock has the following rights: Voting rights: Each holder of Class A common stock will be entitled to one ( 1 ) vote in person or by proxy for each share of the Class A common stock held of record by such holder. The holders of shares of the Class A common stock will not have cumulative voting rights. Except as otherwise required in the Charter or by applicable law, the holders of the Class A common stock vote together as a single class on all matters on which stockholders are generally entitled to vote. Dividend rights: Subject to any other provisions of the Charter, each holder of Class A common stock will be entitled to receive, in proportion to the number of shares of the Class A common stock held, such dividends and other distributions in cash, stock or property of the Company when, as and if declared thereon by the Board from time to time out of assets or funds of the Company legally available therefor. Rights upon liquidation: In the event of any liquidation, dissolution or winding up (either voluntary or involuntary) of the Company, after payments to creditors of the Company that may at the time be outstanding, and subject to the rights of any holders of the Company preferred stock that may then be outstanding, holders of shares of the Class A common stock will be entitled to receive ratably, in proportion to the number of shares of the Class A common stock held by them, all remaining assets of the Company available for distribution. Preferred Stock — The Company has the authority, without stockholder approval, to issue shares of preferred stock from time to time on terms it may determine, to divide shares of preferred stock into one or more class or series and to fix for each such class or series the designations, preferences, privileges, and restrictions of preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preference, and the number of shares constituting any series or the designation of any series to the fullest extent permitted by the Delaware General Corporation Law. The issuance of the Company’s preferred stock could have the effect of decreasing the trading price of the Class A common stock, restricting dividends on the capital stock of the Company, diluting the voting power of the Class A common stock, impairing the liquidation rights of the capital stock of the Company, or delaying or preventing a change in control of the Company. Although the Company does not currently intend to issue any shares of preferred stock, the Company may choose to do so in the future. The Company is authorized to issue up to 1,000,000 shares of preferred stock, each with a par value of $ 0.0001 per share. As of December 31, 2024 , no shares of preferred stock were issued and outstanding. Warrants — As of December 31, 2024 , the Company had 5,555 Private Placement warrants and 255,555 Public warrants outstanding. Each warrant entitles the registered holder to purchase one share of the Company's common stock at a price of $ 345.00 per share. On September 15, 2022 , in connection with the issuance of the 2022 Note, the Company issued warrants to the investor. The warrants are immediately exercisable and entitle the investor to purchase up to 58,333 shares of common stock at a price of $ 105.00 per share, subject to a four year term. As of December 31, 2024 , no shares were exercised pursuant to the warrants. Contingent Warrants - As of December 31, 2023 , the Company had 58,333 contingently issuable warrants outstanding associated with the potential Second Closing under the Securities Purchase Agreement. As the Company did not effect a Second Closing by March 15, 2024 , these warrants are no longer outstanding and will not be issued to the investor. Tumim Stone Common Stock Purchase Agreement — On December 8, 2021, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement with Tumim Stone Capital LLC (“Tumim Stone”). Under the terms and subject to the conditions of the Purchase Agreement, the Company has the right, but not the obligation, to sell to Tumim Stone, and Tumim Stone is obligated to purchase up to the lesser of (i) $ 125,000 of the Company’s common stock, or (ii) the Exchange Cap equal to 1,028,847 shares of the Company's common stock, unless the Company’s stockholders approve the issuance of shares in excess of the Exchange Cap, or the average price of all applicable sales of common stock to Tumim Stone under the Purchase Agreement equals or exceeds $ 148.46 per share. Upon the satisfaction of various commencement conditions, such as the filing of the registration statement which provides for the resale of such shares pursuant to the Registration Rights Agreement, the Company has sole discretion to initiate such sales of common stock over the period of 36 months commencing December 8, 2021. In all instances, the Company may not sell shares of its common stock to Tumim Stone under the Purchase Agreement if doing so would result in Tumim Stone beneficially owning more than 9.99 % of its common stock. 87 Table of Contents The purchase price per share to be purchased by Tumim Stone is equal to the volume-weighted average price for common stock on the applicable purchase date multiplied by 0.9615 (to be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split, or similar transaction). The maximum number of shares the Company may sell to Tumim Stone on any single business day is the lesser of (i) $ 20,000 divided by the closing sale price of the common stock on the trading day immediately preceding the purchase date, and (ii) 0.15 multiplied by the average daily trading volume in common stock for the three trading days preceding the purchase date. In connection with the Purchase Agreement, the Company issued 10,087 restricted common shares in the Company to Tumim Stone. The Company determined that the right to sell additional shares represents a freestanding put option under ASC 815 Derivatives and Hedging , and as such, the financial instrument was classified as a derivative asset with a fair value of zero at inception of the Purchase Agreement on December 8, 2021. During the year ended December 31, 2024 , the Company issued 939,200 shares of its common stock under the Purchase Agreement for gross proceeds of $ 2,489 . During the year ended December 31, 2023 , the Company issued 19,500 shares of its common stock under the Purchase Agreement for gross proceeds of $ 136 . In July 2024 this Purchase Agreement was terminated. New Circle Principal Investments LLC (“New Circle”) Common Stock Purchase Agreement (the “CSPA”) — On July 25, 2024, the Company entered into a CSPA and a Registration Rights Agreement with New Circle. Under the terms and subject to the conditions of the CSPA, the Company has the right, but not the obligation, to sell to New Circle, and New Circle is obligated to purchase up to the lesser of (i) $ 50,000 of the Company's common stock, or (ii) the Exchange Cap equal to 1,721,755 shares of the Company's common stock, unless the Company's stockholders approve the issuance of shares in excess of the Exchange Cap, or the average price of all applicable sales of common stock to New Circle equals or exceeds $1.41 per share. The Company has sole discretion to initiate such sales of common stock over a period of 36 months. In all instances, the Company may not sell shares of its common stock to New Circle under the CSPA if doing so would result in New Circle beneficially owning more than 4.99 % of the Company's common stock. The purchase price per share to be purchased by New Circle shall equal either (i) the lowest volume-weighted average price for common stock either over a one -day trading period or 15 minutes after the number of intraday shares traded exceeds 500% of the shares included the purchase notice or one hour after the receipt of the purchase notice, or (ii) the volume-weighted average price for common stock for the three consecutive trading days commencing on the purchase notice date multiplied by 97.5 %. The maximum number of shares the Company may sell to New Circle on any single business day is the lesser of (i) the number of shares equal to 100% of the average daily trading volume of the common stock of the Company during the five trading days immediately preceding the purchase notice, and (ii) 400,000 shares of common stock. In connection with the CSPA, the Company issued to New Circle 225,563 shares of common stock in the Company as commitment shares for the facility. At issuance, the 225,563 shares of common stock had a fair value of $ 282 and were recorded to Interest expense and other in the Company's consolidated statement of operations and comprehensive loss. The Company determined that the right to sell additional shares represents a freestanding put option under ASC 815, Derivatives and Hedging , and as such, the financial instrument was classified as a derivative asset with a fair value of zero at inception of the CSPA on July 25, 2024. As of December 31, 2024 , including the commitment shares, the Company had issued 1,325,713 shares of its common stock to New Circle under the CSPA for gross proceeds totaling $ 1,679 .  Alliance Global Partners (“AGP”) At Market Issuance Sales Agreement (the “ATM Agreement”) — On September 12, 2024, the Company entered into the ATM and a Registration Rights Agreement with A.G.P. Under the terms and subject to the conditions of the ATM Agreement, the Company may issue and sell through AGP the Company's common stock having an aggregate value offering price of up to $ 2,600 ("Placement Shares") from time to time through an "at-the-market" equity offering program. The Company has sole discretion to initiate such sales of common stock over a period of 36 months. Under the terms and subject to the conditions of the ATM Agreement, the Company will set the parameters for the sale of shares, including the number or dollar amount of Placement Shares to be issued, the time period during which sales are requested to be made, any limitation on the number or dollar amount of Placement Shares that may be sold in any one trading day and any minimum price below which sales may not be made. The Company will pay a cash commission rate of up to 3.0 % of the gross proceeds from the sale of Placement Shares sold pursuant to the ATM Agreement. In December 2024, the Company increased the amount of the Company's common stock that it may issue and sell through AGP, having a new aggregate value offering of up to $5,230. As of December 31, 2024, the Company sold 3,528,617 shares through A.G.P. under the ATM Agreement for gross proceeds totaling $ 5,229 . Registered Direct Offering — On May 29, 2024, the Company entered into a Securities Purchase Agreement with certain institutional investors pursuant to which the Company agreed to issue and sell, in a registered direct offering, an aggregate of 727,706 shares of the Company's common stock, par value $ 0.0001 per share, at a per share purchase price of $ 3.4480 for gross proceeds totaling $ 2,509 . 13. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The changes in accumulated other comprehensive income (loss) by component for the years ended December 31, 2024 and 2023 are as follows (in thousands): Unrealized gains Change in (losses) on fair value available-for-sale due to instrument- securities specific credit risk Total Balance at December 31, 2022 $ ( 1,254 ) $ ( 25 ) $ ( 1,279 ) Other comprehensive income (loss) before reclassifications, net of tax 1,264 ( 21 ) 1,243 Amounts reclassified from accumulated other comprehensive loss, net of tax — 46 46 Net other comprehensive income 1,264 25 1,289 Balance at December 31, 2023 $ 10 $ — $ 10 Other comprehensive loss before reclassifications, net of tax ( 5 ) — ( 5 ) Balance at December 31, 2024 $ 5 $ — $ 5 The amounts reclassified out of accumulated other comprehensive income (loss) in the years ended December 31, 2024 and 2023 are included within Interest expense and other on the consolidated statement of operations. 88 Table of Contents 14. 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): Year ended December 31, 2024 2023 Numerator: Net loss attributable to common stockholders $ ( 35,460 ) $ ( 87,126 ) Denominator: Weighted average common shares outstanding- Basic 7,253,683 5,827,721 Dilutive effect of potential common shares — — Weighted average common shares outstanding- Diluted 7,253,683 5,827,721 Net loss per share attributable to common stockholders - Basic and Diluted $ ( 4.89 ) $ ( 14.95 ) Due to net losses for the years ended December 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. The following table sets forth the anti-dilutive common share equivalents for the periods listed: Year ended December 31, 2024 2023 Common stock options issued and outstanding 139,320 289,015 Unvested restricted stock units 384,783 652,453 Warrants 319,443 319,443 Common Stock Purchase Agreements 23,675,174 — Conversion of convertible notes 119,582 — ESPP 37,882 23,816 Total 24,676,184 1,284,727 15. STOCK-BASED COMPENSATION The Company has five equity incentive plans, the 2014 US LADAR Inc. Equity Incentive Plan (the “2014 Plan”), the 2016 Stock Plan (the “2016 Plan”), the 2021 Equity Incentive Plan (the “Incentive Plan”), the 2022 Employee Stock Purchase Plan (the "ESPP"), and the 2023 CEO Inducement Grant Plan (the "CEO Plan"). On August 16, 2021, the Company’s 2014 Plan and 2016 Plan were terminated in connection with the closing of the business combination as defined in Note 1, but continue to govern the terms of outstanding equity awards that were granted prior to the termination of the plans. 2014 Plan and 2016 Plan The 2014 and 2016 Plan provide for the grant of incentive stock options to employees only and non-statutory stock options and RSUs to employees, directors, and consultants of the Company. As of August 16, 2021, the Company no longer grants equity awards pursuant to the 2014 Plan or 2016 Plan, and as of December 31, 2024 , 58,056 RSUs were granted. Under the 2016 Plan, options to purchase common stock generally vest over four years with 25 % vesting at the end of the first year and the rest vesting ratably over the next three years. RSUs generally vest 25 % at the end of the first year with the remaining RSUs vesting ratably over the next three years or they vest ratably over the four years. Under the 2014 Plan, the vesting period for options to purchase common stock range from immediate to four years. Under each plan, the options expire ten years from the date of grant. 89 Table of Contents 2021 Equity Incentive Plan The Incentive Plan became effective immediately upon the closing of the business combination on August 16, 2021 and initially reserved 514,681 shares of common stock for issuance thereunder. The Incentive Plan includes an evergreen provision that provides for an annual increase in the number of shares of common stock available for issuance thereunder beginning on January 1, 2022 and ending on January 1, 2032, equal to 5 % of the shares of the Company’s common stock outstanding on December 31, 2021 for the first year and by 3 % of the total number of shares of common stock outstanding on December 31 of the preceding calendar year for each year thereafter, or a lesser number of shares as determined by the Board of Directors. Since January 1, 2022, the Board of Directors have authorized the addition of 1,143,844 shares of common stock to be added to the Incentive Plan for issuance. Under the Incentive plan, RSU’s vest depending on their vesting schedule. For newly hired employees, RSU’s generally vest 25 % during the quarterly release date following the recipient’s one year anniversary of their start date. The remaining amounts generally vest quarterly over the next three years. For existing employees, these RSUs generally vest quarterly over three years. The fair value of the RSU is equal to the fair value of the Company’s common stock on the date of grant. As of December 31, 2024 , 1,761,881 RSUs were granted to certain individuals under the Incentive Plan. 2022 Employee Stock Purchase Plan On May 10, 2022, the Company's stockholders approved the 2022 Employee Stock Purchase Plan (the "ESPP"), authorizing 66,666 shares of common stock to be reserved for issuance under the ESPP. The number of shares reserved and available for issuance under the ESPP shall be cumulatively increased by the 1 % of the number of shares issued and outstanding on December 31 of the preceding calendar year for each year thereafter, or a lesser number of shares as determined by the Board of Directors. Since January 1, 2023, the Board of Directors have authorized the addition of 117,465 shares of common stock to be added to the ESPP for issuance. The ESPP provides an offering period of 24 months, with four purchase periods that are generally six months long and end on April 30 and October 31 of each year. The first purchase period to the Company's employees to purchase shares under the ESPP began on November 1, 2022. Each employee who is a participant in the ESPP may purchase shares by authorizing contributions at a minimum of 1 % up to a maximum of 10 % of his or her compensation for each pay period, to a maximum of $ 15 per purchase period and $ 25 per year, which will then be used to purchase shares on the last business day of the purchase period at a price equal to 85 % of the fair market value of common stock on the offering date or the exercise date whichever is less. During the years ended December 31, 2024 and 2023, 107,336 and 64,773 shares, respectively, were purchased under the ESPP. As of December 31, 2024 and 2023, the Company has withheld $ 41 and $ 58 of contributions from its employees within accrued expenses and other current liabilities on the consolidated balance sheets. 2023 CEO Inducement Grant Plan The CEO Plan became effective on February 13, 2023 with 233,332 shares of common stock initially reserved for issuance. In connection with the appointment of the Company's CEO on February 13, 2023, the Company granted 166,666 service-based RSUs and 66,666 market-based RSUs to the CEO. The service-based RSUs will vest over three years. The market-based RSUs would have vested quarterly over six ( 6 ) calendar quarters following the satisfaction of the market condition. The market condition would have been satisfied if the closing price of the Company's common stock, as reported by NASDAQ, met or exceeded $36.00 per share for any ten ( 10 ) consecutive trading days prior to March 1, 2024. As the market condition was not satisfied by March 1, 2024, the market-based RSUs were forfeited. 90 Table of Contents A summary of stock option activity related to the Plans as of December 31, 2024 is as follows: Weighted Weighted Outstanding Average Average Aggregate Stock Exercise Contractual Intrinsic Options Price Life (Years) Value Balance at December 31, 2023 289,015 $ 11.29 3.07 $ — Granted — — Exercised ( 44,255 ) 3.02 Forfeited ( 1,504 ) 18.79 Expired ( 103,936 ) 13.23 Balance at December 31, 2024 139,320 $ 12.39 3.84 $ — Vested and expected to vest as of December 31, 2024 139,320 $ 12.39 3.84 $ — Vested and exercisable as of December 31, 2024 139,320 $ 12.39 3.84 $ — The aggregate intrinsic value is the difference between the current fair value of the underlying common stock and the exercise price for in-the-money stock options. The Company did not grant any options during the years ended December 31, 2024 and 2023 . The following table summarizes the RSU award activity under the Plans: Weighted Average Grant date Fair Value Shares per Share Unvested at December 31, 2023 652,453 $ 30.29 Granted 497,543 3.89 Forfeited ( 206,990 ) 26.52 Vested ( 558,223 ) 17.41 Unvested at December 31, 2024 384,783 $ 16.88 The total fair value of RSUs that vested during the year ended December 31, 2024 was $ 9,716 . Stock-Based Compensation Expense —The following table summarizes stock-based compensation expense recorded in each financial statement line item in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2024 and 2023 (in thousands): Year ended December 31, 2024 2023 Cost of revenue $ — $ 136 Research and development 3,433 6,821 Sales and marketing 247 2,993 General and administrative 5,367 8,121 Total stock-based compensation $ 9,047 $ 18,071 The total unrecognized compensation expense for RSUs was $ 5,603 as of December 31, 2024 which is expected to be recognized over an estimated weighted average period of 1.03 years. The total unrecognized compensation expense for the ESPP was $ 282 as of December 31, 2024 which is expected to be recognized over an estimated weighted average period of 1.00 years. There is no unrecognized compensation expense for stock options as of December 31, 2024 . 91 Table of Contents The Company uses the Black-Scholes option-pricing model to estimate the grant-date fair value of ESPP purchase rights. The fair value of each of the four purchase periods is estimated separately. The Company uses the Monte-Carlo simulation model to estimate the grant date fair value of awards with a market condition. Both models require the input of subjective assumptions such as expected term, expected stock price volatility, risk-free interest rate and dividend yield as discussed below. Expected Term —The expected term for ESPP is the length of time from the grant date to the date on which the stock is purchased by the employees. The expected term for awards with a market condition is the length of time from the grant date to the date the market condition expires. Expected Volatility —Expected volatility is estimated using a combination of the average historical volatility of the Company's own stock and those of comparable companies’ stock at the time of the grant. Risk-Free Interest Rate —The risk-free interest rates are based on US Treasury yields in effect at the grant date for notes with comparable terms as the awards. Dividend Yield —The expected dividend-yield assumption is based on the Company’s current expectations about its anticipated dividend policy. The following table summarizes the range of valuation assumptions used in estimating the fair value of the ESPP during the period: Year ended December 31, 2024 Expected term (years) 0.50 - 2.00 Expected volatility 122.2% - 165.9% Risk-free interest rate 4.2% - 5.5% Dividend yield — % 16. Segment Reporting The Company adopted ASU 2023 - 07 during the year ended December 31, 2024 retrospectively to all periods presented in the consolidated financial statements. The Company has one reportable segment managed on a consolidated basis by the Chief Executive Officer (CEO) who is the chief operating decision maker (“CODM”). In identifying one reportable segment, the Company considered the basis of organization for the design and development of high-performance, active lidar systems and applications. The accounting policies of the segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance and decides how to allocate resources based on consolidated net loss as reported in the consolidated statements of operations and comprehensive loss. There are no other expense categories regularly provided to the CODM that are not already included in the consolidated statements of operations and comprehensive loss. The measure of segment assets is reported on the balance sheet as cash, cash equivalents and marketable securities. 17. REVENUE Sale of Prototypes The Company recorded revenue for prototype sales of $ 97 and $ 477 in 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 as well as a sales, marketing and technical support service 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 $ 105 and $ 987 in revenue for performance obligations satisfied during years ended 2024 and 2023 respectively, in the consolidated statements of operations and comprehensive loss. 92 Table of Contents Disaggregation of Revenue The Company recognized the following revenues by geographic area based on the primary billing address of the customer and by the timing of the transfer of goods or services to customers (point in time or over time), as it believes such criteria best depict how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors. Total revenue based on the disaggregation criteria described above is as follows (in thousands): Year ended December 31, 2024 2023 Revenue by primary geographical market: United States $ 154 $ 1,223 Europe 48 184 Asia-Pacific — 57 Total $ 202 $ 1,464 Revenue by timing of recognition: Recognized at a point in time $ 97 $ 477 Recognized over time 105 987 Total $ 202 $ 1,464 Contract Liabilities The Company had no contract liabilities as of December 31, 2024 and 2023 . The following table shows the significant changes in contract liabilities balance as of December 31, 2024 and 2023 (in thousands): Year ended December 31, 2024 2023 Beginning balance $ — $ 987 Revenue recognized that was included in the contract liabilities beginning balance — ( 987 ) Ending balance $ — $ — Remaining Performance Obligations Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied. It includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods and does not include contracts where the customer is not committed. The customer is not considered committed where they are able to terminate for convenience without payment of a substantive penalty under the contract. Additionally, as a practical expedient, the Company has not disclosed the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. The contract liabilities balance represents the remaining performance obligations for contracts with an original duration of greater than one year. 93 Table of Contents 18. RESTRUCTURING 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 legacy Non-Automotive product, and reducing fixed operating costs. In August 2024, the Company further reduced fixed operating costs and terminated its headquarters lease. See discussion in Note 6, Leases. The winding down of the Company's legacy non-Automotive product in 2023, in combination with an accumulation of other triggering events, indicated that the carrying amount of the Company's long-lived assets may not be recoverable. An impairment review was performed on the Company's long-lived assets as of December 31, 2023, resulting in a write-down of its property and equipment and ROU asset to fair value. As a result of the implementation of the revised strategic plan and the impairment review of long-lived assets, the Company recorded restructuring charges of $ 19,153 for the year ended December 31, 2023 primarily relating to one -time employee termination benefits, inventory and other current asset write-downs, losses on purchase commitments, and impairment and disposal charges on its long-lived assets. The Company recorded a net gain of $ 368 , primarily relating to the net gain on termination of lease, losses on purchase commitments and one -time termination benefits. Restructuring-related liabilities are included in accrued expenses and other current liabilities in the consolidated balance sheets. Restructuring charges were included in the consolidated statements of operations and comprehensive loss during the years ended December 31, 2024 and 2023 as follows (in thousands): Year ended December 31, 2024 2023 Cost of revenue $ 105 $ 5,721 Research and development — 941 Sales and marketing 18 2,079 General and administrative ( 491 ) 472 Impairment of long-lived assets — 9,940 Total restructuring charges $ ( 368 ) $ 19,153 A reconciliation of the beginning and ending balance of cash restructuring charges, including one -time employee termination benefits, losses on purchase commitments, and other restructuring charges, which are included in accounts payable and accrued expenses and other current liabilities in the consolidated balance sheets, is as follows (in thousands): One-time employee Losses on Lease termination purchase Termination benefits commitments Liability Other Total Balance as of December 31, 2023 $ 402 $ 233 $ — $ 56 $ 691 Charges 18 105 5,463 — $ 5,586 Cash payments ( 420 ) ( 41 ) ( 2,150 ) ( 51 ) $ ( 2,662 ) Balance as of December 31, 2024 $ — $ 297 $ 3,313 $ 5 $ 3,615 94 Table of Contents 19. EMPLOYEE BENEFIT PLAN Employees of the Company may participate in the AEye, Inc. 401 (k) Plan (the "401 (k) Plan"), a defined contribution plan, which qualifies under Section 401 (k) of the Internal Revenue Code. Participating employees may contribute into a traditional plan with pretax salary or into a Roth plan with after tax salary up to statutory limits. In 2024 and 2023 , the 401 (k) Plan provides for Company safe harbor matching contributions of 100 % of the employee contribution, up to 5 % of each employee's earnings, which vest upon the first day of employment. The Company made contributions of $ 447 and $ 899 for the years ended December 31, 2024 and 2023 , respectively. 20. INCOME TAXES For the years ended December 31, 2024 and 2023 , the Company recognized a (benefit) provision for income taxes of $( 2 ) and $ 57 , respectively. The benefit for the year ended December 31, 2024 was comprised of $ 2 and $( 4 ) in state and foreign taxes, respectively. The provision for the year ended December 31, 2023 was comprised of $ 3 and $ 54 in state and foreign taxes, respectively. The following table presents a reconciliation of the federal statutory rate of 21 % to the Company's effective tax rate for the periods presented: Year ended December 31, 2024 2023 U.S. federal tax benefit at statutory rate 21 % 21 % Non-deductible expenses and other ( 0.8 )% ( 0.4 )% Stock-based compensation ( 6.7 )% ( 4.6 )% Research and development credits 2.2 % 2.3 % Change in valuation allowance, net ( 15.7 )% ( 18.4 )% Effective tax rate 0.0 % ( 0.1 )% For 2024 and 2023 , the Company's effective tax rate differs from the amount computed by applying the statutory federal and state income tax rates to net loss before income tax, primarily as the result of state income taxes, R&D credits and changes in the Company's valuation allowance. 95 Table of Contents Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023 are presented below (in thousands): As of December 31, 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 80,580 $ 69,612 Research and development credit carryforward 10,719 9,941 Stock-based compensation 215 301 Property and equipment 1,090 2,364 Operating lease liabilities 1,208 4,967 Capitalized R&D expenses 12,401 14,194 Other accruals 1,715 689 Gross deferred tax assets 107,928 102,068 Valuation allowance ( 107,734 ) ( 98,840 ) Deferred tax assets net of valuation allowance 194 3,228 Deferred tax liabilities: Right-of-use assets ( 194 ) ( 3,228 ) Gross deferred tax liabilities ( 194 ) ( 3,228 ) Total deferred tax assets (liabilities), net $ — $ — The Company reports income taxes in accordance with ASC 740, which requires an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as net operating loss and tax credit carryforwards. Deferred tax amounts are determined by using the enacted tax rates expected to be in effect when the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance reduces the deferred tax assets to the amount that is more likely than not to be realized. Realization of deferred tax assets is dependent on future taxable earnings, if any, the timing and amount of which are uncertain. The Company has a history of operating losses and has incurred cumulative book losses since its formation. Based upon the history of losses, the Company has determined that it is more likely than not that the net deferred tax assets will not be realized, and accordingly, a full valuation allowance has been recorded. The valuation allowance as of December 31, 2024 was $ 107,734 which increased from $ 98,840 at December 31, 2023 . The increase in the valuation allowance is primarily related to additional deferred tax assets recorded for net operating losses and research credits generated during the year ended December 31, 2024 . As of December 31, 2024 , the Company had $ 284,368 and $ 241,652 of federal and state net operating losses available to reduce future taxable income, respectively, of which $ 12,256 will begin to expire in 2033 for federal tax purposes and $ 241,652 will begin to expire in 2029 for state tax purposes. Approximately $ 272,112 of federal net operating loss included above can be carried forward indefinitely. As of December 31, 2023 , the Company had $ 247,802 and $ 202,887 of federal and state net operating losses available to reduce future taxable income, which will begin to expire in 2033 for federal and 2029 for state tax purposes. The Company also has federal and state research and development tax credit carryforwards of $ 8,203 and $ 6,255 as of December 31, 2024 and $ 7,591 and $ 5,829 as of December 31, 2023 . The federal credits begin to expire in 2034 and the state credits have no expiration date. Under Section 382 of the Internal Revenue Code of 1986, as amended, the Company’s ability to utilize NOL or other tax attributes, such as research tax credits, in any taxable year, may be limited if the Company has experienced an “ownership change.” Generally, a Section 382 ownership change occurs if there is a cumulative increase of more than 50 percentage points in the stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock within a specific testing period. Similar rules may apply under state tax laws. Based on the Section 382 analysis performed through December 31, 2021, the Company concluded all of its NOLs and credits would be available to use as of December 31, 2021, however, future changes in ownership may limit the ability to use tax attributes under Section 382. 96 Table of Contents The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands): Year ended December 31, 2024 2023 Unrecognized tax benefits as of the beginning of the year $ 3,480 $ 2,822 Decreases (increases) related to prior year tax provisions ( 5 ) 161 Increase related to current year tax provisions 265 497 Unrecognized tax benefits as of the end of the year $ 3,740 $ 3,480 The Company recognizes interest and penalties related to income tax matters as a component of income tax expense. As of December 31, 2024 and December 31, 2023 there was no accrued interest nor penalties related to uncertain tax positions. The Company files income tax returns in the U.S., various state jurisdictions, and foreign jurisdictions. The U.S., state and foreign jurisdictions have statutes of limitations that generally range from three to five years. Due to the Company’s net losses, substantially all of its federal, state and local income tax returns are subject to examination for federal and state purposes since inception. The Company is not currently under examination for federal or state income tax purposes. Effective for tax years beginning on or after January 1, 2022, pursuant to the Tax Cuts and Jobs Act of 2017, companies are required to capitalize Internal Revenue Code ("IRC") Section 174 research and experimental expenses paid or incurred during the year. These expenses are amortized over 5 years for research and development performed in the United States and over 15 years for expenses related to research and development performed outside of the United States. As a result of the IRC Section 174 research and development capitalization, the Company recognized a deferred tax asset for the future tax benefit of the amortization deductions. 21. COMMITMENTS AND CONTINGENCIES Legal Matter The Company may be subject to legal proceedings and claims that arise in the ordinary course of business. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict and the Company’s view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. On August 28, 2024, the Company was served with a complaint that was filed in the Superior Court of California for the County of Alameda on August 26, 2024 that ( 1 ) alleges the Company is in breach of the lease for its former headquarters office in Dublin, California because of the Company’s failure to pay rent as required by the lease and ( 2 ) provides notice that the lease had been terminated by the landlord effective as of August 23, 2024. The landlord claimed that the amount owed could be up to $ 8,500 . Thereafter, in August 2024, the landlord fully drew down the standby letter of credit of $ 2,150 , which was held as security for the payment of rent, due to the alleged default of the lease. The Company disputes, among other things, that the total damages claimed by the landlord equal the amount claimed. Depending on the outcome of this matter, there could be a material adverse effect on the financial position, results of operations, or cash flows of the Company. An initial trial date has been set for April 2026. 22. RELATED PARTIES From November 2016 to December 2023, the Company had employed a sibling of Mr. Dussan, a director and the Company’s former Chief Technology Officer, who held the position of Director, Human Resources and Sr. Manager of Human Resources during 2023. For the year ended December 31, 2023, Mr. Dussan’s sibling received total cash compensation of $ 149 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 during the year ended December 31, 2024. 23. SUBSEQUENT EVENTS Management has evaluated subsequent events through February 24, 2025 and determined that there were no such events requiring recognition or disclosure in the financial statements, other than as noted below. In January 2025, the Company entered into a Securities Purchase Agreement to finance an aggregate principal amount of up to $ 3,240 with a certain institutional investor and issued (i) a senior unsecured convertible promissory note (the "Note") for an aggregate purchase price of $ 3,000 and (ii) a warrant to purchase up to 805,263 shares of the Company’s common stock. The Note, subject to an original issue discount of 7.4 %, has a term of eighteen months and accrues interest at the rate of 7.0 % per annum. The Note is convertible into Common Stock, at a per share conversion price equal to $ 2.22 , subject to adjustments noted in the Note. The Warrant has an initial exercise price of $ 2.22 , and is exercisable after the six month and one day anniversary of its issuance (the “Initial Exercisability Date”) until for four years following the Initial Exercisability Date. In January 2025, the Company increased the amount of the Company's common stock that it may issue and sell through A.G.P. under the ATM Agreement, having a new aggregate value offering of up to $ 15,293 and sold 2,359,023 shares for gross proceeds totaling $ 3,015 . Further, the Company issued 2,155,000 shares of its common stock to New Circle under the CSPA for gross proceeds totaling $ 4,800 . 97 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.