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 ) 43 Consolidated Balance Sheets 45 Consolidated Statements of Operations and Comprehensive Loss 46 Consolidated Statements of Stockholders ’ Equity (Deficit) 47 Consolidated Statements of Cash Flows 48 Notes to Consolidated Financial Statements 49 42 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and Board of Directors of AEye, Inc. AEye, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of AEye, Inc. and subsidiaries (the “Company”) as of December 31, 2025 and December 31, 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes to the consolidated financial statements. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and December 31, 2024, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 43 Table of Contents Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of the accounting for and valuation of convertible debt As discussed in Notes 1 and 9 to the consolidated financial statements, in January 2025, the Company entered into a Securities Purchase Agreement and issued (i) a senior unsecured convertible promissory note (the 2025 Note) for a principal amount of $3,240 thousand for an aggregate purchase price of $3,000 thousand and (ii) a warrant to purchase shares of the Company’s common stock. The Company elected to apply the fair value option to measure the 2025 Note. As a result of this election, the 2025 Note was recorded as a liability at fair value and was remeasured at each reporting period, with changes in fair value recognized in change in fair value of convertible note and warrant liabilities on the consolidated statement of operations. We identified the evaluation of the accounting for, and valuation of, the 2025 Note as a critical audit matter. A high degree of subjective and complex auditor judgment was required, including the involvement of professionals with specialized skills and knowledge, to evaluate the appropriate accounting treatment and fair value of the 2025 Note. The following are the primary procedures we performed to address this critical audit matter. We involved professionals with specialized skills and knowledge in complex debt transactions, who assisted us in evaluating the Company’s accounting assessment of the 2025 Note by inspecting the underlying agreements to identify relevant contract terms and evaluating whether the Company's accounting was in accordance with the technical accounting guidance. We involved valuation professionals with specialized skills and knowledge, who assisted us in evaluating the Company’s fair value estimate for the 2025 Note by comparing it to an independently developed fair value estimate using publicly available data. /s/ KPMG LLP We have served as the Company’s auditor since 2024. Santa Clara, California March 18, 2026 44 Table of Contents AEYE, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and par value) As of December 31, 2025 2024 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 43,356 $ 10,266 Marketable securities 43,104 12,012 Accounts receivable, net 77 11 Inventories, net 1,015 176 Prepaid and other current assets 2,081 2,706 Total current assets 89,633 25,171 Right-of-use assets 441 652 Property and equipment, net 577 605 Other noncurrent assets 242 692 Total assets $ 90,893 $ 27,120 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 3,615 $ 3,598 Accrued expenses and other current liabilities 4,957 7,709 Total current liabilities 8,572 11,307 Operating lease liabilities, noncurrent 235 479 Convertible note 146 146 Other noncurrent liabilities 598 64 Total liabilities 9,551 11,996 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; 45,169,913 and 13,734,160 shares issued and outstanding at December 31, 2025 and 2024 4 1 Additional paid-in capital 488,361 388,213 Accumulated other comprehensive income 30 5 Accumulated deficit ( 407,053 ) ( 373,095 ) Total stockholders’ equity 81,342 15,124 Total liabilities and stockholders’ equity $ 90,893 $ 27,120 The accompanying notes are an integral part of these consolidated financial statements. 45 Table of Contents AEYE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except share and per share data) Year Ended December 31, 2025 2024 Revenue $ 233 $ 202 Cost of revenue 554 778 Gross loss ( 321 ) ( 576 ) OPERATING EXPENSES: Research and development 13,937 16,389 Sales and marketing 2,546 551 General and administrative 14,927 18,312 Total operating expenses 31,410 35,252 LOSS FROM OPERATIONS ( 31,731 ) ( 35,828 ) OTHER INCOME (EXPENSE): Change in fair value of convertible note and warrant liabilities ( 1,895 ) — Interest income and other 1,991 799 Interest expense and other ( 2,312 ) ( 433 ) Total other income (expense), net ( 2,216 ) 366 Loss before income tax ( 33,947 ) ( 35,462 ) Provision (benefit) for income tax 11 ( 2 ) Net loss $ ( 33,958 ) $ ( 35,460 ) Change in net unrealized gain (loss) on available-for-sale securities, net of tax 25 ( 5 ) Comprehensive loss $ ( 33,933 ) $ ( 35,465 ) PER SHARE DATA Net loss per common share (basic and diluted) $ ( 1.47 ) $ ( 4.89 ) Weighted average common shares outstanding (basic and diluted) 23,128,082 7,253,683 The accompanying notes are an integral part of these consolidated financial statements. 46 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 Deficit Equity Shares Amount Shares Amount BALANCE—December 31, 2024 — $ — 13,734,160 $ 1 $ 388,213 $ 5 $ ( 373,095 ) $ 15,124 Stock-based compensation — — — — 5,522 — — 5,522 Issuance of common stock upon vesting of restricted stock units — — 1,287,583 — — — — — Taxes related to net share settlement of equity awards — — ( 557,230 ) — ( 643 ) — — ( 643 ) Issuance of common stock under the Common Stock Purchase Agreements — — 27,347,167 3 89,279 — — 89,282 Transaction costs related to the Common Stock Purchase Agreements — — — — ( 1,408 ) — — ( 1,408 ) Conversions of convertible note into common stock — — 2,405,573 — 2,591 — — 2,591 Issuance of common stock through exercise of convertible note warrants — — 805,263 — 4,716 — — 4,716 Issuance of common stock through the Employee Stock Purchase Plan — — 147,397 — 91 — — 91 Other comprehensive income, net of tax — — — — — 25 — 25 Net loss — — — — — — ( 33,958 ) ( 33,958 ) BALANCE—December 31, 2025 — $ — 45,169,913 $ 4 $ 488,361 $ 30 $ ( 407,053 ) $ 81,342 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 Agreement — — 6,852,059 — 13,041 — — 13,041 Stock issuance costs related to the Common Stock Purchase Agreement — — — — ( 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 The accompanying notes are an integral part of these consolidated financial statements. 47 Table of Contents AEYE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 33,958 ) $ ( 35,460 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 155 129 Gain on sale of property and equipment, net — ( 12 ) Noncash lease expense relating to operating lease right-of-use assets 211 956 Gain on termination of operating lease, net ( 1,014 ) ( 491 ) Common stock purchase agreement costs 337 1,124 Debt issuance costs 2,020 — Gain on extinguishment of warrant ( 64 ) — Inventory write-downs, net of scrapped inventory 48 161 Change in fair value of convertible note and warrant liabilities 1,895 — Stock-based compensation 5,522 9,047 Amortization of premiums and accretion of discounts on marketable securities, net of change in accrued interest ( 378 ) ( 611 ) Expected credit losses, net of write-off 2 35 Changes in operating assets and liabilities: Accounts receivable, net ( 68 ) 85 Inventories, current and noncurrent, net ( 678 ) 245 Prepaid and other current assets ( 1,054 ) 1,490 Other noncurrent assets 241 215 Accounts payable 9 156 Accrued expenses and other current liabilities ( 767 ) ( 2,389 ) Operating lease liabilities ( 236 ) ( 955 ) Other noncurrent liabilities — ( 345 ) Net cash used in operating activities ( 27,777 ) ( 26,620 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 109 ) ( 486 ) Proceeds from sale of property and equipment — 45 Proceeds from redemptions and maturities of marketable securities 23,079 32,426 Purchases of marketable securities ( 53,768 ) ( 24,241 ) Net cash provided by (used in) investing activities ( 30,798 ) 7,744 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of stock options — 134 Proceeds from the issuance of convertible notes 2,950 146 Payments for convertible note redemptions ( 989 ) — Transaction costs related to issuance of convertible note ( 658 ) — Taxes paid related to the net share settlement of equity awards ( 643 ) ( 161 ) Proceeds from issuance of common stock under the Common Stock Purchase Agreements 90,961 11,080 Stock issuance costs related to the Common Stock Purchase Agreements ( 1,835 ) ( 1,232 ) Proceeds from exercise of warrant 1,788 — Proceeds from issuance of common stock through the Employee Stock Purchase Plan 91 93 Net cash provided by financing activities 91,665 10,060 NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 33,090 ( 8,816 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 10,266 19,082 CASH AND CASH EQUIVALENTS—End of period $ 43,356 $ 10,266 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ — $ — Cash paid (refunded) for income taxes, net 58 ( 2 ) SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Noncash debt issuance costs $ 1,362 $ — Stock issuance costs included in accounts payable and accrued liabilities 108 198 Purchases of property and equipment included in accounts payable and accrued liabilities 18 — Operating lease liabilities extinguished upon termination of lease — 16,325 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 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. 48 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 physical AI sensing solutions built on high-performance, active lidar systems for vehicle autonomy, advanced driver-assistance systems, or ADAS, robotic vision applications and a range of Non-Automotive applications. Our physical AI approach combines software‑defined sensing with adaptive perception capabilities that enable machines to interpret and respond to complex physical environments in real time. Our proprietary Intelligent Sensing Platform incorporates a solid‑state, software‑definable active lidar sensor; an adaptive SmartScan architecture that dynamically adjusts scan patterns for different scenes and targets; and a signal‑processing pipeline designed to deliver precise measurements and imaging for safety‑critical use cases. This platform is designed to support a broad set of markets beyond passenger vehicles, including rail, aerospace and defense, smart infrastructure, and security, where long‑range performance, environmental robustness, and software‑based configurability are key requirements. 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 issuances of common stock. Since its inception, the Company has incurred net losses and negative cash flows from operations and expects to incur additional operating losses and negative operating cash flows as management continues to focus on achieving commercialization of its lidar solutions and execute on its strategic initiatives. As of December 31, 2025 , the Company's existing sources of liquidity included cash, cash equivalents, and marketable securities of $ 86,460 . Management believes that the Company has sufficient financial resources to fund operations and meet its capital requirements and anticipated obligations as they come due in the next twelve months from the date of issuance of these consolidated financial statements. Reclassification of Prior Year Presentation Certain prior year amounts have been reclassified for consistency with the current year presentation. 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, and convertible notes. 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. 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, net. 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, net are derived from customers located in the U.S., Europe, and Asia-Pacific. The Company mitigates its credit risks by performing ongoing credit evaluations of its customers’ financial conditions. The Company generally does not require collateral. 49 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, 2025 , 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, 2024 , 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, 2025 and 2024 , revenue from the Company’s major customers representing 10% or more of total revenue was as follows: Year ended December 31, 2025 2024 Customer A 27 % * Customer B 15 % * Customer C 12 % * Customer D 10 % * Customer E * 50 % Customer F * 32 % *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 the 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, 2025 and 2024 , the Company had write-offs of $ 2 and $ 70 , respectively. There are no provisions for credit losses as of December 31, 2025 and 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. 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. 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. 50 Table of Contents 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. No impairment charges were recorded for the years ended December 31, 2025 and 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, the 2025 convertible note, and the warrants issued in connection with the lease settlement 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, non-current, on the Company's consolidated balance sheets. The Company did not have any finance leases as of December 31, 2025 and 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 non-cancelable 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. 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 elected to apply the fair value measurement option to the 2022 convertible note and the 2025 convertible note on the dates that the Company first recognized the respective convertible note in the consolidated balance sheets. The Company acknowledges that its election to apply the fair value option is irrevocable. As of December 31, 2025 , the 2022 convertible note and the 2025 convertible note have 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 products and from development arrangements with companies in both the Automotive and Non-Automotive markets. 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 51 Table of Contents Revenue from the sale of products is generally recognized at a point in time when control of the goods is transferred. Certain sales contracts include services to install and commission or customize the product for customers. Revenues from these services are categorized as product 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 16, 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. 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 90 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 8 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, 2025 . 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, 2025 . 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 lidar units that are held for sale and certain costs associated with development arrangements. Such costs for product 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 lidar units. 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. 52 Table of Contents Research and Development Expenses Research and development expenses include personnel costs (including salaries, benefits, bonuses, 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, 2025 and 2024 , there were no interest or penalties recorded. 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 and net unrealized gains (losses) on available-for-sale debt securities. Recent Accounting Pronouncements 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. 53 Table of Contents Recently Adopted Accounting Pronouncements The Company adopted, ASU 2023 - 09, Income Taxes (Topic 740 ) - Improvements to Income Tax Disclosures, in the fourth quarter of 2025. The amendments in this update require public entities 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 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. 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 the noncurrent 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, 2025 Using: Cash and Adjusted Unrealized Fair Cash Marketable Cost gains Value Equivalent Securities Assets Level 1 Money market funds $ 42,718 $ — $ 42,718 $ 42,718 $ — Level 2 Corporate bonds 19,620 13 19,633 — 19,633 Commercial paper 7,531 3 7,534 — 7,534 U.S. Government securities 8,003 9 8,012 — 8,012 Agency bonds 2,018 — 2,018 — 2,018 Asset backed securities 5,902 5 5,907 — 5,907 Total financial assets $ 85,792 $ 30 $ 85,822 $ 42,718 $ 43,104 Liabilities Level 2 Private placement warrant liability $ — $ — $ — $ — $ — Level 3 Derivative warrant liability — — 560 — — Total financial liabilities $ — $ — $ 560 $ — $ — 54 Table of Contents 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 $ 6,965 $ — $ 6,965 $ 6,965 $ — 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 $ 18,972 $ 5 $ 18,977 $ 6,965 $ 12,012 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 securities, corporate bonds, commercial paper, agency bonds, and asset-backed securities. 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 issued warrants 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 five 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 was included within other noncurrent liabilities on the consolidated balance sheets. These warrants were cancelled on July 28, 2025. In January 2025, the Company entered into a convertible note agreement with a face value of $ 3,000 (the "2025 Note"). The Company issued a warrant to purchase up to 805,263 shares of the Company’s common stock. The warrant was recorded on the accompanying consolidated balance sheet 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 warrant was based on a Black-Scholes model. Inherent in a Black-Scholes model are assumptions related to price, volatility, risk-free interest rate, term to expiration, and dividend yield. Changes in fair value were recognized in other income (expense) for each reporting period. Derivative Warrant Liability was included within other noncurrent liabilities on the consolidated balance sheets. These warrants were exercised in full on July 28, 2025 . In August 2025 , in connection with the lease settlement (see Note 5 for details of the settlement), the Company issued warrants, which are recorded on the accompanying 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 Black-Scholes model. Inherent in a Black-Scholes model are assumptions related to price, volatility, risk-free interest rate, term to expiration, and dividend yield. 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. 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. 55 Table of Contents For the years ended December 31, 2025 and 2024 , there were no transfers between Level 1 and Level 2 inputs. The following table presents a summary of the changes in fair value of the Company’s Level 3 financial instruments for the year ended December 31, 2025 (in thousands): Derivative Warrant Liability 2025 Note Total Balance at December 31, 2024 $ 26 $ — 26 Additions 1,945 3,266 5,211 Change in fair value included in other income (expense), net 1,581 314 1,895 Payments and conversions — ( 3,580 ) ( 3,580 ) Extinguishment and exercise ( 2,992 ) — ( 2,992 ) Balance at December 31, 2025 $ 560 $ — $ 560 The key inputs into the Black-Scholes model for the derivative warrant issued as a result of the lease settlement valued at December 31, 2025 are as follows: December 31, 2025 Expected term (years) 4.7 Expected volatility 140.0 % Risk-free interest rate 3.7 % Dividend yield — % Exercise price $ 2.22 If factors or assumptions change, the estimated fair values could be materially different. The value of the Company’s derivative warrant liabilities would increase if a higher risk-free interest rate was used and would decrease if a lower risk-free interest rate was used. Similarly, a higher volatility assumption would increase the value of the liabilities, and a lower volatility assumption would decrease the value of the liabilities. 3. INVENTORIES Inventory, net of write-downs, as of December 31, 2025 and 2024 were as follows (in thousands): As of December 31, 2025 2024 Raw materials $ 826 $ 158 Work in-process 78 — Finished goods 111 18 Total inventory, net $ 1,015 $ 176 The Company also had $ 0 and $ 209 of noncurrent inventory (raw materials), net of write-downs, classified within other noncurrent assets on the consolidated balance sheet as of December 31, 2025 and 2024 , respectively. 4. PREPAID AND OTHER CURRENT ASSETS Prepaid and other current assets as of December 31, 2025 and 2024 were as follows (in thousands): As of December 31, 2025 2024 Prepaid expenses $ 2,022 $ 966 Receivable for issuance of common stock — 1,679 Other 59 61 Total prepaid and other current assets $ 2,081 $ 2,706 56 Table of Contents 5. 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, which was amended in February 2026 to extend the term and add additional square footage. Some of the Company's leases include options to renew, with renewal terms that, if exercised by the Company, extend the lease term for 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 1.7 years as of December 31, 2025 with the Company serving as guarantor for the remaining term. The resulting maximum exposure includes $ 166 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 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 as of December 31, 2024 was recorded in accrued expenses and other current liabilities in the consolidated balance sheet. On April 28, 2025 , the Company and the former landlord entered into a settlement agreement to resolve all outstanding disputes related to the early termination of the lease. Under the terms of the agreement, the Company paid $ 1,400 in cash and issued a warrant to purchase up to 350,000 shares of the Company's common stock at an exercise price of $ 2.22 per share, which had a fair value of $ 899 on the date of issuance. The Company recorded a net gain on termination of operating lease of $ 1,014 during the year ended December 31, 2025 . The components of operating lease expenses, excluding the gain on lease termination, for the years ended December 31, 2025 and 2024 were as follows (in thousands): Year ended December 31, 2025 2024 Operating lease cost $ 289 $ 1,498 Variable lease cost 16 204 Total operating lease cost $ 305 $ 1,702 Supplemental cash flow information for the years ended December 31, 2025 and 2024 were as follows (in thousands): Year ended December 31, 2025 2024 Cash paid for operating leases included in operating cash flows $ 306 $ 1,497 Supplemental balance sheet information related to operating leases as of December 31, 2025 and 2024 was as follows (in thousands): As of December 31, 2025 2024 Operating lease right-of-use assets $ 441 $ 652 Operating lease liabilities: Operating lease liabilities, current $ 275 $ 267 Lease termination liability — 3,313 Operating lease liabilities, non-current 235 479 Total operating lease liabilities $ 510 $ 4,059 As of December 31, 2025 2024 Weighted average remaining lease term (in years) 1.89 2.89 Weighted average discount rate 6.40 % 6.40 % 57 Table of Contents Maturities of lease liabilities as of December 31, 2025 , are as follows (in thousands). Years ending - December 31: 2026 $ 283 2027 257 Total lease payments 540 Less amount to discount to present value ( 30 ) Present value of lease liabilities $ 510 6. PROPERTY AND EQUIPMENT, NET Property and equipment, net as of December 31, 2025 and 2024 consists of the following (in thousands): As of December 31, 2025 2024 Machinery and equipment $ 218 $ 171 Computers, software and related equipment 63 25 Office furniture and equipment 16 5 Vehicles 56 56 Leasehold improvements 228 204 Construction in progress 254 246 Total property and equipment 835 707 Less accumulated depreciation and amortization ( 258 ) ( 102 ) Property and equipment, net $ 577 $ 605 Depreciation and amortization expense related to property and equipment amounted to $ 155 and $ 129 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, 2025 and 2024 , respectively. The Company recorded disposals of gross property and equipment of $ 59 in the year ended December 31, 2024 . The carrying amount of the property and equipment disposed in the year ended December 31, 2024 was $ 32 . There were no disposals during the year ended December 31, 2025 . 7. OTHER NONCURRENT ASSETS Other noncurrent assets as of December 31, 2025 and 2024 were as follows (in thousands): As of December 31, 2025 2024 Noncurrent inventory $ — $ 209 Long-term prepaid expenses 136 352 Security deposits 106 131 Total other noncurrent assets $ 242 $ 692 8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities as of December 31, 2025 and 2024 were as follows (in thousands): As of December 31, 2025 2024 Lease termination liability $ — $ 3,313 Accrued bonuses 3,605 2,875 Accrued payroll 402 347 Operating lease liabilities 275 267 Accrued payroll taxes 151 159 Accrued other 524 748 Total accrued expenses and other current liabilities $ 4,957 $ 7,709 9. CONVERTIBLE NOTES 2024 Promissory 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. 58 Table of Contents 2025 Convertible Note In January 2025, the Company entered into a Securities Purchase Agreement with a certain institutional investor and issued (i) a senior unsecured convertible promissory note (the "2025 Note") for an aggregate principal amount of $ 3,240 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 2025 Note, subject to an original issue discount of 7.4 %, had a term of eighteen months and accrued interest at the rate of 7 % per annum. The interest may be settled in cash or shares at the option of the Company and was payable together with monthly redemptions of the outstanding principal amount of the 2025 Note. The 2025 Note was convertible into common stock, at a per share conversion price equal to $ 2.22 , subject to adjustments noted in the 2025 Note. Monthly redemptions began in April 2025 and were due on the first 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 2025 Note was fully redeemed, paid in cash or, so long as certain equity conditions are met, shares of our common stock. The equity conditions that must be met in order for the Company to settle the Monthly Redemption Amount in common stock include requirements for the daily volume weighted average price of the Company's common stock to exceed $ 0.50 and the average daily trading volume of the Company's common stock to exceed $ 100 for the twenty ( 20 ) trading days prior to the applicable Installment Notice Date (which is the sixth ( 6th ) trading day prior to each Installment Date). The Monthly Redemption Amount, in most instances, will be 1/15th of the original principal amount, plus any amount accelerated pursuant to the 2025 Note, accrued but unpaid interest, and late fees, if any. If the Company elects to settle such redemptions in shares of common stock, the number of shares to be settled shall be based on an Installment Conversion Price equal to the lower of (i) $ 2.22 or (ii) the greater of $ 0.30 and 90 % of average volume weighted average price of the common stock during the five ( 5 ) trading days immediately preceding the applicable Monthly Redemption Date. The investor is permitted, not exceeding five times, to accelerate up to one Monthly Installment Amount, between Installments, (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. The Acceleration Conversion Price shall be the lower of (i) $ 2.22 or (ii) the greater of $ 0.30 and 90 % of average volume weighted average price of the common stock during the five ( 5 ) trading days immediately preceding the applicable Acceleration Date. The 2025 Note may not be converted into common stock to the extent such conversion would result in the investor and its affiliates having beneficial ownership of more than 19.99 % of our then outstanding shares of common stock. This limitation is waived if the Company either obtains stockholder approval as required by the applicable exchange rules or secures a satisfactory written opinion from its counsel stating that such approval is unnecessary. The Company and investor entered into a registration rights agreement (the “Registration Rights Agreement”) to which the Company was required to file a registration statement registering the resale by the investor of any shares of the Company’s common stock issuable upon conversion, including the resale of shares issuable upon exercise of the associated warrants. The Company is required to meet certain obligations with respect to the timeliness of the filing and effectiveness of the registration statement. The Company filed such registration statement on January 16, 2025, and an amendment thereto on February 25, 2025, which was declared effective by the U.S. Securities and Exchange Commission on March 4, 2025. The Company elected to apply the fair value option to the measurement of the 2025 Note. As a result of adopting the fair value option, no embedded derivatives are bifurcated from the 2025 Note. The Company classified the 2025 Note as a liability at fair value and remeasured the 2025 Note to fair value at each reporting period. The total proceeds received from the investor of $ 3,000 was allocated between the 2025 Note and the related warrants issued using the relative fair value method at issuance date. This resulted in an initial fair value of $ 3,266 being allocated to the 2025 Note, and $ 1,046 allocated to the associated warrants. The Company recorded a non-cash issuance cost of $ 1,312 , representing the difference between the fair value and proceeds received, within Interest expense and other on the consolidated statement of operations. 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. During the year ended December 31, 2025, the Company made cash payments of $ 989 . Additionally, $ 2,591 in aggregate principal and interest were converted into 2,405,573 shares of common stock. As of December 31, 2025, the 2025 Note was fully repaid and all associated warrants fully exercised. 10. INTEREST EXPENSE AND OTHER Interest expense and other for the years ended December 31, 2025 and 2024 consisted of the following (in thousands): Year ended December 31, 2025 2024 Common stock purchase agreement costs $ 337 $ 1,124 Debt issuance costs 2,020 — Amortization of premiums (accretion of discounts) on marketable securities, net ( 394 ) ( 694 ) Expected credit losses 2 35 Loss (gain) on foreign currency 340 ( 37 ) Other 7 5 Interest expense and other $ 2,312 $ 433 59 Table of Contents 11. 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, 2025 , the Company had 45,169,913 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, 2025 , no shares of preferred stock were issued and outstanding. Warrants — As of December 31, 2025 , 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. In January 2025 , in connection with the 2025 Note, the Company issued warrants to the investor. The warrants entitled the investor to purchase up to 805,263 shares of the Company’s common stock at a stock price of $ 2.22 per share. These warrants were exercised in full on July 28, 2025 . In August 2025 , in connection with the lease settlement (see Note 5 for details of the settlement), the Company issued warrants. The warrant entitled the previous landlord to purchase up to 350,000 shares of the Company’s common stock with an exercise price of $ 2.22 per share, subject to a five year term. As of December 31, 2025 , no shares were exercised pursuant to the warrants. 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. These warrants were cancelled on July 28, 2025 and the Company recorded a gain of $ 64 in other income in the consolidated statements of operations during the year ended December 31, 2025. 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. 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. 60 Table of Contents 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. This Purchase Agreement was terminated in July 2024. In total, 996,866 shares were issued under the Tumim Stone Purchase Agreement for gross proceeds totaling $ 5,516 . 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. This CSPA agreement was terminated in December 2025. In total, the Company issued 8,980,713 shares of its common stock, including commitment shares, for gross proceeds totaling $ 27,754 .  Alliance Global Partners (“A.G.P.”) 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 A.G.P. 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 2025, the Company increased the aggregate amount available under the ATM program to $ 125,000 , following multiple prior increases since the original agreement. The Company sold 23,220,784 shares through A.G.P. under the ATM Agreement for gross proceeds totaling $ 68,436 through December 31, 2025 . The remaining availability under the agreement is $ 56,564 as of December 31, 2025 . 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 . 12. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The changes in accumulated other comprehensive income (loss) by component for the years ended December 31, 2025 and 2024 are as follows (in thousands): Unrealized gains (losses) on available-for-sale securities Balance at December 31, 2023 $ 10 Other comprehensive income (loss) before reclassifications, net of tax ( 5 ) Balance at December 31, 2024 $ 5 Other comprehensive income (loss) before reclassifications, net of tax 25 Balance at December 31, 2025 $ 30 61 Table of Contents 13. 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, 2025 2024 Numerator: Net loss attributable to common stockholders $ ( 33,958 ) $ ( 35,460 ) Denominator: Weighted average common shares outstanding- Basic 23,128,082 7,253,683 Weighted average common shares outstanding- Diluted 23,128,082 7,253,683 Net loss per share attributable to common stockholders - Basic and Diluted $ ( 1.47 ) $ ( 4.89 ) Due to net losses for the years ended December 31, 2025 and 2024 , 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, 2025 2024 Common stock options issued and outstanding 122,922 139,320 Unvested restricted stock units 601,073 384,783 Warrants 611,110 319,443 Common Stock Purchase Agreement 30,741,382 23,675,174 Conversion of convertible note 87,099 119,582 ESPP 59,522 37,882 Total 32,223,108 24,676,184 14. STOCK-BASED COMPENSATION The Company has six 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"), the 2023 CEO Inducement Grant Plan (the "CEO Plan"), and the 2025 Employment Inducement Incentive Award Plan, ( “2025 EIIAP”). 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, 2025 , 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. 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 1,549,868 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 two years. For existing employees, these RSUs generally vest quarterly over one year. The fair value of the RSU is equal to the fair value of the Company’s common stock on the date of grant. The Company adds back cancelled, unvested shares and those shares withheld in connection with the net share settlement of vested RSU's to the pool of shares available for future grants. As of December 31, 2025 , 3,225,045 RSUs were granted to certain individuals under the Incentive Plan. 62 Table of Contents 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 252,806 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, 2025 and 2024 , 147,397 and 107,336 shares, respectively, were purchased under the ESPP. As of December 31, 2025 and 2024 , the Company has withheld $ 49 and $ 41 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. 2025 Employment Inducement Incentive Award Plan In October 2025, the Board of Directors approved the 2025 Employment Inducement Incentive Award Plan ( “2025 EIIAP”) which was created as an inducement for accepting employment with the Company. The maximum aggregate number of shares of common stock that may be issued under the 2025 EIIAP is 3,000,000 shares of common stock. The awards vest over three years, with a one -year cliff of 33.3 % of the RSUs on the 15 th day of the second month of the calendar quarter following the recipient’s one year anniversary of their start date. The remaining amounts generally vest quarterly over the following two 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, 2025, 100,000 RSUs were granted to a certain individual under the 2025 EIIAP. A summary of stock option activity related to the Plans as of December 31, 2025 is as follows: Weighted Weighted Outstanding Average Average Aggregate Stock Exercise Contractual Intrinsic Options Price Life (Years) Value Balance at December 31, 2024 139,320 $ 12.39 3.84 $ — Granted — — Exercised — — Forfeited — — Expired ( 16,398 ) 12.57 Balance at December 31, 2025 122,922 $ 12.36 3.02 $ — Vested and expected to vest as of December 31, 2025 122,922 $ 12.36 3.02 $ — Vested and exercisable as of December 31, 2025 122,922 $ 12.36 3.02 $ — 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, 2025 and 2024 . 63 Table of Contents The following table summarizes the RSU award activity under the Plans: Weighted Average Grant date Fair Value Shares per Share Unvested at December 31, 2024 384,783 $ 16.88 Granted 1,563,164 1.14 Forfeited ( 59,291 ) 5.00 Vested ( 1,287,583 ) 4.48 Unvested at December 31, 2025 601,073 $ 3.65 The total fair value of RSUs that vested during the year ended December 31, 2025 was $ 5,763 . 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, 2025 and 2024 (in thousands): Year ended December 31, 2025 2024 Research and development 1,415 3,433 Sales and marketing 397 247 General and administrative 3,710 5,367 Total stock-based compensation $ 5,522 $ 9,047 The total unrecognized compensation expense for RSUs was $ 1,813 as of December 31, 2025 which is expected to be recognized over an estimated weighted average period of 1.49 years. The total unrecognized compensation expense for the ESPP was $ 340 as of December 31, 2025 which is expected to be recognized over an estimated weighted average period of 1.07 years. There is no unrecognized compensation expense for stock options as of December 31, 2025 . 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, 2025 Expected term (years) 0.50 - 2.00 Expected volatility 144.0% - 182.8% Risk-free interest rate 3.6% - 4.4% Dividend yield — % 15. Segment Reporting 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. 64 Table of Contents 16. REVENUE Product Revenue The Company recorded revenue for product sales of $ 157 and $ 97 in 2025 and 2024 , 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 both the Automotive and Non-Automotive markets. The Company assessed the number of performance obligations associated with the promises under each agreement, and recognized $ 76 and $ 105 in revenue for performance obligations that had been satisfied as of December 31, 2025 and 2024 respectively, in the consolidated statements of operations and comprehensive loss. 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, 2025 2024 Revenue by primary geographical market: United States $ 117 $ 154 Europe 93 48 Asia-Pacific 23 — Total $ 233 $ 202 Revenue by timing of recognition: Recognized at a point in time $ 157 $ 97 Recognized over time 76 105 Total $ 233 $ 202 Contract Liabilities The Company had no contract liabilities as of December 31, 2025 and 2024 . 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. 17. 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. The Company recorded a net gain of $ 368 during the year ended December 31, 2024, primarily relating to the net gain on termination of lease, partially offset by losses on purchase commitments and one -time termination benefits. Restructuring-related liabilities were included in accrued expenses and other current liabilities in the consolidated balance sheet. There were no restructuring charges during the year ended December 31, 2025. Restructuring charges were included in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2024 as follows (in thousands): Year ended December 31, 2024 Cost of revenue $ 105 Sales and marketing 18 General and administrative ( 491 ) Total restructuring gain $ ( 368 ) 65 Table of Contents A reconciliation of the beginning and ending balance of cash restructuring charges, including losses on purchase commitments, lease termination liability, and other restructuring charges, which are included in accounts payable and accrued expenses and other current liabilities in the consolidated balance sheets, was as follows (in thousands): Losses on Lease purchase Termination commitments Liability Other Total Balance as of December 31, 2024 $ 297 $ 3,313 $ 5 $ 3,615 Adjustments — ( 1,014 ) — ( 1,014 ) Cash payments ( 297 ) ( 1,400 ) ( 5 ) ( 1,702 ) Issuance of warrants — ( 899 ) — ( 899 ) Balance as of December 31, 2025 $ — $ — $ — $ — 18. 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 2025 and 2024 , 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 $ 474 and $ 447 for the years ended December 31, 2025 and 2024 , respectively. 19. INCOME TAXES For the years ended December 31, 2025 and 2024 , the Company had a loss before income tax of $( 33,947 ) and $( 35,462 ), respectively, primarily from continuing operations in the United States. For the years ended December 31, 2025 and 2024 , the Company recognized a provision (benefit) for income taxes of $ 11 and $( 2 ), respectively. The provision for the year ended December 31, 2025 was comprised of $ 2 and $ 9 in state and foreign taxes, respectively. The benefit for the year ended December 31, 2024 was comprised of $ 2 and $( 4 ) in state and foreign taxes, respectively. The Company has elected to prospectively adopt the guidance in ASU 2023 - 09, Income Taxes (Topic 740 ) - Improvements to Income Tax Disclosures. The following table presents a reconciliation of the federal statutory rate of 21 % to the Company's effective tax rate: Year ended December 31, 2025 Amount (in thousands) Percentage Federal income tax at statutory rate $ ( 7,129 ) 21.0 % Domestic federal Tax credits ( 466 ) 1.4 % Stock-based compensation 933 ( 2.7 )% Stock and debt issuance costs 495 ( 1.5 )% Change in valuation allowance, net 5,828 ( 17.2 )% Other 350 ( 1.0 )% Domestic state taxes, net of federal effect 2 0.0 % Foreign tax effects ( 2 ) 0.0 % Total $ 11 0.0 % As previously disclosed for the year ended December 31, 2024, prior to the adoption of ASU 2023 - 09, the following table is a reconciliation of the difference between the effective income tax rate and the federal statutory tax rate of 21%: Year Ended December 31, 2024 Federal income tax at statutory rate 21.0 % Non deductible expenses and other ( 0.8 )% Share-based compensation ( 6.7 )% Research and development credits 2.2 % Change in valuation allowance, net ( 15.7 )% Effective tax rate 0.0 % For 2025 and 2024 , 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. 66 Table of Contents Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 are presented below (in thousands): As of December 31, 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 94,475 $ 76,199 Research and development credit carryforward 10,492 9,733 Stock-based compensation 57 201 Property and equipment 949 1,020 Operating lease liabilities 141 1,133 R&D Expenses 1,959 12,240 Other accruals 1,595 1,610 Gross deferred tax assets 109,668 102,136 Valuation allowance ( 109,546 ) ( 101,954 ) Deferred tax assets net of valuation allowance 122 182 Deferred tax liabilities: Right-of-use assets ( 122 ) ( 182 ) Gross deferred tax liabilities ( 122 ) ( 182 ) 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 against its net deferred tax assets. The valuation allowance as of December 31, 2025 was $ 109,546 which increased from $ 101,954 at December 31, 2024 . 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, 2025 . As of December 31, 2025 , the Company had $ 362,183 and $ 268,734 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 $ 268,734 will begin to expire in 2029 for state tax purposes. Approximately $ 349,927 of federal net operating loss included above can be carried forward indefinitely. 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, 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 $ 8,824 and $ 6,749 as of December 31, 2025 and $ 8,203 and $ 6,255 as of December 31, 2024 . 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. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands): Year ended December 31, 2025 2024 Unrecognized tax benefits as of the beginning of the year $ 3,740 $ 3,480 Decrease related to prior year tax provisions ( 5 ) ( 5 ) Increase related to current year tax provisions 284 265 Unrecognized tax benefits as of the end of the year $ 4,019 $ 3,740 67 Table of Contents The Company recognizes interest and penalties related to income tax matters as a component of income tax expense. As of December 31, 2025 and December 31, 2024 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. In accordance with the requirements of ASU 2023 - 09 for the year ended December 31, 2025, cash paid for income taxes totaled was $ 58 and was comprised of state income taxes of $ 2 made primarily to California, and $ 9 and $ 47 for foreign taxes paid in Korea and Germany, respectively. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted. This legislation introduces several provisions impacting corporate taxes including (i) the permanent extension of certain expiring or expired elements of the Tax Cuts and Jobs Act such as 100% bonus depreciation and favorable modifications related to deductibility of interest, and (ii) expensing of research and experimental expenses. The OBBBA contains multiple effective dates, with some provisions applicable beginning in 2025. Because of the Company's valuation allowance on its net deferred tax assets, the change did not have a material impact on its financial statements. 20. 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. In 2025, the Company was notified by a former vendor that it intended to pursue a claim against the Company’s wholly owned subsidiary, AEye Technologies, Inc., arising out of an agreement entered into in May 2020, in which the former vendor alleges that AEye Technologies, Inc. failed to pay approximately $ 3,300 plus interest from the date the former vendor alleges such payments were due. In February 2026, the former vendor initiated a binding arbitration proceeding against AEye Technologies, Inc. pursuant to the underlying purchase agreement. AEye Technologies, Inc. has, and continues to dispute the total amount owed based, in part, on the claim that the products supplied by the former vendor were largely defective and such former vendor was repeatedly made aware of the existence of such defects. While it is reasonably possible that a loss may be incurred, the Company is unable to estimate the possible loss or range of loss that could result from an unfavorable outcome in this legal proceeding. In 2024, the Company was purportedly served with a complaint that ( 1 ) alleged the Company was 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 ) provided 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. On April 28, 2025, the Company and the former landlord entered into a settlement agreement to resolve all outstanding disputes related to the early termination of the lease. Under the terms of the agreement, the Company paid $ 1,400 in cash in May 2025 and issued warrants to purchase up to 350,000 shares of common stock at an exercise price of $ 2.22 per share in August 2025. 21. RELATED PARTIES There were no related party transactions during the years ended December 31, 2025 and 2024 . 22. SUBSEQUENT EVENTS Management has evaluated subsequent events through March 18, 2026 and determined that there were no such events requiring recognition or disclosure in the financial statements. 68 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.