What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-16 compared with 2022-03-28 · 463 added, 339 removed, 650 unchanged (55% of the section changed)

2 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB ID 34 )

Consolidated balance sheets

Consolidated statements of operations and comprehensive loss

Consolidated statements of stockholders’ equity (deficit)

Consolidated statements of cash flows

Notes to consolidated financial statements

Consolidated B alance S heets

Consolidated S tatements of O perations and C omprehensive L oss

Consolidated S tatements of S tockholders’ E quity ( D eficit)

Consolidated S tatements of C ash F lows

Notes to C onsolidated F inancial S tatements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

32 unchanged sentences

Total current assets 105,550 177,365

Right-of-use assets 15,502 —

Property and equipment, net 7,665 5,129

2 unchanged sentences

Total assets $ 133,340 $ 186,153

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

3 unchanged sentences

Convertible notes 8,594 —

Borrowing - net of debt issuance costs, current — 2,693

Total current liabilities 22,563 13,568

Operating lease liabilities, noncurrent 16,681 —

Deferred rent, noncurrent — 3,032

Borrowings - net of debt issuance costs, noncurrent — 2,884

Other noncurrent liabilities 126 786

1 unchanged sentence

COMMITMENTS AND CONTINGENCIES (Note 21)

STOCKHOLDERS’ EQUITY (DEFICIT):

STOCKHOLDERS’ EQUITY:

Preferred stock—$ 0.0001 par value:

7 unchanged sentences

Accumulated deficit ( 250,509 ) ( 151,795 )

Total stockholders’ equity (deficit) 168,767 ( 18,225 )

Total liabilities and stockholders’ equity (deficit) $ 186,153 $ 25,885

Total stockholders’ equity 93,970 168,767

Total liabilities and stockholders’ equity $ 133,340 $ 186,153

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

1 unchanged sentence

(In thousands, except share and per share data)

Year ended December 31,

Twelve Months Ended December 31,

Prototype sales $ 1,743 $ 1,004

$ 1,004 $ 365

Development contracts 1,904 2,003

Total revenues 3,007 1,579

Total revenue 3,647 3,007

Cost of revenue 8,732 3,637

Gross profit (loss) ( 630 ) 771

Gross loss ( 5,085 ) ( 630 )

OPERATING EXPENSES:

5 unchanged sentences

OTHER INCOME (EXPENSE):

Change in fair value of embedded derivative liability and warrant liabilities 223 1,410

Change in fair value of convertible note, embedded derivative liability, and warrant liabilities ( 14 ) 223

Gain on PPP loan forgiveness — 2,297

4 unchanged sentences

Net loss $ ( 98,714 ) $ ( 65,011 )

Net unrealized loss on available-for-sale debt securities ( 391 ) —

Change in net unrealized loss on available-for-sale securities, net of tax ( 940 ) ( 391 )

Change in fair value due to instrument-specific credit risk, net of tax ( 25 ) —

Net losses reclassified into income during the period, net of tax 77 —

Comprehensive loss $ ( 99,602 ) $ ( 65,402 )

4 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the years ended December 31, 2021 and 2020

(In thousands, except share data)

Preferred Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity

Shares Amount Shares Amount

BALANCE—December 31, 2021

— $ — 155,137,237 $ 16 $ 320,937 $ ( 391 ) $ ( 151,795 ) $ 168,767

Stock-based compensation — — — — 23,959 — — 23,959

Issuance of common stock upon exercise of stock options — — 3,219,957 — 1,174 — — 1,174

Issuance of common stock upon vesting of restricted stock units — — 3,908,031 — — — — —

Taxes related to net share settlement of equity awards — — ( 1,340,810 ) — ( 3,790 ) — — ( 3,790 )

Issuance of common stock under the Common Stock Purchase Agreement — — 1,145,000 — 2,891 — — 2,891

Transaction costs related to the Common Stock Purchase Agreement — — — — ( 29 ) — — ( 29 )

Issuance of common stock upon exercise of public warrants — — 10 — — — — —

Conversions of convertible note into common stock — — 1,029,699 — 600 — — 600

Other comprehensive loss, net of tax — — — — — ( 888 ) — ( 888 )

Net loss — — — — — — ( 98,714 ) ( 98,714 )

BALANCE—December 31, 2022

— — 163,099,124 16 $ 345,742 $ ( 1,279 ) $ ( 250,509 ) $ 93,970

Preferred Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity (Deficit)

1 unchanged sentence

BALANCE—December 31, 2020 (as previously reported) 16,383,725 $ 62,639 10,838,010 $ — $ 5,920 $ — $ ( 86,784 ) $ ( 18,225 )

16,383,725 $ 62,639 10,838,010 $ — $ 5,920 $ — $ ( 86,784 ) $ ( 18,225 )

Retroactive application of recapitalization (Note 2) ( 16,383,725 ) ( 62,639 ) 90,448,635 10 62,629 — — —

Balance as of December 31, 2020, as adjusted (Note 2) — — 101,286,645 10 68,549 — ( 86,784 ) ( 18,225 )

— — 101,286,645 10 68,549 — ( 86,784 ) ( 18,225 )

Stock based compensation — — — — 10,018 — — 10,018

12 unchanged sentences

BALANCE—December 31, 2021 — — 155,137,237 16 $ 320,937 $ ( 391 ) $ ( 151,795 ) $ 168,767

— $ — 155,137,237 $ 16 $ 320,937 $ ( 391 ) $ ( 151,795 ) $ 168,767

Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount Shares Amount

BALANCE—December 31, 2019 (as previously reported)

16,383,725 $ 62,639 11,283,838 $ — $ 3,305 $ ( 60,233 ) $ 5,711

Retroactive application of recapitalization (Note 2) ( 16,383,725 ) ( 62,639 ) 91,661,644 10 62,629 — —

Balance as of December 31, 2019, as adjusted (Note 2)

— — 102,945,482 10 65,934 ( 60,233 ) 5,711

Stock-based compensation — — — — 1,952 — 1,952

Issuance of common stock upon exercise of stock options — — 1,877,233 — 663 — 663

Repurchase of common stock — — ( 3,536,070 ) — — — —

Net loss — — — — — ( 26,551 ) ( 26,551 )

BALANCE—December 31, 2020

— $ — 101,286,645 $ 10 $ 68,549 $ ( 86,784 ) $ ( 18,225 )

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

1 unchanged sentence

(In thousands)

Year ended December 31,

Twelve months ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Depreciation and amortization 1,422 1,014

Noncash lease expense relating to operating lease right-of-use assets 1,338 —

Noncash common stock purchase agreement costs — 1,583

Inventory write-downs 1,203 72

Change in fair value of embedded derivative liability and warrant liabilities ( 223 ) ( 1,410 )

Inventory write-downs, net of scrapped inventory 675 1,203

Change in fair value of convertible note, embedded derivative liability, and warrant liabilities 14 ( 223 )

Noncash gain on PPP loan forgiveness — ( 2,297 )

Stock-based compensation 23,959 10,018

Convertible note issuance costs 474 —

Amortization of debt issuance costs — 725

Amortization of debt discount — 752

Realized loss on redemption of marketable securities 77 —

Amortization of premiums on marketable securities, net of change in accrued interest 1,086 310

1 unchanged sentence

Accounts receivable, net 3,605 ( 4,066 )

Inventories, net ( 2,633 ) ( 309 )

Inventories, current and noncurrent, net ( 2,634 ) ( 2,633 )

Prepaid and other current assets ( 1,130 ) ( 3,655 )

2 unchanged sentences

Accrued expenses and other current liabilities 85 5,496

Operating lease liabilities ( 1,341 ) —

Deferred rent — ( 538 )

3 unchanged sentences

Purchase of property and equipment ( 4,200 ) ( 1,021 )

Purchase of available-for-sale debt securities ( 150,525 ) —

Net cash used in investing activities ( 151,546 ) ( 4,036 )

Proceeds from redemptions and maturities of marketable securities 96,592 —

Purchase of available-for-sale securities ( 23,929 ) ( 150,525 )

Net cash provided by (used in) investing activities 68,463 ( 151,546 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from the exercise of stock options 150 663

Proceeds from exercise of stock options 1,174 150

Proceeds from Business Combination and PIPE financing — 256,811

1 unchanged sentence

Proceeds from the issuance of convertible notes 9,850 8,045

Proceeds from bank loans 10,000 2,270

Payments for convertible note redemptions ( 874 ) —

Payment of 2022 convertible note issuance costs ( 324 ) —

Proceeds from bank loan — 10,000

Principal payments on bank loans — ( 13,333 )

Payments of debt issuance costs ( 717 ) ( 238 )

Payment of debt issuance costs — ( 717 )

Taxes paid related to the net share settlement of equity awards ( 4,621 ) —

Repurchase of stock options — ( 1,500 )

Proceeds from issuance of common stock under the Common Stock Purchase Agreement 2,891 —

Payment of transaction costs related to the Common Stock Purchase Agreement ( 29 ) —

Net cash provided by financing activities 8,067 207,084

4 unchanged sentences

Cash paid for interest $ 133 $ 358

Cash paid for income taxes 20 —

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

Purchases of property and equipment included in accounts payable and accrued liabilities 28 270

Operating lease right-of-use assets obtained in exchange for lease obligations upon adoption of ASC 842 16,284 —

Conversion of Series A and Series B preferred stock into Class A common stock — 62,639

Conversion of convertible notes and accrued interest into Class A common stock 600 39,095

Operating lease right-of-use assets obtained in exchange for lease obligations 556 —

Taxes related to net share settlement of equity awards included in accrued liabilities 4 835

Assumption of the private placement warrant liability in connection with Business Combination — 268

Transaction costs paid in 2020, previously recorded to other non-current assets and reclassified to additional paid-in capital in 2021 — 289

Taxes related to net share settlement of equity awards included in accrued liabilities 835 —

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

3 unchanged sentences

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

AEye’s software-definable 4Sight TM Intelligent Sensing Platform combines solid-state active lidar, an optionally fused low-light HD camera, and integrated deterministic artificial intelligence to capture more intelligent information with less data, enabling faster, more accurate, and more reliable perception.

On February 17, 2021, AEye Technologies, Inc., then known as AEye, Inc.

11 unchanged sentences

The Company has funded its operations primarily through the Business Combination and issuances of stock.

As of December 31, 2021, the Company’s existing sources of liquidity included cash, cash equivalents and marketable securities of $ 164,007 .

As of December 31, 2022, the Company’s existing sources of liquidity included cash, cash equivalents and marketable securities of $ 94.2 million.

The Company has incurred losses and negative cash flows from operations.

If the Company incurs additional losses in the future, it may need to raise additional capital through issuances of equity and debt.

However, management believes that the Company’s existing sources of liquidity are adequate to fund its operations for at least one year from the date the audited consolidated financial statements were available for issuance.

As the Company incurs additional losses in the future, it may need to raise additional capital through issuances of equity and debt.

However, management believes that the Company’s existing sources of liquidity are adequate to fund its operations for at least the next 12 months.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation.

Specifically, restricted cash is now presented as a separate line item on the consolidated balance sheets and was previously included within other noncurrent assets.

Inventory write-downs is now presented as a separate line item on the consolidated statements of cash flows and was previously included within changes in inventories, net.

Amortization of debt issuance costs is now presented as amortization of debt discounts on the consolidated statements of cash flows.

Noncash interest expense related to bank loans is now presented as amortization of debt issuance costs on the consolidated statements of cash flows.

Advances to suppliers has been broken out from Other within Footnote 6, Prepaid and other current assets.

Amortization of premiums on marketable securities, net within Footnote 13, Interest Expense and Other is now presented as Amortization of premiums on marketable securities, net of accretion and discounts.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to

comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable.

4 unchanged sentences

Actual results could differ from those estimates.

Significant items subject to such estimates and assumptions include investments, embedded derivative and warrant liabilities (See Note 3), fair value of common stock, and stock-based compensation.

Significant items subject to such estimates and assumptions include investments, fair value of the 2022 convertible note, embedded derivative and warrant liabilities, and stock-based compensation.

Segment Reporting

We manage our business on the basis of one reportable and operating segment.

Operating segments are defined as components of an enterprise with separate financial information, and are evaluated regularly by the chief operating decision maker, which is our Chief Executive Officer (“CEO”).

The Company manages its business on the basis of one reportable and operating segment.

The CEO decides how to allocate resources and assesses the Company’s performance based upon consolidated financial information.

All of our sales were made to customers (in USD) located in the United States, Europe, and Asia through AEye, Inc., and all property and equipment is located in the United States.

All of the Company's sales were made to customers (in USD) located in the U.S., Europe, and Asia through AEye, Inc.

Of the $ 7,665 of net property and equipment as of December 31, 2022, $ 7,207 is located in the United States, $ 108 is located in Europe, and $ 350 is located in Asia.

Cash, Cash Equivalents, and Marketable Securities

12 unchanged sentences

The Company has a letter of credit to the amount of $ 2,150 with Silicon Valley Bank as security for the payment of rent on its headquarters in Dublin, CA which require lease payments through 2026.

During the year ended December 31, 2020, as a result of COVID-19, the Company agreed to a rent payment restructuring arrangement with the landlord, whereby restricted cash under the letter of credit was released and $ 928 was used to fund rental payments during the period from May 1, 2020 through December 31, 2020.

At December 31, 2020, the Company had an available letter of credit of $ 1,223 .

As part of the restructuring arrangement, the Company replenished the letter of credit back by paying $ 928 in January 2021.

The Company determines current or non-current classification of restricted cash based on the expected duration of the restriction.

7 unchanged sentences

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, 2022, AEye had four customers, each accounting for 10 % or more of AR and two vendors, each accounting for 10 % or more of AP.

As of December 31, 2021, AEye had one customer accounting for 10 % or more of AR and two vendors accounting for 10 % or more of AP.

As of December 31, 2020, AEye had four customers accounting for 10 % or more of AR and three vendors accounting for 10 % or more of AP.

During the years ended December 31, 2022 and 2021, the Company did not have any write offs of accounts receivable and at December 31, 2022 and 2021, did not record an allowance for doubtful accounts as all accounts receivable amounts were expected to be collected.

For the years ended December 31, 2022 and 2021, revenue from the Company’s major customers representing 10% or more of total revenue was as follows:

Year ended December 31,

Twelve months ended December 31,

Customer A 51 % 55 %

Customer B 13 % *

Customer C 10 % *

*Customer accounted for less than 10% of total revenue in the period.

12 unchanged sentences

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.

Amounts collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash

If necessary, accounts receivable are reduced by an allowance for doubtful accounts, which is the Company’s best estimate of the amount of credit losses inherent in its existing accounts receivable.

4 unchanged sentences

Inventories are stated at the lower of cost and net realizable value and costs are computed under the standard cost method.

Prototype inventory cost consists of the associated raw material, direct labor, and indirect labor.

Inventories that are not expected to be consumed in the next 12 months are classified within Other noncurrent assets.

Prototype inventory cost consists of the associated raw material, direct labor, indirect labor and other overhead costs.

The Company evaluates the need for inventory write-downs associated with obsolete, slow moving, and non-sellable inventory by reviewing estimated net realizable values on a periodic basis and records a provision for excess and obsolete inventory to adjust the carrying value of inventory as needed.

The Company's inventory as of December 31, 2021 and 2020 was written down by $ 1,122 and $ 298 , respectively, in order to reduce inventory to the lower of cost or to its net realizable value.

The Company's inventory as of December 31, 2022 and 2021 was written down by $ 833 and $ 1,122 , respectively, in order to record inventory at its estimated net realizable value.

Deferred Transaction Costs

5 unchanged sentences

Leasehold improvements are amortized over the shorter of the lease term or expected useful life of the improvements.

Construction in progress is the construction or development of property and equipment that have not yet been placed in service.

Maintenance and repairs are charged to expense as incurred, and improvements are capitalized.

When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the consolidated balance sheet and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive loss in the period realized.

Impairment of Long-Lived Assets

3 unchanged sentences

There are no impairment charges recorded in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2022 and 2021.

The Company rents office space under long-term leases that are accounted for as operating leases following FASB ASC Topic 840, Leases (“ASC 840”).

Rent expense is recognized on a straight-line basis over the expected lease term.

The difference between straight-line rent expense and amounts paid are recorded as a deferred rent liability.

Lease incentives, including tenant improvement allowances, are also recorded as a deferred rent liability and amortized as a reduction of rent expense on a straight-line basis over the expected term of the lease.

Warrant Liability

The company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant's specific terms and applicable authoritative guidance.

The warrants assumed in connection with the 2022 convertible note are accounted for in accordance with ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities.

The Private Placement Warrants issued in connection with the IPO 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 .

The Company determines if an arrangement is or contains a lease at inception.

The Company evaluates the classification of leases at commencement, and, as necessary, at modification.

Operating leases, consisting of office leases, are included in Right-of-use ("ROU") assets, Accrued expenses and other current liabilities , and Operating lease liabilities, noncurrent, on the Company's consolidated balance sheets.

The Company did not have any finance leases as of December 31, 2022 and December 31, 2021.

ROU assets represent the Company's right to an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

The operating lease ROU asset also includes any lease payments made prior to lease commencement and initial direct costs and excludes lease incentives.

Variable lease payments not dependent on an index or a rate are expensed as incurred and are not included within the ROU asset and lease liability calculation.

Variable lease payments primarily include reimbursements of costs incurred by lessors for common area maintenance and utilities.

As most of the Company's leases do not include an implicit rate, the Company uses the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date in determining the present value of future payments.

The incremental borrowing rate is a hypothetical rate based on the Company's understanding of what its credit rating would be for a secured borrowing when the lease was executed.

The Company's lease term includes the noncancelable period, any rent-free periods provided by the lessor, and options to extend or terminate the lease when it is reasonably certain that it will exercise that option.

At lease inception, and in subsequent periods as necessary, the Company estimates the lease term based on its assessment of extension and termination options that are reasonably certain to be exercised.

Operating lease expense for lease payments is recognized on a straight-line basis over the lease term and is included in operating expenses on the consolidated statements of operations and comprehensive loss.

The Company elected to exclude from its balance sheets recognition of leases having a term of 12 months or less (short-term leases) and elected to not separate lease components and non-lease components for its long-term real estate leases.

Convertible Notes

The Company elected to early adopt Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).

The Company has elected to apply the fair value measurement option to the 2022 convertible note on the date that the Company first recognized the convertible note on September 15, 2022.

The Company acknowledges that its election to apply the fair value option is irrevocable.

The Company recognized costs incurred upon issuance of the 2022 convertible note as an expense in its consolidated income statement for the twelve months ended December 31, 2022.

The 2022 convertible note is classified and presented as a current liability on the Consolidated Balance Sheet as of December 31, 2022.

Changes in fair value are recorded in the consolidated statements of operations and changes in fair value related to credit risk are recorded in other comprehensive loss.

The Company reports 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

6 unchanged sentences

• Recognition of revenue when, or as, the Company satisfies a performance obligation

Revenue from the sale of prototypes is generally recognized at a point in time when control of the goods is transferred.

Certain prototype sales contracts include services to install and commission or customize the prototypes for customers.

Revenues from these services are categorized as prototype revenue and recognized either over time as the services are being performed, or at a point in time, depending on the nature of the services and whether the criteria for recording revenue over time are met in accordance with ASC 606.

Revenue from development arrangements is either recognized at a point in time or over time depending on the performance obligations in the contract.

For performance obligations that are satisfied over time, such as services which require engineering and development based on customer requirements, the Company recognizes revenue using an input method based on contract costs incurred to date compared to total estimated contract costs.

See Note 18, Revenue, for additional information related to the application of ASC 606 to the Company’s primary revenue streams.

4 unchanged sentences

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 Company generally uses the cost plus margin approach to estimate SSP.

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.

6 unchanged sentences

Refer to Note 10 for further information on warranty reserve amounts.

Collaboration and Development Agreements

The Company considers whether an arrangement qualifies as a collaborative arrangement under FASB ASC Topic 808, Collaborative Arrangements (“ASC 808”) , by assessing whether the arrangement between the parties have joint operating activities where both are (i) active participants in the activity;

and (ii) have exposure to significant risks and rewards dependent on the commercial success of the activity.

When both criteria are met, the arrangement is considered a collaborative arrangement and accounted for under ASC 808.

To qualify and present consideration as revenue within the scope of ASC 606, consideration exchanged in a collaborative arrangement must originate from a customer.

The Company refers to ASU 2018-18, Clarifying the Interaction between Topic 808 and Topic 606 , which clarifies when participants of a collaborative arrangement are within the scope of ASC 606 (and a customer relationship exists in the context of a unit of account).

The Company evaluates the unit of account for each arrangement and determines if the collaboration partner is considered a customer (defined as a party contracted with the entity to obtain goods and services which are outputs from the entity’s ordinary course of business, in exchange for consideration).

When this definition is met, the Company applies the ASC 606 guidance, including recognition, measurement, presentation, and disclosure requirements to the unit of account.

When a portion of a bundle unit of account (i.e., multiple promises which are not individually distinct) is not with a customer, the entire unit of account is not accounted for under the scope of ASC 606.

For such arrangements, the Company may choose to analogize to the recognition and measurement guidance of ASC 606 whereby the consideration associated with revenue from non-ASC 606 elements are recognized together with revenue to be recognized under ASC 606, as appropriate.

Other Policies, Judgments and Practical Expedients

36 unchanged sentences

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 optionee’s requisite service period, which is generally the vesting period, and estimates the fair value of share-based awards using the Black-Scholes option-pricing model.

The Black-Scholes option-pricing model requires the input of subjective assumptions, including the option’s expected term and the price volatility of the underlying stock.

The Company’s policy is to recognize stock-based compensation net of estimated forfeitures, based on historical forfeiture rates.

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 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 fair value of the stock-based compensation is recognized on a straightline basis over the requisite service period, which is generally the vesting period of the 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 Black-Scholes option-pricing model requires the input of subjective assumptions, including the option’s expected term and the price volatility of the underlying stock.

Stock options and RSUs for all periods prior to the Business Combination have been retroactively restated to give effect to the recapitalization.

6 unchanged sentences

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.

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.

4 unchanged sentences

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, convertible notes, and public and private placement 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.

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 Class A common stock outstanding.

4 unchanged sentences

Comprehensive Loss

Comprehensive 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.

Comprehensive loss includes all changes in equity (net assets) from non-owner sources during a period, changes in fair value due to instrument-specific credit risk, and net unrealized gains (losses) on available-for-sale debt securities.

Recent Accounting Pronouncements

12 unchanged sentences

Recently Adopted Accounting Guidance

In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (ASU) No.

In February 2016, the FASB established Topic 842, Leases, by issuing ASU No.

FASB ASC Topic 842, Leases (“ASC 842”) supersedes the previous accounting guidance for leases included within ASC 840.

The new guidance generally requires an entity to recognize operating and financing lease liabilities and corresponding right-of-use assets on its balance sheet, as well as recognize the associated lease expenses on its statements of operations in a manner similar to that required under current accounting rules.

The guidance requires a modified retrospective transition approach with application in all comparative periods presented (the “Comparative Method”), or alternatively, as of the effective date as the date of initial application without restating comparative period financial statements (the “Effective Date Method”).

The new standard is effective for the Company on January 1, 2022.

We adopted the new standard on January 1, 2022 using the Effective Date Method.

The Company has completed a substantial portion of its evaluation of the effect of adopting ASC 842 on its financial statements.

Upon adoption on January 1, 2022, the Company expects to recognize estimated right-of-use assets and lease liabilities totaling approximately $ 16,050 and $ 19,692 , respectively, to reflect the present value of remaining lease payments under existing lease arrangements.

The new guidance also provides several practical expedients and policies that companies may elect upon transition.

The Company plans to elect the transition practical expedient package, which among other things, allows the carryforward of historical lease classifications.

The guidance requires a

modified retrospective transition approach with application in all comparative periods presented (the “Comparative Method”), or alternatively, as of the effective date as the date of initial application without restating comparative period financial statements (the “Effective Date Method”).

The Company adopted the new standard on January 1, 2022 using the Effective Date Method.

Upon adoption, the Company recorded net ROU assets and lease liabilities totaling approximately $ 16,284 and $ 19,921 , respectively, and a reversal of deferred rent of $ 3,032 ;

there were no cumulative effect adjustments as of January 1, 2022.

The standard did not have a material effect on the Company's consolidated statements of operations and comprehensive loss and the consolidated statement of cash flows.

The Company elected the transition practical expedient package which, among other things, allows the carryforward of historical lease classifications.

The Company will continue to apply Topic 840 prior to January 1, 2022, including Topic 840 disclosure requirements, in the comparative periods presented.

The company did not elect to apply the hindsight practical expedient, which permits entities to use hindsight in determining the lease term and assessing impairment of right-of-use assets.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

2 unchanged sentences

ASU 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2021.

We have adopted ASU 2019-12 as of January 1, 2022, and our adoption did not have a material impact on the consolidated financial statements.

The Company adopted ASU 2019-12 as of January 1, 2022, and the Company's adoption did not have a material impact on the consolidated financial statements.

In August 2020, the FASB issued 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, which simplifies the guidance on accounting for convertible debt instruments by removing the separation models for:

(1) convertible debt with a cash conversion feature;

and (2) convertible instruments with a beneficial conversion feature.

Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available.

The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2023 for smaller reporting companies, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020.

The Company adopted this standard using the modified retrospective method, effective January 1, 2022, and the Company's adoption did not have a material impact on the consolidated financial statements.

RECAPITALIZATION

5 unchanged sentences

Under this method of accounting, AEye Technologies was treated as the accounting acquirer and CF III was treated as the acquired company for financial reporting purposes under FASB ASC Topic 805, Business Combinations (“ASC 805”).

This determination is primarily based on AEye Technologies’ stockholders comprising a relative majority of the voting power of the combined entity, and having the ability to nominate the majority of the governing body of the combined entity, AEye Technologies’ senior management comprising the senior management of the combined entity and AEye Technologies’ operations comprising the ongoing operations of the combined entity.

This determination is primarily based on AEye Technologies’ stockholders comprising a majority of the voting power of the Combined Entity, and having the ability to nominate the majority of the governing body of the Combined Entity, AEye Technologies’ senior management comprising the senior management of the Combined Entity and AEye Technologies’ operations comprising the ongoing operations of the Combined Entity.

Accordingly, for accounting purposes, the financial statements of the Combined Entity represented a continuation of the financial statements of AEye Technologies and the Business Combination was treated as the equivalent of AEye Technologies issuing stock for the net assets of CF III, accompanied by a recapitalization.

12 unchanged sentences

CF III also entered into a PIPE Subscription Agreement for 500,000 shares of common stock, for a purchase price of $ 10.00 per share and an aggregate purchase price of $ 5,000 with an investor who defaulted on the Closing under the PIPE Subscription Agreement.

The Company plans to pursue its available remedies with respect to such investor.

The Company has initiated litigation to enforce the terms of that investor's PIPE Subscription Agreement.

Certain CF III shareholders exercised their right to redeem certain of their outstanding shares for cash, resulting in the redemption of 19,355,365 shares of CF III Class A common stock for an aggregate payment of $ 195,498 , at a redemption price of $ 10.10 per share based on the Trust Account balance as of August 11, 2021.

1 unchanged sentence

CF III Warrants issued in connection with the IPO (“Public Warrants”) and in connection with the private placement units held by the Sponsor (“Private Placement Warrants”) to purchase shares of the Company’s common stock, at an exercise price of $ 11.50 per share, remained outstanding after the closing of the Business Combination.

The warrants became exercisable 30 days after the completion of the Business Combination, subject to other conditions, including with respect to the effectiveness of a registration statement covering the shares of common stock underlying such warrants, and will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation.

The warrants became exercisable 30 days after the completion of the Business Combination, subject to other conditions, including with respect to the effectiveness of a registration statement covering the shares of common stock underlying such warrants, an d will expir e five years af ter the completion of the Business Combination or earlier upon redemption or liquidation.

The Public Warrants are classified as equity and valued based on the instrument’s publicly listed trading price.

24 unchanged sentences

Balance at December 31, 2019 11,283,838 41,984,908

11,283,838 41,984,908

Recapitalization applied to Redeemable Convertible preferred stock outstanding at December 31, 2019

16,383,725 60,960,574

Recapitalization applied to Convertible preferred stock outstanding at December 31, 2019 16,383,725 60,960,574

Exercise of common stock options - 2020 504,524 1,877,233

504,524 1,877,233

Repurchase of common stock - 2020 ( 950,352 ) ( 3,536,070 )

Exercise of common stock options - 2021 (pre-Closing) 54,859 204,119

54,859 204,119

Conversion of Convertible Notes and Accrued Interest – 2021 5,584,308 20,778,097

5,584,308 20,778,097

Exercise of common stock and Series A preferred stock warrants - 2021 64,719 240,806

6 unchanged sentences

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

Our financial instruments that are not re-measured at fair value include accounts receivable, prepaid and other current assets, accounts payable, accrued expenses and other current liabilities, convertible notes, and long-term debt.

The Company's financial instruments that are not re-measured at fair value include accounts receivable, prepaid and other current assets, accounts payable, accrued expenses and other current liabilities, 2020 convertible notes, and long-term debt.

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 (in thousands) Measured as of December 31, 2021 Using:

Fair Value Measured as of December 31, 2022 Using:

Adjusted Cost Unrealized losses Fair Value Cash and Cash Equivalent Marketable Securities

6 unchanged sentences

Private placement warrant liability $ — $ — $ 7 $ — $ —

Convertible notes — — 8,594 — —

Derivative warrant liability — — 119 — —

Total financial liabilities $ — $ — $ 9,200 $ — $ —

Fair Value (in thousands) Measured as of December 31, 2020 Using:

Fair Value Measured as of December 31, 2021 Using:

Adjusted Cost Unrealized losses Fair Value Cash and Cash Equivalent Marketable Securities

Common stock and series A preferred stock warrant liability $ — $ — $ 93 $ — $ —

Embedded derivative liability — — 17 — —

Money market funds $ 4,863 $ — $ 4,863 $ 4,863 $ —

Asset-backed securities $ 26,491 $ ( 68 ) $ 26,423 $ — $ 26,423

Corporate bonds 48,643 ( 150 ) 48,493 — 48,493

Commercial paper 45,145 — 45,145 — 45,145

Government securities 29,936 ( 173 ) 29,763 — 29,763

Total financial assets $ 155,078 $ ( 391 ) $ 154,687 $ 4,863 $ 149,824

Private placement warrant liability $ — $ — $ 155 $ — $ —

Total financial liabilities $ — $ — $ 155 $ — $ —

2 unchanged sentences

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.

securities are valued using observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Marketable Securities :

3 unchanged sentences

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.

2022 Convertible Note :

On September 15, 2022, the Company entered into a convertible note agreement with a face value of $ 10,500,000 (the "2022 Note").

The Company elected the fair value option to account for the 2022 Note.

The fair value estimate of the 2022 Note was based on a binomial lattice model, which represents Level 3 measurements.

Significant assumptions include the discount rate used in the model, remaining term, stock price, and volatility.

The discount rate is derived from the estimated credit spread and the risk-free interest rate, which is based on interpolated U.S.

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

The remaining term is calculated as the remaining contractual term of the Note.

The stock price is based on the publicly traded price of our Common Stock as of the measurement date.

The Company estimated the volatility for the Note based on the historical and implied volatilities of the Company's publicly traded common stock under the symbol "LIDR." The changes in fair value are recognized in other income (expense) for each reporting period.

Refer to Note 12 for details of the terms and conditions of the 2022 Note.

Derivative Warrant Liability :

The Company’s derivative warrant liability includes the warrants that were issued by the Company as part of the 2022 Note.

The warrants are recorded on the consolidated balance sheets at fair value.

The fair value is based on unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.

The fair value estimate of the warrants was based on a Monte-Carlo simulation model.

Inherent in a Monte-Carlo simulation model are assumptions related to price, volatility, risk-free interest rate, term to expiration, and dividend yield.

The price is based on the publicly traded price of our 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 under the symbol "LIDR." 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 4 years.

Finally, the Company does not anticipate paying a dividend.

Any changes in these assumptions can change the valuation significantly.

Changes in fair value are recognized in other income (expense) for each reporting period.

Derivative Warrant Liability is included within other noncurrent liabilities on the consolidated balance sheets.

Private Placement Warrant Liability :

As of December 31, 2021 Level 2 fair value measurements were used for private placement warrant liabilities.

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 AEye public warrants traded under the symbol "LIDRW".

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.

As of December 31, 2020, the Company’s financial liabilities subject to fair value procedures were comprised of the following:

Common Stock and Series A Preferred Stock Warrant Liability:

The fair value of the redeemable convertible preferred stock warrant liability is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy.

In determining the fair value of the redeemable convertible preferred stock warrant liability, the Company used the Black-Scholes option-pricing model to estimate the fair value using unobservable inputs including the expected term, expected volatility, risk-free interest rate, and expected dividend yield.

Changes in fair value measurement are reflected in other income (expense), net, on the consolidated statements of operations and comprehensive loss.

See Black-Scholes table below for quantitative information on the unobservable inputs used in the valuation of common stock and series A preferred stock warrant liabilities.

Upon the closing of the Business Combination, the common stock and series A preferred stock warrant liability were net settled and converted to the Class A common stock equity.

The financial liability was retroactively restated as equity resulting from the recapitalization as part of the Business Combination.

Embedded Derivative Liability:

During 2020, the Company entered into a convertible note agreement under which the Company may issue convertible equity instruments (“2020 Notes”).

The 2020 Notes contain an embedded redemption feature, which is considered to be a derivative that is required to be separately accounted for at fair value and subsequently remeasured to fair value at each reporting date.

The fair value of the embedded derivative liability was estimated using a with and without method, and changes in fair value are recognized in other income (expense), net, on the consolidated statements of operations and comprehensive loss.

This method isolates the value of the embedded derivative liability by measuring the difference in the host contract’s value with and without the isolated feature.

The resulting cash flows are discounted at the Company’s borrowing rate, as adjusted for fluctuations in the market interest rate from the inception of the Company’s comparative borrowings to the reporting date, to measure the fair value of the embedded derivative.

The valuation for the conversion portion of the derivative factors in the expected timing and probability of a financing that would result in the conversion of the underlying, plus accrued interest

discounted to the financing price per share.

The probability and timing of a financing are estimated at each reporting date.

Upon the closing of the Business Combination the embedded derivative was settled as the 2020 Notes and accrued interest were converted into the Company’s Class A common stock (see Note 2 Recapitalization).

For the year ended December 31, 2021 and 2020, there were no transfers between Level 1 and Level 2 inputs.

The private placement warrant liability transferred from Level 3 into Level 2 during the year ended December 31, 2021 as a result of the Business Combination which introduced Level 2 inputs into the valuation of the private placement warrant liability, specifically the observable input of AEye public warrants (LIDRW).

There were no issuances, purchases, sales, or settlements of Level 3 inputs, other than as disclosed below.

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, 2021 (in thousands):

Embedded Derivative Common Stock and Series A Preferred Stock Warrant Liability Total

Balance at December 31, 2020

$ 17 $ 93 $ 110

(Gain) loss in fair value included in other income (expense, net) ( 17 ) ( 93 ) ( 110 )

Balance at December 31, 2021

Embedded Derivative Common Stock and Series A Preferred Stock Warrant Liability Total

For the years ended December 31, 2022 and 2021, 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, 2022:

2022 Convertible Note Derivative Warrant Liability Total

Balance at December 31, 2021 $ — $ — $ —

Initial fair value of embedded derivative 1,520 — 1,520

(Gain)/loss in fair value included in other income (expense, net) ( 1,503 ) 93 ( 1,410 )

Additions 9,512 488 10,000

Payments or conversions ( 1,474 ) — ( 1,474 )

Change in fair value included in other income (expense) 531 ( 369 ) 162

Change in fair value due to instrument specific credit risk included in other comprehensive income 25 — 25

Balance at December 31, 2022 $ 8,594 $ 119 $ 8,713

$ 17 $ 93 $ 110

The key inputs into the Black-Scholes option-pricing model for the common stock and series A preferred stock warrant liability valued at December 31, 2020 are as follows:

The key inputs into the binomial-lattice model for the convertible note valued at December 31, 2022 are as follows:

December 31, 2022

Remaining term (years) 1.2

Expected volatility 90.4 %

Risk-free interest rate 4.6 %

Dividend yield — %

Estimated credit spread 37.7 %

The key inputs into the Monte-Carlo simulation model for the derivative warrant liability valued at December 31, 2022 are as follows:

December 31, 2022

Expected term (years) 3.7

4 unchanged sentences

If factors or assumptions change, the estimated fair values could be materially different.

The value of the Company’s common stock and series A preferred stock warrant liability 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 stock warrants, and a lower volatility assumption would decrease the value of the stock warrants.

The value of the Company’s derivative warrant liability 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 liability, and a lower volatility assumption would decrease the value of the liability.

The value of the Company's convertible note liability would increase if a lower discount rate was used, and would decrease if a higher discount rate was used.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

10 unchanged sentences

Total inventory, net $ 4,553 $ 4,085

The Company's inventory write-down to reduce inventories to net realizable value was $ 1,203 and $ 72 during the years ended December 31, 2021 and 2020, respectively.

The Company also had $ 1,491 and $ 0 of non-current inventory (raw materials) classified within Other noncurrent assets on the consolidated balance sheet as of December 31, 2022 and December 31, 2021, respectively.

PREPAID AND OTHER CURRENT ASSETS

3 unchanged sentences

Demonstration units 281 224

Advances to suppliers 984 745

Other 713 102

Total prepaid and other current assets $ 6,181 $ 5,051

OTHER NONCURRENT ASSETS

Other noncurrent assets as of December 31, 2021 and 2020 were as follows (in thousands):

As of December 31,

Deferred financing costs $ — $ 288

Security deposits 133 27

Long-term prepaid expenses 1,376 —

Total other noncurrent assets $ 1,509 $ 315

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities as of December 31, 2021 and 2020 were as follows (in thousands):

As of December 31,

Accrued payroll $ 957 $ 741

Accrued bonuses 3,408 —

Accrued payroll taxes 1,547 273

Accrued interest — 391

Accrued purchases and other 1,947 1,406

Warranty reserve 275 —

Deferred rent - current 605 545

Accrued expenses and other current liabilities $ 8,739 $ 3,356

The Company primarily leases office facilities in Northern California under noncancelable operating leases expiring at various dates through November 2026.

Some of the Company's leases include options to renew, with renewal terms that, if exercised by the Company, extend the lease term from two to five years .

The exercise of these renewal options is at the Company's discretion.

The Company's lease agreements do not contain any material terms and conditions of residual value guarantees or material restrictive covenants.

The Company's short-term lease expense was determined to not be material.

The components of operating lease expenses for the twelve months ended December 31, 2022 were as follows (in thousands):

Twelve months ended

December 31, 2022

Operating lease cost $ 2,382

Variable lease cost 241

Total operating lease cost $ 2,623

Supplemental cash flow information for the twelve months ended December 31, 2022 were as follows (in thousands):

December 31, 2022

Cash paid for operating leases included in operating cash flows $ ( 1,341 )

Supplemental balance sheet information related to operating leases was as follows (in thousands):

December 31, 2022

Operating lease right-of-use assets $ 15,502

Operating lease liabilities:

Operating lease liabilities, current $ 2,455

Operating lease liabilities, non-current 16,681

Total operating lease liabilities $ 19,136

December 31, 2022

Weighted average remaining lease term (in years) 9.26

Weighted average discount rate 5.35 %

Maturities of lease liabilities were as follows (in thousands).

Years ended - December 31:

Thereafter 11,116

Total lease payments 24,146

Less amount to discount to present value ( 5,010 )

Present value of lease liabilities $ 19,136

Disclosures under ASC 840, Leases

The company recognizes rent expense on a straight-line basis over the lease period.

Rent expense is principally the leased office space and was $ 1,876 within operating expenses in the consolidated statements of operations and comprehensive loss for the twelve months ended December 31, 2021.

Deferred rent liabilities, including unamortized leasehold improvement incentives was $ 3,637 as of December 31, 2021 within the consolidated balance sheet.

Future minimum payments as of December 31, 2021 under the noncancellable operating leases are as follows (in thousands):

Operating Leases

2026 and after 2,340

Total minimum lease payments 11,970

PROPERTY AND EQUIPMENT, NET

11 unchanged sentences

Depreciation and amortization expense related to property and equipment amounted to $ 1,422 and $ 1,014 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, 2022 and 2021.

Disposals of property and equipment were not material for the years ended December 31, 2021 and 2020.

$ 604 of property and equipment was disposed in the year ended December 31, 2022.

Disposals of property and equipment were not material the year ended December 31, 2021.

OTHER NONCURRENT ASSETS

Other noncurrent assets as of December 31, 2022 and 2021 were as follows (in thousands):

As of December 31,

Non-current inventory $ 1,491 $ —

Long-term prepaid expenses 901 1,376

Security deposits 81 133

Total other noncurrent assets $ 2,473 $ 1,509

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities as of December 31, 2022 and 2021 were as follows (in thousands):

As of December 31,

Accrued purchases and other $ 4,092 $ 1,947

Operating lease liabilities - current 2,455 —

Accrued bonuses 1,022 3,408

Accrued payroll 1,148 957

Accrued payroll taxes 526 1,547

Warranty reserve 480 275

Income tax payable 41 —

Deferred rent - current — 605

Total accrued expenses and other current liabilities $ 9,764 $ 8,739

Silicon Valley Bank Financing Facility

On April 26, 2021, the Company entered into a loan and security agreement (the “Agreement”) with an affiliate of Silicon Valley Bank (“SVB” or the “Lender”) in connection with the non-binding term sheet for a financing facility of up to $ 10,000 entered into on March 18, 2021.

Under the Agreement, the Lender shall make a term loan advance to the Company of $ 4,000 .

Subject to the terms and conditions of the Agreement, and upon the Company’s request, the Lender shall make one term loan advance to the Company of $ 6,000 .

On April 26, 2021, the Company entered into a loan and security agreement (the “Loan Agreement”) with an affiliate of Silicon Valley Bank (“SVB” or the “Lender”) in connection with the non-binding term sheet for a financing facility of up to $ 10,000 entered into on March 18, 2021.

Under the Loan Agreement, the Lender was obligated to make a term loan advance to the Company of $ 4,000 .

Subject to the terms and conditions of the Loan Agreement and, upon the Company’s request, the Lender was obligated to make one term loan advance to the Company of $ 6,000 .

The interest rate on the term loan advance is calculated at 8 % per annum and payable monthly, in arrears.

Upon entering the agreement, the $ 4,000 was drawn.

Upon entering the Loan Agreement, $ 4,000 was drawn.

On May 13, 2021, the additional $ 6,000 was drawn.

balance of $ 10,540 for the financing facility, including interest, was repaid on August 20, 2021.

The balance of $ 10,540 for the financing facility, including interest, was repaid on August 20, 2021.

Silicon Valley Bank Credit Facility

2 unchanged sentences

The term loan’s borrowings are subject to certain financial covenants and restrictions.

The Company complied with all financial covenants and restrictions as of December 31, 2021 and 2020.

The growth capital term loan facility is made up of a $ 4,000 loan amount, which was drawn in December 2019.

The Company began repaying the term loan under this facility beginning January 1, 2020 in equal monthly payments of principal, plus accrued interest.

The interest rate on the term loan is the greater of (a) the prime rate plus 0.75 % and (b) 5.5 %.

On April 20, 2020, the Company entered into a deferral agreement with SVB, whereby the payment dates for all monthly principal payments on the term loan falling due after the deferred agreement’s effective date was extended by six months .

Therefore, the Company did not make any principal payments for any term loans for the period from May 31, 2020 to December 31, 2020.

The Company accounted for this as a debt modification.

The Company complied with all financial covenants and restrictions.

The balance of $ 2,333 for the term loan was repaid on September 7, 2021.

1 unchanged sentence

On June 19, 2021, the Company received notice of the Paycheck Protection Program (PPP) forgiveness payment made to SVB by the Small Business Administration in the amount of $ 2,270 in principal and $ 27 in interest.

This amount represents the forgiveness of the total PPP loan the Company received in 2020 under the PPP Loan provisions of the CARES act.

As of December 31, 2021, there were no borrowings outstanding.

As of December 31, 2020, the Company’s borrowings consisted of the following (in thousands):

December 31, 2020

Silicon Valley Bank credit facility $ 3,333

Payroll Protection Program (PPP) Loan 2,270

Unamortized debt issuance costs - SVB financing and credit facility ( 26 )

Total borrowings, net of debt issuance costs $ 5,577

Borrowings - net of debt issuance costs, current $ 2,693

Borrowings - net of debt issuance costs, noncurrent 2,884

Total borrowings, net of debt issuance costs $ 5,577

This amount represents the forgiveness of the total PPP loan the Company received in 2020 under the PPP Loan provisions of the Coronavirus Aid, Relief and Economic Security (CARES) Act.

As of December 31, 2022 and 2021, there were no borrowings outstanding.

CONVERTIBLE NOTES

During 2020, the Company entered into various convertible note agreements (“2020 Notes”) under which the Company may issue convertible equity instruments having an aggregate principal amount of up to $ 40,000 , a 3 % accruing dividend (“accrued interest”) and a maturity date, extended in July 2021, of October 31, 2021.

During 2020 the Company received $ 30,000 in proceeds related to the 2020 Notes.

During 2021, the Company issued an additional $ 8,045 of convertible notes.

Pursuant to the terms of the 2020 Notes, upon the closing by the Company of a financing, all outstanding principal and unpaid accrued interest of the 2020 Notes will automatically convert into Company preferred stock sold (the “Next Financing Stock”) at a “conversion price” equal to the lesser of:

(i) the original issue price per share paid in the Next Financing Stock multiplied by 90 %;

(ii) the price obtained by dividing $ 250,000 by the number of outstanding shares of common stock of the Company immediately prior to the Next Financing, as applicable.

In connection with the Business Combination on August 16, 2021, all outstanding principal and unpaid accrued interest of the 2020 Notes were converted into AEye Technologies’ preferred stock and subsequently were converted into 20,778,097 shares of the Company’s Class A common stock.

Accordingly, at December 31, 2021, the convertible notes balance was $ 0 .

December 31, 2020

Convertible notes - face value $ 29,990

Unamortized debt issuance costs ( 175 )

Unamortized debt discount ( 753 )

Embedded derivative liability 17

Convertible notes - current $ 29,079

2020 Convertible Notes

In connection with the Business Combination on August 16, 2021, all outstanding principal of $ 38,045 and unpaid accrued interest on the 2020 Notes were converted into AEye Technologies’ preferred stock and

subsequently were converted into 20,778,097 shares of the Company’s Class A common stock.

Accordingly, at December 31, 2022 and December 31, 2021, the convertible notes balance was $ 0 .

2022 Convertible Note

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

The first Note Closing ("First Closing") occurred on September 15, 2022, and the Company entered into a Senior Unsecured Convertible Note with the investor pursuant to which the Company issued to the investor one convertible note ("2022 Note") with a principal balance of $ 10,500 for cash proceeds of $ 10,000 .

As part of the First Closing, the Company also issued warrants to the investor - see Note 14 for further details.

The second Note Closing ("Second Closing") may occur, at the Company's option, no earlier than the ninetieth ( 90 th) calendar day after the First Closing, provided that the Company meets certain equity conditions.

Additional warrants would be issued to the investor upon the Second Closing.

The 2022 Note bears interest at an annual rate of 5.0 %, in addition to an original issue discount of 4.76 %, and has a maturity date of March 15, 2024 ("Maturity Date").

The interest may be settled in cash or shares at the option of the Company and is payable together with monthly redemptions of the outstanding principal amount of the Note.

Beginning December 15, 2022, and the first of each subsequent month (each a "Monthly Redemption Date" or an "Installment Date"), the Company shall redeem the Monthly Redemption Amount until the 2022 Note is fully redeemed, payable in cash or, so long as certain equity conditions are met, shares of Common Stock at the option of the Company.

The equity conditions that must be met in order for the Company to settle the Monthly Redemption Amount in shares include requirements for the daily volume weighted average price of the Company's Common Stock to exceed $ 0.33 and the average daily trading volume of the Company's Common Stock to exceed $ 500,000 for the twenty ( 20 ) trading days prior to the applicable Installment Notice Date (which is the sixth ( 6 th ) trading day prior to each Installment Date).

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

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) $ 2.50 or (ii) 95 % of the lowest daily volume weighted average price of the Common Stock during the five ( 5 ) trading days immediately preceding the applicable Monthly Redemption Date.

If the Company elects to settle redemptions in cash, the Monthly Redemption Amount shall include a 5 % premium.

The investor is permitted to accelerate up to four ( 4 ) Monthly Redemption Amounts in any calendar month (each, an "Acceleration," and each such amount, an "Acceleration Amount", and the Conversion Date of any such Acceleration, each an "Acceleration Date") at the Acceleration Conversion Price, subject to a $ 2,800 limit per month.

The Acceleration Conversion Price shall be the lower of (i) the Installment Conversion Price for such current Installment Date or (ii) the greater of $ 0.30 and 95 % of the lowest daily volume weighted average price of the Common Stock during the five (5) trading days immediately preceding the Acceleration Date.

If, at any time while the 2022 Note is outstanding, the Company carries out one or more capital raises in excess of $ 5,000 in gross proceeds each, the investor shall have the right to require the Company to first use up to 30 % of the gross proceeds of each capital raise to redeem all or a portion of the 2022 Note for an amount in cash (such amount, the "Mandatory Redemption Amount") equal to the sum of (a) 1.05 multiplied by the sum of the principal amount subject to the Mandatory Redemption and accrued but unpaid interest and (b) 1.00 multiplied by the sum of the Make-Whole amount, if any, and any other amounts, if any, then owing to the investor in respect of the 2022 Note (a "Mandatory Redemption").

The Make-Whole amount is defined as an amount equal to the additional interest that would accrue under the 2022 Note assuming for calculation purposes that the principal of the 2022 Note remained outstanding through the Maturity Date.

The 2022 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 9.99 % of our then outstanding shares of Common Stock.

The Company and investor entered into a registration rights agreement (the “Registration Rights Agreement”) to which the Company is 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 October 19, 2022, which was declared effective by the U.S.

Securities and Exchange Commission on October 27, 2022.

The Company elected to apply the fair value option to the measurement of the 2022 Note.

As a result of adopting the fair value option no embedded derivatives should be bifurcated from the 2022 Note.

The Company classifies the 2022 Note as a liability at fair value and will remeasure the 2022 Note to fair value at each reporting period.

The total proceeds received from the investor of $ 10,000 should be allocated between the 2022 Note and the related warrants issued using the relative fair value method at issuance date.

This resulted in an initial fair value of $ 9,512 being allocated to the 2022 Note, and $ 488 allocated to the associated warrants (see Note 3 for further details).

The Company recorded total issuance costs of $ 474 , representing placement agent and legal fees, within Interest expense and other on the consolidated statement of operations.

The fair value measurement includes the assumption of accrued interest and expense and thus a separate amount is not reflected on the consolidated statement of operations.

As of December 31, 2022, the 2022 Note has outstanding principal of $ 9,200 and is recorded as a current liability at fair value of $ 8,594 .

The Company evaluated the Second Closing and associated warrants to be a contingently issuable financial asset with a fair value of zero at inception in accordance with ASC 815-40 Contracts in an Entity's own Equity.

The contingently issuable warrants are considered issued for accounting purposes - see Note 14 for further details.

Embedded Derivative Liability

1 unchanged sentence

The redemption price is defined as a price per share equal to 90 % of the price per share paid by the other purchasers of the Financing Stock sold in the Next Financing.

The 2020 Notes are redeemable into the number of shares of Next Financing Stock needed to settle all of the aggregate amount of principal and unpaid interest owed to the holder of such notes, which is based on the ultimate price per share associated with the Financing Stock.

The 2020 Notes are redeemable into the number of shares of Financing Stock needed to settle the aggregate amount of principal and unpaid interest owed to the holder of such notes, which is based on the ultimate price per share associated with the Financing Stock.

Consequently, the 2020 Notes are considered stock settled debt.

2 unchanged sentences

Upon the closing of the Business Combination on August 16, 2021, the embedded derivative was settled.

Accordingly, at December 31, 2021, the fair value of the embedded derivative liability wa s $ 0 .

The value of the embedded derivative liability at December 31, 2020 is presented together with the associated convertible notes on the consolidated balance sheets.

See Note 3 for additional discussion of derivatives.

Accordingly, at December 31, 2022 and December 31, 2021 , the fair value of the embedded derivative liability wa s $ 0 .

INTEREST EXPENSE AND OTHER

Interest expense and other for the years ended December 31, 2022 and 2021 consisted of the following (in thousands):

Year ended December 31,

Twelve months ended December 31,

Interest on term loan debt $ — $ 630

2 unchanged sentences

Amortization of debt issuance costs — 725

2022 convertible note issuance costs 474 —

Amortization of debt discount — 752

Amortization of premiums on marketable securities, net 456 —

Common stock purchase agreement costs 1,583 —

Amortization of premiums on marketable securities, net of accretion of discounts 778 456

Realized losses on redemptions of marketable securities 77 —

Common stock purchase agreement transaction costs 29 1,583

Interest expense and other $ 1,379 $ 4,857

STOCKHOLDERS’ EQUITY

The Company is authorized to issue 300,000,000 shares of common stock, par value $ 0.0001 per share, and 1,000,000 shares of preferred stock, par value $ 0.0001 per share.

As of December 31, 2021, the Company had 155,137,237 and 0 shares of common stock and preferred stock issued and outstanding, respectively.

The Company is authorized to issue 300,000,000 shares of common stock, par value $ 0.0001 per share.

As of December 31, 2022, the Company had 163,099,124 shares of common stock issued and outstanding.

Class A Common Stock — Class A common stock has the following rights:

11 unchanged sentences

As discussed in Note 2, Recapitalization, the Company has retroactively adjusted the preferred shares issued and outstanding prior to August 16, 2021 to give effect to the Exchange Ratio established in the Merger Agreement to determine the number of shares of common stock into which they were converted.

Upon the Closing, all of the outstanding shares of preferred stock were cancelled and exchanged for shares of the surviving Company’s Class A common stock at the Exchange Ratio of 3.7208 , the exchange rate established in the Merger Agreement.

Upon the Closing on August 16, 2021, all of the outstanding shares of preferred stock were cancelled and exchanged for shares of the surviving Company’s Class A common stock at the Exchange Ratio of 3.7208 , the exchange rate established in the Merger Agreement.

August 16, 2021

5 unchanged sentences

As of December 31, 2022, no shares of preferred stock were issued and outstanding.

Private and Public Warrants — As of December 31, 2021, the Company had 166,666 Private Placement warrants and 7,666,666 Public warrants outstanding.

Each warrant entitles the registered holder to purchase one share of Class A common stock at a price of $ 11.50 per share.

Warrants — As of December 31, 2022, the Company had 166,666 Private Placement warrants and 7,666,656 Public warrants outstanding.

Each warrant entitles the registered holder to purchase one share of the Company's common stock at a price of $ 11.50 per share.

On September 15, 2022, in connection with the issuance of the 2022 Note, the Company issued warrants to the investor.

The warrants are immediately exercisable and entitle the investor to purchase up to 1,750,000 shares of Common Stock at a price of $ 3.50 per share, subject to a four ( 4 ) year term.

As of December 31, 2022, no shares were exercised pursuant to the warrants.

Contingent Warrants - As of December 31, 2022, the Company had 1,750,000 contingently issuable warrants outstanding associated with the potential Second Closing under the Securities Purchase Agreement.

These warrants will become exercisable by the investor if and when the Second Closing occurs.

They will entitle the investor to purchase up to 1,750,000 shares of Common Stock at a price of $ 3.50 per share, subject to a four ( 4 ) year term.

Tumim Stone Common Stock Purchase Agreement — On December 8, 2021, the Company entered into a Common Stock Purchase Agreement (the “CSPA”) and a Registration Rights Agreement with Tumim Stone Capital LLC (“Tumim Stone”).

Under the terms and subject to the conditions of the CSPA, 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, and (ii) the Exchange Cap equal 19.99 % of the shares of the Company’s common stock outstanding immediately prior to the execution of the CSPA, 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 CSPA equals or exceeds $ 4.9485 .

Under the terms and subject to the conditions of the CSPA, 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 19.99 % of the shares of the Company’s common stock outstanding immediately prior to the execution of the CSPA, 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 CSPA equals or exceeds $ 4.9485 .

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 CSPA 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 shall equal 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 purchase price per share to be purchased by Tumim is equal to the volume-weighted average price for common stock on the applicable purchase date multiplied by 0.9615 (to be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split, or similar transaction).

The maximum number of shares the Company may sell to Tumim Stone on any single business day is the lesser of (i) $ 20,000 divided by the closing sale price of the common stock on the trading day immediately preceding the purchase date, and (ii) 0.15 multiplied by the average daily trading volume in common stock for the three trading days preceding the purchase date.

In connection with the CSPA, the Company issued Tumim Stone commitment shares in the amount of 302,634 restricted common shares in the Company.

In connection with the CSPA, the Company issued to Tumim Stone 302,634 restricted common shares in the Company.

At issuance, the 302,634 shares of common stock had a fair value of $ 1,583 and were recorded to Interest expense and other in the Company’s consolidated statements 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 December 8, 2021.

As of December 31, 2021 the Company had no t sold any shares to Tumim Stone under the CSPA nor filed any registration statement which allows for the sale of such shares.

On May 6, 2022, the Company filed a Registration Statement on Form S-1, which relates to the offer and resale of up to 30,865,419 shares of AEye's common stock by to Tumim Stone, the selling stockholder.

During the twelve months ended December 31, 2022, the company issued 1,145,000 shares of its common stock under the CSPA for proceeds of $ 2,891 .

ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in accumulated other comprehensive loss by component for the twelve months ended December 31, 2022 and 2021 are as follows (in thousands):

Unrealized gains (losses) on available-for-sale securities Change in fair value due to instrument-specific credit risk Total

Balance at December 31, 2020 $ — $ — $ —

Other comprehensive loss, net of tax ( 391 ) — ( 391 )

Balance at December 31, 2021 ( 391 ) — ( 391 )

Other comprehensive loss before reclassifications, net of tax ( 940 ) ( 25 ) ( 965 )

Amounts reclassified from accumulated other comprehensive loss, net of tax 77 — 77

Net other comprehensive loss ( 863 ) ( 25 ) ( 888 )

Balance at December 31, 2022 $ ( 1,254 ) $ ( 25 ) $ ( 1,279 )

The $ 77 reclassified out of accumulated other comprehensive loss in the twelve months ended December 31, 2022 is included within Interest expense and other on the consolidated statement of operations.

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,

Twelve months ended December 31,

Net loss attributable to common stockholders $ ( 98,714 ) $ ( 65,011 )

4 unchanged sentences

Due to net losses for the years ended December 31, 2022 and 2021, basic and diluted net loss per share were the same, as the effect of all potentially dilutive securities would have been anti-dilutive.

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

Year ended December 31,

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

Twelve months ended December 31,

Warrants 9,583,322 7,833,332

2 unchanged sentences

Conversion of convertible notes 16,293,602 —

ESPP 2,000,000 —

Total 66,041,560 44,506,507

STOCK-BASED COMPENSATION

The Company has three equity incentive plans, the 2014 US LADAR Inc.

Equity Incentive Plan (the “2014 Plan”), the 2016 Stock Plan (the “2016 Plan”), and the 2021 Equity Incentive Plan (the “Incentive Plan”).

The Company has four 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”) and the 2022 Employee Stock Purchase Plan (the "ESPP").

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.

1 unchanged sentence

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.

On November 17, 2020, Robert Brown was granted the option to purchase 3,262,744 shares of AEye, Inc.

common stock in accordance with the 2016 Plan subject to the vesting schedule set forth in the Notice of Grant of Stock Option (the “Brown Award”).

The options granted contain a service-based and performance-based vesting condition.

In regards to the service-based vesting condition, the options vest 25 % at the first anniversary of the grant date, with the remaining vesting ratably over the next three years .

The performance condition states that 25 % of the options will vest immediately upon a Business Combination.

In connection with the Business Combination on August 16, 2021, 25 % of the options vested.

In January 2021, the Board approved an amendment and restatement of the 2016 Stock Plan to provide for the issuance of RSUs under the Plan and increase the number of shares of common stock of the Company reserved for issuance pursuant to the Plan by 1,153,448 shares to a new total of 33,121,391 .

As of December 31, 2021, 1,741,689 RSUs were granted.

The Board determines the terms of the awards, including the amount, fair market value, and vesting provisions.

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, 2022, 1,741,689 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 .

2 unchanged sentences

Under each plan, the options expire ten years from the date of grant.

On June 28, 2021, the Company entered into an Option Repurchase and Release Agreement to purchase 542,615 vested options for $ 1,500 from an executive awarded with these options under the Company’s 2016 Plan.

Based on the term of the agreement the consideration is transferred following the closing of the first “Exit Event,” defined as any of the following:

(a) the Business Combination described in the Merger Agreement and preliminary S-4 registration statement filed with the Securities and Exchange Commission on May 13, 2021;

(b) a transaction whereby a special purpose acquisition company acquires equity interests of the Company;

or (d) the first firm commitment underwritten public offering pursuant to an effective registration statement on an established national or foreign securities exchange covering the offer and sale by the Company.

In connection with the Business Combination, the consideration of $ 1,500 was paid to the executive.

In connection with the Closing on August 16, 2021, $ 1,500 was paid to a former executive as consideration for repurchasing 542,615 of his vested options under the Company's 2016 Plan.

2021 Equity Incentive Plan

As previously reported in the Current Report on Form 8-K filed with the SEC on August 16, 2021, at the special meeting of stockholders held in connection with the Business Combination, the CF III stockholders considered and approved the CF III 2021 Equity Incentive Plan and reserved 15,440,430 shares of common stock for issuance thereunder.

The Incentive Plan was previously approved, subject to stockholder approval, by the board of directors of CF III on February 17, 2021.

The Incentive Plan became effective immediately upon the closing of the Business Combination.

The purpose of the Incentive Plan is to attract, retain, and motivate persons who make (or are expected to make) important contributions to the Company by providing these individuals with equity ownership opportunities, and to promote the success of the Company’s business.

The Company’s 2021 Equity Incentive Plan provides for the grant of stock options, stock appreciation rights, restricted stock units, performance stock unit awards, and other forms of equity compensation (collectively, “equity awards”).

All awards within the Incentive Plan may be granted to employees, including officers, as well as directors and consultants, within the limit defined in the Incentive Plan.

The Incentive Plan became effective immediately upon the Closing on August 16, 2021 and initially reserved 15,440,430 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.

Under the 2021 plan, RSU’s vest depending on their vesting schedule.

Primarily for newly hired employees, these RSU’s vest 25 % during the month following the recipient’s one year anniversary of their start date or from receiving the awards.

The remaining amounts vest ratably over the next three years .

After January 1, 2022, the Board of Directors authorized the addition of 7,743,413 shares of common stock to be added to the Incentive Plan for issuance.

Under the Incentive plan, RSU’s vest depending on their vesting schedule.

For newly hired employees, RSU’s generally vest 25 % during the quarterly release date following the recipient’s one year anniversary of their start date.

The remaining amounts generally vest quarterly over the next three years .

For existing employees, these RSUs generally vest quarterly over three years.

The fair value of the RSU is equal to the fair value of the Company’s common stock on the date of grant.

As of December 31, 2021, 6,172,071 RSUs were granted to certain individuals under the 2021 Equity Incentive Plan.

As of December 31, 2022, 17,891,938 RSUs were granted to certain individuals under the Incentive Plan.

2022 Employee Stock Purchase Plan

On May 10, 2022, the Company's stockholders approved the 2022 Employee Stock Purchase Plan (the "ESPP"), authorizing 2,000,000 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.

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 year ended December 31, 2022, no shares were purchased under the ESPP.

As of December 31, 2022, the Company has withheld $ 188 of contributions from its employees.

A summary of stock option activity related to the Plans as of December 31, 2022 is as follows:

1 unchanged sentence

Balance at December 31, 2021 29,238,432 $ 0.48 7.35 $ 127,345

31,618,135 $ 0.48 8.3 $ 112,548

Exercised ( 3,219,957 ) 0.36

3 unchanged sentences

Balance at December 31, 2022 25,393,540 $ 0.49 6.45 $ 2,277

29,238,432 $ 0.48 7.4 $ 127,345

Vested and expected to vest as of December 31, 2022 25,393,540 $ 0.49 6.45 $ 2,277

27,555,673 $ 0.48 7.3 $ 120,250

Vested and exercisable as of December 31, 2022 20,356,221 $ 0.47 6.14 $ 2,277

18,615,254 $ 0.41 6.7 $ 82,475

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, 2022 and 2021.

The following table summarizes the RSU award activity under the Plans:

5 unchanged sentences

Unvested at December 31, 2022 12,771,096 $ 4.00

7,434,743 $ 5.80

The total fair value of RSUs that vested during the year ended December 31, 2022 was $ 10,992 .

Stock-Based Compensation Expense — The following table summarizes stock-based compensation expense recorded in each component of operating expenses in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2022 and 2021 (in thousands):

Year ended December 31,

Twelve months ended December 31,

Research and development $ 7,201 $ 2,175

1 unchanged sentence

General and administrative 11,931 6,462

Cost of revenue 131 —

Total stock-based compensation $ 23,959 $ 10,018

The weighted-average grant date fair value of options granted during the year ended December 31, 2021 and 2020 was $ 0 and $ 0.95 respectively.

As of December 31, 2021, the Company had $ 7,637 of unrecognized compensation expense for related stock option grants, including $ 3,376 related to the Brown Award.

As of December 31, 2022, the Company had $ 5,418 of unrecognized compensation expense for related stock option grants.

This cost is expected to be recognized over an estimated weighted average period of 1.35 years.

The total unrecognized compensation expense for RSUs, net of estimated forfeitures, was $ 28,059 as of December 31, 2021 which is expected to be recognized over an estimated weighted average period of 3.45 years.

The Company estimates the fair value of its options on grant date using the Black-Scholes option-pricing model, which requires the input of subjective assumptions as discussed below, including the expected stock price volatility over the expected term of the award, actual and projected employee stock option exercise behaviors, the risk-free interest rate for the expected term of the award, and expected dividends.

The risk-free interest rate is based on the yields of U.S.

Treasury securities with maturities similar to the expected term of the options for each option group.

Each of these inputs are based on highly subjective assumptions and require significant judgment.

For the year ended December 31, 2021, the Company granted no new options.

Expected Term —The expected term of options granted to employees is based on the expected life of the stock options, giving consideration to the contractual terms and vesting schedules.

Expected Volatility —Expected volatility was estimated based on the average historical volatility of comparable companies’ stock, as the Company does not have a sufficient trading history to determine historical volatility.

The total unrecognized compensation expense for RSUs was $ 47,007 as of December 31, 2022 which is expected to be recognized over an estimated weighted average period of 2.44 years.

The total unrecognized compensation expense for the ESPP was $ 1,152 as of December 31, 2022 which is expected to be recognized over an estimated

weighted average period of 1.83 years.

The Company uses the Black-Scholes option-pricing model to estimate the grant-date fair value of ESPP purchase rights, which requires the input of subjective assumptions such as expected term, expected stock price volatility, risk-free interest rate and dividend yield as discussed below.

The fair value of each of the four purchase periods is estimated separately.

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.

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.

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 weighted average assumptions used in the Black-Scholes option-pricing model for stock options for the year ended December 31, 2020, was as follows:

December 31, 2020

Expected term (in years) 5.8

Risk-free interest rate 0.4 %

The following table summarizes the range of valuation assumptions used in estimated the fair value of the ESPP during the period:

Year Ended December 31, 2022

Expected term (years) 0.5 - 2

Expected volatility 94.8 % - 105.3 %

Expected dividend yield — %

Risk-free interest rate 4.5 % - 4.8 %

Dividend yield — %

Sale of Prototypes

The Company recorded revenue for prototype sales of $ 1,743 and $ 1,004 in 2022 and 2021 respectively.

These arrangements typically have one performance obligation which is satisfied at the point of delivery or shipment to the customer.

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

Collaboration and Development Agreements

In 2021 and 2020, the Company entered into collaborative research and development agreements with companies primarily in the auto, transportation and electronic display industry.

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

The Company assessed the number of performance obligations associated with the promises under each agreement, primarily the delivery of customized iDAR perception-related goods and services, and recognized $ 2,003 and $ 1,214 in revenue for performance obligations satisfied during 2021 and 2020 respectively, in the consolidated statements of operations and comprehensive loss.

For Revenue with related parties, refer to Note 19.

Development Contracts

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

The Company assessed the number of performance obligations associated with the promises under each agreement, primarily the delivery of customized 4Sight TM perception-related goods and services, and recognized $ 1,904 and $ 2,003 in revenue for performance obligations satisfied during years ended 2022 and 2021 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 timing of transfer of goods or services to customers (point in time or over time), as it believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

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 are as follows (in thousands):

Year ended December 31,

Twelve months ended December 31,

Revenue by primary geographical market:

United States $ 2,471 $ 2,215

Other European countries 111 110

Germany 65 536

Europe 855 111

$ 3,647 $ 3,007

Revenue by timing of recognition:

1 unchanged sentence

Recognized over time 1,665 16

$ 3,647 $ 3,007

Contract Liabilities

Contract liabilities consisted of the following as of December 31, 2021 (in thousands):

Contract liabilities consisted of the following as of December 31, 2022 and 2021 (in thousands):

As of December 31,

4 unchanged sentences

The following table shows the significant changes in contract liabilities balance as of December 31, 2022 and 2021 (in thousands):

Year ended December 31,

Twelve months ended December 31,

Beginning balance $ 2,918 $ 660

Revenue recognized that was included in the contract liabilities beginning balance ( 1,931 ) ( 570 )

Increase due to invoices issued on performance obligations not yet satisfied during the period

Increase due to cash received and not recognized as revenue and billings in excess of revenue recognized during the period — 2,828

Ending balance $ 987 $ 2,918

3 unchanged sentences

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.

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

The contract liabilities balance represents the remaining performance obligations for contracts with an original duration of greater than one year.

The current contract liabilities balance of $ 2,287 at December 31, 2021 is expected to be recognized over the next 12 months.

Prior to the Business Combination, AEye Technologies, and CF III filed separate standalone federal, state, and local income tax returns.

As a result of the Business Combination, the Company will file a consolidated income tax return.

For legal purposes, CF III acquired AEye Technologies, and the transaction represents a reverse acquisition for federal income tax purposes.

CF III will be the parent of the consolidated group with AEye Technologies as a subsidiary, but in the year of the closing of the Business Combination, AEye Technologies will file a full-year tax return with CF III joining in the return the day after the Closing.

There has historically been no federal or state provision for income taxes because the Company has historically incurred operating losses and maintains a full valuation allowance against its net deferred tax assets.

For the years ended December 31, 2021 and 2020, the Company recognized no provision for income taxes.

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 2022, 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.

In 2021, the 401(k) Plan provided for Company safe harbor matching contributions of 100 % of the first 3 % of employee earnings, and 50 % of the next 2 % of earnings.

The Company made contributions of $ 1,177 and $ 565 for the years ended December 31, 2022 and 2021, respectively.

For the years ended December 31, 2022 and 2021, the Company recognized $ 58 and $ 0 provision for income taxes, respectively.

The provision for the year ended December 31, 2022 was comprised of $ 9 and $ 49 in state and foreign taxes, respectively.

Utilization of net operating loss carryforwards, tax credits, and other attributes may be subject to future annual limitations due to the ownership change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions.

The following table presents a reconciliation of the federal statutory rate of 21.0 % to our effective tax rate for the periods presented:

Year ended December 31,

Twelve months ended December 31,

federal tax benefit at statutory rate 21.0 % 21.0 %

8 unchanged sentences

For 2022 and 2021, our 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 our valuation allowance.

The Company did not have deferred tax liabilities as of December 31, 2021 and 2020.

Significant components of the Company’s deferred tax assets are presented below:

Year ended December 31,

Significant components of the Company’s deferred tax assets as of December 31, 2022 and December 31, 2021 are presented below:

As of December 31,

Deferred tax assets:

3 unchanged sentences

Property and equipment 234 178

Operating lease liabilities 4,435 —

Section 174 R&D capitalization 9,053 —

Other accruals 630 734

1 unchanged sentence

Valuation allowance ( 68,868 ) ( 48,353 )

Total deferred tax assets— net $ — $ —

The Company recognizes deferred tax assets to the extent that these assets are more likely than not to be realized.

The Company could not conclude that it was more likely than not that tax benefits from operating losses would be realized and, accordingly, has provided a full valuation allowance against its deferred tax assets.

Deferred tax assets net of valuation allowance 4,168 —

Deferred tax liabilities:

Right-of-use assets ( 4,168 ) —

Gross deferred tax liabilities ( 4,168 ) —

Total deferred tax assets (liabilities)—net $ — $ —

Realization of deferred tax assets is dependent on future earnings, if any, the timing and amount of which are uncertain.

The Company could not conclude that it was more likely than not that tax benefits from operating losses would be realized, and accordingly, has provided a full valuation allowance against its net deferred tax assets.

The valuation allowance as of December 31, 2022 was $ 68,868 which increased from $ 48,353 at December 31, 2021.

The increase in the valuation allowance is primarily due to additional reserve required against net operating losses and research credits generated during the year ended December 31, 2022.

As of December 31, 2021, the Company had $ 156,584 and $ 104,555 of federal and state net operating losses available to reduce future taxable income, of which $ 110 will begin to expire in 2033 for federal tax purposes and $ 5,041 will begin to expire in 2029 for state tax purposes.

The Company has not provided deferred taxes on unremitted earnings attributable to foreign subsidiaries because these earnings are intended to be reinvested indefinitely.

No deferred tax asset was recognized since the Company does not believe the deferred tax asset will be realized in the foreseeable future.

The accumulated foreign earnings of the Company's foreign subsidiaries totaled $ 111 as of December 31, 2022.

If the Company's foreign earnings were repatriated, additional tax expense might result.

The Company determined that the calculation of the amount of unrecognized deferred tax liability related to these cumulative unremitted earnings attributable to foreign subsidiaries is not practicable.

As of December 31, 2022, the Company had $ 184,007 and $ 127,624 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 $ 5,033 will begin to expire in 2029 for state tax purposes.

Approximately $ 171,751 of federal net operating loss included above can be carried forward indefinitely.

5 unchanged sentences

However future change in ownership may limit the ability to use tax attributes under Section 382.

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 specified testing period.

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.

Unrecognized Tax Benefits — The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:

Year ended December 31,

Twelve months ended December 31,

Unrecognized tax benefits as of the beginning of the year $ 1,681 $ 1,210

Increases (decreases) related to prior year tax provisions 40 ( 14 )

Increases related to prior year tax provisions 182 40

Increase related to current year tax provisions 959 431

1 unchanged sentence

The Company recognizes interest and penalties related to income tax matters as a component of income tax expense.

As of December 31, 2021 there was no accrued interest nor penalties related to uncertain tax positions.

As of December 31, 2022 and December 31, 2021 there was no accrued interest nor penalties related to uncertain tax positions.

The Company reports income taxes in accordance with ASC 740, which requires an asset and liability approach in accounting for income taxes.

4 unchanged sentences

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 deferred tax assets will not be realized, and accordingly, a full valuation allowance has been recorded.

Based upon the history of losses, the Company has determined that it is more likely than not that the net deferred tax assets will not be realized, and accordingly, a full valuation allowance has been recorded.

The Company files income tax returns in the U.S., various state jurisdictions, and foreign jurisdictions.

2 unchanged sentences

The Company is not currently under examination for federal or state income tax purposes.

Effective for tax years beginning on or after January 1, 2022, pursuant to the Tax Cuts and Jobs Act of 2017, companies are required to capitalize Internal Revenue Code ("IRC") Section 174 research and experimental expenses paid or incurred during the year.

These expenses are amortized over 5 years for research and development performed in the United States and over 15 years for expenses related to research and development performed outside of the United States.

As a result of the IRC Section 174 research and development capitalization, the Company recognized a deferred tax asset for the future tax benefit of the amortization deductions.

COMMITMENTS AND CONTINGENCIES

The Company primarily leases offices, under noncancellable operating lease agreements that expire from 2022 to 2026.

During 2019 the Company entered into a rental agreement for the Company’s headquarters in Dublin, California.

Under the agreement the Company is provided an option to extend the lease term one time for a period of five years and the Company received leasehold improvement incentives of $ 3,845 .

Leasehold improvement incentives are amortized over the life of the lease.

The Company recognizes rent expense on a straight-line basis over the lease period.

Rental expense is principally for leased office space and was $ 1,876 and $ 1,942 within operating expenses in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2021 and 2020, respectively.

Deferred rent liabilities, including unamortized leasehold improvement incentives, were $ 3,637 and $ 4,175 as of December 31, 2021 and 2020 within the consolidated balance sheets.

F uture minimum payments as of December 31, 2021 under the noncancellable operating leases are as follows (in thousands):

2026 and after

Total minimum lease payments $ 11,970

Contingencies —The Company may be subject to legal proceedings and claims that arise in the ordinary course of business.

Legal Matters —The Company may be subject to legal proceedings and claims that arise in the ordinary course of business.

Management is not currently aware of any matters that will have a material effect on the financial position, results of operations, or cash flows of the Company.

RELATED PARTIES

Revenue, accounts receivable, and contract liabilities for stockholders of the Company who were also related parties were as follows (in thousands) - these stockholders no longer qualified as related parties in 2021:

Year ended December 31,

Prototype sales:

Stockholder A $ — $ 60

Development contracts:

Stockholder B $ — $ 100

Stockholder C $ — $ 1,050

Year ended December 31,

Accounts receivable:

Stockholder A $ — $ 22

Year ended December 31,

Contract liabilities (current):

Stockholder B $ — $ 65

Stockholder D $ — $ 500

Since November 2016, the Company has employed a sibling of Mr.

Dussan, the Company’s Chief Technology Officer, who held the position of Sr.

Manager of Human Resources at December 31, 2021 and 2020.

For the year ended December 31, 2021 and 2020, Mr.

Dussan, the Company’s Chief Technology Officer, who held the position of Director, Human Resources and Sr.

Manager of Human Resources at December 31, 2022 and 2021, respectively.

For the years ended December 31, 2022 and 2021, Mr.

Dussan’s sibling received total cash compensation of $ 162 and $ 136 , respectively.

For the year ended December 31, 2021, Mr.

Dussan’s sibling was granted 1,860 RSUs.

In 2020 he was granted options to purchase 37,208 shares of common stock with an exercise price of $ 0.63 per share.

For the years ended December 31, 2022 and 2021, Mr.

Dussan’s sibling was granted 22,500 and 1,860 RSUs, respectively.

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

SUBSEQUENT EVENTS

Management has evaluated subsequent events through March 28, 2022 and determined that there were no such events requiring recognition or disclosure in the financial statements.

Management has evaluated subsequent events through March 15, 2023 and determined that there were no such events requiring recognition or disclosure in the financial statements other than the below.

DGCL 205 Petition

On August 12, 2021, CF Finance Acquisition Corp.

III, or the Pre-Merger Company, our predecessor, held a special meeting of stockholders to approve certain matters related to the business combination between the Pre-Merger Company and AEye Technologies, Inc.

Among the proposals presented to the Pre-Merger Company stockholders were proposals to (i) adopt a certificate of amendment to the Pre-Merger Company’s amended and restated certificate of incorporation to increase the number of authorized shares of its Class A Common Stock from 200,000,000 to 300,000,000 , or the Authorized Share Amendment, and (ii) amend and restate the charter in connection with the business combination, which included eliminating its Class B Common Stock immediately prior to the closing of the business combination after giving effect to the conversion of each outstanding share of Class B Common Stock into one share of its Class A Common Stock, or the Class B Elimination Amendment.

The proposals each received approval from the holders of a majority of the Pre-Merger Company’s outstanding shares of Class A Common Stock and Class B Common Stock, voting together as a single class, that were outstanding as of the record date for such special meeting.

Following the special meeting, the business combination was closed and the Pre-Merger Company changed its name to "AEye, Inc."

A recent ruling by the Court of Chancery of the State of Delaware, or Chancery Court, introduced uncertainty as to whether Section 242(b)(2) of the General Corporation Law of the State of Delaware, or DGCL, would have required the Authorized Share Amendment to be approved by a separate vote of the majority of the Pre-Merger Company’s then-outstanding shares of Class A Common Stock and the Class B Elimination Amendment to be approved by a separate vote of the majority of the Pre-Merger Company’s then-outstanding shares of Class B Common Stock.

Although we received no demands or inquiries from our stockholders regarding the potential uncertainty surrounding our Second Amended and Restated Certificate of Incorporation, or our Charter, which was adopted at the special meeting, and our own analysis determined that a separate class vote to adopt the Charter was not necessary, in light of the recent Chancery Court decision, and to resolve any potential uncertainty with respect to our Charter, or our capital structure, on February 23, 2023, we filed a petition in the Chancery Court under Section 205 of the DGCL, our Section 205 Petition, to seek validation of the Authorized Share Amendment, our Charter, and the shares we issued in reliance thereon.

Section 205 permits the Chancery Court, in its discretion, to validate potentially defective corporate acts after considering a variety of factors.

Concurrently with the filing of our Section 205 Petition, we filed a motion to expedite the hearing, which was granted.

The hearing was set for March 14, 2023.

At the March 14, 2023 hearing on our Section 205 Petition, no objections were filed and the court granted our petition.

The court order declared our Charter to be valid and effective as of the date and time it was originally filed and that all shares of our capital stock that we have issued in reliance on our Charter were valid as of the date such shares were issued, thereby eliminating any uncertainty with respect to our Charter or any shares we have issued or may issue in the future in reliance thereon.

Silicon Valley Bank Closure

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

We have deposit accounts at SVB.

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

As of March 10, 2023, we had approximately $ 9,600 in deposit accounts at SVB, of which $ 2,150 was held as collateral for letters of credit under our lease agreement.

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

On March 12, 2023, the U.S.

Treasury, Federal Reserve, and FDIC announced that SVB depositors will have access to all of their money starting March 13, 2023.

We began the process of withdrawing our deposits from SVB on March 13, 2023.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data