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Item 9A. Controls and Procedures

2023-03-16 compared with 2022-03-28 · 43 added, 36 removed, 122 unchanged (39% of the section changed)

3 unchanged sentences

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of December 31, 2022.

Based on this review, our principal executive officer and principal financial officer have concluded that these disclosure controls and procedures were not effective as of December 31, 2021 due to the material weakness in our internal control over financial reporting described below.

Management’s Report on Internal Control Over Financial Reporting

As discussed elsewhere in this Annual Report on Form 10-K, we completed the Business Combination on August 16, 2021.

Prior to the Business Combination, the Company was a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses.

As a result, previously existing internal controls are no longer applicable or comprehensive enough as of the assessment date as the Company’s operations prior to the Business Combination were insignificant compared to those of the Post-Combination Company.

The design and implementation of internal control over financial reporting for the Post-Combination Company has required and will continue to require significant time and resources from management and other personnel.

Because of this, the design and ongoing development of our framework for implementation and evaluation of internal control over financial reporting is in its preliminary stages.

As a result, management was unable, without incurring unreasonable effort or expense, to complete an assessment of our internal control over financial reporting as of December 31, 2021.

Accordingly, we are excluding management’s report on internal control over financial reporting pursuant to Section 215.02 of the SEC Division of Corporation Finance’s Regulation S-K Compliance & Disclosure Interpretations.

Based on an initial assessment, we concluded that our internal control over financial reporting was not effective as of December 31, 2021 because of the material weakness described below.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

In connection with our financial statement close process for the year ended December 31, 2021, we identified a material weakness in our internal control over financial reporting resulting from a lack of a sufficient number of qualified personnel within our accounting and IT functions who possessed an appropriate level of expertise to effectively perform the following functions:

• identify, select and apply GAAP sufficiently to provide reasonable assurance that transactions were being appropriately recorded;

• assess risk and design appropriate control activities over information technology systems and financial and reporting processes necessary to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements.

Management continues to be actively engaged in remediating the material weakness through the development and implementation of systems, processes, and controls over the financial close and reporting process, and has hired additional accounting and finance personnel with technical public company accounting and financial reporting experience.

We have also engaged external consultants to assist us in designing, implementing, and monitoring an appropriate system of internal controls.

We will also continue to evaluate our IT systems and related processes to enhance our financial statement close process, reduce the number of manual journal entries, and facilitate review controls related to our significant classes of transactions.

While we have made progress, the material weakness will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.

Based on this evaluation, our principal executive officer and principal financial officer have concluded that these disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2022.

Remediation of Previously Reported Material Weaknesses

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of our annual or interim financial statements would not be prevented or detected in a timely basis.

As previously reported in Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, management identified material weaknesses in our internal control over financial reporting.

The material weaknesses related to a lack of a sufficient number of qualified personnel within our accounting and IT functions who possessed an appropriate level of expertise to effectively identify, select and apply GAAP sufficiently to provide reasonable assurance that transactions were being appropriately recorded;

and to assess risk and design appropriate control activities over information technology systems and financial and reporting processes necessary to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements.

As part of the remediation process, we implemented additional measures including the hiring of qualified accounting and finance personnel with technical public company accounting and financial reporting assistance and the engagement of external consultants to assist us with designing, implementing, and monitoring an appropriate system of internal controls.

We also evaluated our IT systems and related processes which enhanced our financial statement close process, reduced the number of manual journal entries, and facilitated review controls related to our significant classes of transactions.

The applicable measures have been implemented for a sufficient period of time and management has concluded, through testing, that the enhanced controls are operating effectively, and that the material weaknesses were remediated as of December 31, 2022.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act.

Under the supervision of and with the participation of our principal executive officer and principal financial officer, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013).

Based on this assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2022.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm on our internal control over financial reporting.

Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the SEC that permit emerging growth companies such as our company to provide only management’s report in the Annual Report on Form 10-K.

Inherent Limitations on Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, has determined that our internal controls are reasonably designed and implemented to assure reliable financial reporting and preparation of our financial statements.

However, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

The design of any system of controls is based in part on certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Projections of any evaluation of the effectiveness of controls to future periods are subject to risks.

Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control Over Financial Reporting

Other than in connection with executing upon the implementation of remediation measures as noted above, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarterly period ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other than described above, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarterly period ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other Information

36 unchanged sentences

4.5 Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934

10-K 001-39699 4.5 03/28/2022

10.1 Form of PIPE Subscription Agreement

4 unchanged sentences

10.3 Form of Amended and Restated Stockholder Support Agreement, by and among CF Finance Acquisition Corp.

III and certain sto ckholders of AEye, Inc.

III and certain stockholders of AEye, Inc.

S-4 333-256058 10.2 05/13/2021

10.4 Form o f Sponsor Support Agreement, by and among CF Finance Acquisition Corp.

III, CF Finance Holdings III, LL C and AEye, Inc.

10.4 Form of Sponsor Support Agreement, by and among CF Finance Acquisition Corp.

III, CF Finance Holdings III, LLC and AEye, Inc.

S-4 333-256058 10.3 05/13/2021

10 unchanged sentences

8-K 001-39699 10.1 10/29/2021

10.9 Form of Indem n ification Agreement

10.9 Form of Indemnification Agreement

8-K 001-39699 10.2 08/23/2021

4 unchanged sentences

10.12 Common Stock Purchase Agreement by and between AEye, Inc.

and Tunim Stone Capital LLC, dated December 8, 20 21.

and Tu m im Stone Capital LLC, dated December 8, 2021.

8-K/A 001-39699 10.1 12/15/2021

10.13 Registration Rights Agreement, by and among CF Finance Acquisition Corp.

III and the invest ors lis ted there to .

III and the investors listed thereto.

S-4 333-256058 10.6 05/13/2021

10.14 Form of Senior Unsecured Convertible Note, dated September 15, 2022

8-K 001-39699 4.1 09/16/2022

10.15 Form of Common Stock Purchase Warrant, dated September 15, 2022

8-K 001-39699 4.2 09/16/2022

10.16 Securities Purchase Agreement by and among AEye, Inc.

and 3i, LP, dated September 15, 2022

8-K 001-39699 10.1 09/16/2022

10.17 Registration Rights Agreement by and among AEye, Inc.

and 3i, LP, dated September 15, 2022

8-K 001-39699 10.2 09/16/2022

21.1 List of Significant Subsidiaries

S-1 333-259554 21.1 09/15/2021

23.1 Consent of Deloitte & Touche LLP

18 unchanged sentences

March 15, 2023

/s/ Blair LaCorte

Blair LaCorte

/s/ Matthew Fisch

Matthew Fisch

Chief Executive Officer and Director

4 unchanged sentences

POWER OF ATTORNEY

By signing this Annual Report on Form 10-K below, I hereby appoint each of Blair LaCorte and Robert Brown as my attorney-in-fact to sign all amendments to this Form 10-K on my behalf, and to file this Form 10-K (including all exhibits and other documents related to the Form 10-K) with the Securities and Exchange Commission.

By signing this Annual Report on Form 10-K below, I hereby appoint each of Matthew Fisch and Robert Brown as my attorney-in-fact to sign all amendments to this Form 10-K on my behalf, and to file this Form 10-K (including all exhibits and other documents related to the Form 10-K) with the Securities and Exchange Commission.

I authorize each of my attorneys-in-fact to (1) appoint a substitute attorney-in-fact for himself and (2) perform any actions that he believes are necessary or appropriate to carry out the intention and purpose of this Power of Attorney.

1 unchanged sentence

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.

/s/ Blair LaCorte

Blair LaCorte

/s/ Matthew Fisch

Matthew Fisch

Chief Executive Officer and Director

17 unchanged sentences

March 15, 2023

Karl-Thomas Neumann

March 15, 2023

/s/ Sue Zeifman

March 28, 2022

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 9A. Controls and Procedures